<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 20, 1996
REGISTRATION NO. 333-10191
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CARSON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 2844 06-142-8605
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
64 ROSS ROAD
SAVANNAH INDUSTRIAL PARK
SAVANNAH, GA 31405
(912) 651-3400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DR. LEROY KEITH
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
64 ROSS ROAD
SAVANNAH INDUSTRIAL PARK
SAVANNAH, GA 31405
(912) 651-3400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
IT IS REQUESTED THAT COPIES OF COMMUNICATIONS BE SENT TO:
LAWRENCE LEDERMAN, ESQ. GERALD S. TANENBAUM, ESQ.
ARNOLD B. PEINADO, III, ESQ. HELENE R. BANKS, ESQ.
MILBANK, TWEED, HADLEY & MCCLOY CAHILL GORDON & REINDEL
ONE CHASE MANHATTAN PLAZA 80 PINE STREET
NEW YORK, NY 10005 NEW YORK, NY 10005
(212) 530-5000 (212) 701-3000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
----------------
If any of the Securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 of the Securities Act of
1933, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration Statement number of the earlier
effective registration statement for the same offering. [_]
____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE(3)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock.... 4,818,500 $16.00 $77,096,000 $26,585
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</TABLE>
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(1) Includes 628,500 shares subject to options granted to the U.S.
Underwriters and International Managers to cover any over-allotments.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended.
(3) A fee of $27,759 was previously paid upon the initial filing of this
registration statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be used
in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and one to be used in a concurrent offering outside the United
States and Canada (the "International Prospectus"). The two prospectuses are
identical except for the front and back cover pages, the inside front cover
page and the section entitled "Underwriting." The form of U.S. Prospectus is
included herein and is followed by the alternate pages to be used in the
International Prospectus. Each of the alternate pages for the International
Prospectus included herein is labeled "Alternate Page for International
Prospectus." Final forms of each Prospectus will be filed with the Securities
and Exchange Commission under Rule 424(b).
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 20, 1996
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
4,190,000 SHARES
CARSON, INC.
CLASS A COMMON STOCK
-----------
Of the 4,190,000 shares of Class A Common Stock of Carson, Inc. offered
hereby, 2,484,500 shares are being offered by Carson, Inc. (the "Company") and
1,705,500 shares are being offered by the Selling Stockholders. See "Principal
and Selling Stockholders." The Company will not receive any of the proceeds
from the sale of the shares of Common Stock by the Selling Stockholders.
Of the shares being offered hereby, 3,352,000 shares are being offered for
sale initially in the United States and Canada by the U.S. Underwriters and
838,000 shares are being offered for sale initially in a concurrent offering
outside of the United States and Canada by the International Managers. The
initial public offering price and the underwriting discount per share are
identical for both Offerings. Of the shares being offered hereby, 400,000 will
be reserved for sale to certain directors, officers, employees, business
associates and related persons of the Company. See "Underwriting."
Upon consummation of the Offerings, the Company's issued and outstanding
capital stock will consist of 4,190,000 shares of Class A Common Stock offered
hereby, 1,859,677 shares of Class B Common Stock and 8,306,014 shares of Class
C Common Stock, each with a par value of $.01 per share (the "Common Stock").
The Class A Common Stock entitles each holder to one vote per share and the
Class C Common Stock entitles each holder to ten votes per share. The Class B
Common Stock generally is not entitled to vote on any matter submitted for the
vote of stockholders. Immediately after the Offerings, the percentage of the
combined voting power with respect to all matters submitted for the vote of all
stockholders held by holders of the Class A Common Stock, Class B Common Stock
and Class C Common Stock will be 4.8%, 0% and 95.2%, respectively. See
"Description of Capital Stock." Immediately after the Offerings, DNL Partners,
Limited Partnership will have approximately 75.8% of the combined voting power.
See "Principal and Selling Stockholders."
Prior to the Offerings, there has been no public market for the Class A
Common Stock. It is currently anticipated that the initial public offering
price will be between $14.00 and $16.00 per share. For a discussion relating to
the factors to be considered in determining the initial public offering price,
see "Underwriting."
The Class A Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "CIC," subject to official notice of issuance.
SEE "RISK FACTORS," BEGINNING ON PAGE 11, FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON
STOCK OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT (1) COMPANY (2) STOCKHOLDERS
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<S> <C> <C> <C> <C>
Per Share.............. $ $ $ $
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Total(3)............... $ $ $ $
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</TABLE>
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(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including certain
liabilities under the Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted the U.S. Underwriters and the International
Managers options, exercisable within 30 days after the date hereof, to
purchase up to an additional 502,800 shares and 125,700 shares of Class A
Common Stock, respectively, solely to cover over-allotments, if any. If
such options are exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and $ , respectively.
See "Underwriting."
-----------
The shares of Class A Common Stock are offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the Underwriters and
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of the shares of Class A Common Stock will be made in
New York, New York on or about , 1996.
-----------
MERRILL LYNCH & CO. DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
-----------
The date of this Prospectus is , 1996.
<PAGE>
[ART WORK]
[pictures of models, product advertisements and
packaging, brand names and logos, text as follows:
900 million people of African descent; Carson
products--spanning the globe]
The names Dark & Lovely(R), Dark & Lovely Excelle(R), Dark & Natural(R),
Beautiful Beginnings(R), Reviving Colors(R), and Magic(R) are included among
the registered trademarks of the Company. The names Fail Safe(TM),
DL 2000(TM), Comfort Plus(TM) and Color Care(TM) are the subject of pending
trademark registrations.
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMPANY'S
CLASS A COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements, including the related notes
thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated or
where the context otherwise requires, (i) all information in this Prospectus
gives effect to the Recapitalization (as defined herein) and assumes no
exercise of the Underwriters' over-allotment options, and (ii) all references
herein to the "Company" refer to Carson, Inc., Aminco, Inc. (the "Predecessor")
and their direct and indirect subsidiaries. Unless otherwise indicated, certain
industry data and data regarding the Company's products in this Prospectus are
based on (i) the December 1995 Combined Food and Drug Store Report (the "Towne-
Oller Report") published by Towne-Oller & Associates, Inc., a market research
organization and a subsidiary of Information Resources Inc., and (ii) a July
1995 report published by Packaged Facts, an independent market research company
that provides market data to consumer products companies and relies on a
variety of information sources including the Towne-Oller Report (the "Packaged
Facts Report"). Towne-Oller's data is based on market samples from food and
drug chain stores, which constitute approximately 20% of the total ethnic
health and beauty aids product distribution channels, and is therefore limited
in scope. While the Company believes these reports to be reliable, the Company
has not independently verified the data contained therein. References herein to
fiscal years refer to the Company's fiscal year ending March 31 in the year
referenced.
THE COMPANY
GENERAL
The Company is a leading manufacturer and marketer in the U.S. retail ethnic
hair care market for African-Americans. The Company believes that it is one of
the leading global manufacturers and marketers of ethnic hair care products for
persons of African descent. The Company's flagship brand, Dark & Lovely, is the
most widely recognized ethnic brand name in the U.S. retail ethnic hair care
market. The Company currently sells over 60 different products under five
principal brand names, including Dark & Lovely, Excelle, Beautiful Beginnings,
Dark & Natural and Magic. The majority of the Company's sales are derived from
four categories of the ethnic health and beauty aids market: hair relaxers and
texturizers, which are used to chemically treat and straighten hair
(constituting approximately 50% of the Company's net sales in fiscal 1996),
hair color, shaving products and hair care maintenance products. The Company's
products are specifically formulated to address the unique physiological
characteristics of hair of persons of African descent, which typically include
curliness and dryness. The Company markets its products in the United States
with its own experienced direct sales force. The Company also currently markets
its products in 60 countries outside of the United States, primarily through
local distributors. In fiscal 1996, approximately 23.8% of the Company's net
sales were derived from sales within these countries.
On August 23, 1995, the Predecessor was acquired (the "Acquisition") by an
investor group for a purchase price of approximately $95 million (inclusive of
transaction costs), funded primarily with Company debt. This investor group
assembled a new management team to focus on enhancing the Company's position in
the ethnic hair care market. Several important initiatives have been undertaken
by the new management, including establishing a manufacturing facility in South
Africa, expanding the in-house direct sales force, selecting a new ethnic-
oriented advertising agency, reinvigorating the product line with new packaging
and accelerating the introduction of new products. The Company experienced a
17.5% increase in net sales from $58.1 million in fiscal 1995 to $68.3 million
in fiscal 1996 and a 45.6% increase in operating income from $8.2 million in
fiscal 1995 to $12.0 million in fiscal 1996.
ETHNIC MARKET LEADERSHIP
The Company's resources are focused primarily on satisfying the unique hair
care needs of individuals of African descent worldwide. The Company believes
that it has the number one U.S. retail market position in three of the four
ethnic hair care categories in which it competes (hair relaxers and
texturizers, hair color and shaving
3
<PAGE>
products). The Company attributes its leading market position to its strong
brand names, combined with its direct sales force, broad distribution, research
and development capabilities and experienced management team. Because of these
strengths, the Company believes that it has a competitive advantage over both
the companies specializing in products for the ethnic hair care market and the
few general market companies that compete in the ethnic hair care market, but
whose principal resources are targeted to the general health and beauty aids
market.
. Strong brands. The Company currently sells its products under five
principal brand names including Dark & Lovely, Excelle, Beautiful
Beginnings, Dark & Natural and Magic. The Company's flagship brand, Dark
& Lovely, is the most widely recognized ethnic brand name in the U.S.
retail ethnic hair care market for African-Americans. The Company
believes that its brand strength is based upon product quality, properly
targeted advertising, package design, reputation for innovation and
focused commitment to the unique needs of ethnic consumers.
. Experienced Sales Force and Broad Distribution. In April 1995, the
Company established a direct sales force to enhance its ability to
further penetrate existing markets with both current and new products.
The sales force has significant sales experience both with major
consumer product companies and ethnic hair care competitors. The Company
believes that it now has the largest direct sales force serving the U.S.
retail ethnic hair care market. Historically, the Company used
commissioned sales brokers, as is the industry norm, who tended to have
conflicting brand loyalties and provided minimal marketing and sell-
through support. In the United States, the Company benefits from having
its extensive product line distributed broadly through three principal
channels: (i) multi-warehouse chains, including mass merchandisers
(e.g., Wal-Mart, K-Mart), major drug chains (e.g., Walgreens, Revco),
food chains (e.g., Winn Dixie, Kroger) and discount chains (e.g., Family
Dollar, Dollar General), (ii) beauty and barber supply stores ("B&Bs")
such as Alberto-Culver Company's Sally's Beauty Supply stores and
members of the National Beauty Supply Dealers Association, and (iii)
ethnic product distributors.
. Research and Development. The Company believes that its heritage of
technological innovation and its focused research and development
("R&D") effort are important to maintaining its market leadership
position. Three of the ethnic hair care industry's most significant
innovations were introduced by the Company: the first hair color
developed exclusively for hair of persons of African descent (1972), the
first no-lye relaxer, which provided a safe relaxer product for home use
(1978), and the Fail Safe technology for no-lye relaxers (1993), which
eliminates problems associated with imprecise mixing which can make no-
lye products too weak, thereby impacting straightening, or too strong,
leading to hair damage. One of the most significant sources of consumer
complaints in the industry is inconsistent results caused by mixing
errors. The Company believes that its R&D department, led by two
industry experienced chemists with Ph.D.s and including nine other
researchers and technicians, represents the largest R&D effort focused
on the ethnic hair care market.
. Experienced Management Team. In connection with the Acquisition, the
senior management of the Predecessor was replaced. A team of seasoned
senior executives with extensive experience in the ethnic market and
consumer products industry was recruited to build on the Company's
strong position in the global ethnic hair care market. As Chairman and
Chief Executive Officer, Dr. Leroy Keith, former President of Morehouse
College and Director of the Predecessor, entrepreneur and prominent
member of the African-American community, provides the Company with
leadership and vision. Joyce M. Roche, President and Chief Operating
Officer, has over 20 years of experience in the health and beauty aids
industry, including positions as Senior Vice President of Marketing and
Vice President of Global Marketing at Avon Products, Inc. ("Avon") and
Director of Marketing at Revlon, Inc. ("Revlon"). Dennis Smith,
Executive Vice President of Sales, has over 20 years of experience in
the ethnic hair
4
<PAGE>
care industry, including senior management positions with a competitor
and 14 years with the Company. Miriam Muley, Executive Vice President of
Marketing, has over 17 years of consumer products industry experience,
having held marketing positions at Avon, Bristol-Myers Squibb Company's
Clairol division and Johnson & Johnson. This management team has focused
the Company's strategy to further develop the ethnic hair care market
both in the United States and internationally.
GROWTH STRATEGY
The Company believes that it is well positioned to grow both internally and
through acquisitions, in order to enhance its market position in the ethnic
hair care market. The Company intends to achieve its goals by (i) increasing
its share of existing markets, (ii) increasing international expansion, (iii)
leveraging brands into new categories, (iv) targeting the U.S. professional
salon market and (v) capitalizing on selective acquisition opportunities.
. Increase Share of Existing Markets. Product innovation and ongoing
upgrading of existing products are the cornerstone of the Company's
efforts to increase its market share in existing markets. The Company
recently incorporated into all of its relaxer products its latest
innovation in relaxer technology, called Fail Safe, which eliminates the
problem of mixing errors which occur with the in-home use of no-lye
relaxers. The Company's Fail Safe technology assures that the consumer
will not make a mixing error and thereby vary the relaxer strength. The
Company has been on an aggressive schedule of new product introductions
or existing product upgrades during the last several years with over 10
products that have been recently introduced or that will be introduced
during the next six months, including improved Dark & Lovely and Excelle
products, a new shampoo and conditioner to complement the Company's hair
color products and a new Magic mild cream formula shaving product.
. Increase International Expansion. The Company believes it is poised for
growth in markets such as Africa, Brazil and the Caribbean, each of
which has a significant concentration of consumers of African descent.
The Company currently markets its entire product line in over 60
countries worldwide under the same brand names as it uses in the United
States. International sales in fiscal 1996 of $16.3 million represented
23.8% of the Company's fiscal 1996 net sales and increased 48.0%
compared to fiscal 1995.
-- Africa: In fiscal 1996, the Company had sales of approximately $7.7
million to 17 of the 55 African countries. The Company commenced its
own manufacturing operations in South Africa in March 1996 to
support its African strategic initiatives. The Company's key
strategic initiatives to achieve growth throughout the African
continent are to: (i) continue market penetration and expansion of
the core Southern African business; (ii) establish and develop
distribution and/or manufacturing facilities in East Africa and West
Africa; (iii) extend existing product lines to include related
product categories such as cosmetics; and (iv) identify selected
strategic acquisitions.
-- Brazil: Brazil has a population of approximately 100 million people
of African descent, almost three times the number of people of
African descent as the United States. Moreover, the Company believes
that the ethnic hair care industry in Brazil is underdeveloped and
that the country's improving economy and demographic trends make
this market attractive for the introduction of the Company's
products. The Company began establishing a distribution network and
training stylists in Brazil in October 1995, through a strategic
alliance with Servico Nacional de Aprendizagem (SENAC), a national
professional services training organization. The Company intends to
use Brazil as a base for expanding its products and facilities to
other Central and South American countries.
5
<PAGE>
-- Caribbean: In order to increase sales penetration in the Caribbean
region, the Company recently appointed a Caribbean Sales Manager and
is investigating whether to establish a factory in Jamaica which
would enable the Company to produce in a Caribbean Community and
Common Market (CARICOM) nation, thereby substantially reducing taxes
and tariffs. The Company has sold products into the Caribbean on an
export basis through brokers since before 1975, but expects to
benefit from a more focused local marketing and manufacturing
presence.
. Leverage Brands into New Product Categories. The Company believes that
its flagship Dark & Lovely brand name is transferable to other ethnic
health and beauty aids categories, including cosmetics. According to the
Packaged Facts Report, the cosmetics segment of the U.S. retail ethnic
health and beauty aids market was projected to be approximately $251
million in retail sales in 1995, and is forecasted to grow at 15% per
year until 1999. The Company intends to enter the ethnic cosmetics
market with a product line that is consistent with the positioning of
its ethnic hair care brands. The Company intends to take advantage of
(i) its ability to introduce its consumers to the Dark & Lovely cosmetic
line through inserts in Dark & Lovely relaxer and hair color kits (which
total 11 million units annually), (ii) its strong relationships with its
current customers which will enable it to distribute new cosmetics
products efficiently through the same channels, and (iii) its exclusive
contract manufacturing arrangement with AM Cosmetics, Inc. ("AM
Cosmetics"), a leading low-cost manufacturer of cosmetics. The Company
is engaged in market research and product development and, although no
specific product launch date has been set, expects to enter the ethnic
cosmetics market by the end of 1997.
. Target the U.S. Professional Salon Market. The Company believes that its
R&D expertise and heritage as the technological innovator in the ethnic
hair care market will facilitate its entry into the United States
professional salon market. The Company is developing a new professional
product line under a distinct brand name that will offer certain
technological advantages versus products currently offered in salons, as
well as a complementary line of hair care maintenance products for
exclusive purchase in salons. The Company estimates that there are in
excess of 28,000 African-American hair care salons in the United States
and Company market research indicates that African-American women are
twice as likely as their Caucasian counterparts to patronize salons. The
Company believes that it is well positioned to deliver products to the
salon market, in significant part because many ethnic stylists purchase
their supplies at B&Bs, a distribution channel in which the Company is
well established. Additionally, the Company has successfully entered the
professional salon market internationally through its South African
subsidiary and is implementing a professional salon strategy in other
parts of Africa as well as in Brazil. The Company will use the expertise
gained from its international efforts to create teams of technical
experts to educate salon owners and stylists about the new brand and
provide ongoing training and education on the latest techniques in
ethnic hair care through trade shows, clinics and newsletters. The
Company is engaged in market research and product development and
although no specific launch date has been set, expects to be able to
enter the salon market by the end of 1997.
. Capitalize on Selective Acquisition Opportunities. In addition to
internally generated growth, the Company will consider the selective
acquisition of related brands and businesses which would increase the
Company's market share or expand and complement its product lines. The
Company does not currently have any outstanding agreements, commitments
or understandings to make any acquisitions or enter into any joint
ventures. There can be no assurance that suitable acquisition or joint
venture candidates can be identified, or if an acquisition is completed,
that the operations will be successfully integrated or otherwise not
have an adverse effect on the Company.
6
<PAGE>
BACKGROUND
On August 23, 1995, DNL Savannah Acquisition Corp. ("Acquisition Corp."), a
wholly-owned subsidiary of the Company, acquired all of the stock of the
Predecessor in the Acquisition. Acquisition Corp. was formed by Morningside
Capital Group, L.L.C. ("Morningside"), as financial sponsor, on behalf of an
investor group consisting of DNL Partners, Limited Partnership ("DNL
Partners"), a partnership formed by the principals of Morningside, the lenders
providing the acquisition financing, and certain members of management,
specifically, Dr. Leroy Keith and Mr. Bradford N. Creswell. The Predecessor was
acquired for a purchase price of approximately $95 million (inclusive of
transaction costs), funded primarily with Company debt. See "Use of Proceeds."
The principal shareholder of the Predecessor, Mr. A. Minis, Jr., owned and
controlled the Predecessor since 1951 when he purchased it from its original
founders and owners who had started the business in 1901 with a single
product--Magic shaving powder. The Minis family and certain related trusts and
entities (the "Selling Stockholders") will sell all of their shares of Common
Stock in the Offerings. Concurrent with the Acquisition, Acquisition Corp.
merged into Carson Products Company ("Carson Products").
The Company's existing equity structure will be altered prior to the
effectiveness of the Registration Statement of which this Prospectus is a part
(the "Recapitalization"). The Company will effect the conversion of each
outstanding share of the Company's former Class A common stock into 11,370
shares of its newly created Class C Common Stock and the conversion of each
outstanding share of the Company's former Class B common stock into 11,370
shares of its newly created Class B Common Stock. After the Recapitalization,
holders of Class A Common Stock, Class B Common Stock and Class C Common Stock
will have 4.8%, 0% and 95.2% of the combined voting power of the outstanding
shares of Common Stock of the Company. See "Description of Capital Stock."
Upon the consummation of the Offerings, senior management will own
approximately 6.2% of the total number (including shares held in a voting
trust), and 4.4% of the combined voting power, of the outstanding shares of
Common Stock of the Company. DNL Partners will own approximately 46.1% of the
total number and 75.8% of the combined voting power of the outstanding shares
of Common Stock of the Company.
THE OFFERINGS
The offering of 3,352,000 shares of Class A Common Stock in the United States
and Canada (the "U.S. Offering") and the offering of 838,000 shares of Class A
Common Stock outside the United States and Canada (the "International
Offering") are collectively referred to herein as the "Offerings."
<TABLE>
<S> <C>
Class A Common Stock
offered(a):
By the Company........ 2,484,500 shares
By the Selling Stock-
holders.............. 1,705,500 shares
Total............... 4,190,000 shares
Common Stock to be Out-
standing After the Of-
ferings................ 4,190,000 shares of Class A Common Stock(b)
1,859,677 shares of Class B Common Stock(c)
8,306,014 shares of Class C Common Stock(c)
Total............... 14,355,691 shares of Common Stock(b)
=====
Voting Rights........... The Class A Common Stock and Class C Common Stock vote
as a single class on all matters, except as otherwise
required by law, with each share of Class A Common
Stock entitling its holder to one vote and each share
of Class C Common Stock entitling its holder to ten
votes. The Class B Common Stock generally is not
entitled to vote on any matter submitted for the vote
of stockholders. See "Description of Capital Stock."
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Use of Proceeds......... The net proceeds to be received by the Company from the
Offerings (estimated to be $33.7 million based on an
assumed initial public offering price of $15.00 per
share, the midpoint of the estimated range of the
initial public offering price) will be used to repay
certain outstanding indebtedness. The Company will not
receive any proceeds from the sale of shares by the
Selling Stockholders. See "Use of Proceeds."
New York Stock Exchange
Symbol................. "CIC"
</TABLE>
- --------
(a) Of the shares being offered hereby, 400,000 shares of Class A Common Stock
will be reserved for sale to certain directors, officers, employees,
business associates and related persons of the Company. See "Underwriting."
(b) Excludes 400,000 shares of Class A Common Stock reserved for issuance
pursuant to the Company's 1996 Non-Employee Directors Equity Incentive
Program (including 10,500 shares issuable upon the exercise of options to
be granted to the Company's non-employee directors immediately prior to the
consummation of the Offerings). Also excludes 600,000 shares of Class A
Common Stock reserved for issuance pursuant to the Company's 1996 Long-Term
Incentive Plan (including 59,500 shares issuable upon the exercise of
options to be granted to the Company's management immediately prior to the
consummation of the Offerings). The exercise price for the options to be
granted under each of these programs will be the initial public offering
price of the Class A Common Stock.
(c) Each share of Class B Common Stock and Class C Common Stock is convertible
at any time at the option of the holder thereof into one share of Class A
Common Stock and converts automatically into one share of Class A Common
Stock upon transfer to any person other than specified permitted
transferees. The Class C Common Stock will automatically convert to Class A
Common Stock if, at any time, the then outstanding Class C Common Stock
represents less than 9% of the outstanding shares of Common Stock. See
"Description of Capital Stock."
RISK FACTORS
An investment in the Class A Common Stock involves certain risks associated
with the Company's business and the industry in which it competes, including
(i) risks inherent in the Company's growth strategy, (ii) the Company's
dependence on its trademarks in its current and future markets, (iii) increased
risk of disruption of the business because of the concentration of the
Company's manufacturing operations in Savannah, Georgia, (iv) the Company's
reliance on certain of its suppliers, (v) social, political and economic risks
that may affect the Company's foreign operations or cause foreign currency
fluctuations, (vi) competition, (vii) quarterly fluctuations in operating
results, (viii) changes in the retail industry, and (ix) the effect on the
Company of compliance with environmental laws, consumer laws and government
regulation. For a more detailed discussion of these and certain other risks,
see "Risk Factors."
8
<PAGE>
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA(A)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND FOOTNOTES)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY PREDECESSOR COMPANY
------------------------------- --------------- -------------- --------------
FULL FISCAL YEAR 1996
-----------------------------
YEAR ENDED
MARCH 31, APRIL 1 AUGUST 23, 1995 THREE MONTHS THREE MONTHS
---------------- TO AUGUST 22, TO MARCH 31, ENDED JUNE 30, ENDED JUNE 30,
1994 1995 1995 1996 1995 1996
------- ------- ------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $50,108 $58,126 $26,854 $41,465 $17,271 $18,799
Cost of sales........... 23,622 25,692 11,513 18,629 7,351 8,135
------- ------- ------- ------- ------- -------
Gross profit........... 26,486 32,434 15,341 22,836 9,920 10,664
SG&A expenses........... 21,473 23,134 9,743 14,642 6,545 6,673
Incentive compensation.. 800(b)
Depreciation and amorti-
zation................. 828 1,085 502 1,331(c) 301 629(c)
------- ------- ------- ------- ------- -------
Operating income....... 4,185 8,215 5,096 6,863 3,074 2,562
Interest expense........ 97 136 56 4,487(c) 34 1,826(c)
Other income............ 699 783 1,137(d) 182 328 37
------- ------- ------- ------- ------- -------
Income from continuing
operations before in-
come taxes and changes
in accounting princi-
ples................... 4,787 8,862 6,177 2,558 3,368 773
Provision for income
taxes.................. 1,704 3,174 2,243 1,352 1,230 465
------- ------- ------- ------- ------- -------
Income from continuing
operations before
changes in accounting
principles............. $ 3,083 $ 5,688 $ 3,934 $ 1,206 $ 2,138 $ 308
======= ======= ======= ======= ======= =======
Net income............. $ 1,897 $ 5,438 $ 3,934 $ 1,206 $ 2,138 $ 308
======= ======= ======= ======= ======= =======
Net income per
share(e)............... $ .10 $ .03
======= =======
Weighted average shares
outstanding............ 11,871 11,871
======= =======
<CAPTION>
PREDECESSOR
YEAR ENDED PREDECESSOR COMPANY
MARCH 31, COMBINED THREE MONTHS THREE MONTHS
---------------- YEAR ENDED ENDED JUNE 30, ENDED JUNE 30,
1994 1995 MARCH 31, 1996 1995 1996
------- ------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Capital expenditures.... $ 1,515 $ 979 $ 1,953 $ 263 $ 540
EBITDA(f)............... 5,121 9,053 13,977 3,452 3,185(b)
EBITDA as a percentage
of net sales(f)........ 10.2% 15.6% 20.5% 20.0% 16.9%(b)
<CAPTION>
PREDECESSOR COMPANY
COMBINED THREE MONTHS THREE MONTHS
YEAR ENDED ENDED JUNE 30, ENDED JUNE 30,
MARCH 31, 1996 1995 1996
--------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
PRO FORMA STATEMENT OF OPERATIONS DATA(G):
Net sales............................................. $68,319 $17,271 $18,799
Operating income...................................... 11,426 2,587 2,682(b)
Interest expense...................................... 2,350 592 488
Net income............................................ 5,117 1,236 1,161(h)
Net income per share(i)............................... .36 .09 .08
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------
ACTUAL AS ADJUSTED(J)
------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $14,860 $16,584
Total assets............ 92,246 88,515
Total long-term debt
(excluding current
portion)............... 67,219 32,927
Stockholders' equity.... 10,091 45,539
</TABLE>
(footnotes on following page)
9
<PAGE>
- --------
(a) The period beginning August 23, 1995 reflects data of the Company and its
subsidiaries. The periods prior to and including August 22, 1995 reflect
data of the Predecessor, all of the stock of which was acquired by the
Company on August 23, 1995. See "The Company--Background." Because of the
revaluation of the assets and liabilities acquired and the related impact
to the statement of operations, the financial statements of the Predecessor
for the periods prior to August 23, 1995 are not strictly comparable to
those of the Company subsequent to that date.
(b) The Company recognized $0.8 million of incentive compensation expense
during the quarter ended June 30, 1996 relating to anticipated costs under
certain long-term incentive compensation agreements. Upon completion of the
Offerings, the Company will record additional compensation charges of
approximately $0.6 million (based on the midpoint of the estimated range of
the initial public offering price) principally for final payments under
these awards.
During August 1996, several outside directors and members of senior
management purchased 115,373 and 385,818 shares, respectively, of the
Company's Common Stock. The purchase of such shares by senior management was
financed with $1.3 million (net of discount) in non-interest bearing long-
term full recourse loans from the Company. The Company will record
additional non-cash compensation expense of approximately $6.8 million (with
no associated income tax benefits) during the three months ended September
30, 1996 for the excess of the estimated initial public offering price over
the actual purchase price of such shares and for the shares of Carson South
Africa awarded to certain members of its management. See "Management."
(c) Results for the period from August 23, 1995 to March 31, 1996 include $0.7
million of amortization expense related to acquired goodwill and $4.4
million of interest expense related to debt used to fund the Acquisition.
Results for the three months ended June 30, 1996 include $0.3 million of
amortization expense related to acquired goodwill and $1.8 million of
interest expense related to debt used to fund the Acquisition.
(d) Includes realized gains of $0.8 million recorded by the Predecessor for
investment securities of the Predecessor which were sold prior to the
Acquisition. The cash received from the sale of such investment securities
was used to fund a portion of the consideration for the Acquisition.
(e) Net income per share data has been computed assuming there were 11,871,191
weighted average shares of Common Stock outstanding for the periods
presented, after giving effect to the Recapitalization and shares of
Common Stock purchased by several outside directors and members of senior
management.
(f) EBITDA represents earnings before interest expense, provision for income
taxes, depreciation and amortization, adjusted to exclude investment income
and the pre-tax effect of changes in accounting principles. While EBITDA
should not be construed as a substitute for net income or a better
indicator of liquidity than cash flow from operating activities, which are
determined in accordance with generally accepted accounting principles, it
is included herein to provide additional information with respect to the
ability of the Company to meet its future debt service, capital expenditure
and working capital requirements. EBITDA is not necessarily a measure of
the Company's ability to fund its cash needs.
(g) The unaudited pro forma statements of operations data have been prepared to
give effect to the Acquisition, the Recapitalization, the Offerings and the
application of the net proceeds therefrom, and the refinancing of the
Senior Bank Credit Facility as if these events had occurred on April 1,
1995. See "Unaudited Pro Forma Financial Data."
(h) Excludes extraordinary loss of approximately $3.6 million, net of tax,
which will result from prepayment penalties and the write-off of
unamortized debt discount and deferred financing costs associated with the
repayment of the Senior Bank Credit Facility, the Senior Subordinated
Notes, and the PIK Subordinated Notes.
(i) Pro forma net income per share has been computed assuming there were
14,355,691 weighted average shares of Common Stock outstanding for the
periods presented, after giving effect to the Recapitalization, the
Offerings and 501,191 shares of Common Stock purchased by several outside
directors and members of senior management.
(j) The unaudited as adjusted balance sheet data as of June 30, 1996 has been
prepared to give effect to the purchase of shares of Common Stock by
several outside directors and members of senior management, the Offerings
and the application of the net proceeds therefrom as if these events had
occurred on June 30, 1996. See "Use of Proceeds" and "Capitalization."
10
<PAGE>
RISK FACTORS
Prospective purchasers of the shares of Class A Common Stock offered hereby
should consider carefully all of the information set forth in this Prospectus
and, in particular, should evaluate the following risks in connection with an
investment in the Class A Common Stock being offered hereby.
RISK OF INABILITY TO SUCCESSFULLY IMPLEMENT GROWTH STRATEGY
The Company's growth strategy is to (i) increase its share of existing
markets, (ii) increase international expansion, (iii) leverage brands into new
product categories, (iv) target the U.S. professional salon market and (v)
capitalize on selective acquisition opportunities. The Company's continued
ability to implement its growth strategy successfully will be dependent on
business, financial and other factors beyond the Company's control, including
prevailing economic conditions, changes in consumer preferences and changes in
the competitive environment. There can be no assurance that the Company will
continue to be successful in the implementation of its growth strategy. See
"Selected Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
of the Company included herein.
The Company's ability to anticipate changes in market and industry trends
and to successfully develop and introduce new and enhanced products on a
timely basis will be a critical factor in its ability to grow and remain
competitive. There can be no assurance that new products and product
enhancements will be completed on a timely basis or will enjoy market
acceptance following their introduction. In addition, the anticipated
development schedules for new or improved products are inherently difficult to
predict and are subject to change as a result of shifting priorities in
response to customers' requirements and competitors' new product
introductions. Moreover, the Company expects that it will devote substantial
resources to R&D efforts, including Quality Control. The costs of such efforts
are likely to be expensed as they are incurred, notwithstanding that the
benefits, if any, from such efforts (in the form of increased revenues or
decreased product costs) may not be reflected until subsequent periods. See
"Business--Research and Development and Quality Control."
The Company's growth will be partially dependent upon its ability to
increase its manufacturing capacity. The Company is currently operating at
capacity in its Savannah facility. However, the Company is in the process of
reconfiguring its production lines and expanding its physical space in order
to increase the capacity of the Savannah facility. While the Company believes
its sources of financing are adequate to fund its current level of operations,
the Company will need to seek additional debt or equity financing if it makes
significant expansions or acquisitions. Future growth will be dependent, in
part, upon the capital resources available to the Company from time to time.
There can be no assurance that such additional financing, if required, will be
available in amounts and on terms satisfactory to the Company, if at all. See
"Use of Proceeds" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Another element of the Company's growth strategy is to capitalize on
selective acquisition opportunities. However, there can be no assurance that
suitable acquisition or joint venture candidates can be identified, or that,
if identified, adequate financing sources will be available on terms
satisfactory to the Company. If an acquisition is completed, there can be no
assurance that the operations will be successfully integrated with those of
the Company or that such an acquisition will not otherwise have an adverse
effect on the Company.
DEPENDENCE ON TRADEMARKS FOR CURRENT AND FUTURE MARKETS
The market for the Company's products is significantly dependent upon the
goodwill engendered by its trademarks and trade names. Trademark protection is
therefore material to the Company's business. Although all of the Company's
material trademarks and trade names are registered in the United States and in
the principal foreign countries in which the Company sells its products, there
can be no assurance that the Company will be successful in asserting trademark
or trade name protection for its significant marks and names in the United
States or other markets, and the costs to the Company of such efforts may be
substantial. See "Business-- Trademarks and Patents."
CONCENTRATED MANUFACTURING OPERATIONS INCREASE RISK OF DISRUPTION
The Company manufactures its products domestically at its facility in
Savannah, Georgia, which includes five manufacturing and warehousing
buildings, and internationally at its recently-acquired facility in Midrand,
South Africa. Any prolonged disruption to the operations of either such
facility, whether due to labor difficulties,
11
<PAGE>
destruction of or damage to the facility or other reasons, could have a
material adverse effect on the Company's business, results of operations or
financial condition. The Company maintains business interruption insurance in
an amount which it deems reasonable to cover the occurrence of such events;
however, there can be no assurance that the proceeds of any such insurance
would be sufficient to meet the Company's needs if such an event were to
occur.
RELIANCE ON SUPPLIERS
The Company purchases raw materials from third-party suppliers for use in
its manufacturing operations. The Company does not have any long-term written
contracts with suppliers. Although the Company believes that other suppliers
are available who can produce similar materials and products, there can be no
guarantee that such materials would be available to the Company on an
immediate basis if needed, or at prices similar to those now paid by the
Company. From time to time, the Company has experienced delays in shipments
from suppliers in the ordinary course of operations, but none of such delays
has had a material adverse effect on the Company's business, results of
operations or financial condition. Guanidine carbonate is an essential raw
material used in the manufacturing of no-lye relaxer products and has been
purchased by the Company for over 15 years from the one principal supplier to
all manufacturers of no-lye relaxers, located in Austria. The Company
maintains a stock of guanidine carbonate at its Savannah facility which would
satisfy its requirements for approximately four to six months of future
production. Based on previous testing of alternative guanidine carbonate
supplies, the Company believes that guanidine carbonate of comparable quality
could be made available within this time period from other suppliers on
comparable terms. The failure to timely secure such an alternative source of
guanidine carbonate would have a material adverse effect on the Company's
business, results of operations and financial condition. See "Business--
Manufacturing."
SOCIAL, POLITICAL AND ECONOMIC RISKS AFFECTING FOREIGN OPERATIONS AND EFFECTS
OF FOREIGN CURRENCY FLUCTUATIONS
The Company's products are sold in approximately 60 countries and
territories outside the United States and the Company has a manufacturing
facility in Midrand, South Africa as well as in Savannah, Georgia. For fiscal
1996 and fiscal 1995, approximately 23.8% and 19.6%, respectively, of the
Company's net sales were outside the United States, including domestic exports
and sales by the Company's South African operations. All of the Company's
sales are in dollars with the exception of sales to South Africa, Botswana,
Lesotho, Namibia and Swaziland which are denominated in South African Rand. A
significant component of the Company's business strategy is to expand its
international operations. In March 1996, the Company commenced operations at
its own manufacturing facility in Midrand South Africa, 15 miles north of
Johannesburg. The Company is exposed to the risk of changes in social,
political and economic conditions inherent in foreign operations, including
changes in the laws and policies that govern foreign investment in countries
where it has operations as well as, to a lesser extent, changes in United
States laws and regulations relating to foreign trade and investment. In
addition, the Company's results of operations and the value of its foreign
assets are affected by fluctuations in foreign currency exchange rates, which
may favorably or adversely affect reported earnings and accordingly, the
comparability of period-to-period results of operations. The Company does not
currently engage in hedging activities to minimize its exposure to such
fluctuations. Changes in currency exchange rates may affect the relative
prices at which the Company and foreign competitors sell their products in the
same market. There can be no assurance as to the future effect of any such
changes in social, political and economic conditions on the Company's
business, results of operations or financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"The Company--Corporate Structure."
COMPETITION
The U.S. retail ethnic hair care market for African-Americans is competitive
and highly fragmented with a number of market participants that focus
specifically on this market. Six companies generated approximately 50% of
industry sales in the U.S. retail ethnic hair care market in 1995 with the
remainder being generated by a number of smaller companies, according to the
Towne-Oller Report. Some of the larger companies, such as Soft Sheen Products,
Inc. ("Soft Sheen"), Luster Products and Pro-Line Corp., are privately-owned
and compete only in the ethnic market, as does the Johnson Products subsidiary
of IVAX, Inc., a New York Stock Exchange traded
12
<PAGE>
company. However, a few general market companies, such as Revlon and Alberto-
Culver Company, also produce a limited line of specialized products for the
ethnic consumer. In certain product categories, such as shampoos and hair
color, competition also arises from general market manufacturers such as the
Procter & Gamble Company and Bristol-Myers Squibb Company's Clairol division.
Some of the Company's competitors are general market companies which are
larger and have substantially greater financial and other resources than the
Company. Internationally, the Company's competitors differ from market to
market, and include Revlon, Soft Sheen and several regionally based foreign
companies.
Competitive market conditions could materially and adversely affect the
Company's business, results of operations and financial condition if the
Company were required to reduce product prices to remain competitive or
experienced decreased sales volume. The Company plans to increase sales
internationally, particularly in Africa, Brazil and the Caribbean. Expanding
the Company's share of international markets will require the Company to
address competitive factors similar to those it faces in the United States, as
well as comply with any local regulatory requirements.
OPERATING RESULTS MAY FLUCTUATE QUARTERLY
The Company's operating results may vary significantly from quarter to
quarter, in part because of the changes in net sales and costs associated with
changes in the Company's product mix, timing of promotions, changes in
consumer buying patterns, aggressive competition, and the timing of, and costs
related to, any future acquisitions. Historically, the Company has typically
experienced its slowest quarter in the three months ending December 31 of any
given year. The Company's operating results for any particular quarter are not
necessarily indicative of any future results primarily due to the Company's
marketing decisions, including the factors cited above. The uncertainties
associated with new or improved product introductions and market trends may
limit management's ability to accurately forecast short-term results of
operations. Fluctuations caused by variations in quarterly operating results
may adversely affect the market price of the Class A Common Stock.
CHANGES IN THE RETAIL INDUSTRY
The retail industry has periodically experienced consolidation and other
ownership changes. Major retailers in the United States and in foreign markets
may in the future consolidate, undergo restructurings or realign their
affiliations which could decrease the number of stores that sell the Company's
products or increase the ownership concentration within the retail industry.
While such changes in the retail industry to date have not had a material
adverse effect on the Company's business, results of operations or financial
condition, there can be no assurance as to the future effect of any such
changes. See "Business--Distribution and Sales."
COMPLIANCE WITH CONSUMER LAWS AND GOVERNMENT REGULATIONS
The Company is subject to the Food, Drug and Cosmetics Act, the Consumer
Product Safety Act, the Federal Hazardous Substance Act and to the
jurisdiction of the Consumer Product Safety Commission as well as product
safety laws in foreign jurisdictions. Such regulations subject the Company to
the possibility of requirements to repurchase or recall products found to be
defective and the possibility of fines or penalties. The Food and Drug
Administration ("FDA") has promulgated certain regulations concerning product
ingredients, product labeling and product claims. In addition, the Federal
Trade Commission ("FTC") regulates product claims. The Company is subject to
consumer laws in foreign countries where its products are sold, for example,
bilingual packaging requirements (Canada) and new product registration
requirements (Brazil). Existing and future FDA, FTC and foreign regulations
could impact distribution and sales of certain of the Company's products. See
"Business--Consumer Laws, Government and Industry Regulations."
RELIANCE ON KEY MANAGEMENT
The Company's executive officers have extensive experience serving the
consumer products industry and the ethnic market. If, for any reason, key
members of senior management, including Dr. Leroy Keith, Joyce M. Roche,
Dennis E. Smith, Miriam Muley and Bradford N. Creswell, do not continue to be
active in management, the Company's business, results of operations or
financial condition could be adversely affected. Other than Mr. Creswell,
these key senior management employees have employment contracts, which
generally contain non-compete clauses, with the Company as described in
"Management--Compensation of Executive
13
<PAGE>
Officers--Employment Agreements", but there can be no assurance that such
individuals will remain with the Company. Upon the consummation of the
Offerings, the Company's senior management will own approximately 6.2% of the
total number (including shares held in a voting trust), and 4.4% of the
combined voting power of the outstanding Common Stock.
CONTROL BY CERTAIN EXISTING STOCKHOLDERS
The Company has three classes of authorized Common Stock, Class A Common
Stock, which is offered hereby, Class B Common Stock, which generally has no
voting rights, and Class C Common Stock. The Class B Common Stock and Class C
Common Stock are convertible into Class A Common Stock at the option of the
holder and will automatically convert to Class A Common Stock upon transfer to
persons other than specified permitted transferees. While holders of Class A
Common Stock are entitled to one vote per share, holders of the Class C Common
Stock are entitled to 10 votes per share. The Class A Common Stock and Class C
Common Stock generally vote together as a single class, with certain limited
exceptions. Immediately after the consummation of the Offerings, DNL Partners
will beneficially own approximately 46.1% of the total shares of Common Stock
and will have 75.8% of the combined voting power of the outstanding Common
Stock. Accordingly, DNL Partners will have sufficient voting power to elect
the Board of Directors of the Company and to control the vote on all matters
submitted to a vote of stockholders, including extraordinary transactions such
as mergers, sales of all or substantially all of the Company's assets or going
private transactions. Such concentration of ownership may have the effect of
delaying or preventing certain types of transactions involving an actual or
potential change in control of the Company, including transactions in which
the holders of the Class A Common Stock might receive a premium on their
shares over prevailing market prices. See "Principal and Selling
Stockholders."
POSSIBLE ADVERSE EFFECT ON MARKET PRICE DUE TO SHARES ELIGIBLE FOR FUTURE SALE
AND ISSUANCE OF ADDITIONAL SHARES
Upon completion of the Offerings, the Company will have 4,190,000 shares of
Class A Common Stock outstanding, 1,859,677 shares of Class B Common Stock
outstanding and 8,306,014 shares of Class C Common Stock outstanding. The
shares of Class A Common Stock sold in the Offering will be freely tradeable
without restriction or further registration under the Securities Act unless
held by an "affiliate" of the Company, as that term is defined under Rule 144
of the Securities Act, which shares will be subject to the resale limitations
of Rule 144. In addition, all existing stockholders have registration rights,
either "demand" or "piggyback", with respect to the Common Stock held by them.
See "Description of Capital Stock--Registration Rights." Such stockholders
have waived all rights to register securities owned by them in connection with
the Offerings. In addition, all existing stockholders have agreed not to
dispose of any shares for a period of 180 days from the date of this
Prospectus, or to make any demand for or exercise any right with respect to
the registration of the shares, and the Company has agreed not to dispose of
any shares (other than shares sold in the Offerings or issuances by the
Company of certain employee stock options and shares covered thereby) for a
period of 180 days from the date of this Prospectus, without the prior written
consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"). Upon expiration of such 180-day period, 10,165,691 shares will be
eligible for sale subject to the resale limitations of Rule 144 and Rule 144A
under the Securities Act. No prediction can be made as to the effect, if any,
that the availability of additional shares of Common Stock for sale will have
on the market price of the Class A Common Stock. The sale of a substantial
number of shares held by the existing stockholders, whether pursuant to a
subsequent public offering or otherwise, or the perception that such sales
could occur, could adversely affect the market price of the Class A Common
Stock and could materially impair the Company's future ability to raise
capital through an offering of equity securities. See "Shares Eligible For
Future Sale" and "Underwriting." At the request of the Company, the
Underwriters have reserved shares to be issued by the Company and sold to
directors, officers, employees, business associates and related persons of the
Company at the initial public offering price. Such persons will be required to
agree not to sell or otherwise dispose of any shares of Class A Common Stock
for a period of 90 days following the date of this Prospectus. See
"Underwriting." Pursuant to its Amended and Restated Certificate of
Incorporation, the Company has the authority to issue additional shares of
Common Stock and shares of one or more series of preferred stock. The issuance
of such shares could result in the dilution of the voting power of the shares
of Class A Common Stock purchased in the Offerings.
14
<PAGE>
DILUTION
The initial public offering price is substantially higher than the net
tangible book value per share of Common Stock. Investors purchasing shares of
Class A Common Stock in the Offerings will therefore incur immediate and
substantial dilution of $15.06 per share based on an initial public offering
price of $15.00 per share, the midpoint of the estimated range of the initial
public offering price. See "Dilution."
NO PRIOR MARKET FOR CLASS A COMMON STOCK; DETERMINATION OF PUBLIC OFFERING
PRICE
Prior to the Offerings, there has been no public market for the Class A
Common Stock. Although the Company has been approved for listing on the New
York Stock Exchange, there can be no assurance that an active or liquid
trading market for the Class A Common Stock will develop or be sustained. The
initial public offering price of the Class A Common Stock will be determined
by negotiations among the Company, the Selling Stockholders and the
Representatives of the Underwriters and may not be indicative of the market
price for the Class A Common Stock after the Offerings. The market price for
shares of Class A Common Stock may be highly volatile depending on news
announcements and changes in general market conditions. In recent years, the
stock market has experienced extreme price and volume fluctuations. See
"Underwriting."
FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY
Certain statements contained in this Prospectus, including in the sections
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" contain "forward-looking" information
(as defined in the U.S. Private Securities Litigation Reform Act of 1995) that
involves risk and uncertainties, including (i) the Company's plans to
introduce new products and product enhancements, (ii) the Company's plans to
expand its international operations in Africa, Brazil and the Caribbean, (iii)
the Company's plans to enter the ethnic cosmetics product category, (iv) the
Company's plans to enter the U.S. professional salon market for ethnic hair
care products, (v) the Company's plans to make selective acquisitions, and
(vi) the Company's marketing, distribution and manufacturing expansion plans.
Actual future results and trends may differ materially depending on a variety
of factors discussed in this "Risk Factors" section and elsewhere in this
Prospectus, including (a) the Company's success in implementing its growth
strategy, including its success in arranging financing where required, (b) the
nature and extent of future competition in the Company's principal marketing
areas, and (c) political, economic and demographic developments in the U.S.,
Africa, Brazil, the Caribbean, Europe and other countries where the Company
now does business or in the future may do business.
COST OF COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS MAY BE MATERIAL
The Company is subject to Federal, state, local and foreign environmental
requirements, including those relating to discharges to air, water and land,
the handling and disposal of solid and hazardous waste and the cleanup of
properties affected by hazardous substances. Certain environmental laws, such
as the Comprehensive Environmental Response, Compensation, and Liability Act,
as amended ("CERCLA"), impose strict, retroactive, joint and several liability
upon persons responsible for releases of hazardous substances.
The Company is not aware of any liabilities arising under environmental
requirements, except as would not be expected to have a material adverse
effect on the Company's business, results of operations or financial
condition. However, some risk of environmental liability is inherent in the
nature of the Company's current and former businesses and the Company might in
the future incur material costs to meet current or more stringent compliance,
cleanup or other obligations pursuant to environmental requirements.
The Company has had certain difficulties meeting its permit levels for
various parameters for its wastewater discharge to the City of Savannah's
sewer system resulting in the issuance of notices of violation to the Company
by the City of Savannah. The Company is working cooperatively with the City of
Savannah to address this issue and has not been nor does it expect to be
fined. However, there can be no guarantee that the Company will not incur
future costs, including but not limited to, fines in connection with waste
water compliance. See "Business--Environmental Matters."
15
<PAGE>
THE COMPANY
GENERAL
The Company is a leading manufacturer and marketer in the U.S. retail ethnic
hair care market for African-Americans. The Company believes that it is one of
the leading global manufacturers and marketers of ethnic hair care products
for persons of African descent. The Company's flagship brand, Dark & Lovely,
is the most widely recognized ethnic brand name in the U.S. retail ethnic hair
care market. The Company currently sells over 60 different products under five
principal brand names, including Dark & Lovely, Excelle, Beautiful Beginnings,
Dark & Natural and Magic. The majority of the Company's sales are derived from
four categories of the ethnic health and beauty aids market: hair relaxers and
texturizers, which are used to chemically treat and straighten hair, hair
color, shaving products and hair care maintenance products. The Company's
products are specifically formulated to address the unique physiological
characteristics of hair of persons of African descent, which typically include
curliness and dryness. The Company markets its products in the United States
with its own experienced direct sales force. The Company also currently
markets its products in 60 countries outside of the United States, primarily
through local distributors. The Company believes that in 1995, it had the
number one U.S. retail market position in three of the four ethnic hair care
categories in which it competes (hair relaxers and texturizers, hair color and
shaving products). In addition, the Company believes that the strength of its
competitive position in the ethnic hair care industry is attributable, in
part, to its heritage of technological innovation and its focused R&D effort.
BACKGROUND
The Company (formerly DNL Savannah Holding Corp.) was established in May
1995. On August 23, 1995, Acquisition Corp., a wholly-owned subsidiary of the
Company, acquired all of the stock of the Predecessor from the Minis family
and the Aminco, Inc. ESOP (the "ESOP"). Acquisition Corp. was formed by
Morningside, as financial sponsor, on behalf of an investor group consisting
of DNL Partners, the lenders providing the acquisition financing and certain
members of management, specifically Dr. Leroy Keith and Mr. Bradford N.
Creswell. The purchase price (inclusive of transaction costs) consisted of
approximately $83.2 million in cash, and $11.8 million in junior subordinated
promissory notes (the "Junior Subordinated Notes") bearing interest at 10.0%
and 15.0% of the common stock of the Company which was retained by the
sellers. The Acquisition was financed primarily by debt incurred by the
Company including borrowings of $35.0 million aggregate principal amount under
a Credit Agreement dated as of August 23, 1995 (as amended, the "Senior Bank
Credit Facility"), the issuance of 12.5% Senior Subordinated Notes due 2002
(the "Senior Subordinated Notes") in an aggregate principal amount of $18.0
million, the issuance of 15.0% Subordinated Notes due 2003 (the "PIK
Subordinated Notes") in an aggregate principal amount of $3.0 million and the
issuance of the Junior Subordinated Notes to the sellers in an aggregate
principal amount of approximately $11.8 million, as well as equity
contributions of $12.0 million and $15.2 million of the Predecessor's
available cash. Concurrent with the Acquisition, the following events took
place: (i) two subsidiaries of the Predecessor, Carson Products Company, a
Georgia Corporation, and Aminco, Inc., a Georgia corporation, merged into the
Predecessor; (ii) the Predecessor changed its name to Carson Products Company;
and (iii) Acquisition Corp. merged with Carson Products Company, with Carson
Products as the surviving entity.
The principal shareholder of the Predecessor, Mr. A. Minis, Jr., owned and
controlled the Company since 1951 when he purchased it from its original
founders and owners who had started the business in 1901 with a single
product--Magic shaving powder. In 1985, the Predecessor formed the ESOP, which
was terminated with the Acquisition. The shares of the Company collectively
owned by the Minis family are currently held by a trust established for the
benefit of Mr. Minis, certain Minis family members individually and certain
other affiliated trusts and entities, each of which will sell all of their
shares in the Offerings and consequently will no longer have an ownership
interest in the Company. The Selling Stockholders have agreed that
simultaneously with the closing of the Offerings, the Company will purchase
all of the outstanding Junior Subordinated Notes held by the Selling
Stockholders for a purchase price of approximately $4.7 million to be paid in
cash at the closing of the Offerings. The Company intends to use a portion of
the proceeds from the Offerings to repurchase the Junior Subordinated Notes.
See "Use of Proceeds."
16
<PAGE>
CORPORATE STRUCTURE
The following chart sets forth the corporate structure of the Company.
Except as noted below, each of the Company's direct and indirect subsidiaries
are wholly-owned.*
CARSON, INC.
CARSON PRODUCTS COMPANY
CARSON
SOUTH AFRICA
(73.125% OWNED)
CARSON PRODUCTS
S.A.
- --------
* Does not include inactive subsidiaries.
Carson Holdings Limited ("Carson South Africa"), a South African company
incorporated on February 14, 1996, is currently 73.125% owned by Carson
Products. Carson Products (Proprietary) Limited ("Carson Products S.A."), a
South African registered company, wholly-owned by Carson South Africa, serves
as the operating company for the Company's South African operations. On July
3, 1996, Carson South Africa sold 25% of its shares to the public in an
initial public offering on the Johannesburg Stock Exchange, which raised
approximately $4.2 million in net proceeds. At the same time an additional
1.875% of Carson South Africa shares were issued to certain employees,
directors and officers of the Company involved in the South Africa operations.
The net proceeds were used by Carson South Africa to purchase a manufacturing
facility and related equipment as well as to provide funds for the Company's
strategic initiatives in Africa.
Carson Products S.A. has been in operation for the past three years and
manufactures and distributes ethnic hair care products under license from
Carson Products. In-house manufacturing of products, previously carried out
through a contract manufacturer, began in March 1996 and is being phased in
over a one-year period. Pursuant to a distribution agreement with Carson
Products dated May 14, 1996, Carson Products S.A. has the exclusive right to
distribute and sell the Company's entire product line throughout the African
continent and has the right to supply the Company's products to the European
market up to 20% of the Company's budgeted European sales. The initial term of
the agreement expires on April 1, 2001; however, the agreement continues
indefinitely thereafter until terminated by either party upon 12 months
written notice. Carson Products S.A. has a license agreement with Carson
Products whereby Carson Products S.A. has licensed a number of the products of
Carson Products (totalling over 60). In conjunction with the South African
initial public offering, the license agreement was amended to provide that,
commencing on April 1, 1998, Carson Products S.A. will pay to Carson Products
a royalty in the amount of 3.0% of the net sales price of all licensed
products sold. The amount of the royalty increases to 3.5% on April 1, 1999
and 4.0% on April 1, 2000 until the termination of the agreement. The initial
term of the agreement expires on April 1, 1999, however, the agreement
continues indefinitely thereafter until terminated by either party upon 12
months written notice.
The Company's principal executive offices are located at 64 Ross Road,
Savannah Industrial Park, Savannah, GA 31405, and its telephone number is
(912) 651-3400.
17
<PAGE>
USE OF PROCEEDS
The net proceeds to be received from the sale of the 2,484,500 shares of
Class A Common Stock by the Company in the Offerings (after deducting the
underwriting discounts and estimated expenses of the Offerings payable by the
Company) are estimated to be approximately $33.7 million ($42.4 million if the
Underwriters exercise their over-allotment options in full), based on an
assumed initial public offering price of $15.00 per share (which represents
the midpoint of the estimated range of the initial public offering price).
The Company intends to use a portion of such net proceeds, (i) to purchase all
of the $18.0 million aggregate principal amount of the 12.5% Senior
Subordinated Notes due 2002, plus prepayment premium for an aggregate purchase
price of approximately $19.3 million plus accrued and unpaid interest thereon,
(ii) to redeem all of the $3.0 million aggregate principal amount of the 15.0%
PIK Subordinated Notes due 2003, plus prepayment premium for an aggregate
redemption price of approximately $3.6 million plus accrued and unpaid
interest thereon, and (iii) to purchase all of the $11.8 million aggregate
principal amount of the Junior Subordinated Notes, for a purchase price of
$4.7 million, which Junior Subordinated Notes bear interest at a rate of
10.0% per annum and of which $5.0 million aggregate principal amount matures
in August 2000 and approximately $3.4 million aggregate principal amount
matures in each of August 2001 and August 2002. The balance of such net
proceeds along with borrowings under the New Senior Bank Facility will be used
to repay all outstanding borrowings under the Senior Bank Credit Facility,
which matures in September 2001 and which bears interest at floating rates
based on the prime rate or the Eurodollar rate (the weighted average interest
rate on this indebtedness at June 30, 1996 was 8.4%). The Company will not
receive any proceeds from the sale of shares of Class A Common Stock by the
Selling Stockholders.
DIVIDEND POLICY
Since the Acquisition, the Company has not declared or paid any cash or
other dividends on its Common Stock and does not expect to pay dividends for
the foreseeable future. The Company anticipates that for the foreseeable
future, earnings will be reinvested in the business to finance its growth and
development. The declaration and payment of dividends by the Company are
subject to the discretion of the Board of Directors of the Company (the
"Board"). The Company anticipates entering into an amended and restated senior
bank facility (the "New Senior Bank Facility") prior to or simultaneous with
the consummation of the Offerings. The New Senior Bank Facility will restrict
the ability of the Company's subsidiaries to pay dividends or make other
distributions on their common stock to the Company which will limit cash
available at the Company for dividends. Any future determination to pay
dividends will depend on the Company's results of operations, financial
condition, capital requirements, contractual restrictions and other factors
deemed relevant by the Board.
18
<PAGE>
DILUTION
The net tangible book value (deficit) of the Company as of June 30, 1996 was
approximately ($36.2 million) or ($3.19) per share of Common Stock. Net
tangible book value (deficit) per share represents the amount of the Company's
total assets (excluding intangible assets) less its total liabilities, divided
by the number of shares of Common Stock outstanding. In August 1996, several
outside directors and members of senior management bought 501,191 shares of
Common Stock for aggregate consideration of $1.9 million of which $1.6 million
($1.3 million net of discount) was financed with full recourse loans and $0.3
million was paid in cash. After adjusting for this purchase, the net tangible
book value as of June 30, 1996 would have increased $0.16 per share. The pro
forma net tangible book value (deficit) of the Company at June 30, 1996 as
adjusted, would have been approximately ($0.8) million, or ($0.06) per share
of Common Stock, after giving effect to the Offerings and the use of the net
proceeds therefrom and the purchase of shares of Common Stock by several
outside directors and members of senior management. This represents an
immediate increase in net tangible book value of $2.97 per share to the
existing stockholders and an immediate net tangible book value dilution of
$15.06 per share to new investors purchasing shares in the Offerings. The
following table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $15.00
Net tangible book value (deficit) per share at June 30,
1996...................................................... $(3.19)
Increase in net tangible book value per share attributable
to the purchase of shares in August 1996 by several out-
side directors and members of senior management........... .16
Increase in net tangible book value per share attributable
to new 2.97
investors................................................. ------
Pro forma net tangible book value (deficit) per share after the (.06)
Offerings(1).................................................. ------
Dilution per share to new investors............................ $15.06
======
</TABLE>
The following table summarizes, the shares of Common Stock purchased from
the Company, the total consideration paid and the average price per share paid
by the existing stockholders (including the shares purchased in August 1996 by
several outside directors and members of senior management) and new
stockholders, adjusted as of June 30, 1996 to give effect to the sale of
shares of Class A Common Stock offered hereby:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
AMOUNT PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(2)... 11,871,191 82.7% $10,546,000 22.1% $ 0.89
New investors.............. 2,484,500 17.3% $37,267,500 77.9% $15.00
</TABLE>
- --------
(1) Excludes 400,000 shares of Class A Common Stock reserved for issuance
pursuant to the Company's 1996 Non-Employee Directors Equity Incentive
Program (including 10,500 shares issuable upon exercise of options to be
granted to the Company's non-employee directors immediately prior to the
consummation of the Offerings). Also excludes 600,000 shares of Class A
Common Stock reserved for issuance pursuant to the Company's 1996 Long-
Term Incentive Plan (including 59,500 shares issuable upon the exercise
of options to be granted to the Company's management immediately prior to
the consummation of the Offerings). The exercise price for the options to
be granted under each of these programs will be the initial public
offering price of the Class A Common Stock.
(2) The sale by the Selling Stockholders in the Offerings will cause the
number of shares held by the existing stockholders to be reduced by
1,705,500 shares, or 11.9% of the total number of shares to be
outstanding after the Offerings.
19
<PAGE>
CAPITALIZATION
(IN THOUSANDS, EXCEPT SHARE DATA AND FOOTNOTES)
The following table sets forth the short-term debt and the consolidated
capitalization of the Company at June 30, 1996 after giving effect to the
Recapitalization and as adjusted to give effect to the purchase of shares of
common stock by certain outside directors and members of senior management in
August 1996, the Offerings and the application of the net proceeds therefrom,
and the refinancing of the Senior Bank Credit Facility with the New Senior
Bank Facility. This table should be read in conjunction with the Consolidated
Financial Statements of the Company and accompanying Notes thereto appearing
elsewhere in this Prospectus. See "Use of Proceeds" and "Selected Consolidated
Historical Financial Data."
<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------
AS
ACTUAL ADJUSTED
------- ---------
<S> <C> <C>
Short-term debt (including current portion of
long-term debt)................................ $ 2,510 $ 10
======= ========
Long-term debt:
Senior Bank Credit Facility:
Term loan................................... $29,000 --
Revolving line of credit.................... 7,500 --
New Senior Bank Facility(a):
Term loans.................................. -- $ 25,000
Revolving line of credit.................... -- 7,900
12.5% Senior Subordinated Notes due 2002...... 16,726 (b) --
15.0% PIK Subordinated Notes due 2003......... 2,414 (b) --
10.0% Junior Subordinated Notes due through
2002......................................... 11,552 (b) --
Other......................................... 27 27
------- --------
Total long-term debt........................ 67,219 32,927
------- --------
Stockholders' equity:
Preferred stock, par value $.01 per share,
10,000,000 shares authorized, none issued.... -- --
Class A Common Stock, par value $.01 per
share, 150,000,000 shares authorized, no
shares (actual) and 4,190,000 shares (as
adjusted) issued and outstanding (c)......... -- 42
Class B Common Stock, par value $.01 per
share, 2,000,000 shares authorized, 1,859,677
shares (actual) and 1,859,677 shares (as
adjusted) issued and outstanding............. 19 19
Class C Common Stock, par value $.01 per
share, 10,000,000 shares authorized,
9,510,323 shares (actual) and 8,306,014
shares (as adjusted) issued and outstanding.. 95 83
Paid-in capital............................... 8,557 55,647 (d)(e)
Retained earnings (deficit)................... 1,514 (8,833)(e)(f)(g)
Foreign currency translation adjustment....... (94) (94)
Notes receivable, net of discount............. (1,325)(e)
------- --------
Total stockholders' equity.................. 10,091 45,539
------- --------
Total capitalization...................... $77,310 $ 78,466
======= ========
</TABLE>
(footnotes on following page)
20
<PAGE>
- --------
(a) Prior to or simultaneously with the consummation of the Offerings, the
Company will enter into the New Senior Bank Facility. The New Senior Bank
Facility will include a $15.0 million revolving credit facility subject to
borrowing base limitations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation--Liquidity and Capital
Resources."
(b) Net of unamortized discount of $1,274, $986, and $201 for the Senior
Subordinated Notes, PIK Subordinated Notes, and Junior Subordinated Notes,
respectively.
(c) Does not include 59,500 shares issuable upon exercise of options to be
granted immediately prior to the consummation of the Offerings under the
Company's 1996 Long-Term Incentive Plan having a weighted average exercise
price of $15.00 per share and 10,500 shares issuable upon exercise of
options to be granted immediately prior to the consummation of the
Offerings under the Company's 1996 Non-Employee Directors Equity Incentive
Plan having a weighted average exercise price of $15.00 per share.
(d) Paid-in capital has been increased for the addition of the excess of the
carrying value of the Junior Subordinated Notes (net of related prepaid
interest and deferred financing costs of $1.8 million) over the purchase
price to be paid ($4.7 million). Since the Junior Subordinated Notes are
held by a related party, the gain on extinguishment of debt will be
recorded as a capital transaction.
(e) Retained earnings has been reduced for a compensation charge of $6.8
million (with no associated income tax benefits) as a result of the
purchase of 501,191 shares of common stock by several outside directors
and members of senior management during August 1996. Paid-in capital has
been increased for the compensation charge of $6.8 million and for the
purchase price of $0.3 million and $1.3 million (net of discount) for
shares of Common Stock purchased by such outside directors and members of
senior management, respectively. The purchase of such shares by senior
management was financed with non-interest bearing long-term full recourse
loans from the Company.
(f) Retained earnings has been reduced for the extraordinary loss of
approximately $3.6 million, net of tax, resulting from prepayment
penalties, write-off of unamortized debt discount and deferred financing
costs associated with the repayment of the Senior Bank Credit Facility,
the Senior Subordinated Notes and the PIK Subordinated Notes.
(g) Retained earnings has not been reduced for compensation charges of
approximately $0.6 million principally for cash awards under certain
incentive compensation agreements which will be recorded upon completion
of the Offerings.
21
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND FOOTNOTES)
The following unaudited pro forma statements of operations for the year
ended March 31, 1996 and the three months ended June 30, 1996 and 1995 give
effect to (i) the Acquisition and (ii) the Offerings including the application
of the net proceeds therefrom, and (iii) the refinancing of the Senior Bank
Credit Facility as if such events had occurred on April 1, 1995.
The unaudited pro forma financial data are based on the historical
consolidated financial statements for the Predecessor and the Company and the
assumptions and adjustments described in the accompanying notes. The unaudited
pro forma statements of continuing operations do not purport to be
representative of the Company's actual results of operations had the events
described above occurred as of the dates indicated or what such results will
be for any future periods. The unaudited pro forma financial data are based
upon assumptions that the Company believes are reasonable and should be read
in conjunction with the Consolidated Financial Statements and accompanying
notes thereto included elsewhere in this Prospectus.
PRO FORMA STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
APRIL 1, AUGUST 23,
1995 TO 1995 TO COMBINED ADJUSTMENTS ADJUSTMENTS PRO FORMA
AUGUST 22, MARCH 31, FISCAL RELATING TO THE RELATING TO THE FISCAL
1995 1996 1996(A) ACQUISITION OFFERINGS 1996
----------- ---------- -------- --------------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $26,854 $41,465 $68,319 $68,319
Cost of sales........... 11,513 18,629 30,142 30,142
------- ------- ------- -------
Gross profit.......... 15,341 22,836 38,177 38,177
SG&A expenses........... 9,743 14,642 24,385 $ 266 (b) 24,651
Depreciation and amorti-
zation................. 502 1,331 1,833 745 (c) $ (478)(d) 2,100
------- ------- ------- ------- ------ -------
Operating income...... 5,096 6,863 11,959 (1,011) 478 11,426
Interest expense........ 56 4,487 4,543 3,160 (e) (5,025)(d) 2,678
Other income............ 1,137 182 1,319 (1,068)(f) 251
------- ------- ------- ------- ------ -------
Income before income
taxes.................. 6,177 2,558 8,735 (5,239) 5,503 8,999
Provision for income
taxes.................. 2,243 1,352 3,595 (1,804)(g) 2,091 (g) 3,882
------- ------- ------- ------- ------ -------
Net income.............. $ 3,934 $ 1,206 $ 5,140 $(3,435) $3,412 $ 5,117(h)(i)
======= ======= ======= ======= ====== =======
Net income per share.... $ 0.36(j)
=======
Weighted average shares
outstanding............ 14,356
=======
</TABLE>
22
<PAGE>
THREE MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
COMPANY ADJUSTMENTS PRO FORMA
THREE MONTHS RELATING TO THE THREE MONTHS ENDED
ENDED JUNE 30, 1996 OFFERINGS JUNE 30, 1996
------------------- --------------- ------------------
<S> <C> <C> <C>
Net sales......................... $18,799 $18,799
Cost of sales..................... 8,135 8,135
------- -------
Gross profit.................... 10,664 10,664
SG&A expenses..................... 6,673 6,673
Incentive compensation............ 800 800(k)
Depreciation and amortization..... 629 $ (120)(d) 509
------- ------ -------
Operating income................ 2,562 120 2,682
Interest expense.................. 1,826 (1,256)(d) 570
Other income...................... 37 37
------- ------ -------
Income before income taxes........ 773 1,376 2,149
Provision for income taxes........ 465 523 (g) 988
------- ------ -------
Net income........................ $ 308 $ 853 $ 1,161(h)(i)
======= ====== =======
Net income per share.............. $ 0.08(j)
=======
Weighted average shares outstand-
ing.............................. 14,356
=======
</TABLE>
THREE MONTHS ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
PREDECESSOR ADJUSTMENTS ADJUSTMENTS PRO FORMA
THREE MONTHS RELATING TO THE RELATING TO THE THREE MONTHS ENDED
ENDED JUNE 30, 1995 ACQUISITION OFFERINGS JUNE 30, 1995
------------------- --------------- --------------- ------------------
<S> <C> <C> <C> <C>
Net sales............... $17,271 $17,271
Cost of sales........... 7,351 7,351
------- -------
Gross profit.......... 9,920 9,920
SG&A expenses........... 6,545 $ 160 (b) 6,705
Depreciation and amorti-
zation................. 301 447 (c) $ (120)(d) 628
------- ------- ------ -------
Operating income...... 3,074 (607) 120 2,587
Interest expense........ 34 1,896 (e) (1,256)(d) 674
Other income............ 328 (147)(f) 181
------- ------- ------ -------
Income before income
taxes.................. 3,368 (2,650) 1,376 2,094
Provision for income
taxes.................. 1,230 (895) (g) 523 (g) 858
------- ------- ------ -------
Net income ............. $ 2,138 $(1,755) $ 853 $ 1,236(h)(i)
======= ======= ====== =======
Net income per share.... $ 0.09(j)
=======
Weighted average shares
outstanding............ 14,356
=======
</TABLE>
(footnotes on following page)
23
<PAGE>
- --------
(a) The statement of operations of the Predecessor for the period from April
1, 1995 to August 22, 1995 is combined with the statement of operations of
the Company for the period August 23, 1995 to March 31, 1996.
(b) Adjustment to reflect the pro forma effect of a full year of executive
salary expense increase and management fee arising from the Acquisition.
(c) Adjustment to reflect (i) amortization of goodwill and deferred financing
costs arising from the Acquisition and depreciation expense resulting from
the revaluation of the Company's fixed assets as a result of the
Acquisition, and (ii) the elimination of package design costs amortization
(net of actual costs incurred) resulting from a change from the
Predecessor's policy of capitalizing to the Company's policy of expensing
package design costs as incurred as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS YEAR
ENDED ENDED
JUNE 30, 1995 MARCH 31, 1996
------------- --------------
<S> <C> <C>
Goodwill...................................... $ 295 $ 491
Deferred financing costs...................... 136 228
Depreciation expense.......................... (23) (38)
Package design costs.......................... 39 64
----- -----
$ 447 $ 745
===== =====
</TABLE>
(d) Reflects a reduction in amortization of deferred financing costs and
interest expense resulting from the use of net proceeds from the Offerings
to repay $6.1 million of the term loan under the Senior Bank Credit
Facility (and the refinancing of remaining amounts thereunder into the New
Senior Bank Facility), the Senior Subordinated Notes, and the PIK
Subordinated Notes and to repurchase the Junior Subordinated Notes.
(e) Adjustment to reflect interest expense for the entire period presented
related to indebtedness under (i) the Senior Bank Credit Facility, (ii)
the Senior Subordinated Notes (which bear interest of 12.5% per annum),
(iii) the PIK Subordinated Notes (which bear interest of 15.0% per annum),
(iv) the Junior Subordinated Notes (which bear interest of 10.0% per
annum), and amortization of related debt discounts.
(f) Adjustment to eliminate investment income related to investment securities
held by the Predecessor which were sold in connection with the financing
of the Acquisition.
(g) Adjustment to reflect income tax effects of the pro forma adjustments
presented herein based on the statutory tax rate (38%) in effect.
(h) Excludes extraordinary loss of approximately $3.6 million, net of tax,
which will result from prepayment penalties and write-off of unamortized
debt discount and deferred financing costs associated with the repayment
of the Senior Bank Credit Facility, the Senior Subordinated Notes and the
PIK Subordinated Notes.
(i) Excludes the effect of non-cash compensation charges aggregating
approximately $6.8 million (with no associated income tax benefits) to be
recorded during the three months ended September 30, 1996 resulting from
the purchase of shares of Common Stock by several outside directors and
members of senior management during August 1996 and the share awards made
by Carson South Africa to certain members of its management. Also excludes
compensation charges of approximately $0.6 million principally for cash
awards under certain incentive compensation agreements which will be
recorded upon completion of the Offerings.
(j) Net income per share is based on the weighted average shares of Common
Stock outstanding during the period from August 23, 1995 to March 31,
1996. All Common Stock issued prior to the Offerings has been included in
the calculation of Common Stock outstanding as if such shares were
outstanding for the entire period presented. The total weighted average
shares of Common Stock outstanding has been adjusted to give effect to the
Recapitalization, the Offerings and the purchase of shares of Common Stock
by several outside directors and senior management.
(k) The Company recognized $0.8 million of incentive compensation expense
during the quarter ended June 30, 1996 relating to anticipated costs under
certain long-term incentive compensation agreements.
24
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA (A)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND FOOTNOTES)
Set forth below are selected historical financial data of the Predecessor
and the Company as of the dates and for the periods shown. The selected
historical financial data of the Predecessor as of March 31, 1995 and for the
years ended March 31, 1994 and 1995 and for the period from April 1, 1995
through August 22, 1995 were derived from the audited historical financial
statements of the Predecessor for such periods appearing elsewhere in this
Prospectus. The selected historical financial data of the Predecessor as of
March 31, 1992, 1993, and 1994 and for the periods ended March 31, 1992 and
1993 were derived from audited historical financial statements of the
Predecessor not included in this Prospectus. The selected historical financial
data of the Company as of March 31, 1996 and for the period from August 23,
1995 through March 31, 1996 were derived from the audited historical financial
statements of the Company for such period appearing elsewhere in this
Prospectus. The selected historical financial data of the Predecessor as of
and for the three months ended June 30, 1995 and of the Company as of and for
the three months ended June 30, 1996 are unaudited; however, in the opinion of
management such unaudited data include all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of the information
included therein. The results of operations for the three months ended June
30, 1996 are not necessarily indicative of the results for the entire fiscal
year or any other interim period. Because of the revaluation of the assets and
liabilities and related impact to the statement of operations, the financial
statements of the Predecessor for the periods prior to August 22, 1995 are not
strictly comparable to those of the Company subsequent to that date. The
selected historical financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Unaudited Pro Forma Financial Data" and the Consolidated
Financial Statements of the Predecessor and the Company and accompanying notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY PREDECESSOR
--------------------------------------------- ------------ --------------
FULL FISCAL YEAR 1996
-------------------------
<CAPTION>
COMPANY
---------------
YEAR ENDED APRIL 1 AUGUST 23,
MARCH 31, TO 1995 THREE MONTHS
--------------------------------- AUGUST 22, TO MARCH 31, ENDED JUNE 30,
1992 1993 1994 1995 1995 1996 1995
------- ------- ------- ------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $49,947 $49,335 $50,108 $58,126 $26,854 $41,465 $17,271
Cost of sales...................... 21,211 21,585 23,622 25,692 11,513 18,629 7,351
------- ------- ------- ------- ------- ------- -------
Gross profit...................... 28,736 27,750 26,486 32,434 15,341 22,836 9,920
SG&A expenses...................... 20,077 20,316 21,473 23,134 9,743 14,642 6,545
Incentive compensation.............
Depreciation and amortization...... 566 695 828 1,085 502 1,331 (c) 301
------- ------- ------- ------- ------- ------- -------
Operating income.................. 8,093 6,739 4,185 8,215 5,096 6,863 3,074
Interest expense................... 81 115 97 136 56 4,487 (c) 34
Other income....................... 697 916 699 783 1,137(d) 182 328
------- ------- ------- ------- ------- ------- -------
Income from continuing operations
before income taxes and changes in
accounting principles............. 8,709 7,540 4,787 8,862 6,177 2,558 3,368
Provision for income taxes......... 3,104 2,601 1,704 3,174 2,243 1,352 1,230
------- ------- ------- ------- ------- ------- -------
Income from continuing operations
before changes in accounting prin-
ciples............................ 5,605 4,939 3,083 5,688 3,934 1,206 2,138
Income (loss) from discontinued op-
erations, net of tax(e)........... 63 (353) (574)
Loss on disposal of discontinued
operations, net of tax(e)......... (635)
------- ------- ------- ------- ------- ------- -------
Income before cumulative effect of
changes in accounting principles.. 5,668 4,586 1,874 5,688 3,934 1,206 2,138
Cumulative effect of changes in ac-
counting principles, net of tax... 23 (250)
------- ------- ------- ------- ------- ------- -------
Net income......................... $ 5,668 $ 4,586 $ 1,897 $ 5,438 $ 3,934 $ 1,206 $ 2,138
======= ======= ======= ======= ======= ======= =======
Net income per share(f)............ $ .10
=======
Weighted average shares
outstanding(f).................... 11,871
- --------------------------------------------------
=======
THREE MONTHS
ENDED JUNE 30,
1996
---------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $18,799
Cost of sales...................... 8,135
---------------
Gross profit...................... 10,664
SG&A expenses...................... 6,673
Incentive compensation............. 800 (b)
Depreciation and amortization...... 629 (c)
---------------
Operating income.................. 2,562
Interest expense................... 1,826 (c)
Other income....................... 37
---------------
Income from continuing operations
before income taxes and changes in
accounting principles............. 773
Provision for income taxes......... 465
---------------
Income from continuing operations
before changes in accounting prin-
ciples............................ 308
Income (loss) from discontinued op-
erations, net of tax(e)...........
Loss on disposal of discontinued
operations, net of tax(e).........
---------------
Income before cumulative effect of
changes in accounting principles.. 308
Cumulative effect of changes in ac-
counting principles, net of tax...
---------------
Net income......................... $ 308
===============
Net income per share(f)............ $ .03
===============
Weighted average shares
outstanding(f).................... 11,871
- --------------------------------------------------
===============
</TABLE>
25
<PAGE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
PREDECESSOR MARCH 31,
-------------------------------
COMPANY PREDECESSOR COMPANY
MARCH 31, JUNE 30, JUNE 30,
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital......... $14,184 $14,256 $11,653 $15,140 $13,957 $16,364 $14,860
Total assets............ 37,848 37,572 39,209 43,863 88,082 44,555 92,246
Total long-term debt
(excluding current por-
tion).................. 552 288 -- -- 63,778 -- 67,219
Stockholders' equity.... 29,141 30,473 29,699 34,358 9,877 35,928 10,091
</TABLE>
- --------
(a) The period beginning August 23, 1995 reflects data of the Company and its
subsidiaries. The periods prior to and including August 22, 1995 reflect
data of the Predecessor, all of the stock of which was acquired by the
Company on August 23, 1995. See "The Company--Background." Because of the
revaluation of the assets and liabilities acquired and the related impact
to the statement of operations, the financial statements of the
Predecessor for the periods prior to August 23, 1995 are not strictly
comparable to those of the Company subsequent to that date.
(b) The Company recognized $0.8 million of incentive compensation expense
during the quarter ended June 30, 1996 relating to anticipated costs under
certain long-term incentive compensation agreements. Upon completion of
the Offerings, the Company will record additional compensation charges of
approximately $0.6 million (based on the midpoint of the estimated range
of the initial public offering price) principally for final payments under
these awards.
During August 1996, several outside directors and members of senior
management purchased 115,373 and 385,818 shares, respectively, of the
Company's Common Stock. The purchase of such shares by senior management
was financed with $1.3 million (net of discount) in non-interest bearing
long-term full recourse loans from the Company. The Company will record
additional non-cash compensation expense of approximately $6.8 million
(with no associated income tax benefits) during the three months ended
September 30, 1996 for the excess of the estimated initial public offering
price over the actual purchase price of such shares and for the shares of
Carson South Africa awarded to certain members of its management.
(c) Results for the period from August 23, 1995 to March 31, 1996 include $0.7
million of amortization expense related to acquired goodwill and $4.4
million of interest expense related to debt used to fund the Acquisition.
Results for the three months ended June 30, 1996 include $0.3 million of
amortization expense related to acquired goodwill and $1.8 million of
interest expense related to debt used to fund the Acquisition.
Upon completion of the Offerings, the Company will record an extraordinary
loss of approximately $3.6 million, net of tax, which will result from
prepayment penalties and write-off of unamortized debt discount and
deferred financing costs associated with the repayment of the Senior Bank
Credit Facility, the Senior Subordinated Notes and the PIK Subordinated
Notes. See "Use of Proceeds."
(d) Includes realized gains of $0.8 million recorded by the Predecessor for
investment securities of the Predecessor which were sold prior to the
Acquisition. The cash received from the sale of such investment securities
was used to fund a portion of the consideration in the acquisition.
(e) Effective January 31, 1994, the Predecessor discontinued operations of a
subsidiary and sold certain assets of the subsidiary for proceeds of $1.1
million.
(f) Net income per share data has been computed assuming there were 11,871,191
weighted average shares of Common Stock outstanding, after giving effect
to the Recapitalization and 501,191 shares of Common Stock purchased by
several outside directors and members of senior management.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RECENT OPERATING RESULTS
The Company's operating results for the four month period ended July 31,
1996 (prior to any incentive compensation expense) include sales of $25.7
million, operating income of $4.4 million and EBITDA of $5.3 million,
representing an increase of 14.9%, 9.4% and 18.2%, respectively, over such
results for the four month period ended July 31, 1995.
OVERVIEW
The Company is the leading manufacturer and marketer in the U.S. retail
ethnic hair care market for African-Americans. The Company currently sells
over 60 different products in the United States and 60 other countries under
five principal brand names. The majority of the Company's net sales are
derived from four categories of the ethnic health and beauty aids market: hair
relaxers and texturizers (which constituted approximately 50% of the Company's
net sales in fiscal 1996), hair color, shaving products and hair care
maintenance products. The Predecessor had and the Company currently has a
March 31 fiscal year end. The Company intends to change its fiscal year to a
calendar year beginning on January 1, 1997.
The Company introduced the first no-lye relaxer in the U.S. ethnic retail
hair care market in 1978. This allowed the Company to grow and secure a
significant position in the U.S. ethnic retail hair care market. This growth
continued throughout the 1980s until fiscal 1992. The five-year compounded
annual growth rate in net sales for the period from March 31, 1987 to March
31, 1992 was 9.4%. From fiscal year 1992 to fiscal year 1994, net sales
remained flat and gross margin decreased from 57.5% to 52.9%. The Company
faced competitive pressure during this same time period in the relaxer market,
and responded by reformulating and improving its relaxer products, in addition
to introducing several other product lines. At the same time, the Company
developed and designed new packaging for many of its products and introduced a
new marketing campaign. Additionally, the Company introduced, Beautiful
Beginnings, a children's relaxer, Dark & Natural, a men's texturizer and new
hair care maintenance products. The effect of these competitive responses is
reflected in fiscal 1995 results as net sales increased 16.0% and gross margin
recovered to 55.8%. In fiscal 1996 on a combined basis the growth continued
with a net sales increase of 17.5% and an operating income increase of 45.6%
as compared to fiscal 1995. For the three months ended June 30, 1996 net sales
increased 8.8% and, excluding the effect of an unusual incentive compensation
charge, operating income increased 9.4% and EBITDA increased 15.4% over the
Predecessor three month period ended June 30, 1995.
On August 23, 1995, Acquisition Corp., a wholly-owned subsidiary of the
Company, acquired the stock of the Predecessor from the Minis family and the
ESOP. Acquisition Corp. was formed by Morningside as financial sponsor, on
behalf of an investor group consisting of DNL Partners, the lenders providing
the acquisition financing and certain members of management. The purchase
price consisted of approximately $83.2 million in cash and $11.8 million in
Junior Subordinated Notes bearing interest at 10.0% and 15.0% of the common
stock of the Company retained by the sellers. The Acquisition was financed by
borrowings of $35.0 million aggregate principal amount under the Senior Bank
Credit Facility, the issuance of 12.5% Senior Subordinated Notes in an
aggregate principal amount of $18.0 million, the issuance of 15.0% PIK
Subordinated Notes in an aggregate principal amount of $3.0 million, the
issuance of the Junior Subordinated Notes to the sellers in an aggregate
principal amount of approximately $11.8 million, equity contributions of $12.0
million and $15.2 million of available cash. Concurrent with the Acquisition,
Acquisition Corp. merged into Carson Products Company. In connection with the
Acquisition, the senior management of the Predecessor was replaced and a team
of seasoned senior executives with extensive experience in the ethnic market
and consumer products industry was recruited to build on the Company's strong
position in the global ethnic hair care market.
In fiscal 1996, 23.8% of the net sales of the Company were to customers
outside the United States. The following table presents the combined
Predecessor and Company net sales by geographic region for fiscal 1996:
27
<PAGE>
<TABLE>
<CAPTION>
NET SALES TO: (IN MILLIONS) % OF TOTAL
------------- ------------- ----------
<S> <C> <C>
United States....................................... $52.0 76.2%
Africa.............................................. 7.7 11.3
Europe.............................................. 5.6 8.2
Other international................................. 3.0 4.3
----- -----
$68.3 100.0%
===== =====
</TABLE>
In March 1996, the Company commenced operations at its own manufacturing
facility in Midrand, South Africa, 15 miles north of Johannesburg. Previously,
the Company used a contract manufacturer to produce its products for the
Southern African market.
On July 3, 1996, the Company's South African subsidiary, Carson South
Africa, sold 25.0% of its shares in an initial public offering on the
Johannesburg Stock Exchange. This offering resulted in net proceeds of
approximately $4.2 million. At the same time, Carson South Africa issued
1.875% of its shares to certain employees, officers and directors involved in
the Company's South African operations. As a result of the issuance of these
shares, the Company will reflect in its consolidated statement of operations
for periods subsequent to the share issuance a minority interest in subsidiary
earnings. The amount of the charge to be reflected in this line item will
generally equal Carson South Africa's net income for the applicable period
multiplied by the percentage of the Carson South Africa shares which are not
indirectly owned by the Company. In conjunction with the South African initial
public offering, Carson Products entered into an amendment to its license
agreement with Carson Products S.A., which provides that commencing on April
1, 1998, Carson Products S.A. will pay to Carson Products a royalty in the
amount of 3.0% of the net sales of all licensed products. The amount of the
royalty increases to 3.5% on April 1, 1999 and 4.0% on April 1, 2000 until the
termination of the agreement. The initial term of the agreement expires on
April 1, 1999; however, the agreement continues indefinitely thereafter until
terminated by either party upon 12 months written notice. See "The Company--
Corporate Structure."
With the exception of sales by Carson Products S.A. to South Africa,
Botswana, Lesotho, Namibia and Swaziland which are denominated in South
African Rand, all of the Company's sales are made in U.S. Dollars. The Company
does not view the exposure to Rand exchange rate fluctuations as significant
because the South African subsidiary incurs all of its costs in Rand. Assets
and liabilities of the Company's South African operations are translated for
consolidation purposes from South African Rand into U.S. Dollars at the rate
of currency exchange at the end of the fiscal period. Revenues and expenses
are translated at average monthly prevailing exchange rates. Resulting
translation differences are recognized as a component of stockholders' equity.
Adjustments resulting from translations have historically been immaterial to
the Company's financial statements.
On June 26, 1996, Carson Products made an investment of $3.0 million in
Morningside AM Acquisition Corp., the parent of AM Cosmetics, a leading low-
cost manufacturer of cosmetics. The investment was made through the purchase
of $3.0 million of 12% cumulative, payment-in-kind preferred stock. The
Company's consolidated statement of operations for periods subsequent to June
26, 1996 will include the dividend income from this investment, although
dividends are anticipated to be paid through the issuance of additional
preferred stock. Therefore, it is anticipated that no cash will be generated
from this investment in the near future. In connection with the investment,
Carson Products entered into a management agreement and will enter into
certain related sales agreements and manufacturing agreements with AM
Cosmetics. See "Certain Relationships and Related Transactions--AM Cosmetics."
EFFECT OF THE ACQUISITION ON RESULTS OF OPERATIONS
The consummation of the Acquisition affected the Company's results of
operations following the Acquisition in certain significant respects. The
Acquisition was reflected using purchase accounting with the purchase price
being allocated to the Company's identifiable assets and liabilities based on
fair values at the Acquisition Date. The excess of the purchase price over the
fair value of the Company's identifiable net assets has been classified as
goodwill. Therefore, the depreciation and amortization expense of the Company
are significantly higher than the corresponding amounts for the Predecessor.
Additionally, interest expense increased due to debt used to finance the
Acquisition. The impact of the Acquisition on the Company's results of
operations is discussed below in the comparison of combined fiscal 1996 to
fiscal 1995.
28
<PAGE>
RESULTS OF OPERATIONS
The Acquisition was completed on August 23, 1995. Because of the application
of purchase accounting and the resulting revaluation of the Predecessor's
assets and liabilities and the impact on certain expenses, the financial
statements of the Predecessor for the periods prior to August 23, 1995 are not
strictly comparable to those of subsequent periods. However, the following
table combines historical fiscal 1996 data for the Predecessor and the Company
in order to facilitate discussion of financial results.
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
PREDECESSOR
-----------------------------
PREDECESSOR COMPANY
COMBINED YEAR THREE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED ENDED
MARCH 31, 1994 MARCH 31, 1995 MARCH 31, 1996 JUNE 30, 1995 JUNE 30, 1996
-------------- -------------- -------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales............... $50,108 $58,126 $68,319 $17,271 $18,799
Cost of sales........... 23,622 25,692 30,142 7,351 8,135
------- ------- ------- ------- -------
Gross profit.......... 26,486 32,434 38,177 9,920 10,664
Selling expenses........ 14,639 17,888 17,047 4,938 4,713
General and administra-
tive
expenses............... 6,834 5,246 7,338 1,607 1,960
Incentive compensation.. -- -- -- -- 800
Depreciation and amorti- 828 1,085 1,833 301 629
zation................. ------- ------- ------- ------- -------
Operating income...... 4,185 8,215 11,959 3,074 2,562
Interest expense........ 97 136 4,543 34 1,826
Investment income....... 591 633 1,134 251 43
Other income (expense), 108 150 185 77 (6)
net.................... ------- ------- ------- ------- -------
Income before taxes..... 4,787 8,862 8,735 3,368 773
Provision for income 1,704 3,174 3,595 1,230 465
taxes.................. ------- ------- ------- ------- -------
Net income (a).......... $ 3,083 $ 5,688 $ 5,140 $ 2,138 $ 308
======= ======= ======= ======= =======
EBITDA.................. $ 5,121 $ 9,053 $13,977 $ 3,452 $ 3,185
DATA AS A PERCENTAGE OF
SALES:
Net sales............... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........... 47.1 44.2 44.1 42.6 43.3
------- ------- ------- ------- -------
Gross profit.......... 52.9 55.8 55.9 57.4 56.7
Selling expenses........ 29.2 30.8 25.0 28.6 25.1
General and administra-
tive
expenses............... 13.6 9.0 10.7 9.3 10.4
Incentive compensation.. -- -- -- -- 4.3
Depreciation and amorti-
zation................. 1.7 1.9 2.7 1.7 3.3
------- ------- ------- ------- -------
Operating income...... 8.4% 14.1% 17.5% 17.8% 13.6%
======= ======= ======= ======= =======
</TABLE>
- --------
(a) Before effects of discontinued operations and changes in accounting
principles in the years ended March 31, 1994 and 1995.
29
<PAGE>
COMPANY THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO PREDECESSOR THREE MONTHS
ENDED JUNE 30, 1995.
Net Sales. Net sales increased from $17.3 million in the three months ended
June 30, 1995 to $18.8 million in the three months ended June 30, 1996, an
increase of 8.8%. In the United States, relaxers and texturizers, hair color
and hair care maintenance products all generated net sales increases. Shaving
products decreased as a result of the shaving products' manufacturing line
being out of service while it was reorganized and moved to another building to
optimize capacity. Carson South Africa continued to demonstrate strong results
with an increase in net sales of 47.2% from $1.5 million in the three months
ended June 30, 1995 to $2.2 million in the three months ended June 30, 1996.
International sales excluding South Africa decreased slightly, primarily as a
result of delayed shipments to Nigeria due to changes in import regulations.
Gross Profit. Gross profit increased from $9.9 million in the three months
ended June 30, 1995 to $10.7 million in the three months ended June 30, 1996,
an increase of 7.5%. This increase was almost entirely the result of the
increase in net sales. Gross margin decreased slightly from 57.4% to 56.7%
during this period, primarily as a result of an addition to the LIFO (last in,
first out) provision recorded in the three months ended June 30, 1996.
Selling Expenses. Selling expenses decreased from $4.9 million in the three
months ended June 30, 1995 to $4.7 million in the three months ended June 30,
1996, a decrease of 4.6%. As a percentage of net sales, selling expenses
decreased from 28.6% to 25.1% during this period. This decrease was due
primarily to the timing of advertising and promotional expenses and, to a
lesser extent, the inclusion of a full quarter in the three months ended June
30, 1996 of the effect of the establishment of an in-house sales organization
and termination of the majority of the Company's sales broker relationships.
General and Administrative Expenses. General and administrative expenses
increased from $1.6 million in the three months ended June 30, 1995 to $2.0
million in the three months ended June 30, 1996, an increase of 22.0%. As a
percentage of net sales, general and administrative expenses increased from
9.3% to 10.4% during this period. This increase in general and administrative
expenses as a percentage of net sales was a function of several factors
relating to the Acquisition and the new management structure. First, the new
management team included the addition of several new senior executives and the
promotion of certain key executives that increased personnel costs by
approximately $0.3 million which management believed were necessary to support
the future growth of the Company. Second, the Company entered into a
management agreement with Morningside which provides strategic consulting
advice to the Company for a fee of $350,000 per annum. Third, travel expenses
increased significantly due to the new management's focus on international
markets which required extensive travel. Finally, bank fees and professional
fees increased due to the new credit agreements relating to the debt incurred
to finance the Acquisition.
Incentive Compensation Expenses. The Company recognized $0.8 million of
incentive compensation expense during the quarter ended June 30, 1996 relating
to anticipated costs under certain long-term incentive compensation
agreements. Upon completion of the Offerings, the Company will record
additional compensation charges of approximately $0.6 million (based on the
midpoint of the estimated range of the initial public offering price)
principally for final payments under these awards. During August 1996, several
outside directors purchased 115,373 shares of Common Stock for an aggregate
purchase price of $250,000 and members of senior management purchased 385,818
shares of Common Stock for an aggregate purchase price of $1.6 million. The
purchase of such shares by senior management was financed with $1.3 million
(net of discount) in non-interest bearing long-term full recourse loans from
the Company. The Company will record additional non-cash compensation expense
of approximately $6.8 million (with no associated income tax benefits) during
the three months ended September 30, 1996 for the excess of the estimated
initial public offering price over the actual purchase price of such shares
and for the shares of Carson South Africa awarded to certain members of its
management. See "Management."
Depreciation and Amortization. Depreciation and amortization expense
increased from $0.3 million in the three months ended June 30, 1995 to $0.6
million in the three months ended June 30, 1996. As a percentage of net sales,
depreciation and amortization expense increased from 1.7% to 3.3% during this
period. This increase was primarily due to goodwill amortization which
resulted from the application of purchase accounting. The increase in
amortization due to the Acquisition was partially offset by a change in the
way the Company accounts for package design costs. Prior to the Acquisition,
the Predecessor capitalized package design costs and amortized it over a four
year period. Since the Acquisition, the Company has expensed package design
costs as
30
<PAGE>
incurred. The application of purchase accounting related to the Acquisition
did not have a material impact on the Company's depreciation expense.
Operating Income and EBITDA. As a result of the above changes, operating
income decreased from $3.1 million in the three months ended June 30, 1995 to
$2.6 million in the three months ended June 30, 1996, a decrease of 16.7%. As
a percentage of net sales, operating income decreased from 17.8% to 13.6%
during this period. EBITDA decreased from approximately $3.5 million to $3.2
million, a decrease of 7.7% during this period. Excluding the effects of the
incentive compensation charge, operating income and EBITDA increased 9.4% and
15.4% respectively during this period.
Interest expense. Interest expense increased substantially from $0.0 million
in the three months ended June 30, 1995 to $1.8 million in the three months
ended June 30, 1996 as a result of the new debt incurred to finance the
Acquisition.
Other Income; Investment Income. Other income decreased as a result of the
elimination of royalty income associated with the Caribbean. The Company now
handles Caribbean sales through its in-house sales organization. Investment
income decreased because most of the Predecessor's investments were liquidated
in conjunction with the Acquisition.
Provision for Income Taxes. The provision for income taxes decreased from
$1.2 million in the three months ended June 30, 1995 to $0.5 million in the
three months ended June 30, 1996 as a result of the decrease in pre-tax
income. The effective tax rate increased from 36.5% to 60.2% primarily as a
result of goodwill amortization which is not deductible for income tax
purposes.
COMBINED YEAR ENDED MARCH 31, 1996 COMPARED TO PREDECESSOR YEAR ENDED MARCH
31, 1995
Net Sales. Net sales increased from $58.1 million in fiscal 1995 to $68.3
million in fiscal 1996, an increase of 17.5%, as a result of positive market
acceptance of new product formulations and new packaging, and the efforts of
the Company's in-house sales organization which was established in April 1995.
In the United States, relaxers and texturizers, hair color, shaving products
and hair care maintenance products all generated net sales increases. Carson
South Africa continued to show strong growth with an increase in net sales of
84.0% from $3.6 million in fiscal 1995 to $6.7 million in fiscal 1996, a
function of both the rapid expansion of the African market and increasing
market share. International sales excluding sales by Carson South Africa also
increased, primarily due to European sales where the Company increased its
sales representation.
Gross Profit. Gross profit increased from $32.4 million in fiscal 1995 to
$38.2 million in fiscal 1996, an increase of 17.7%. This increase was almost
entirely the result of the increase in net sales. Gross margin increased
slightly from 55.8% to 55.9% during this period.
Selling Expenses. Selling expenses decreased from $17.9 million in fiscal
1995 to $17.0 million in fiscal 1996, a decrease of 4.7% despite an increase
in net sales of 17.5%. As a percentage of net sales, selling expenses
decreased from 30.8% to 25.0% during this period. This decrease was due to the
Company's decision to establish an in-house sales organization and terminate
the majority of its sales broker relationships. In fiscal 1995, brokers were
paid a commission which averaged slightly above 5%. The commission expense was
almost entirely eliminated in fiscal 1996. This savings was offset in part by
an increase in sales salaries and other payroll costs related to the new sales
employees.
General and Administrative Expenses. General and administrative expenses
increased from $5.2 million in fiscal 1995 to $7.3 million in fiscal 1996, an
increase of 39.9%. As a percentage of net sales, general and administrative
expenses increased from 9.0% to 10.7% during this period. The increase in
general and administrative expenses as a percent of net sales was a function
of several factors relating to the Acquisition and the new management
structure. First, the new management team included the addition of several new
senior executives and the promotion of certain key executives that increased
personnel costs by approximately $0.4 million which management believed were
necessary to support the future growth of the Company. Second, the Company
entered into a management agreement with Morningside which provides strategic
consulting advice to the Company for a fee of $350,000 per annum. Third,
travel expenses increased significantly due to the new management's focus on
international markets, including the establishment of the South African
manufacturing
31
<PAGE>
operations which required extensive travel. Finally, bank fees and
professional fees increased approximately $0.2 million due to the new credit
agreements relating to the debt incurred to finance the Acquisition.
Depreciation and Amortization. Depreciation and amortization expense
increased from $1.1 million in fiscal 1995 to $1.8 million in fiscal 1996. As
a percentage of net sales, depreciation and amortization expense increased
from 1.9% to 2.7% during this period. This increase was due to goodwill
amortization which resulted from the application of purchase accounting. The
increase in amortization due to the Acquisition was partially offset by a
change in the way the Company accounts for package design costs. Prior to the
Acquisition, the Predecessor capitalized package design costs and amortized
them over a four year period. Since the Acquisition, the Company has expensed
package design costs as incurred. The application of purchase accounting
related to the Acquisition did not have a material impact on the Company's
depreciation expense.
Operating Income and EBITDA. As a result of the above changes, operating
income increased from approximately $8.2 million in fiscal 1995 to $12.0
million in fiscal 1996, an increase of 45.6%. As a percentage of net sales,
operating income increased from 14.1% to 17.5% during this period. EBITDA
increased from approximately $9.1 million to $14.0 million, an increase of
54.4% during this period.
Interest expense. Interest expense increased substantially from $0.1 million
in fiscal 1995 to $4.5 million in fiscal 1996 as a result of the new debt
incurred to finance the Acquisition.
Other Income; Investment Income. Other income remained approximately the
same in fiscal 1996 as compared to fiscal 1995. Investment income increased
from $0.6 million in fiscal 1995 to $1.1 million in fiscal 1996 as the
Predecessor realized gains on the liquidation of certain investment
securities.
Provision for Income Taxes. The provision for income taxes increased from
$3.2 million in fiscal 1995 to $3.6 million in fiscal 1996, an increase of
13.3%. This increase occurred despite pre-tax income decreasing from $8.9
million in fiscal 1995 to $8.7 million in fiscal 1996 as a result of goodwill
amortization of $0.7 million in fiscal 1996 which was not deductible for tax
purposes. Accordingly, the effective tax rate increased from 35.8% to 41.2%
during this period.
PREDECESSOR YEAR ENDED MARCH 31, 1995 COMPARED TO PREDECESSOR YEAR ENDED
MARCH 31, 1994
Net Sales. Net sales increased from $50.1 million in fiscal 1994 to $58.1
million in fiscal 1995, an increase of 16.0%. In the United States, net sales
of relaxers and texturizers, hair color, and shaving products all increased,
offset by a nominal decrease in the hair care maintenance category. The
Company's South African subsidiary's sales increased from $1.8 million in
fiscal 1994, the first full fiscal year of South African operations, to
$3.6 million in fiscal 1995, an increase of 105.1%. International sales
excluding South Africa also increased, primarily due to increased European
sales penetration.
Gross Profit. Gross profit increased from $26.5 million in fiscal 1994 to
$32.4 million in fiscal 1995, an increase of 22.5%. Gross margin improved from
52.9% to 55.8% during this period. Several of the product reformulations
completed in fiscal 1995 resulted in lower manufacturing costs. Additionally,
due to new packaging and increased advertising, the Predecessor implemented
the first significant price increase on the Dark & Lovely relaxer kits in
several years.
Selling Expenses. Selling expenses increased from $14.6 million in fiscal
1994 to $17.9 million in fiscal 1995, an increase of 22.2%. This increase was
primarily a result of the increase in net sales since most of the components
of selling expense were directly variable with sales. As a percentage of net
sales, selling expenses increased from 29.2% to 30.8% during this period,
almost entirely attributable to increased advertising.
General and Administrative Expenses. General and administrative expenses
decreased from $6.8 million in fiscal 1994 to $5.2 million in fiscal 1995, a
decrease of 23.2%. As a percentage of net sales, general and administrative
expenses decreased from 13.6% to 9.0% during this period. This decrease was
due primarily to a $1.0 million reduction in compensation paid to the previous
owners, decreased computer training expenses and lower legal costs as a result
of the settlement of law suits in 1994.
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Depreciation and Amortization. Depreciation and amortization expense
increased from $0.8 million in fiscal 1994 to $1.1 million in fiscal 1995. As
a percentage of net sales, depreciation and amortization increased from 1.7%
to 1.9% during this period. This increase was due to higher capitalized
package design cost and higher depreciation expense related to a new
administrative building and finished goods warehouse.
Operating Income and EBITDA. As a result of the above changes, operating
income increased from approximately $4.2 million in fiscal 1994 to $8.2
million in fiscal 1995, an increase of 96.3%. As a percentage of net sales,
operating income increased from 8.4% to 14.1% during this period. EBITDA
increased from approximately $5.1 million to $9.1 million, an increase of
76.8% during this period.
Interest Expense. Interest expense remained approximately the same at $0.1
million in fiscal 1995 as compared to fiscal 1994.
Other Income; Investment Income. Other income and investment income remained
approximately the same in fiscal 1995 as compared to fiscal 1994.
Provision for Income Taxes. The provision for income taxes increased from
$1.7 million in fiscal 1994 to $3.2 million in fiscal 1995, an increase of
86.3%, due to the increase in pre-tax income. The effective tax rate remained
constant at approximately 36% during this period.
Discontinued Operation; Effect of Changes in Accounting Principles. The
charge for the discontinued operation related to the loss on disposal of Fine
Products, a candy manufacturing company that was sold in fiscal 1994. The
effect of changes in accounting principles related to the adoption of FAS
115--"Accounting for Certain Investments in Debt and Equity Securities", FAS
106--"Accounting for Post-retirement Benefits other than Pensions", and FAS
109--"Accounting for Income Taxes" (see Note 1 to the Predecessor's
Consolidated Financial Statements for the years ended March 31, 1994 and 1995
contained elsewhere in this Prospectus).
LIQUIDITY AND CAPITAL RESOURCES
Prior to the Acquisition, the Predecessor's liquidity requirements arose
primarily from working capital needs, especially increases in inventory and
receivables, as well as capital expenditures. The Predecessor maintained lines
of credit totalling $5.0 million but did not use these lines in fiscal 1994 or
1995. The Predecessor maintained substantial balances of cash and marketable
securities which were available for liquidity needs, although cash flow from
operations was historically sufficient to fund the Predecessor's liquidity
requirements.
Upon consummation of the Acquisition, the Company's liquidity requirements
increased significantly due to the debt service requirements associated with
borrowings used to finance the Acquisition. See "The Company--Background."
Under the Senior Bank Credit Facility, the Company maintains a revolving
credit line which matures in July 2001 and provides for borrowings of up to
$10.0 million at a floating rate based upon the Base Rate as defined in the
Senior Bank Credit Facility or the Eurodollar Rate as defined in the same
agreement, subject to the maintenance of a borrowing base. The Company used
$5.0 million of the revolving credit line as part of the financing for the
Acquisition. As of March 31, 1996, the Company had borrowed an additional
$2.5 million under the revolving credit line to finance short term working
capital requirements. The Company had $1.6 million of cash and cash
equivalents on hand at March 31, 1996, and availability under the revolving
credit line of $2.5 million. The Company had $0.9 million of cash and cash
equivalents on hand at June 30, 1996 and availability under the revolving line
of credit of $2.5 million.
At March 31, 1996, the Company did not comply with certain covenants of the
Senior Bank Credit Facility and the Senior Subordinated Notes related to
capital expenditures and net worth. The net worth covenant had originally been
set without regard to the carryover for accounting purposes of predecessor
basis; as a result of such carryover the net worth covenant was amended. The
Company has received waivers of these events of default from the lenders under
the Senior Bank Credit Facility and Senior Subordinated Notes and is currently
in compliance with all such covenants.
The Company intends to use the net proceeds of the Offerings (i) to redeem
$18.0 million aggregate principal amount of the 12.5% Senior Subordinated
Notes due 2002, plus prepayment premium for an aggregate redemption price of
approximately $19.3 million plus accrued and unpaid interest thereon, (ii) to
redeem $3.0 million aggregate principal amount of the 15.0% PIK Subordinated
Notes due 2003, plus prepayment premium for an aggregate redemption price of
approximately $3.6 million plus accrued and unpaid interest thereon, and (iii)
to purchase $11.8 million aggregate principal amount of the Junior
Subordinated Notes for a repurchase price
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of $4.7 million. The balance of the net proceeds, along with borrowings under
the New Senior Bank Facility, will be used to repay all outstanding borrowings
under the Senior Bank Credit Facility.
In conjunction with the Offerings, the Company intends to refinance the
remaining portion of the Senior Bank Credit Facility with borrowings under the
New Senior Bank Facility which is anticipated to include (i) a $15.0 million
term loan A, (ii) a $10.0 million term loan B and (iii) a $15.0 million
revolving credit facility, which will provide more availability than the
current facility. The term loan A and revolving credit facility would bear
interest at the applicable prime rate plus 0.5% or LIBOR plus 2.0% and would
have a final maturity of six years. The term loan B would bear interest at the
applicable prime rate plus 1.0% or LIBOR plus 2.5% and would have a final
maturity of seven years. Management believes that the New Senior Bank Facility
will contain less restrictive covenants compared to the existing facility,
since the Company will be substantially less leveraged following the
Offerings.
In the seven month period since the Acquisition, August 23, 1995 to March
31, 1996, the Company generated $3.3 million in cash flow from operations
adjusted for depreciation and amortization and deferred income taxes. However,
changes in assets and liabilities used $4.5 million of cash. Therefore, net
cash used in operating activities was $1.2 million. The use of cash relating
to changes in assets and liabilities was driven primarily by increases in
accounts receivable and inventory due to the increase in net sales, increases
in other current assets relating to a deposit, and decreases in accrued
expenses primarily relating to the timing of advertising expenditures. These
changes were partially offset by increases in accounts payable relating to the
higher net sales of the Company, higher interest payable relating to the
acquisition debt and decreases in other assets relating to the amortization of
the prepaid interest on the Junior Subordinated Notes.
Net cash used in investing activities (other than to acquire the
Predecessor) for the seven months since the Acquisition was $1.5 million of
capital expenditures. The two largest capital projects involved equipping the
new South African manufacturing facility and reorganizing the shaving powder
production in Savannah to better optimize capacity.
Net cash provided by financing activities (other than to acquire the
Predecessor) for the seven months since the Acquisition totaled $1.5 million
which included additional borrowings under the revolving credit line of $2.5
million and payments on senior term debt of $1.0 million. The net cash flow
for the seven month period since the Acquisition was an outflow of $1.2
million, which, when combined with acquired cash of $2.7 million, results in a
net increase in cash of $1.5 million.
For the three months ended June 30, 1996, the Company generated $1.0 million
in cash flow from operations adjusted for depreciation and amortization.
However, changes in assets and liabilities used $0.6 million in cash.
Therefore, net cash provided by operating activities for the three months
ended June 30, 1996 was $0.4 million. Net cash used in investing activities
during this period totaled $3.5 million including the $3.0 million investment
in the parent of AM Cosmetics and $0.5 million of capital expenditures. Net
cash provided by financing activities totaled $2.5 million resulting from $3.0
million of additional borrowings to fund the investment in the parent of AM
Cosmetics, less a payment on the term loan of $0.5 million. The net decrease
in cash for the three months ended June 30, 1996 was $0.7 million.
The Company's and the Predecessor's capital expenditures for fiscal 1996,
fiscal 1995 and fiscal 1994 were $2.2 million (including package design costs
of $0.2 million), $1.3 million (including package design costs of $0.4
million), and $2.5 million (including package design costs of $1.0 million),
respectively. The Company anticipates that capital expenditures for the twelve
month period ending March 31, 1997 will be approximately $4.3 million, which
includes $1.7 million for the purchase of the South African manufacturing
plant and additional related equipment (the land and buildings were leased as
of March 31, 1996) and the expansion of the Savannah manufacturing and
warehousing facility.
The Company believes that cash flow from operating activities, existing cash
balances and available borrowings under its existing revolving credit facility
or the New Senior Bank Facility will be sufficient to fund working capital
requirements, capital expenditures and debt service requirements in the
foreseeable future.
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BUSINESS
GENERAL
The Company is a leading manufacturer and marketer in the U.S. retail ethnic
hair care market for African-Americans. The Company believes that it is one of
the leading global manufacturers and marketers of ethnic hair care products
for persons of African descent. The Company's flagship brand, Dark & Lovely,
is the most widely recognized ethnic brand name in the U.S. retail ethnic hair
care market. The Company currently sells over 60 different products under five
principal brand names, including Dark & Lovely, Excelle, Beautiful Beginnings,
Dark & Natural and Magic. The majority of the Company's sales are derived from
four categories of the ethnic health aid beauty aids market: hair relaxers and
texturizers, which are used to chemically treat and straighten hair
(constituting approximately 50% of the Company's net sales in fiscal 1996),
hair color, shaving products and hair care maintenance products. The Company's
products are specifically formulated to address the unique physiological
characteristics of hair of persons of African descent, which typically include
curliness and dryness. The Company believes that it has the number one U.S.
retail market position in three of the four ethnic hair care categories in
which it competes (hair relaxers and texturizers, hair color and shaving
products). In addition, the Company believes that the strength of its
competitive position in the ethnic hair care industry is attributable, in
part, to its heritage of technological innovation and its focused R&D effort.
The Company markets its products in the U.S. with its own experienced direct
sales force. The Company currently markets its products in 60 countries
outside of the United States, primarily through local distributors. In fiscal
1996, approximately 23.8% of the Company's net sales were derived from sales
within these countries.
In order to capitalize on new growth opportunities, the Company has
assembled a senior management team of seasoned executives with extensive
experience serving the consumer products industry and the ethnic market. As
Chairman and Chief Executive Officer, Dr. Leroy Keith, former President of
Morehouse College and director of the Predecessor, entrepreneur and prominent
member of the African-American community, provides the Company with leadership
and vision. Joyce M. Roche, President and Chief Operating Officer, has over 20
years of experience in the health aid beauty aids industry, including
positions as Senior Vice President of Marketing and Vice President of Global
Marketing at Avon and Director of Marketing at Revlon. Dennis Smith, Executive
Vice President of Sales, has over 20 years of experience in the ethnic hair
care industry, including senior management positions with a competitor and 14
years with the Company. Miriam Muley, Executive Vice President of Marketing,
has over 17 years of consumer products industry experience, having held
marketing positions at Avon, Bristol-Myers Squibb Company's Clairol division
and Johnson & Johnson, and as a Vice President at Uniworld Group, a leading
advertising agency targeting the African-American market segment.
The Company has recently taken several important initiatives to enhance its
position in the ethnic hair care marketplace. In 1996, the Company's R&D
department finalized the development of several product innovations, including
the Fail Safe and DL 2000 hair relaxer technologies and a full line of hair
care maintenance products. After 20 years of using the same advertising
agency, the Company, in early 1996, appointed a new advertising agency, Don
Coleman & Associates, Inc., which specializes in the African-American market.
The introduction of new and attractive product packaging for many of the
Company's products will be completed in 1996. The in-house sales force formed
in April 1995 was further expanded in 1996 with the addition of several
experienced senior sales executives. In addition, the Company established its
own manufacturing plant in South Africa by acquiring a former Pfizer facility,
and began operations in early 1996. The Company began establishing a
distribution network and training stylists in Brazil in October 1995, through
a strategic alliance with Servico Nacional de Aprendizagem (SENAC), a national
professional services training organization. The Company intends to use Brazil
as a base for expanding to other Central and South American countries.
The Company experienced a 17.5% increase in net sales from $58.1 million in
fiscal 1995 to $68.3 million in fiscal 1996 and a 45.6% increase in operating
income from $8.2 million in fiscal 1995 to $12.0 million in fiscal 1996.
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INDUSTRY OVERVIEW
The U.S. retail ethnic hair care market, principally targeting the distinct
hair care needs of African-Americans, was estimated in the Packaged Facts
Report to be a $1.2 billion retail business in 1995. According to 1995 U.S.
Census Data ("Census Data") published by the U.S. Department of Commerce, the
African-American population was approximately 34 million and represented 12.7%
of the U.S. population. This segment of the U.S. population is projected by
the U.S. Department of Commerce to grow significantly faster than the general
population through the middle of the next century. The personal income of
African-Americans doubled from 1980 to 1990 and their combined purchasing
power was estimated to be approximately $260 billion in 1990, according to the
Census Data. Moreover, the Packaged Facts Report indicates that African-
American consumers generally spend up to three times as much of their
disposable income on health and beauty products as Caucasian consumers.
The Company believes that the U.S. retail ethnic hair care market is highly
fragmented, with six companies generating approximately one half of the sales
in 1995 in this market and the remaining sales generated by a large number of
smaller companies, according to the Towne-Oller Report. Most of the larger
competitors in the ethnic hair care market are privately owned and compete
only in this market. A few general market health and beauty aids companies
produce a limited line of ethnic products.
In addition to the retail segment of the U.S. ethnic hair care market, there
are also professional ethnic hair care salons which the Company estimates to
exceed 28,000 in the United States. According to market research studies
commissioned by the Company in 1990, which have been updated through focus
groups and other internal research conducted by the Company (collectively,
"Company Market Research"), approximately 40% of African-American women
patronize salons exclusively, 40% maintain their hair at home exclusively and
20% switch between salons and home hair care. The professional segment of the
U.S. ethnic hair care market is also highly fragmented, with the leading
competitor being a general market health and beauty aids company. The Company
does not currently participate in the U.S. professional segment but intends to
do so in the near future. See "--Growth Strategy."
On a global scale, the Company currently estimates that there are
approximately 900 million people of African descent outside the United States,
including an estimated 750 million people on the African continent, 100
million people in Brazil, 20 million people in the Caribbean, 10-15 million
people in Europe and 10-13 million people in Central America. The Company's
experience in developing regions such as South Africa, the Caribbean and
Brazil, indicates the percentage of women who patronize salons is dramatically
higher in these developing markets than in developed markets such as the
United States. These women tend to patronize salons because relaxer products
are generally unavailable on a retail basis, professionals have the expertise,
as well as ready access to hot water, which is necessary for effective use of
relaxer products, and the local salon is often a social gathering place for
its patrons. Although there is no independent market data to support the size
of the international market, the Company believes that the international
market is significant. For example, the Company estimates that in Southern
Africa, with a Black population of approximately 100 million, manufacturers of
ethnic hair care products generated approximately $40 million in sales in
1995. Southern Africa refers to Angola, Botswana, Lesotho, Malawi, Mozambique,
Namibia, South Africa, Swaziland, Zambia and Zimbabwe.
The major segments of the ethnic hair care market in which the Company
competes are described below:
. Relaxers and Texturizers. Chemical hair relaxing is the process of
permanently straightening curly hair. Texturizers generally work in a
similar manner as relaxers to loosen curly hair, but do not straighten
the hair completely. The amount of curl in any type of hair is
determined by the abundance of disulfide bonds as well as the shape of
the hair follicle from which the hair emerges, either straight, slightly
curved or curly. Relaxed hair serves as the foundation for and
facilitator of daily hair styling. Consequently, its popularity is not
significantly related to current fashion trends. For the person with
relaxed hair, relaxers represent a basic personal care product, similar
to shampoos and conditioners for the general market. Further, the
continual need for "touch-ups" approximately every six weeks requires
the relaxer user to frequently purchase relaxers and related products.
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According to the Packaged Facts Report, over 50% of African-American
women use chemical relaxers in their hair. For persons of African
descent, chemical relaxation became popular in the 1940's with the
introduction of sodium hydroxide or "lye" relaxer which was the sole
product available until the Company invented and patented "no-lye," or
guanidine carbonate hydroxide relaxers in 1978. In the retail market,
no-lye relaxers are generally sold in kits which include a cream base
component and a chemical activator component, which are mixed together
to create the requisite chemical reaction. One of the most significant
sources of consumer complaints in the industry is inconsistent results
caused by mixing errors. Fail Safe technology, developed by the Company,
eliminates such mixing problems. Although lye relaxers do not require
mixing and tend to work faster than no-lye relaxers, they have a much
higher risk of hair damage and skin irritation than no-lye relaxers.
Until the Company invented no-lye relaxers, relaxing hair was relegated
primarily to salons where it was applied by trained technicians for
safety reasons. The introduction of Dark & Lovely no-lye relaxers by the
Company offered an effective and less expensive in-home alternative
which significantly changed the industry.
In 1995, the U.S. retail ethnic relaxer and texturizer segment was the
largest category of U.S. retail ethnic hair care products, representing
approximately 31% of the U.S. retail ethnic hair care market, according
to the Towne-Oller Report. The relaxer and texturizer market is highly
fragmented with almost 50 brands available; however, according to the
Towne-Oller Report, the top five brands generated almost half of the
sales volume in 1995, with the Company's Dark & Lovely brand having the
largest market share with approximately 14.5% of the total sales in this
segment.
. Hair Color. Hair coloring involves the addition of chemical coloring
agents to the natural pigment of hair, or a lightening or "lifting" of
the natural pigment followed by the addition of color to brighten hair.
The hair of individuals of African descent has more pigment in the hair
cortex than Caucasian hair. This type of hair also has a lower sulfur
content, a slightly lower lipid content and possesses sulfur-containing
bonds that have a different configuration than Caucasian hair. As a
consequence of these characteristics, the pigment in hair of individuals
of African descent reacts to coloring agents differently than Caucasian
hair and chemically relaxed hair will react more quickly to lightening
which can result in a brassy appearance. All of the Company's Dark &
Lovely hair colors are formulated to react appropriately to the hair of
individuals of African descent to ensure the delivery of the intended
color without brassiness.
The three major categories of hair color are: temporary, semi-permanent
and permanent. Temporary hair colors are generally removed from the
hair in the first or second shampooing. Temporary color is only
deposited on the hair surface and for the most part, no chemical
reactions take place, so it is safe to use immediately after relaxing.
Temporary color can only deposit pigment, it cannot lighten the hair
color. Semi-permanent hair colors are more resistant to removal and are
formulated to last from four to six shampoos. They are applied without
peroxide, so they do not change the basic structure of the hair and are
also safe to use immediately after relaxing. Semi-permanent colors are
only designed to add color to the hair. Permanent hair colors produce
the most effective and durable coloration. Due to dye penetration of
the cortex of the hair as well as the addition of peroxide, these
colors can both lighten hair and deposit color. Therefore, permanent
color offers the greatest range of shades. According to the Packaged
Facts Report, approximately one quarter of all African-American women
color their hair, with approximately one half of this group coloring
their hair at home.
In 1995 the U.S. retail ethnic hair color segment represented
approximately 6% of the U.S. retail ethnic hair care market, according
to the Towne-Oller Report. The Company believes that it has the leading
market share in this segment. Three ethnic and two general market
health and beauty aids companies produce hair color product lines
specifically targeted to consumers of African descent.
. Hair Care Maintenance Products. The physiological differences between
the hair of individuals of African descent and Caucasian hair create the
need for a variety of products to treat or "maintain" the hair and
scalp. Hair is lubricated by the sebaceous gland which excretes oil that
flows down and lubricates the hair shaft. While this generally happens
in straight hair and in wavy hair, it is very difficult for oils to
follow the curves and undulations of curly or kinky hair. The lack of
oil causes
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curly or kinky hair to become very dry and brittle, leaving the hair
with a matte, almost dull finish. This condition is the major reason
that hair care maintenance products such as oil sheens, hair dress
conditioners, comb-outs/detanglers and wave products are popular among
individuals of African descent.
Women, children and men of African descent use a variety of products in
order to permanently change the structure of their hair. In most
instances, chemical processes (e.g., relaxing and color treating hair)
leave the hair more dry and brittle than it would be otherwise and can
significantly damage hair if used improperly. Thus there is an even
greater need to condition, replenish and protect hair before, after and
in between treatments. In order to protect the hair, strengthen it and
return it to a soft, shiny condition with a healthy-looking appearance,
the consumer in this market has an even greater need for hair care
maintenance products than her or his general market counterpart.
Numerous ethnic hair care companies and several general market health
and beauty aids companies sell hair care maintenance products to
consumers of African descent.
. Shaving Products. "Razor bumps," known medically as Pseudofolliculitis
Barbae (PFB), is a condition which primarily affects men of African
descent. Razor bumps are both caused and aggravated by shaving due to
the way curly facial hairs grow on these men, because as their beards
grow back after shaving with a razor, the sharp tip of each hair will
continue curling until it grows back into the skin. Razor bumps may lead
to an unpleasant appearance or even permanent disfigurement and can
cause great discomfort during the shaving process. The incidence of men
of African descent who suffer from some degree of razor bumps is
estimated to range from 35% to 40% and, of this group, an estimated 50%
seek some sort of relief, according to reports published by the National
Medical Association, a group of predominantly African-American
physicians. The primary alternative to shaving is using a depilatory
such as the Company's Magic product line. The advantage of depilatories
is that they remove hair chemically by weakening and dissolving the hair
so that it can be easily removed to give a smooth, close, razorless
shave. Because depilatories do not leave sharp tips on the ends of hair,
they reduce the probability that hair will grow back into the skin.
Two companies specializing in men's hair depilation compete in this
market, with the Company dominating this segment.
ETHNIC MARKET LEADERSHIP
The Company's resources are focused primarily on satisfying the unique hair
care needs of individuals of African descent worldwide. The Company believes
that it has the number one U.S. retail market position in three of the four
ethnic hair care categories in which it competes (hair relaxers and
texturizers, hair color and shaving products). The Company attributes its
leading market position to its strong brand names, combined with its direct
sales force, broad distribution, R&D capabilities and experienced management
team. Because of these strengths, the Company believes that it has a
competitive advantage over both the companies specializing in products for the
ethnic hair care market and the few general market companies that compete in
the ethnic hair care market but whose principal resources are targeted to the
general health and beauty aids market.
. Strong brands. The Company currently sells its products under five
principal brand names including Dark & Lovely, Excelle, Beautiful
Beginnings, Dark & Natural and Magic. The Company's flagship brand, Dark
& Lovely, is the most widely recognized ethnic brand name in the U.S.
retail ethnic hair care market for African-Americans. The Company
believes that its brand strength is based upon product quality, properly
targeted advertising, package design, reputation for innovation and
focused commitment to the unique needs of ethnic consumers.
. Experienced Sales Force and Broad Distribution. In April 1995, the
Company established a direct sales force to enhance its ability to
further penetrate existing markets with both current and new products.
The sales force has significant sales experience both with major
consumer product companies and ethnic hair care competitors. The Company
believes that it now has the largest direct sales force serving the U.S.
retail ethnic hair care market. Historically, the Company used
commissioned sales
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brokers, as is the industry norm, who tended to have conflicting brand
loyalties and provide minimal marketing and sell-through support. In the
United States, the Company benefits from having its extensive product
line distributed broadly through three principal channels: (i) multi-
warehouse chains, including mass merchandisers (e.g., Wal-Mart, K-Mart),
major drug chains (e.g., Walgreens, Revco), food chains (e.g., Winn
Dixie, Kroger) and discount chains (e.g., Family Dollar, Dollar
General), (ii) B&Bs such as Alberto-Culver Company's Sally's Beauty
Supply stores and members of the National Beauty Supply Dealers
Association, and (iii) ethnic product distributors. See "--
Distribution."
. Research and Development. The Company believes that its heritage of
technological innovation and its focused R&D effort are important to
maintaining its market leadership position. Three of the ethnic hair
care industry's most significant innovations were introduced by the
Company: the first hair color developed exclusively for hair of persons
of African descent (1972), the first no-lye relaxer, which provided a
safe relaxer product for home use (1978), and the Fail Safe technology
for no-lye relaxers (1993), which eliminates problems associated with
imprecise mixing which can make no-lye products too weak, thereby
impacting straightening, or too strong, leading to hair damage. One of
the most significant sources of consumer complaints in the industry is
inconsistent results caused by mixing errors. The Company believes that
its R&D department, led by two industry experienced chemists with Ph.D.s
and including nine other researchers and technicians, represents the
largest R&D effort focused on the ethnic hair care market.
. Experienced Management Team. In connection with the Acquisition, the
senior management of the Predecessor was replaced. A team of seasoned
senior executives with extensive experience in the ethnic market and
consumer products industry were recruited to build on the Company's
strong position in the global ethnic hair care market. This management
team has focused the Company's strategy to further develop the ethnic
hair care market both in the United States and internationally. See
"Management."
GROWTH STRATEGY
The Company believes that it is well positioned to grow both internally and
through acquisitions, in order to enhance its market position in the ethnic
hair care market. The Company intends to achieve its goals by (i) increasing
its share of existing markets, (ii) increasing international expansion, (iii)
leveraging brands into new categories, (iv) targeting the U.S. professional
salon market and (v) capitalizing on selective acquisition opportunities.
. Increase Share of Existing Markets. Product innovation and ongoing
upgrading of existing products are the cornerstone of the Company's
efforts to increase its market share in existing markets. The Company
recently incorporated into all of its relaxer products its latest
innovation in relaxer technology, called Fail Safe, which eliminates the
problem of mixing errors which occur with the in-home use of no-lye
relaxers. The Company's Fail Safe technology assures that the consumer
will not make a mixing error and thereby vary the relaxer strength. The
Company believes it has the only no-lye relaxer that can consistently
deliver the same results every time. The Company has been on an
aggressive schedule of new product introductions or existing product
upgrades during the last several years with over 10 products that have
been recently introduced or will be introduced during the next six
months, including the following:
-- Improved Dark & Lovely Relaxer: The Company's flagship line was
upgraded to include its innovative Fail Safe technology.
Simultaneously, conditioning benefits (ultra-conditioning relaxer
base and shampoo) were added to every step of the relaxer system and
the packaging was updated. Company research indicates that the new
product out-performs both the competition and the former Dark &
Lovely product in five key areas: straightening, manageability,
softness, health and shine.
-- Improved Excelle Relaxer: The improved Excelle relaxer brand will
use Fail Safe technology as well as increased moisturizing benefits
to deliver more body and a finished, salon look. The components of
the Excelle kit will be improved and the packaging will be
redesigned and upgraded to a modern, more elegant look.
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-- Excelle Hair Care: An Excelle hair care moisturizing line will be
added at the same time as the Excelle relaxer relaunch. Three
"after-care" products will initially be added, highlighting the
Excelle relaxer product and providing necessary hair care
maintenance items.
-- Dark & Lovely Color Care Shampoo and Conditioner: Traditional
shampoos and conditioners can strip or dull the hair of individuals
of African descent that has been color treated. The Company will
introduce a shampoo and conditioner especially designed to add body
and shine to color-treated hair to complement the Company's hair
color products.
-- Magic Mild Cream Formula: The Company has developed a mild cream
formula which is in a no-mix, easy-to-use form and is targeted to
younger users. The current Magic product line is sold primarily to
older men of African descent.
. Increase International Expansion. The Company believes it is poised for
growth in markets such as Africa, Brazil and the Caribbean, each of
which has a significant concentration of consumers of African descent.
The Company currently markets its entire product line in over 60
countries worldwide under the same brand names as it uses in the United
States. International sales in fiscal 1996 of $16.3 million represented
23.8% of the Company's fiscal 1996 net sales and increased 48.0%
compared to fiscal 1995.
-- Africa: The Company currently sells to 17 of the 55 African
countries, with fiscal 1996 net sales of approximately $7.7
million, 84% of which was in Southern Africa (Angola, Botswana,
Lesotho, Malawi, Mozambique, Namibia, South Africa, Swaziland,
Zambia, and Zimbabwe). In Southern Africa the current customer
base, which consists primarily of professional salon owners and
stylists, is serviced through regional distributors and specialty
cash-and-carry wholesale outlets. The Company currently offers
professional training through salons and seminars in order to
educate the professional salon owner or stylist as well as to
differentiate itself from its competitors in South Africa. Retail
product distribution is currently being expanded to mass
merchandisers and other large retail chains in South Africa. The
Company commenced its own manufacturing operations in South Africa
in March 1996 to support its African strategic initiatives. The
Company expects to benefit from the cost and quality advantages of
in-house production going forward. The Company's key strategic
initiatives to achieve growth throughout the African continent are
to: (i) continue market penetration and expansion of the core
Southern African business; (ii) establish and develop distribution
and/or manufacturing facilities in East Africa and West Africa;
(iii) extend existing product lines to include related product
categories such as cosmetics; and (iv) identify selected strategic
acquisitions. Carson South Africa recently sold 25% of its shares
in an initial public offering on the Johannesburg Stock Exchange.
The proceeds of such offering were used to purchase the
manufacturing facility and related equipment as well as to fund the
Company's African strategic initiatives.
-- Brazil: Brazil has a population of approximately 100 million people
of African descent, almost three times the number of people of
African descent as the United States. Moreover, the Company
believes that the ethnic hair care industry in Brazil is
underdeveloped and that the country's improving economy and
demographic trends make this market attractive for the introduction
of the Company's products. The Company began establishing a
distribution network and training stylists in Brazil in October
1995, through a strategic alliance with Servico Nacional de
Aprendizagem (SENAC), a national professional services training
organization. The Company intends to use Brazil as a base for
expanding its products and facilities to other Central and South
American countries.
-- Caribbean: In order to increase sales penetration in the Caribbean
region, the Company recently appointed a Caribbean Sales Manager
position and is investigating whether to establish a factory in
Jamaica which would enable the Company to produce in a Caribbean
Community and Common Market (CARICOM) nation, thereby substantially
reducing taxes and tariffs. The Company has sold products into the
Caribbean on an export basis through brokers since before 1975, but
expects to benefit from a more focused local marketing and
manufacturing presence.
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. Leverage Brands into New Product Categories. The Company believes that
its flagship Dark & Lovely brand name is transferable to other ethnic
health and beauty aids categories, including cosmetics.
-- Cosmetics Market Opportunity: According to the Packaged Facts
Report, the cosmetics segment of the U.S. retail ethnic health and
beauty aids market was projected to be approximately $251 million in
retail sales in 1995, and is forecasted to grow at 15% per year
until 1999. The Company intends to enter the ethnic cosmetics market
with a product line that is consistent with the positioning of its
ethnic hair care brands. The Company intends to take advantage of
(i) its ability to introduce its consumers to the Dark & Lovely
cosmetic line through inserts in Dark & Lovely relaxer and hair
color kits (which total 11 million units annually), (ii) its strong
relationships with its current customers which will enable it to
distribute new cosmetics products efficiently through the same
channels, and (iii) its exclusive contract manufacturing arrangement
with AM Cosmetics, a leading low-cost manufacturer of cosmetics. See
"Certain Relationships and Related Transactions--AM Cosmetics." The
Company is engaged in market research and product development and,
although no specific product launch date has been set, expects to be
able to enter the ethnic cosmetics market by the end of 1997.
. Target the U.S. Professional Salon Market. The Company believes that its
R&D expertise and heritage as the technological innovator in the ethnic
hair care market will facilitate its entry into the United States
professional salon market. The Company is developing a new professional
product line under a distinct brand name that will offer certain
technological advantages versus products currently offered in salons, as
well as a complementary line of hair care maintenance products for
exclusive purchase in salons. The Company estimates that there are in
excess of 28,000 African-American hair care salons in the United States
and Company market research indicates that African-American women are
twice as likely as their Caucasian counterparts to patronize salons and
that of the total number of African-American women who relax their hair,
40% are exclusive salon users, 40% are exclusive at-home users, and 20%
switch between salon and at-home care. Of the approximately 40% of all
African-American women who color treat their hair, approximately one
half treat their hair at salons.
The Company believes that it is well positioned to deliver products to
the salon market, in significant part because many ethnic stylists
purchase their supplies at B&Bs, a distribution channel in which the
Company is well established. Additionally, the Company has successfully
entered the professional salon market internationally through its South
African subsidiary and is implementing this strategy in other parts of
Africa as well as in Brazil. The Company will use the expertise gained
from its international efforts to create teams of technical experts to
educate salon owners and stylists about the new brand and provide
ongoing training and education on the latest techniques in ethnic hair
care through trade shows, clinics and newsletters. The Company is
engaged in market research and product development and although no
specific launch date has been set, expects to be able to enter the salon
market by the end of 1997.
. Capitalize on Selective Acquisition Opportunities. In addition to
internally generated growth, the Company will consider the selective
acquisition of related brands and businesses which would increase the
Company's market share or expand and complement its product lines. The
Company does not currently have any outstanding agreements, commitments
or understandings to make any acquisitions or enter into any joint
ventures. There can be no assurance that suitable acquisition or joint
venture candidates can be identified, or if an acquisition is completed,
that the operations will be successfully integrated or otherwise not
have an adverse effect on the Company.
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PRODUCTS
The Company manufactures and markets a variety of products worldwide. The
following table sets forth the Company's principal products, by brand, as of
July 1, 1996.
<TABLE>
<CAPTION>
BRAND PRODUCTS
- -----------------------------------------------------------------------------------------
<C> <S>
Dark & Lovely Relaxers: Creme Relaxer, Regular Strength; Creme Relaxer Plus,
Super Strength
Hair Care Maintenance Products: Corrective Leave-in Condition
Therapy; Pro Therapy Protein Intensive Conditioner; Rich & Natural
Hair Dress Conditioner; Silky Set Conditioning Set & Wrap Lotion;
Quik Freeze Super Shine Spritz;
3-N-1 Plus Detangling/Conditioning Shampoo; Deep Conditioning
Treatment; Restore & Repair Reconstructive Hair Therapy; Styling
Gel; Super Hold Gel; Cholesterol Super Strengthening/Conditioning
Treatment; 24-hr. Therapy Moisture & Shine Replenisher; Ultra
Nourish Vitamin Hair Therapy;
The Restorer Super Strengthening Hot Oil; Healthy Shine Oil Sheen
Spray
Hair Color: Permanent: Jet Black; Natural Black; Brown Sable; Rich
Auburn; Sunset Auburn; Autumn Red; Light Brown; Honey Blonde;
Golden Bronze; Chestnut Blonde; Spicy Cinnamon; Midnight Blue;
Black Ruby; Light Golden Blonde
Reviving Colors Hair Color: Semi-Permanent: Radiant Black; Ebone
Brown; Spiced Auburn; Passion Plum
- -----------------------------------------------------------------------------------------
Excelle Relaxers: Creme Relaxer, Regular Strength; Creme Relaxer Plus,
Super Strength
- -----------------------------------------------------------------------------------------
Beautiful Beginnings Relaxers: Children's Relaxer
Hair Care Maintenance Products: Conditioning Shampoo Plus
Detangler; Leave-In Conditioner Plus Detangler; Natural Oil
Moisturizer Plus Detangler; Scalp Conditioner and Hair Dress
- -----------------------------------------------------------------------------------------
Dark & Natural Texturizers: Texture Enhancer, Regular Strength; Texture Enhancer,
Extra Strength; Texture Enhancer for Short Hair and Fades
Hair Care Maintenance Products: Moisturizing Shampoo; Dry Hair &
Scalp Moisturizer Conditioner; Wave Lotion; Wave & Style Gel
Hair Color: Jet Black; Natural Black; Darkest Brown
Moustache & Beard Color: Jet Black; Natural Black
- -----------------------------------------------------------------------------------------
Magic Shaving Products: Shaving Powder: Gold, Platinum, Blue and Red;
Pre-shave/after-shave lotion; Cream Shave
</TABLE>
. Dark & Lovely. The Dark & Lovely relaxer was introduced in 1978 and
effectively changed the way African-American women could relax their
hair. The introduction of the no-lye technology by the Company
significantly reduced the possibility of hair damage and skin irritation
frequently caused by sodium-based (lye) relaxers. The Dark & Lovely
brand is positioned to appeal to the younger African-American woman who
is looking for a "straight" look.
For more than 20 years, Dark & Lovely Hair Color--the first hair color
formulated specifically for the distinct hair needs of African-American
women--has been the market leader in ethnic hair color. Introduced in
1972, Dark & Lovely Hair Color targets African-American consumers who
are interested in changing and enhancing the appearance of their hair
color. The brand is supported with a complete line of hair care
maintenance products for daily care. In addition, Reviving Colors by
Dark & Lovely offers African-American women a range of semi-permanent
shades to choose from for a subtle change in color. Two new shades will
be introduced in late 1996, offering a total of six shades. A new line
of hair care products, Color Care, will also be launched in autumn of
1996 to address the need to maintain and refresh hair that has been
color-treated.
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. Excelle. This is the Company's premiere brand targeted to the more
mature fashion conscious African-American woman concerned with the
appearance and health of her hair who is trying to achieve a finished
salon look at home. Introduced in 1984, Excelle Salon Performance
relaxer will be relaunched in 1996 with the aim of offering its target
audience healthier looking hair with luxurious body and sheen. The new
Excelle formula has improved relaxing capabilities and natural
ingredients such as aloe vera, vitamin E and protein. The Company
believes that upgraded packaging, a new hair care maintenance product
line and increased advertising will help communicate the brand's
upscale image to consumers.
. Beautiful Beginnings. This brand, targeted to parents of girls aged 5
to 12 years old, achieved the number three position in sales among
children's relaxers within three years of its introduction in 1993.
Beautiful Beginnings is an advanced conditioning Fail Safe relaxer
system for children with an exclusive Comfort Plus pretreatment that
protects sensitive young hair and scalp without inhibiting the
relaxing process. The Company believes Beautiful Beginnings is one of
the safest and gentlest children's relaxer systems available. The
brand is complemented with a complete line of hair care maintenance
products.
. Dark & Natural. This brand is targeted to men of African descent. The
Dark and Natural texturizer product delivers rich, natural-looking
waves. DL 2000 technology, a tension activated process in the Dark &
Natural product line, allows the user to control the amount of
relaxation in his hair through combing. Dark & Natural Hair Color for
men was introduced in 1992 and represents the first hair color
targeted to and developed exclusively for the African-American male.
Dark & Natural hair color products are designed to recapture the
natural color of hair that is dull or graying and produces a richer,
deeper and healthier looking color. The easy-to-mix formula contains
no ammonia and therefore is gentle to men's hair.
. Magic. This brand of shaving products is the top-selling male
depilatory product in the United States and globally among Black men.
On the market since 1901, Magic shaving products are the only
depilatory products endorsed by the National Medical Association for
the treatment and prevention of "razor bumps". A new no-mix cream
targeted to younger African-American men is planned for introduction
in the autumn of 1996.
MARKETING AND PROMOTIONS
The Company believes that understanding the consumer, meeting her or his
needs and delivering on product promises are critical in maintaining the
Company's competitive position. The Company spent an average of approximately
1% of net sales for each of the last two fiscal years on market research, such
as in-home consumer product placements for new products, tracking studies,
concept testing, package testing and advertising testing aimed at improving
its understanding of and effectively targeting its consumer. The Company also
maintains a toll-free telephone number to answer consumer questions and to
gather consumer feedback used to focus the Company's marketing programs.
Over 15% of net sales in fiscal 1996 was allocated to advertising and
consumer promotions. The Company believes that it is the leading advertiser in
the ethnic hair care market, with most of its emphasis on television and
print. The Company regularly advertises in magazines aimed at consumers of
African descent, such as Essence, Ebony, Black Enterprise and Jet, and in
targeted spot advertising on television and cable channels such as Black
Entertainment Television (BET) and engages in promotional activities and in-
store displays to introduce new products or attract new consumers. The Company
also uses its kit packaging format to conduct sampling programs for new
products.
In January 1996, the Company's advertising account was awarded to Don
Coleman & Associates, Inc., considered by the Company to be in the forefront
of ethnic advertising. The previous agency had been in place for over 20
years. A new campaign for the Company's flagship brand, Dark & Lovely,
including television, print, and radio advertising is scheduled for late
autumn of 1996.
The Company is actively involved in numerous public relations and community
relationship events. In 1996, the Company was involved in the Olympics both in
Savannah and Atlanta. In Atlanta, the Company was one of the sponsors of La
Maison Olympique Africaine, The African Olympic House, providing the Company
with an
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opportunity to highlight its presence in the global African business
community. The Company's commitment to the African-American community is
demonstrated through several support programs including sponsorship of the
Black Family Reunion Program and a Safe Shelter Program for homeless women and
children and the establishment of the Carson Scholarship Program at
historically Black universities such as Dillard, Hampton and Fisk
Universities. From October to December 1996, the Company, in conjunction with
several leading African-American women's organizations and the Celebrating
Life Foundation, will be promoting awareness of breast cancer among African-
American women. In addition, the Company has committed to donate $0.10 from
the sale of every Dark & Lovely relaxer and hair color unit sold during that
period, up to $150,000, to the Celebrating Life Foundation to help provide
education on breast cancer and make screening available to African-American
women unable to afford the examination.
DISTRIBUTION AND SALES
The Company's customers can be categorized into three principal distribution
channels in the U.S. retail ethnic hair care market, as follows:
. Multi-warehouse Chains. Multi-warehouse chains are groups of stores
operating under the same name that have a number of different
distribution points, warehouses or shipping points. Chains which carry
the Company's products include mass merchandisers (e.g., Wal-Mart, K-
Mart), drug chains (e.g., Walgreens, Revco, CVS, Rite Aid, Duane Reade),
food chains (e.g., Winn Dixie, Kroger), and discount chains (e.g.,
Family Dollar, Dollar General). The chains generally are an important
part of the Company's retail business because of their ability to draw
ethnic customers from a large geographic area. The Company's multi-
warehouse chain customers may purchase the Company's products directly
from the Company, through an ethnic product distributor, or both.
. Beauty & Barber Supply Stores. The Beauty & Barber Supply Stores
("B&Bs") are dominated by the Sally's Beauty Supply retail chain
(Alberto-Culver Company) and the National Beauty Supply Dealers
Association (the "NBSDA"), a large group of independent family-
controlled retail outlets. B&Bs that are members of the NBSDA are
prevalent in the African-American community, typically in retail outlets
in strip shopping malls. B&Bs generally have convenient locations, low
everyday prices, and a wide selection of ethnic products relative to
retail chains.
. Ethnic Product Distributors. Ethnic product distributors are wholesalers
who either place products directly in stores or have a warehouse-to-
warehouse relationship with the major chains. K-Mart is an example of a
chain that has a warehouse-to-warehouse relationship in which K-Mart
obtains the Company's products for certain of its stores through a major
ethnic product distributor in Detroit. The overall importance of this
class of trade has gained increasing significance in recent years.
The combination of multi-warehouse chains, B&Bs and ethnic product
distributors accounted for approximately 87.0% of the Company's domestic net
sales in fiscal 1996. The balance of the Company's net sales during this
period were generated by general market distributors, regional chains and
military exchanges and commissaries. No single Company customer accounted for
more than approximately 8% of the Company's net sales in fiscal 1996.
As the Company develops new stock keeping units (SKUs) for existing product
lines, launches new products and enters new markets in the U.S. ethnic health
and beauty aids sector, the Company believes that its strong, direct
relationships with multi-warehouse chains, B&Bs and ethnic product
distributors will play an increasingly valuable role in maintaining market
share as well as gaining additional shelf space, promotional/advertising space
and store merchandising coverage. The Company has been selected by one of its
multi-warehouse chain customers to be the ethnic category manager for all
ethnic health and beauty aids products carried by such customer. As ethnic
category manager, the Company assists in the development of the customer's
merchandising program for ethnic health and beauty aids products.
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The Company's strong relationships with its customers in the various
distribution channels are enhanced by its direct sales force which totals over
30 and is comprised of two divisional managers, eight regional managers and
between three and six sales merchandisers per region, covering the Northeast,
Mid-Atlantic, Mideast and Midwest regions in the Northern Division and the
Mid-South, Southeast, Southwest and Western regions in the Southern Division.
The sales force in each region sells to all of the distribution channels doing
business in its market.
The Company has established distributor relationships in various countries
in international markets. In South Africa, the Company focuses its direct
sales efforts primarily on hair care salons which are serviced through
regional distributors and specialty cash-and-carry wholesale outlets. Retail
product distribution in South Africa is currently being expanded to include
mass merchandisers and other large retail chains.
RESEARCH AND DEVELOPMENT AND QUALITY CONTROL
The Company believes that the strength of its competitive position in the
ethnic hair care industry is attributable, in part, to its heritage of
technological innovation and its focused R&D effort. Three of the ethnic hair
care industry's most significant innovations were introduced by the Company:
the first hair color developed exclusively for African-American hair (1972),
the first no-lye relaxer, which provided a safe relaxer product for home use
(1978), and the Fail Safe technology for no-lye relaxers, which eliminates
problems associated with mixing no-lye relaxer products to obtain the correct
strength (1993). The Company believes that its R&D department, led by two
industry experienced chemists with Ph.D.s and including nine other researchers
and technicians, represents the largest R&D effort focused on the ethnic hair
care market. In 1996, the Company's R&D department finalized the development
of several product innovations, including the Fail Safe and DL 2000 hair
relaxer technologies, as well as a full line of hair care maintenance
products.
The R&D department pursues an aggressive product development schedule and
intends to maintain its leadership in product innovations and technological
improvements. In particular, the R&D department intends to: (i) facilitate the
Company's entry into the U.S. professional salon market with a line of
specially formulated products; (ii) expand the rapidly growing line of Dark &
Natural products; (iii) develop new and innovative hair care maintenance
products; (iv) strengthen the Company's hair color products; (v) and develop
more effective, milder depilatories for both men and women. The R&D
department's agenda also includes the continued review and evaluation of
various packaging alternatives to ensure that the Company's products are
delivered in safe, secure and cost-effective containers. The Company's R&D
costs (principally for new products) for the years ended March 31, 1994, 1995
and 1996 was $0.4 million, $0.3 million and $0.4 million, respectively. The
Company's estimated budget for R&D costs for fiscal 1997 is $0.5 million.
These amounts do not include amounts spent on quality control, analytical
chemistry, microbiology, package testing and consumer products testing.
The R&D department also supervises the Quality Control staff of 13 who
perform extensive safety and quality tests on the Company's products,
including analytical chemistry, microbiology and package testing. The Company
tests its new products with the aid of its four in-house cosmetology
technicians at its on-site salon.
MANUFACTURING
The Company uses a batching process in its manufacturing operations for
virtually all of its products. The batching process begins with chemical
ingredients being mixed in kettles in batch sizes ranging from 2,000 lbs. to
21,000 lbs. The kettles heat, cool, homogenize and blend each batch of
materials according to standard operating procedures (SOPs). The SOPs for each
product are established by the Company's R&D and Quality Control staff and are
periodically reviewed and improved to ensure uniformity and batch-to-batch
conformity with the manufacturing specifications for the product.
The product is then transferred from the kettles into a holding tank or
another type of storage device until it is pumped into a filling machine that
volumetrically fills the liquid or cream into plastic jars, tubes, bottles or
packets. Each container (i.e., jar, tube, bottle or packet) is coded to
identify or track a specific batch. Hair care maintenance products are then
packed in shipping boxes and sent to the finished goods warehouse ready for
shipment to the Company's customers. Certain other products are filled,
capped, labeled, coded and stored temporarily until they are assembled as
components in the relaxer, texturizer or hair color kits.
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The Company emphasizes quality and adherence to Good Manufacturing Practices
(according to FDA guidelines) throughout the production operation. Each batch
of finished product is tested by Quality Control staff before it is packaged
and shipped. The Company's quality control measures and standards include
testing raw materials and packaging materials.
The Company purchases raw materials, packaging, and components throughout
the world and reviews the efficiency and quality of its purchasing contracts.
Except as described below, the Company believes that alternate sources of
supplies exist and does not anticipate any significant shortages of, or
difficulty in obtaining, such supplies.
Guanidine carbonate is an essential raw material used in the manufacturing
of no-lye relaxer products and has been purchased by the Company for over 15
years from the one principal supplier to all manufacturers of no-lye relaxers,
located in Austria. The Company maintains a stock of guanidine carbonate at
its Savannah facility which would satisfy its requirements for approximately
four to six months of future production. The Company believes that guanidine
carbonate of comparable quality could be made available within this time
period from other suppliers on comparable terms.
FACILITIES
The Company owns and occupies six buildings on an 11.6-acre tract in
Savannah. The plant, warehouses and offices encompass approximately 225,000
sq. ft. on seven acres of the property, with the remaining 4.6 acres
undeveloped. Four of the buildings are used primarily for warehousing and
storage. The largest building (more than 120,000 sq. ft) houses the
manufacturing equipment for substantially all of the Company's products,
shipping, quality control, the R&D laboratories, customer research and a
professional hair salon which tests new products. The manufacturing and
warehousing space has been expanded seven times since it was originally built
in 1954. The Company is in the process of reconfiguring its production lines
and expanding its physical space in order to increase the capacity of the
Savannah facility. Following the planned capacity increase, the Company
believes that the capacity in the Savannah facility will be adequate for its
needs in the reasonably foreseeable future.
Carson South Africa owns and occupies one building on 4.5 acres in Midrand,
South Africa, 15 miles north of Johannesburg in a developing industrial park
located on the major highway between Johannesburg and Pretoria. The property
was previously occupied by Pfizer as a manufacturing facility and was easily
converted to suit the Company's needs. The building encompasses approximately
40,000 sq. ft. and houses the manufacturing equipment for all products,
shipping and receiving, raw material and finished goods storage, an R&D
laboratory and executive office space. Ample acreage is available for
expansion of the facility. The Company believes that capacity in the South
African facility is adequate for its needs in the reasonably foreseeable
future.
COMPETITION
The U.S. retail ethnic hair care market is competitive and highly fragmented
with a number of market participants that focus specifically on this market.
Six companies generated approximately 50% of industry sales in 1995 with the
remainder being generated by a number of smaller companies, according to the
Towne-Oller Report. Some of the larger companies, such as Soft Sheen, Luster
Products and Pro-Line Corp., are privately-owned and compete only in the
ethnic market, as does the Johnson Products subsidiary of IVAX, Inc., a New
York Stock Exchange traded company. However, a few general market companies,
such as Revlon and Alberto-Culver Company, also produce a limited line of
specialized products for the ethnic consumer. In certain product categories,
such as shampoos and hair color, competition also arises from general market
manufacturers such as the Procter & Gamble Company and Bristol-Myers Squibb
Company's Clairol division. Such general market companies are larger and have
substantially greater financial and other resources than the Company.
Internationally, the Company's competitors differ from market to market, and
include Revlon, Soft Sheen and several regionally based foreign companies.
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The Company primarily competes on the basis of brand recognition, product
quality, performance and price. Advertising, promotions, merchandising,
packaging and the timing of new product introductions and line extensions also
have a significant impact on buying decisions and the structure and quality of
the sales force affect product reception, in-store position, display space and
inventory levels in retail outlets.
TRADEMARKS AND PATENTS
The Company owns all of the trademark rights used in connection with its
principal brands both in the United States and in the other countries in which
its products are principally sold. Significant trademarks include: Dark &
Lovely, Dark & Lovely Excelle, Beautiful Beginnings, Dark & Natural and Magic.
The Company utilizes certain proprietary or patented technologies in the
formulation or manufacture of a number of its products; however, the loss of
such proprietary rights would not have a material adverse effect on the
business, results of operations or financial condition of the Company.
CONSUMER LAWS, GOVERNMENT AND INDUSTRY REGULATIONS
The Company is subject to the Food, Drug and Cosmetics Act, the Consumer
Product Safety Act, the Federal Hazardous Substance Act and to the
jurisdiction of the Consumer Product Safety Commission as well as product
safety laws in foreign jurisdictions. Such regulations subject the Company to
the possibility of requirements of repurchase or recall of products found to
be defective and the possibility of fines or penalties. The FDA has
promulgated certain regulations concerning product ingredients, product
labeling and product claims. In addition, the FTC regulates product claims.
The Company is subject to consumer laws in foreign countries where its
products are sold, for example, bilingual packaging requirements (Canada) and
new product registration requirements (Brazil). Existing and future FDA, FTC
and foreign regulations could impact distribution and sales of certain of the
Company's products.
The Company operates under the FDA's Good Manufacturing Practices (GMP)
guidelines and is regulated by the FDA, although its product formulas do not
have to be approved in advance by the FDA. Coloring agents used in the
Company's products may be either Food, Drug & Cosmetic (FD&C) or Drug &
Cosmetic (D&C) classified. Additionally, as a member of the Cosmetics,
Toiletries and Fragrances Association ("CTFA"), the Company agrees to adhere
to Quality Assurance Guidelines as promulgated by CTFA. The Company believes
that it is substantially in compliance with such guidelines and uses such
guidelines as standards for its operational activities. The Company is also
subject to various other Federal, state, local and foreign regulations.
Federal, State and local regulations in the United States that are designed to
protect customers or the environment have had an increasing influence on
product claims, contents and packaging. The Company believes that it is in
substantial compliance with such regulations.
EMPLOYEES
The Company is organized into seven departments--Marketing, R&D (including
Quality Control), Sales, Operations (Production and Materials Management),
Finance, Administration and Human Resources. As of July 1, 1996, the Company
employed approximately 252 persons in Savannah, an additional 30 elsewhere in
the United States and 90 internationally. In the United States, 188 were
hourly personnel and 94 were salaried employees. The Company also utilizes
temporary workers as needed, primarily in manufacturing. An average of 82 such
temporary workers were utilized on a daily basis by the Company during the
quarter ended June 30, 1996. The Company is non-union and believes that its
relationship with employees is good.
LEGAL PROCEEDINGS
The Company is involved in various routine legal proceedings incident to the
ordinary course of its business and believes that the outcome of all pending
legal proceedings, in the aggregate, will not have a material adverse effect
on the business, results of operations or financial condition of the Company.
47
<PAGE>
ENVIRONMENTAL MATTERS
The Company is subject to various Federal, state, local and foreign
environmental requirements, including those relating to discharges to air,
water and land, the handling and disposal of solid and hazardous waste and the
cleanup of properties affected by hazardous substances. Certain environmental
laws, such as the Comprehensive Environmental Response, Compensation, and
Liability Act, as amended ("CERCLA"), impose strict, retroactive, joint and
several liability upon persons responsible for releases of hazardous
substances.
The Company has no liabilities arising under environmental requirements,
except as would not be expected to have a material adverse effect on the
Company's business, results of operations or financial condition. However,
some risk of environmental liability is inherent in the nature of the
Company's current and former businesses and the Company might in the future
incur material costs to meet current or more stringent compliance, cleanup or
other obligations pursuant to environmental requirements.
The Company has had difficulty meeting its permit levels for various
parameters for its wastewater discharge to the City of Savannah's sewer system
resulting in the issuance of notices of violation to the Company by the City
of Savannah. In response, the Company installed pretreatment equipment, which
has reduced the concentrations of many of the constituents of concern.
However, the Company continues to experience difficulty meeting certain
discharge limitations. If the Company cannot either improve the reliability of
its present treatment system, or obtain modifications to its discharge limits
from the sewer authorities, it may be required to install additional treatment
equipment. The Company is working cooperatively with the City of Savannah to
address this issue and has not been nor does it expect to be fined. However,
there can be no guarantee that the Company will not incur future costs,
including but not limited to, fines in connection with waste water compliance.
The costs for installing additional treatment equipment could be as much as
$0.5 million. The Company does not expect the costs of environmental
compliance to have a material adverse effect on its business, results of
operations or financial condition.
48
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and Carson Products, and
their ages as of July 1, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Dr. Leroy Keith......... 57 Chairman of the Board of Directors and Chief Executive Officer
Joyce M. Roche.......... 49 President, Chief Operating Officer, Director
Dennis E. Smith......... 49 Executive Vice President of Sales, Director
Miriam Muley............ 41 Executive Vice President of Marketing
Bradford N. Creswell.... 36 Executive Vice President of Finance and Chief Financial Officer
Lawrence E. Bathgate, 57
II..................... Director
Abbey J. Butler......... 59 Director
Suzanne de Passe........ 49 Director
Melvyn J. Estrin........ 53 Director
James L. Hudson......... 56 Director
John L. Sabre........... 37 Director
Vincent A. Wasik........ 51 Director
Jack Kemp............... 60 Director*
Henry H. Minis.......... 49 Director**
</TABLE>
- --------
* Mr. Kemp resigned from the Board of Directors of Carson Products on August
13, 1996 due to his recent decision to be a candidate for the Vice
Presidency of the United States. Mr. Kemp retains his ownership interest in
the Company. See "--Compensation of Board of Directors--Outside Director
Stock Purchases."
** Mr. Minis is a Director of Carson Products only, and will resign from such
position upon the closing of the Offerings.
Dr. Keith became Chairman and Chief Executive Officer of Carson Products
concurrent with the Acquisition in August 1995 and a Director of the Company
upon its inception in May 1995, and served as Vice President until August
1996. Dr. Keith became Chairman and Chief Executive Officer of the Company in
August 1996. Dr. Keith has served as Chairman of the Board of Directors of AM
Cosmetics since June 1996. He served on the Board of Directors of the
Predecessor from June 1994 to August 1995. Prior to that, he served as
President of Morehouse College from 1987 to 1994. Dr. Keith is a member of the
Board of Directors of Keystone Investment Group, the Mutual Funds Board of
Phoenix Home Life Insurance Company, One to One Partnership, Inc. and the
National Committee for the Performing Arts of the John F. Kennedy Center.
Ms. Roche became President and Chief Operating Officer of Carson Products in
July 1996 and of the Company in August 1996. Prior to July 1996, she held the
position of Executive Vice President of Global Marketing since joining Carson
Products in August 1995. Before joining Carson Products, Ms. Roche was
employed with Avon, Inc. for 19 years where she held the titles of Senior Vice
President of Marketing from 1991 to 1993 and Vice President of Global
Marketing from 1993 to 1994.
Mr. Smith became Executive Vice President of Sales of Carson Products
concurrent with the Acquisition in August 1995 and of the Company in August
1996. Prior to August 1995, he held the position of Vice President of Sales of
Carson Products from 1990 to 1995.
Ms. Muley became Executive Vice President of Marketing of Carson Products in
July 1996 and of the Company in August 1996. Prior to July 1996, she held the
position of Vice President, Marketing since joining Carson Products in April
1996. She was previously employed by Avon from 1992 to 1996 as General
Manager, African-American Business Unit and by Bristol-Myers Squibb's Clairol
division as Product Manager from 1990 to 1992.
Mr. Creswell became Executive Vice President of Finance and Chief Financial
Officer of Carson Products concurrent with the Acquisition in August 1995 and
of the Company in August 1996. He has also served as President of Northwest
Capital, Inc. since 1992. Prior to that time, he was employed as Vice
President, Investment Banking with Bankers Trust Company from 1987 to 1992.
49
<PAGE>
Mr. Bathgate became a Director of the Company upon its inception in May 1995
and of Carson Products in August 1995. He served as Secretary of the Company
from May 1995 to August 1996. He also serves as President and Chief Executive
Officer of Bathgate, Wegener & Wolf, P.A., a law firm with which he has been
affiliated since 1970. Mr. Bathgate is a founder and principal of Morningside,
and has served on the Board of Directors of AM Cosmetics since June 1996. He
also serves on the Board of Trustees of Villanova University, the Board of
Regents of Seton Hall University and served as Finance Chairman of the
Republican National Committee from 1988 to 1992.
Mr. Butler became a Director of Carson Products in June 1996 and of the
Company in August 1996. Mr. Butler currently serves in the following
capacities for the following companies and organizations: FoxMeyer Health
Corporation, Director from 1990, Co-Chairman of the Board of Directors from
1990, Co-Chief Executive Officer from 1990 ; Ben Franklin Retail Stores, Inc.,
Director from 1992 and Co-Chairman of the Board of Directors from 1992; C.B.
Equities Capital Corp., President from 1982 and Director from 1982; FWB
Bancorporation, Director from 1994; CST Entertainment Inc., Director from
1994; UroHealth Systems, Inc., Director from 1995; Cyclone Fence Corp.,
Director from 1995; Phar-Mor, Inc., Director from 1995; The American
University, Trustee from 1986; Starlight Foundation, Director from 1990;
Executive Council of the National Committee for the Performing Arts of the
John F. Kennedy Center, Director from 1989; and President's Advisory Committee
on the Arts, Member from 1992. Mr. Butler is the former Co-Chief Executive
Officer of FoxMeyer Drug Company which filed for protection under Chapter 11
of the U.S. Bankruptcy Code on August 27, 1996.
Ms. de Passe became a Director of Carson Products in June 1996 and of the
Company in August 1996. Ms. de Passe has served as Chief Executive Officer of
de Passe Entertainment since 1991. She currently serves on the Board of
Directors of The American Film Institute and the Los Angeles Opera.
Mr. Estrin became a Director of Carson Products in June 1996 and of the
Company in August 1996. Mr. Estrin currently serves in the following
capacities for the following companies: FoxMeyer Health Corporation, Director
since 1990, Co-Chairman of the Board of Directors from March 1991, Co-Chief
Executive Officer from October 1991; Washington Gas Light Company, Director
from October 1991; Ben Franklin Retail Stores, Inc., Co-Chairman of the Board
of Directors from November 1991, Co-Chief Executive Officer from 1994,
Director from 1991; FWB Bank, Director from August 1993; FoxMeyer Canada,
Inc., Director from February 1995, Co-Chairman of the Board of Directors from
February 1996, Co-Chief Executive Officer from 1995; UroHealth Systems, Inc.,
Director from July 1995; Phar-Mor, Inc., Director from September 1995; and
Centaur Partners, L.P., Managing Partner from 1990. Mr. Estrin has also served
in the following capacities for the following companies and organizations:
University of Pennsylvania, Trustee from 1990 to 1995; and National Capital
Planning Commission, Commissioner from 1993 to 1995. Mr. Estrin is the former
Co-Chief Executive Officer of FoxMeyer Drug Company which filed for protection
under Chapter 11 of the U.S. Bankruptcy Code on August 27, 1996.
Mr. Hudson became a Director of Carson Products in June 1996 and of the
Company in August 1996. Mr Hudson has served as Chairman of JAH Development
Company since 1985. Mr. Hudson served as Chairman of the Board of Trustees of
Morehouse College, and as a member of the Board of the Metropolitan Washington
Airports Authority.
Mr. Sabre became a Director of Carson Products concurrent with the
Acquisition in August 1995 and of the Company in August 1996. He currently
serves as Managing Director of Indosuez Capital, a position he has held since
April 1992. Prior to that, Mr. Sabre was a Vice President at Kidder, Peabody &
Co. from March 1990 to April 1992.
Mr. Wasik became Chairman of the Board of Directors and President of the
Company upon its inception in May 1995 and served as such until August 1996.
Mr. Wasik has been a Director of Carson Products since August 1995 and of the
Company since its inception. He became a member of the Board of Directors of
AM Cosmetics in June 1996 and currently serves as President. He is also a
founder and serves as President of Morningside. From 1985 to 1995, Mr. Wasik
served as President of Fidelco Capital Group. He was also President
50
<PAGE>
of Wondercamp Entertainment Company from 1994 to 1995. He served as Chairman
and Chief Executive Officer of National Car Rental Systems, Inc. from December
1986 to January 1992. He is also currently a member of the Board of Directors
of the One to One Partnership, Inc., the National Committee for the Performing
Arts of the John F. Kennedy Center and the Board of Trustees for Boston
College.
Mr. Kemp was a Director of Carson Products from February 1996 to August
1996. Mr. Kemp served as Secretary of Housing and Urban Development for the
United States Government from 1989 to 1992. Mr. Kemp is also a member of the
Board of Directors of Landair, Cyrix Corp., Oracle Corp., Columbus Trust
Realty, American Bankers Insurance Corp., and Worldcorp and has served as Co-
Director of Empower America since 1993.
Mr. Minis served as a Director of the Predecessor from 1978 to August 1995
and is currently a Director of Carson Products. Mr. Minis will resign from
such position upon the closing of the Offerings. He served as Vice President-
International of the Predecessor from April 1988 until August 23, 1995. Prior
to that, he was Export Sales Manager of the Predecessor from June 1981 to
April 1988.
COMPENSATION OF EXECUTIVE OFFICERS
Summary of Cash and Certain Other Compensation. The following table sets
forth in summary form information concerning the compensation for all services
rendered in all capacities to the Company for Dr. Keith, the three other most
highly compensated executive officers of the Company at the end of fiscal
1996, David A. Young (the Predecessor's Chief Executive Officer) and two other
highly compensated executive officers of the Predecessor who served as such
during fiscal 1996 (collectively, the "named executive officers").
SUMMARY COMPENSATION TABLE(A)
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- ------------------------ ------------
SECURITIES
RESTRICTED UNDERLYING
NAME AND PRINCIPAL FISCAL STOCK OPTIONS/SARS ALL OTHER
POSITION YEAR SALARY BONUS AWARDS (#) OF SHARES COMPENSATION
------------------ ------ ------------------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Leroy Keith(b)...... 1996 $ 190,816 $ 215,000 $ -- -- $ --
Chairman of the Board
and
Chief Executive Officer
Joyce M. Roche(b)....... 1996 117,692 35,000 -- (c) --
President and Chief
Operating Officer
Dennis E. Smith......... 1996 150,405 75,870 -- (c) --
Executive Vice 1995 99,312 19,813 --
President of Sales
Bradford N. 1996 146,681 -- -- -- --
Creswell(b)............
Executive Vice
President of Finance
and
Chief Financial Officer
David A. Young(d)....... 1996 88,039 80,600 197,306 -- 100,000(e)
Former Chief Executive 1995 181,680 15,056 107,472 -- --
Officer
Mario J. de la 1996 147,608 71,364 -- -- --
Guardia(f)............. 1995 155,700 12,583 -- -- --
Former President
H. L. Cornish, Jr.(d)... 1996 55,918 51,760 -- -- 100,000(e)
Former Senior Vice 1995 114,885 9,771 -- -- --
President,
Treasurer and Secretary
</TABLE>
- --------
(a) The summary compensation table does not include the value of perquisites
and other personal benefits made available by the Company. However, no
named executive officer received such compensation in any fiscal year
valued in excess of the lesser of $50,000 or 10% of such officer's total
salary and bonus reported for such fiscal year.
(b) Dr. Keith, Ms. Roche and Mr. Creswell became executive officers of Carson
Products on August 23, 1995 and of the Company on August 14, 1996.
(c) The securities underlying the SARs were shares of the former Class A
common stock of the Company. In August 1996, Ms. Roche surrendered her
SAR, and Mr. Smith surrendered one-half of his SAR, in exchange for the
right to subscribe for 118,713 shares and 59,357 shares of Class C Common
Stock, respectively. See
51
<PAGE>
"Management--Compensation of Executive Officers--Employment Agreements,"
for a discussion of the exercise of such rights and the treatment of Mr.
Smith's remaining SAR.
(d) The employment of Messrs. Young and Cornish was terminated on August 23,
1995 in connection with the Acquisition.
(e) Severance payment made in connection with the Acquisition.
(f) Mr. de la Guardia resigned as President of the Predecessor on August 23,
1995 and retired from Carson Products on December 31, 1995.
Stock Options and Stock Appreciation Rights. No options to purchase stock
were granted during fiscal 1996. The following table sets forth information
concerning the grant of stock appreciation rights ("SARs") to each of the
named executive officers during fiscal 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------------------------------ -------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING SARS GRANTED TO
SARS EMPLOYEES EXERCISE OR EXPIRATION
NAME GRANTED (#)(A) IN FISCAL YEAR BASE PRICE ($/SH) DATE 5% ($) 10% ($)
- ---- -------------- ---------------- ----------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Dr. Leroy Keith......... -- -- -- -- -- --
Joyce M. Roche.......... (b) 23.53% (b) 8/23/05 -- --
Dennis E. Smith......... (b) 23.53% (b) 8/23/05 -- --
Bradford N. Creswell.... -- -- -- -- -- --
David A. Young.......... -- -- -- -- -- --
Mario J. de la Guardia.. -- -- -- -- -- --
H. L. Cornish, Jr....... -- -- -- -- -- --
</TABLE>
- --------
(a) The securities underlying the SARs are shares of the former Class A common
stock of the Company.
(b) In August 1996, Ms. Roche surrendered her SAR, and Mr. Smith surrendered
one-half of his SAR, in exchange for the right to subscribe for 118,713
shares and 59,357 shares of Class C Common Stock, respectively. Both Ms.
Roche and Mr. Smith have exercised such rights. See "Management--
Compensation of Executive Officers--Employment Agreements" for a
discussion of the exercise of such rights and the treatment of Mr. Smith's
remaining SAR.
Option/SAR Exercises and Holdings. No options to purchase Common Stock were
outstanding and no SARs were exercised by the named executive officers during
fiscal 1996.
Long-Term Incentive Plans. No long term incentive plan awards were granted
to the named executive officers during fiscal 1996.
Employment Agreements. Carson Products has entered into employment
agreements with Dr. Keith, Ms. Roche, Mr. Smith and Ms. Muley which agreements
provide for the terms discussed below (the "Employment Agreements"). The
Employment Agreements provide for a term of employment expiring on the third
anniversary of the closing of the Offerings. Under the Employment Agreements,
the annual base salary amounts for Dr. Keith, Ms. Roche, Mr. Smith and Ms.
Muley are $385,000, $260,000, $200,000 and $155,000 respectively. In addition
to such base salary, the Employment Agreements provide for, among other
things: an annual bonus determined under a formula based on specified net
revenue growth, net income, earnings per share and/or stock price growth;
eligibility in any pension and welfare benefit plans (other than certain
profit sharing plans) maintained by Carson Products; a monthly automobile
allowance for Dr. Keith, Ms. Roche and Mr. Smith equal to $1,000, $750 and
$500, respectively; reimbursement for specified relocation expenses, including
without
52
<PAGE>
limitation general relocation payments to Dr. Keith, Ms. Muley and Ms. Roche,
equal to $50,000, $10,000 and $10,000 respectively; and such other fringe
benefits generally provided by Carson Products to its employees.
Carson Products retains the right to terminate the employment of Dr. Keith,
Ms. Roche, Mr. Smith and Ms. Muley, and each such executive officer retains
the right to resign, at any time for any reason. If Carson Products terminates
the employment of any of the executive officers named above for "cause" (as
defined in the Employment Agreements) or with "good reason" (as defined in the
Employment Agreements) such officers will only be entitled to any unpaid base
salary amounts through and including the date of termination. If Carson
Products terminates the officer's employment without cause, the officer will
be entitled to receive severance pay equal to 150% of the officer's base
annual salary (200%, in the case of Mr. Smith). If the officer (other than Mr.
Smith and Ms. Muley) terminates his or her employment with Carson Products for
good reason, the officer will be entitled to receive severance pay equal to
200% of the officer's annual base salary (payable in one lump sum). In the
event of "disability," as defined in the Employment Agreements, Carson
Products may terminate the officer's employment and the officer will thereupon
be entitled to receive 150% (200%, in the case of Mr. Smith) of the officer's
annual base salary (payable in one lump sum).
Pursuant to the Employment Agreements, Ms. Roche, Mr. Smith and Ms. Muley
have purchased 118,713, 59,357 and 59,357 shares, respectively, of the Class C
Common Stock of the Company at a price per share equal to $4.21. The aggregate
purchase price for the shares acquired by each officer was paid in the form of
a non-interest bearing long-term full recourse promissory note. In connection
with such purchase, each officer pledged the shares he or she acquired to the
Company to secure payment of the principal amount of the promissory notes. The
principal amount of the notes will be due and payable on the earlier to occur
of the sale of the shares acquired, termination of employment or the third
anniversary of the date of purchase. The officer may prepay the principal
amount of his or her promissory note at any time and from time to time.
Pursuant to Dr. Keith's agreement, the Company has issued him 341,100 shares
of the Class C Common Stock, which represented at the time of issuance 3% of
the Company's then outstanding common stock. These shares were issued in
consideration for securing the Acquisition. These shares were transferred
immediately after issuance to DNL Partners, as trustee under a certain voting
trust agreement, dated August 23, 1995, by and among DNL Partners, Dr. Keith
and certain other stockholders.
Upon the occurrence of a "triggering event" (as defined in the Employment
Agreement for Mr. Smith), which will include the closing of the Offerings, Mr.
Smith will be entitled to receive, within 90 days after the closing of the
Offerings, a lump sum amount in cash equal to the difference between (i) the
product obtained when (A) the Specified Percentage of the value of the Company
on the closing of the Offerings (reduced by the aggregate underwriting
discount in connection with the Offerings) is multiplied by (B) the Dilution
Percentage, and (ii) the Specified Base Value. The Specified Percentage and
the Specified Base Value (as defined in the Employment Agreement for Mr.
Smith) for Mr. Smith is 0.5%, and $250,000. For purposes of the Employment
Agreement for Mr. Smith, the Dilution Percentage (as defined therein) is equal
to the quotient resulting when (i) the number of shares of all classes of the
Company's Common Stock outstanding on July 31, 1996 is divided by (ii) the
number of shares of all classes of the Company's Common Stock outstanding
immediately after the closing of the Offerings.
The Employment Agreements also provide that Dr. Keith, Ms. Roche, Mr. Smith
and Ms. Muley, while employed by Carson Products and in the case of Mr. Smith
and Ms. Muley, during the period in which Mr. Smith or Ms. Muley,
respectively, is receiving Base Salary (as defined in the Employment
Agreements) payments from Carson Products (regardless as to whether Mr. Smith
or Ms. Muley, respectively, is employed by Carson Products), may not directly
or indirectly (i) own, operate, represent, promote, consult for, control or
participate in the ownership, operation, acquisition or management of any
business manufacturing and/or distributing ethnic hair care products or
cosmetics within a 500-mile radius of Carson Products' headquarters, (ii)
solicit (other than on behalf of Carson Products on any of its affiliates),
divert or take away the business of any customers of Carson Products or any of
its affiliates, or any prospective customers of Carson Products or any of its
affiliates whose business Carson Products or any of its affiliates actively
solicits during such officer's employment with Carson Products, or (iii)
solicit or induce any employee of Carson Products or any of its affiliates to
terminate such employee's employment with Carson Products or such affiliates.
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<PAGE>
Management Agreement. Carson has entered into a Management Agreement with
Morningside Capital Group, L.L.C. regarding the services of Mr. Wasik. See
"Certain Relationships and Related Transactions--Morningside."
1996 Long-Term Incentive Plan. Prior to the closing of the Offerings, the
Board will establish and approve, and the Company will adopt, the 1996 Long-
Term Incentive Plan (the "1996 Plan"), which will be administered by a
committee of the Board comprised of non-employee directors (the "Committee").
The purpose of the 1996 Plan is to attract, retain and motivate executives and
other key individuals who will make significant contributions to the growth
and overall success of the Company and its subsidiaries and to align the
interests of such executives and individuals with those of the Company's
shareholders.
All salaried employees and consultants of the Company and its subsidiaries
are eligible to participate in the 1996 Plan. The 1996 Plan authorizes the
grant of (i) options to acquire shares of the Class A Common Stock of the
Company intended to qualify as "incentive stock options" under Section 422 of
the Code ("ISOs"), (ii) options to acquire the same that do not, or are not
intended to, so qualify, (iii) restricted shares of the Class A Common Stock,
subject to specified forfeiture risks (the "Restricted Shares"), (iv) stock
appreciation rights ("SARs") based on the Class A Common Stock and payable in
cash or in shares of the new Class A Common Stock, and (v) performance-based
awards, payable in cash or in shares of the Class A Common Stock.
The 1996 Plan authorizes 600,000 shares of the Class A Common Stock (equal
to 4.2% of the aggregate shares of the Common Stock to be outstanding after
the Offerings) for issuance, subject to adjustment in certain circumstances.
The Committee has determined to grant options to the following officers
contemporaneously with the Offerings to acquire the following number of shares
of the Class A Common Stock: Dr. Keith, 7,500, Ms. Roche, 6,000 and Mr. Smith,
4,000, respectively. Additional option grants will be made to other members of
management. The number of shares underlying these grants, in the aggregate,
will be equal to 59,500 shares. The exercise price per share for these options
will be equal to the initial public offering price paid by the public for the
Class A Common Stock. All such options granted to an officer contemporaneously
with the Offerings will be either non-statutory stock options or incentive
stock options, to the extent permitted by Section 422 of the Code, and will
become exercisable by such officer on a cumulative basis in equal installments
at a rate of 33 1/3% per year commencing one year from the date of grant. All
options granted to an officer will be 100% exercisable in the event of a
change in control (as defined in the 1996 Plan) or in the event the optionee
terminates his or her employment due to death, disability (as defined in the
1996 Plan) or retirement (as defined in the 1996 Plan). The exercise price may
be paid in cash or shares of new Class A Common Stock.
Pursuant to the regulations under Section 16(b) of the Exchange Act, so long
as certain conditions are met, an officer receiving an option award may be
able to exercise options that are then exercisable and sell the underlying
shares of the Class A Common Stock on the same day without incurring liability
under such Section 16(b). The ability to exercise options and concurrently
sell the Class A Common Stock obtained upon exercise means that officers face
no investment risk with respect to the shares subject to options, since they
will generally only exercise an option if the market value of the Class A
Common Stock is greater than the exercise price of the option.
No awards may be granted under the 1996 Plan after December 31, 2006.
Restricted shares, performance-based awards and options intended to be ISOs
will be transferable only by will or the laws of descent and distribution.
ISOs granted to any person who is the beneficial owner of more than 10% of
the total combined voting of all classes of stock of the Company or Carson
Products will contain special limitation provisions required by Section 422 of
the Code. Unless otherwise determined by the Committee, no stock option
granted in connection with the 1996 Plan will be exercisable more than ninety
days after the date on which the optionee ceases to perform services for
Carson Products, except that in the event of death, disability or retirement
or a termination after a change of control, options may be exercised for up to
one year after such event. If, however, an optionee ceases to perform services
for Carson Products, any ISO exercised more than three months following the
date the optionee ceases to perform services will be treated as a non-
statutory stock option.
The Committee generally is empowered to interpret the 1996 Plan, prescribe
rules and regulations relating thereto, determine the terms of awards and
other agreements, amend them (in certain cases only with the consent
54
<PAGE>
of the optionee), determine the individuals to whom awards are to be granted,
determine the number of shares subject to each award and the exercise price
thereto, and take all actions in connection with the Plan and the awards
thereunder as the Committee, in its sole discretion, deems necessary or
desirable. In general, the Board may modify, suspend, or terminate the Plan at
any time; provided, however, that any change in the 1996 Plan that may
adversely affect an award previously granted under the Plan requires the
consent of the adversely affected awardee.
The Company submitted the 1996 Plan to its existing stockholders for
approval. The purpose of seeking stockholder approval was to qualify the 1996
Plan for the granting of ISOs. Although options and other awards may be
granted under the 1996 Plan prior to the receipt of such stockholder approval,
the exercisability of such options is contingent upon the receipt of such
stockholder approval.
BOARD OF DIRECTORS
The Company has three classes of directors, which are elected for staggered
terms of three years. The initial terms of each class expire at the annual
meeting of stockholders in 1997 (Class I), 1998 (Class II) and 1999 (Class
III), respectively. Dennis E. Smith, Suzanne de Passe and James Hudson are
Class I directors, Joyce M. Roche, Abbey J. Butler and Melvyn J. Estrin are
Class II directors and Dr. Leroy Keith, Lawrence E. Bathgate, II, John L.
Sabre and Vincent A. Wasik are Class III directors. Each director holds office
until his or her successor is duly elected and qualified or until his or her
resignation or removal, if earlier.
COMMITTEES OF THE BOARD OF DIRECTORS
In connection with the Offerings, the Board will create an Audit Committee,
a Compensation Committee and an Executive Committee of the Board. Following
the Offerings, the Audit Committee will initially be comprised of Messrs.
Butler and Sabre and will be charged with reviewing the Company's annual audit
and meeting with the Company's independent accountants to review the Company's
internal controls and financial management practices. The Compensation
Committee will initially be comprised of Messrs. Butler and Sabre. The
Executive Committee will initially be comprised of Dr. Keith and Messrs.
Bathgate, Butler, Sabre and, Wasik and will have the authority to act on
behalf of the full Board with respect to all matters.
COMPENSATION OF BOARD OF DIRECTORS
1996 Non-Employee Directors Equity Incentive Program. Prior to the closing
of the Offerings, the Board will establish and approve, and the Company will
adopt, the 1996 Non-Employee Directors Equity Incentive Program (the "Outside
Directors Program"). The Outside Directors Program is designed to attract,
retain and motivate individuals who the Company believes are capable of making
significant contributions to the Board and the Company generally, and to align
their interests with those of the shareholders.
The Outside Directors Program authorizes the issuance of up to 400,000
shares of the Class A Common Stock, subject to adjustment in certain
circumstances. Under the Outside Directors Program, each non-employee director
of the Company will receive in connection with the Offerings an option to
acquire 1,500 shares of the Class A Common Stock. The exercise price per share
for these options will be equal to the initial public offering price paid by
the public for the Class A Common Stock. Each such option will become
exercisable upon grant and will expire on the first anniversary of the closing
of the Offerings (if such option is not exercised prior thereto by the non-
employee director grantee). In the aggregate, a total of 10,500 shares of the
Class A Common Stock will underlie such options granted to the seven non-
employee directors of the Company in connection with the closing of the
Offerings.
In addition, pursuant to the Outside Directors Program, each non-employee
director will receive, immediately following each annual meeting of the
Company's stockholders occurring after the closing of the Offerings (i) a
number of shares, subject to certain forfeiture restrictions, of the Class A
Common Stock (the "Outside Director Restricted Shares") equal to the quotient
resulting when $25,000 is divided by the average fair market value of the
Class A Common Stock for the five trading days preceding such annual meeting
(the
55
<PAGE>
"Trading Period"), and (ii) an option to acquire 5,000 shares of the Class A
Common Stock with an exercise price equal to the average fair market value of
the Class A Common Stock for the Trading Period (the "Outside Director
Options").
The Outside Director Restricted Shares will vest and become non-forfeitable
as to one-third of the aggregate shares granted on each of the next succeeding
three anniversaries of the date of grant of such Restricted Shares. If a non-
employee director resigns voluntarily from the Board or is removed therefrom
with "cause" (as defined in the Outside Directors Program), the unvested
Outside Director Restricted Shares held by such non-employee director will be
immediately forfeited and automatically cancelled by the Company.
The Outside Director Options will become exercisable on the first
anniversary of the date of grant of any such option and will expire on the
tenth anniversary of such date (if any such option is not exercised prior
thereto by the non-employee director grantee). If a non-employee director
resigns voluntarily from the Board or is removed therefrom for cause, the
Outside Director Option held by such director, if then unexercisable, will be
immediately forfeited by such director and automatically cancelled by the
Company or, if then exercisable, must be exercised by such non-employee
director within 90 days after any such resignation or removal.
The Outside Directors Program will be administered by the Board or a duly
appointed committee of the Board. The Board (or such committee thereof) will
have the full and final authority to interpret the Outside Directors Program
and to adopt and amend such rules and regulations for the administration of
the Outside Directors Program as the Board or such committee may deem
desirable. In addition, the Board has the right to amend or terminate the
Outside Directors Program, subject to certain restrictions set forth therein.
Outside Director Stock Purchases. Messrs. Kemp and Sabre invested $100,000
and $50,000, respectively, in the former Class A common stock of the Company
and Messrs. Butler, Estrin and Hudson and Ms. de Passe each invested $25,000
in the former Class A common stock. These investments resulted in the
acquisition of 46,139 shares for Mr. Kemp, 23,070 shares for Mr. Sabre, and
11,541 shares each for Messrs. Butler, Estrin, Hudson and Ms. de Passe. Mr.
Kemp's shares will be placed in a blind trust.
56
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock (i) immediately prior to the Offerings and (ii) as
adjusted to reflect the sale of shares of Common Stock pursuant to the
Offerings, by (a) each person or entity known by the Company to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock,
(b) each of the Company's directors, (c) each of the named executive officers,
(d) all directors and officers of the Company as a group and (e) all other
selling stockholders. Unless otherwise noted in the footnotes to the table,
the persons named in the table have sole voting and investing power with
respect to all shares of Common Stock indicated as being beneficially owned by
them.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT FOOTNOTES)
CLASS B
COMMON CLASS C COMMON
CLASS A COMMON STOCK STOCK STOCK
----------------------------------------------- ---------------- ------------------
TO BE TO BE OWNED PRIOR OWNED PRIOR
SOLD IN OWNED TO AND TO AND
OWNED PRIOR TO THE AFTER THE AFTER THE AFTER THE
OFFERINGS(A)(B) OFFERINGS OFFERINGS(A)(B) OFFERINGS(A)(B) OFFERINGS (A)(B)
NAME AND ADDRESS OF ------------------ --------- ----------------- ---------------- ------------------
BENEFICIAL OWNERS NUMBER % NUMBER NUMBER % NUMBER % NUMBER %
- ------------------- ---------- ------ --------- ----------------- ---------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DNL 0 0 0 0 6,617 80.0%
Partners(c)....
c/o Morningside
Capital L.L.C.
One Morningside
Drive North,
Suite 200
Westport, CT
06880
Banque 0 0 0 1,860 100% 0
Indosuez(d)....
c/o Indosuez
Capital
1211 Avenue of
the Americas
7th Floor
New York, NY
10036-8701
Minis 1,706 100% 1,706 0 0 0
Family(e)......
c/o Hunter,
Maclean, Exley
& Dunn, P.C.
200 East St.
Julian St.
P.O. Box 9848
Savannah, Geor-
gia 31401
Morgan Guaranty 0 0 0 0 1,187 14.3%
Trust
Company(f).....
c/o J.P. Morgan
Investment
Management
522 Fifth Ave-
nue
New York, NY
10036
Dr. Leroy
Keith(g)....... 0 0 0 0 0
Joyce M. Roche.. 0 0 0 0 119 1.4%
Dennis E.
Smith.......... 0 0 0 0 59 0.7%
Bradford N.
Creswell(h).... 0 0 0 0 0
David A. Young.. 0 0 0 0 0
Mario J. de la
Guardia........ 0 0 0 0 0
H. L. Cornish,
Jr............. 0 0 0 0 0
Lawrence E.
Bathgate,
II(i).......... 0 0 0 0 0
Abbey J.
Butler(i)...... 0 0 0 0 13 0.2%
Suzanne de Pas-
se............. 0 0 0 0 13 0.2%
Melvyn J.
Estrin(i)...... 0 0 0 0 13 0.2%
James L.
Hudson(i)...... 0 0 0 0 13 0.2%
John L. Sabre... 0 0 0 0 26 0.3%
Vincent A.
Wasik(c)....... 0 0 0 0 6,617 80.0%
All Directors
and Executive
Officers as a
Group (12 per-
sons).......... 0 0 0 0 6,919 83.3%
</TABLE>
<TABLE>
<CAPTION>
TOTAL COMMON STOCK
-------------------------------
TO BE VOTING
OWNED POWER
AFTER THE AFTER THE
OFFERINGS(A)(B) OFFERINGS(A)(B)
NAME AND ADDRESS OF --------------- ---------------
BENEFICIAL OWNERS % %
- ------------------- --------------- ---------------
<S> <C> <C>
DNL 46.1% 75.8%
Partners(c)....
c/o Morningside
Capital L.L.C.
One Morningside
Drive North,
Suite 200
Westport, CT
06880
Banque 13.0% 0%
Indosuez(d)....
c/o Indosuez
Capital
1211 Avenue of
the Americas
7th Floor
New York, NY
10036-8701
Minis 0% 0%
Family(e)......
c/o Hunter,
Maclean, Exley
& Dunn, P.C.
200 East St.
Julian St.
P.O. Box 9848
Savannah, Geor-
gia 31401
Morgan Guaranty 8.3% 13.6%
Trust
Company(f).....
c/o J.P. Morgan
Investment
Management
522 Fifth Ave-
nue
New York, NY
10036
Dr. Leroy
Keith(g).......
Joyce M. Roche.. 0.8% 1.4%
Dennis E.
Smith.......... 0.4% 0.7%
Bradford N.
Creswell(h)....
David A. Young..
Mario J. de la
Guardia........
H. L. Cornish,
Jr.............
Lawrence E.
Bathgate,
II(i)..........
Abbey J.
Butler(i)...... 0.1% 0.1%
Suzanne de Pas-
se............. 0.1% 0.1%
Melvyn J.
Estrin(i)...... 0.1% 0.1%
James L.
Hudson(i)...... 0.1% 0.1%
John L. Sabre... 0.2% 0.3%
Vincent A.
Wasik(c)....... 46.1% 75.8%
All Directors
and Executive
Officers as a
Group (12 per-
sons).......... 48.2% 79.3%
</TABLE>
- -------
(a) Does not give effect to purchases, if any, by such persons in the
Offerings. Percentage indicates percentage of class, except for the Total
Common Stock column.
(b) Based on 1,705,500, 1,859,677 and 8,306,014 shares of Class A Common
Stock, Class B Common Stock and Class C Common Stock, respectively,
outstanding prior to the Offerings and 4,190,000, 1,859,677 and 8,306,014
shares of Class A Common Stock, Class B Common Stock and Class C Common
Stock, respectively, outstanding after the Offerings, assuming no exercise
of the Underwriters' over-allotment options. Calculation of percentage of
beneficial ownership assumes the exercise of all options and warrants
exercisable within 60 days of the date hereof only by the respective named
stockholder.
57
<PAGE>
(c) Amounts shown represent the aggregate number of shares beneficially owned
by DNL Partners, including 818,640 shares subject to a Voting Trust
Agreement dated August 23, 1995. Pursuant to the Voting Trust Agreement,
DNL Partners was granted full power and authorization to vote the shares
of the members of the DNL Partners Limited Partnership Voting Trust (the
"Voting Trust"), including Dr. Keith and Northwest Capital, Inc., on all
matters. Mr. Wasik has a 99% ownership interest in the general partner of
DNL Partners, DNL Group L.L.C., and therefore is deemed to have voting
and dispositive control as to the shares held by DNL Partners and the
Voting Trust. Messrs. Wasik, Bathgate, Butler, Estrin and Hudson, who
serve as Directors of the Company, are, or have interests in, limited
partners of DNL Partners, including in the case of Messrs. Wasik and
Bathgate, ownership interests in Morningside, one of the limited partners
in DNL Partners.
(d) Includes Indosuez Carson Partners and Indosuez CM II, Inc. Mr. Sabre is a
general partner of Indosuez Carson Partners.
(e) Includes Vango L.P. (Don L. Waters and Russell W. Carpenter, as co-
Trustees, u/a/w Abram Minis, Jr. dated July 15, 1993 as the General
Partner), Henry H. Minis, Marguerite M. Trethewey, James E. Hungerpiller,
James E. Hungerpiller, as Trustee of The James E. Hungerpiller Charitable
Remainder Unitrust--1996 u/a/dtd September 20, 1996, James E.
Hungerpiller, as Trustee of The Edith Hunter Minis Charitable Remainder
Unitrust--1996 u/a/dtd September 20, 1996, and Don L. Waters and Russell
W. Carpenter, as Co-Trustees, u/a/w Abram Minis, Jr. dated July 15, 1993.
Henry Minis was Vice President and Director of the Predecessor for
three years prior to the Acquisition, and has been a Director of Carson
Products since the Acquisition. The shares held by the Minis family will
be converted from Class C Common Stock to Class A Common Stock
immediately prior to the effectiveness of the Registration Statement.
(f) Includes Morgan Guaranty Trust Company, as Trustee of a Commingled
Pension Fund-Multi-Market Special Investment Fund II, Multi-Market
Special Investment Trust Fund of Morgan Guaranty Company of New York and
Morgan Guaranty Trust Company New York as Investment Manager and Agent
for the Alfred P. Sloan Foundation Multi-Market Account.
(g) Excludes 341,100 shares held by the Voting Trust. See Note (c).
(h) Excludes 159,180 shares held by the Voting Trust on behalf of Northwest
Capital, Inc., a company of which Mr. Creswell is the President and a
stockholder. See Note (c).
(i) These directors are, or have direct or indirect interests in, limited
partners of DNL Partners. See Note (c).
58
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MORNINGSIDE
Carson Products and Morningside Capital Group, L.L.C., a Connecticut limited
liability company ("Morningside") entered into a Management Assistance
Agreement dated August 23, 1995 (the "Management Agreement"), pursuant to
which Morningside agreed to supply the services of Vincent A. Wasik (a
principal member of Morningside) to provide advice and assistance with respect
to (i) the formulation of a "strategic direction"; (ii) the formulation of
business plans, capital budgets and financial strategies; (iii) the
formulation of marketing, sales and operational plans; (iv) the evaluation of
investment and acquisition opportunities; and (v) dealings with banks and
other lending institutions. Such services are provided for a fee of $350,000
per year, payable on a monthly basis in advance plus reimbursement for out of
pocket expenses. The Management Agreement provides that Carson Products
indemnify Morningside, its members, employees and agents, including Mr. Wasik,
for all actions, claims, damages and liabilities based upon or arising from
the acceptance of or performance of the obligations of Morningside under the
Management Agreement (other than actions resulting from gross negligence,
willful misconduct or a material breach of the Management Agreement by
Morningside or Mr. Wasik). The termination date of the Management Agreement is
August 23, 1998; however, the term of the agreement shall continue after such
termination date until terminated by not less than 30 days' advance notice by
either party.
Additionally, for the term of the Management Agreement, Morningside has
agreed that neither it nor Mr. Wasik shall directly or indirectly (i) own
(other than through the ownership of five percent (5%) or less of any class of
securities registered under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), manage, operate, represent, promote, consult for,
control or participate in the ownership, operation, acquisition or management
of any business manufacturing and/or distributing ethnic hair care products or
cosmetics within a 500-mile radius of Carson Products' headquarters, or (ii)
solicit (other than on behalf of Carson Products or any of its affiliates),
divert or take away the business of any customers of Carson Products or any of
its affiliates or any prospective customers of Carson Products or any of its
affiliates.
In connection with the Acquisition, Morningside received fees of $500,000
from the Company for arranging and negotiating the financing for the
Acquisition and performing other consulting and financial advisory services
and was reimbursed by the Company for certain related expenses. Under the
Management Agreement, the Company paid Morningside approximately $25,000 in
fiscal 1996 for reimbursement of out-of-pocket expenses. From time to time
Morningside may provide additional financial advisory services to the Company,
for which Morningside will receive usual and customary compensation.
FEES RELATED TO THE ACQUISITION
Northwest Capital, Inc., a corporation in which Bradford N. Creswell serves
as President and is a principal stockholder, was paid $290,000 and received
159,180 shares of the Company's Class C Common Stock from the Company in
connection with financial advisory services related to the Acquisition.
Bathgate, Wegener & Wolf, P.A., a law firm in which Lawrence E. Bathgate, II
serves as President and Chief Executive Officer, was paid approximately
$690,000 for services rendered in arranging the equity investment in the
Company in connection with the Acquisition. Banque Indosuez received fees and
reimbursement of out-of-pocket expenses totalling $1,783,000 in connection
with the Acquisition.
AM COSMETICS
Morningside AM Acquisition Corp., a Delaware corporation ("AM Acquisition"),
entered into a Subscription Agreement dated as of June 26, 1996 (the
"Subscription Agreement") with Carson Products, providing for the purchase by
Carson Products of 300 shares of cumulative Payment in Kind Preferred Shares
(the "PIK Preferred Shares") issued by AM Acquisition, at a price of $10,000
per share. AM Acquisition was formed by Morningside on behalf of an investor
group to acquire the assets of Arthur Matney Co., Inc. ("Matney"). AM
Acquisition created a wholly-owned operating subsidiary, AM Cosmetics, to hold
such
59
<PAGE>
assets and to continue the operations of Matney as a low-cost manufacturer of
cosmetics. AM Cosmetics sells three brands of "budget" cosmetics, one of which
is targeted at the African-American consumer. The PIK Preferred Shares are
non-voting and are entitled to cumulative dividends payable quarterly in
additional PIK Preferred Shares at a rate of 12% per annum. Additionally, the
PIK Preferred Shares are subject to redemption in whole at the option of
Carson Products on or after July 1, 2005, at the stated value per share (which
is $10,000 per share) plus an amount in cash equal to all accrued and unpaid
dividends on the PIK Preferred Shares (the "Redemption Price"), and are
subject to redemption in whole at any time (or in part from time to time if
all dividends accrued and unpaid have been paid for all past dividend periods
and full dividends have been paid or declared and the amount set apart for
payment for the current dividend period) at the option of AM Acquisition at
the same redemption price.
Pursuant to the Subscription Agreement, AM Acquisition agreed on behalf of
itself and its wholly-owned subsidiary, AM Cosmetics, that for a period of
five years commencing on July 1, 1996, (i) AM Cosmetics would not "contract
manufacture" for any other ethnic cosmetics line, (ii) AM Cosmetics will agree
to produce a cosmetics line for Carson Products, as designed and directed by
Carson Products, at AM Cosmetics' cost plus a maximum 25% markup, and (iii) AM
Cosmetics will agree to provide the necessary research and development for
formulations for the ethnic cosmetic product line(s) as determined by Carson
Products, at no additional cost to Carson Products.
Concurrent with its investment in AM Acquisition, Carson Products entered
into a Management Agreement (the "Carson-AM Management Agreement") with AM
Cosmetics, pursuant to which Carson Products agreed to manage the business
operations of, and provide certain other services to AM Cosmetics. Under the
Carson-AM Management Agreement, Carson Products is required to supervise the
production of a detailed business plan and budget for AM Cosmetics each year.
Once the business plan is approved by AM Cosmetics' Board of Directors, Carson
Products will supervise and administer AM Cosmetics within the confines of the
business plan, with the approval of AM Cosmetics' board for any material
deviations. In return for the management and other services it will provide,
Carson Products is entitled to fees equal to 1% of AM Cosmetics' annual net
sales subject to a minimum of $500,000 per annum. The Carson-AM Management
Agreement expires on June 26, 2004 unless terminated earlier, or renewed for
an additional three-year period at AM Cosmetics' option by giving Carson
Products written notice thereof at least 180 days prior to the expiration
date. Either party may terminate the AM Management Agreement by providing the
other party with written notice, at least 360 days in advance if terminated by
Carson Products and 60 days in advance if terminated by AM Cosmetics. The
Company anticipates that to perform its obligations under the Carson-AM
Management Agreement, certain members of senior management of the Company will
devote a portion of their time to assisting the management of AM Cosmetics.
The Carson-AM Management Agreement also provides that the parties may enter
into (i) sales agreements, substantially in the form agreed upon by the
parties which provides for a five percent sales commission on net sales, and
(ii) manufacturing agreements which will include the specifications of each
product, substantially in the form agreed upon by the parties which provides
that AM Cosmetics will be entitled to a 25% profit margin above all costs,
including general administrative costs. The Company is currently negotiating
such a sales agreement, which the Company believes will provide it with the
opportunity to increase its revenues with little additional expense. The
Company believes that it can use its existing relationships with its
distribution channels to expand the sales of AM Cosmetics' products, and that
the Company's sales force will be motivated by the opportunity to earn
additional commissions without lowering their targets for sales of the
Company's products. The Company expects to enter into a manufacturing
agreement with AM Cosmetics in the near future once precise product
specifications have been determined, which the Company believes will provide
it with the basis for launching its own line of cosmetics targeted to women of
African descent under the Dark & Lovely brand name. Pursuant to discussions
among the parties, the Company expects that the manufacturing agreement will
not contain volume requirements or termination rights for AM Cosmetics.
Certain of the principal and management stockholders of the Company have
ownership interests in AM Cosmetics, including Vincent A. Wasik, Dr. Leroy
Keith and Bradford N. Creswell. In addition, Dr. Keith serves as Chairman of
the Board of Directors of AM Cosmetics and Mr. Wasik serves as President.
60
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
Simultaneous with the consummation of the Offerings, Carson Products expects
to enter into an Amended and Restated Credit Agreement (the "Credit
Agreement") with Banque Indosuez, as agent and a lender (the "Bank"), and the
other lenders party thereto under which the Bank and the other lenders will
provide term loans and a revolving credit facility to Carson Products, subject
to the conditions set forth therein. The following summary of the New Senior
Bank Facility is subject to, and qualified in its entirety by, the Credit
Agreement that will be filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The Company intends to use a portion of the
net proceeds received from the Offerings, together with borrowings under the
New Senior Bank Facility, to repay all of the outstanding borrowings under the
Senior Bank Credit Facility. See "Use of Proceeds" and "Capitalization."
The New Senior Bank Facility will include (i) a $15.0 million term loan A,
(ii) a $10.0 million term loan B and (iii) a $15.0 million revolving credit
facility, including up to $3.0 million of letters of credit. The aggregate of
the revolving credit facility and the aggregate outstanding letters of credit
may not exceed Carson Product's Borrowing Base, which equals the sum of (i)
80% of Eligible Accounts Receivable and (ii) 50% of Eligible Inventory (each
such term is as defined in the Credit Agreement). The final maturity date for
term loan A, term loan B and the revolving credit facility is expected to be
the last business day of October 2002, 2003 and 2002, respectively. Term loan
A will amortize in equal quarterly installments of $625,000 beginning in
January 1997 and ending in October 2002. Term loan B will amortize in equal
quarterly installments of $25,000 beginning in January 1997 through October
2002 and in equal quarterly installments of $2,350,000 beginning in January
2003 and ending in October 2003.
Borrowings under term loan A, term loan B and the revolving credit facility
will generally bear interest at the Base Rate (as defined in the Credit
Agreement) plus 0.5%, the Base Rate plus 1.0% and the Base Rate plus 0.5%,
respectively, or at the Company's option, the Eurodollar Rate (as defined in
the Credit Agreement) plus 2.0%, the Eurodollar Rate plus 2.5%, and the
Eurodollar Rate plus 2.0%, respectively. Interest on Base Rate borrowings are
payable quarterly in arrears and interest on Eurodollar Rate borrowings are
payable at the end of the applicable interest period and, if such interest
period is in excess of three months, at three month intervals thereafter. If
any borrowings are not repaid when due, the outstanding principal amount of
such borrowings will bear interest at the then applicable rate plus 2.0%.
The Credit Agreement will provide for (i) a commitment fee of 0.5% per annum
on the unutilized portion of the revolving credit facility, payable quarterly
in arrears, (ii) a fee of 2.0% per annum on the maximum amount available to be
drawn under letters of credit, payable quarterly in arrears, and (iii) a
letter of credit issuance fee equal to the greater of (x) 0.25% of the maximum
amount available at any time to be drawn under any letter of credit or (y)
$2,500.
The obligations of Carson Products under the New Senior Bank Facility will
be secured by security interests in all accounts receivable, inventory,
property, plant and equipment and other personal, intellectual and real
property of Carson Products and its subsidiaries, as well as by a pledge of
the capital stock of Carson Products and its subsidiaries. The New Senior Bank
Facility will be guaranteed by the Company and each subsidiary of Carson
Products. The New Senior Bank Facility will contain customary covenants with
respect to, among other things, (i) maintenance by Carson Products of certain
total interest coverage ratios, fixed charge coverage ratios and leverage
ratios, and (ii) restrictions on the incurrence of additional liens or
indebtedness. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
61
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL MATTERS
Immediately prior to the effectiveness of the Registration Statement of
which this Prospectus is a part, the Company will amend and restate its
Restated Certificate of Incorporation to (i) change the authorized capital
stock of the Company to 150,000,000 shares of Class A Common Stock, par value
$0.01 per share ("Class A Common Stock"), 2,000,000 shares of Class B Common
Stock, par value $0.01 per share ("Class B Common Stock"), 10,000,000 shares
of Class C Common Stock, par value $0.01 per share ("Class C Common Stock"),
and 10,000,000 shares of preferred stock, par value $0.01 per share (the
"Preferred Stock"), (ii) reclassify each outstanding share of Class A Common
Stock into 11,370 shares of its newly created Class C Common Stock and (iii)
reclassify each outstanding share of Class B Common Stock into 11,370 shares
of its newly created Class B Common Stock (the "Amended and Restated
Certificate of Incorporation"). Upon completion of the Offerings, 4,190,000
shares of Class A Common Stock, 1,859,677 shares of Class B Common Stock and
8,306,014 shares of Class C Common Stock will be issued and outstanding and no
shares of Preferred Stock will be issued and outstanding. The discussion
herein describes the Company's capital stock, the Amended and Restated
Certificate of Incorporation and Bylaws anticipated to be in effect upon
effectiveness of the Registration Statement. The following summary of certain
provisions of the Company's capital stock describes all material provisions,
but does not purport to be complete and is subject to, and qualified in its
entirety by, the Amended and Restated Certificate of Incorporation and the
Bylaws of the Company that are included as exhibits to the Registration
Statement and by the provisions of applicable law.
Certain provisions described herein may have the effect of impeding
stockholder actions with respect to certain business combinations and the
election of new members to the Board. As such, the provisions could have the
effect of discouraging open market purchases of the Company's Common Stock
because they may be considered disadvantageous by a stockholder who desires to
participate in a business combination or elect a new director.
COMMON STOCK
Dividends. Holders of record of shares of Common Stock on the record date
fixed by the Company's Board are entitled to receive such dividends as may be
declared by the Board out of funds legally available for such purpose, subject
to the rights of the holders of any series of Preferred Stock. No dividends
may be declared or paid in cash or property on any share of any class of
Common Stock, unless simultaneously the same dividend is declared or paid on
each share of the other classes of Common Stock except that if dividends are
declared that are payable in Common Stock or options or warrants to purchase
Common Stock or securities convertible into or exchangeable for Common Stock,
a like dividend or other distribution will also be paid on each other class of
Common Stock, as the case may be, in an equal amount per share.
Voting Rights. Holders of shares of Class A Common Stock and Class C Common
Stock will vote as a single class on all matters submitted to a vote of the
stockholders, with each share of Class A Common Stock entitled to one vote and
each share of Class C Common Stock entitled to ten votes, except as otherwise
provided by law. Holders of shares of Class B Common Stock will not be
entitled to vote on any matter submitted to a vote of the stockholders, except
as otherwise provided by law and except that the holders of the Class B Common
Stock will be entitled to vote as a separate class on any amendment, repeal or
modification of any provision of the Amended and Restated Certificate of
Incorporation that adversely affects the powers, preferences or special rights
of the Class B Common Stock in a manner different from the adverse effect on
the powers, preferences or special rights of the Class A Common Stock. On any
matter on which holders of Class A Common Stock, Class B Common Stock (other
than with respect to matters referred to in the previous sentence) and Class C
Common Stock are entitled to vote, such holders shall vote together as a
single class with each share of Class A Common Stock entitled to one vote and
each share of Class B Common Stock and Class C Common Stock entitled to ten
votes, except as otherwise provided by law. Holders of Common Stock are not
entitled to cumulate votes in the election of Directors.
62
<PAGE>
Pursuant to the Voting Trust Agreement, DNL Partners, as trustee of the
Voting Trust, will vote the shares of Common Stock held in the Voting Trust.
Dr. Keith and Mr. Creswell hold trust certificates in the Voting Trust.
Liquidation Rights. Upon liquidation, dissolution or winding-up of the
Company, the holders of Class A Common Stock are entitled to share ratably
with the holders of Class B Common Stock and Class C Common Stock in all
assets available for distributions after payment in full of creditors and
payment in full to any holders of Preferred Stock then outstanding of any
amount required to be paid under the terms of such Preferred Stock.
Conversion. Each share of Class B Common Stock is convertible at any time,
at the option of its holder, into one share of Class A Common Stock or, prior
to a Triggering Event (as defined below), one share of Class C Common Stock.
Each share of Class C Common Stock is convertible at any time, at the option
of its holder, into one share of Class A Common Stock at any time. In
addition, certain stockholders ("Regulated Holders") that are subject to
regulation under Regulation Y of the Board of Governors of the Federal Reserve
System or the Bank Holding Company Act of 1956, as amended, may convert their
shares of Class C Common Stock into the same number of shares of Class B
Common Stock at any time. The Company is required to notify each Regulated
Holder prior to converting or directly or indirectly purchasing or otherwise
acquiring any shares of Class A Common Stock or Class C Common Stock or taking
any other action affecting the voting rights of the holders of such shares if
such action will increase the percentage of outstanding Class A Common Stock
or Class C Common Stock owned by or controlled by any Regulated Holder. The
Company will defer making any such conversion, purchase or other acquisition
or taking any such other action for a period of 30 days after giving such
notice to allow each such Regulated Holder to make a determination as to
whether it wishes to effect a conversion or take any other action with respect
to the Class A Common Stock or the Class C Common Stock it owns prior to the
expiration of such 30 day period. The Company is prohibited from directly or
indirectly redeeming, purchasing, acquiring or taking any other action
affecting outstanding Class A Common Stock or Class C Common Stock if such
action will increase above 24.9% the percentage of outstanding Common Stock
owned by or controlled by any Regulated Holder and its affiliates.
Each share of Class C Common Stock converts automatically into one share of
Class A Common Stock upon transfer to any person other than a Permitted
Transferee. For purposes hereof, a "Permitted Transferee" means any beneficial
owner of the Class C Common Stock on the date hereof, any affiliate of such
owner, any member of such owner's immediate family, or any trust or foundation
for the benefit of any of the foregoing. In the event that the number of
shares of Class C Common Stock issued and outstanding at any time shall
constitute less than 9% of the total number of shares of Common Stock issued
and outstanding at such time (a "Triggering Event"), then without further act
on the part of the holder of the Class C Common Stock, all shares of Class C
Common Stock then issued and outstanding will be deemed converted into shares
of Class A Common Stock. Additionally, upon the occurrence of a Triggering
Event, the holders of the shares of issued and outstanding Class B Common
Stock will no longer have the option to convert such shares into Class C
Common Stock.
The holders of Common Stock are not entitled to preemptive rights. Certain
stockholders have the right to purchase additional shares of Common Stock
pursuant to (i) a Subscription Agreement dated as of August 23, 1995 between
the Company and the investors set forth in Schedule I thereto (entities
affiliated with Banque Indosuez and Morgan Guaranty Trust Company), and (ii) a
Subscription Agreement dated as of August 23, 1995 between the Company and DNL
Partners. These rights will be waived in connection with the Offerings. The
shares of Common Stock obtained upon the conversion of the Company's former
common stock presently outstanding are, and the shares of Class A Common Stock
offered hereby will be, upon conversion or issuance, validly issued, fully
paid and nonassessable. Pursuant to the Amended and Restated Certificate of
Incorporation, in any merger, consolidation or business combination, the
consideration to be received per share by holders of Class A Common Stock must
be identical to that received by holders of Class B Common Stock and Class C
Common Stock, except that in any such transaction in which voting securities
(or options or warrants to purchase voting securities, or securities
convertible into or exchangeable for voting securities), are distributed, such
voting securities (or options or warrants to purchase voting securities, or of
securities convertible into or exchangeable for, voting securities) may differ
as to voting rights to the extent that voting rights now differ among the
classes
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of Common Stock. Pursuant to the Amended and Restated Certificate of
Incorporation, no class of Common Stock may be subdivided, reclassified or
otherwise changed unless concurrently the other classes of Common Stock are
subdivided, consolidated, reclassified or otherwise changed in the same
proportion and in the same manner.
Except as expressly set forth in the Amended and Restated Certificate of
Incorporation, the rights of the holders of Class A Common Stock, Class B
Common Stock and Class C Common Stock are in all respects identical.
PREFERRED STOCK
The 10,000,000 authorized and unissued shares of Preferred Stock may be
issued with such designations, preferences, limitations and relative rights as
the Company's Board may authorize, including, but not limited to: (i) the
distinctive designation of each series and the number of shares that will
constitute such series; (ii) the voting rights, if any, of shares of such
series; (iii) the dividend payable on the shares of such series, any
restriction, limitation or condition upon the payment of such dividends,
whether dividends shall be cumulative, and the dates on which dividends are
payable; (iv) the prices at which, and the terms and conditions on which, the
shares of such series may be redeemed, if such shares are redeemable; (v) the
purchase or sinking fund provisions, if any, for the purchase or redemption of
shares of such series; (vi) any preferential amount payable upon shares of
such series in the event of liquidation, dissolution or winding-up of the
Company or the distribution of its assets; and (vii) the prices or rates of
conversion at which, and the terms and conditions on which, the shares of such
series may be converted into other securities, if such shares are convertible.
Although the Company has no present intention to issue Preferred Stock, the
issuance of Preferred Stock, or the issuance of rights to purchase such
shares, could discourage an unsolicited acquisition proposal.
CERTAIN PROVISIONS OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
AND BYLAWS AND STATUTORY PROVISIONS
The Amended and Restated Certificate of Incorporation and Bylaws contain
certain provisions that could make more difficult the acquisition of the
Company by means of a tender offer, a proxy contest or otherwise.
Board of Directors. The Amended and Restated Certificate of Incorporation
will provide that the Board will consist of 10 to 15 Directors, and that the
number of directors may be increased or decreased from time to time in such
manner as may be prescribed in the Bylaws. The Board will be classified into
three classes, each of which, after a transitional arrangement, will serve for
three years, with one class being elected each year. All Directors will be
elected by the holders of the Class A Common Stock and Class C Common Stock,
voting as a class.
Directors may be removed only for cause and only with the approval of the
holders of at least 80% of the voting power of the then outstanding shares of
capital stock of the Company entitled to vote generally in the election of
directors, voting together as a single class. In addition, the Bylaws will
provide that any vacancy on the Board shall be filled only by the remaining
directors then in office, even if the remaining Directors constitute less than
a quorum, and that directors so appointed will serve for the remainder of the
term of the class in which the vacancy occurred rather than until the next
annual meeting of stockholders.
Advance Notice Provisions for Stockholder Nominations and Stockholder
Proposals. The Amended and Restated Certificate of Incorporation will require
that any action required or permitted to be taken by the Company's
stockholders must be effected at a duly called annual or special meeting of
stockholders and such action may not be effected by consent in writing.
Additionally, the Amended and Restated Certificate of Incorporation will
require that special meetings of the stockholders of the Company be called
only by the Chairman of the Board or the Secretary pursuant to a resolution
adopted by a majority of the entire Board, and that advance notice of
stockholder nominations for the election of directors be given in the manner
provided in the Bylaws.
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The Amended and Restated Bylaws will provide that stockholders seeking to
bring business before or to nominate directors at any annual meeting of
stockholders must provide timely notice thereof in writing. To be timely, a
stockholder's notice must be delivered to, or mailed and received at, the
principal executive offices of the Company not less than 60 days nor more than
90 days prior to such meeting or, if less than 70 days' notice was given for
the meeting, within ten days following the date on which such notice was
given. The Bylaws also will specify certain requirements for a stockholder's
notice to be in proper written form. These provisions will restrict the
ability of stockholders to bring matters before the stockholders or to make
nominations for directors at meetings of stockholders.
Amendment to the Charter and Bylaws. The Amended and Restated Certificate of
Incorporation will provide that the stockholder vote required to alter, amend,
or repeal the foregoing provisions and certain other provisions of the
Articles of Incorporation and the Bylaws, or to adopt any provision
inconsistent therewith, shall be 80% of the Voting Stock, voting together as a
single class.
Rights to Purchase Stock. The Amended and Restated Certificate of
Incorporation will also provide that the Board is authorized to create and
issue rights entitling the holders thereof to purchase from the Company shares
of stock or other securities of the Company or any other corporation. The
creation and issuance of such rights could have the effect of discouraging
third party attempts to acquire the Company.
Section 203 of Delaware Law. Following the consummation of the Offerings,
the Company will be subject to the "business combination" provisions of the
Delaware General Corporation Law. In general, such provisions prohibit a
publicly-held Delaware corporation from engaging in various "business
combination" transactions with any "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
"interested stockholder," unless (i) the transaction is approved by the Board
prior to the date the interested stockholder obtained such status, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
"interested stockholder," the "interested stockholder" owned at least 85% of
the voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned by (a) persons who are directors and also
officers and (b) employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer, or (iii) on or subsequent
to such date the "business combination" is approved by the Board and
authorized at an annual or special meeting of stockholders by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not owned by
the "interested stockholder." A "business combination" is defined to include
mergers, asset sales and other transactions resulting in financial benefit to
a stockholder. In general, an "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years, did own)
15% or more of a corporation's voting stock. The statute could prohibit or
delay mergers or other takeover or change in control attempts with respect to
the Company and, accordingly, may discourage attempts to acquire the Company.
In addition, the Amended and Restated Certificate of Incorporation will
provide that the affirmative vote of at least 80% of the outstanding voting
stock is required for a business combination between the Company or any
subsidiary and the beneficial owner of more than five percent of the
outstanding voting stock unless such transaction (i) has been approved by a
majority of the disinterested directors or (ii) involves a person who, as of
the effectiveness of the Offerings, was the beneficial owner of more than five
percent of the outstanding voting stock.
Limitations on Liability and Indemnification of Officers and Directors. The
Delaware Law provides that a corporation may limit the liability of each
director to the corporation or its stockholders for monetary damages except
for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
or that involve intentional misconduct or a knowing violation of law, (iii) in
respect of certain unlawful dividend payments or stock redemptions or
repurchases and (iv) for any transaction from which the director derives an
improper personal benefit. The Company's Amended and Restated Certificate of
Incorporation provides that, to the fullest extent permitted by Delaware law,
no director of the Company shall be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duties as a
director. The effect of these provisions is to eliminate the rights of the
Company and its stockholders (through
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stockholders' derivative suits on behalf of the Company) to recover monetary
damages against a director for breach of fiduciary duty as a director
(including breaches resulting from grossly negligent conduct). This provision
does not exonerate the directors from liability under Federal securities laws
nor does it limit the availability of non-monetary relief in any action or
proceeding against a director. In addition, the Amended and Restated
Certificate of Incorporation provides that the Company shall, to the fullest
extent permitted by Delaware Law, indemnify its officers and directors against
liabilities, cost and expenses as provided by Delaware Law. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or others pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offerings, there has been no public market for the Common
Stock. Future sales of substantial amounts of Common Stock in the public
market could adversely affect market prices of the Class A Common Stock.
Upon the closing of the Offerings there will be 4,190,000 shares of Class A
Common Stock, 1,859,677 shares of Class B Common Stock and 8,306,014 shares of
Class C Common Stock outstanding. The shares of Class A Common Stock sold in
the Offerings will be freely tradeable without restriction or further
registration under the Securities Act, unless held by an "affiliate" of the
Company as that term is defined in the Securities Act, which shares will be
subject to the resale limitations of Rule 144. All of the remaining shares
will be "restricted securities" under the Securities Act and may not be sold
unless they are registered or unless an exemption from registration, such as
the exemptions provided by Rule 144 or Rule 144A under the Securities Act, is
available. On , 1996, 10,165,691 restricted shares of Common Stock will be
eligible for sale pursuant to Rule 144, subject to the holding period and
volume limitations described below.
In general, under Rule 144 as currently in effect, a stockholder (or
stockholders whose shares are aggregated) who has beneficially owned shares
constituting "restricted securities" (generally defined as securities acquired
from the Company or an affiliate of the Company in a non-public transaction)
for at least two years, is entitled to sell within any three-month period a
number of shares that does not exceed the greater of one percent of the
outstanding Common Stock or the average weekly trading volume in the Common
Stock during the four calendar weeks preceding the date on which notice of
such sale is filed pursuant to Rule 144. Sales under Rule 144 are also subject
to certain provisions regarding the manner of sale, notice requirements and
the availability of current public information about the Company. A
stockholder (or stockholders whose shares are aggregated) who is not an
affiliate of the Company for at least 90 days prior to a proposed transaction
and who has beneficially owned "restricted securities" for at least three
years is entitled to sell such shares under Rule 144 without regard to the
limitations described above.
Rule 144A provides a nonexclusive safe harbor exemption from the
registration requirements of the Securities Act for specified resales of
restricted securities to certain institutional investors. In general, Rule
144A allows unregistered resales of restricted securities to a "qualified
institutional buyer," which generally includes an entity, acting for its own
account or for the account of other qualified institutional buyers, that in
the aggregate owns or invests at least $100 million in securities of
unaffiliated issuers. Rule 144A does not extend an exemption to the offer or
sale of securities that, when issued, were of the same class as securities
listed on a national securities exchange or quoted on Nasdaq. The shares of
Class B Common Stock and Class C Common Stock outstanding as of the date of
this Prospectus would be eligible for resale under Rule 144A because such
shares, when issued, were not of the same class as any listed or quoted
securities.
All of the Company's existing stockholders, including the officers and
directors of the Company (other than the Selling Stockholders with respect to
the shares included in the Offerings), have agreed, subject to certain
exceptions, that they will not, without the prior written consent of Merrill
Lynch on behalf of the Underwriters,
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sell or otherwise dispose of any shares of Common Stock for a period of 180
days after the date hereof or make any demand for or exercise any rights with
respect to the registration of the securities. All existing stockholders have
also waived all rights (including demand and "piggyback" registration rights)
to register securities owned by them for such 180 day period and rights to
purchase additional shares of Common Stock in connection with the Offerings.
All of the outstanding shares of Common Stock (other than those sold in the
Offerings) are subject to such agreements. At the request of the Company, the
Underwriters have reserved shares to be issued by the Company to be sold to
directors, officers, employees, business associates and related persons of the
Company at the initial public offering price. Such persons will be required to
agree not to sell or otherwise dispose of any shares of Common Stock for a
period of 90 days following the date of this Prospectus. See "Underwriting."
REGISTRATION RIGHTS
"Piggyback" registration rights will be available for a total of 9,688,151
shares of Common Stock held by members of management and certain other persons
with respect to the registration of Common Stock by the Company under (i) a
Subscription Agreement dated as of August 23, 1995 between the Company and
Indosuez Carson Partners and Indosuez CM II, Inc., (ii) a Subscription
Agreement dated as of August 23, 1995 between the Company and the investors
set forth in Schedule I thereto (entities affiliated with Banque Indosuez and
Morgan Guaranty Trust Company), (iii) a Subscription Agreement dated as of
August 23, 1995 between the Company and DNL Partners, (iv) a Registration
Rights Agreement dated as of August 23, 1995 between the Company and Dr. Leroy
Keith, (v) a Subscription and Registration Rights Agreement between the
Company and the outside directors named therein and (vi) a Subscription and
Registration Rights Agreement between the Company and the members of senior
management named therein, each of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. Such rights are
being waived in connection with the Offering.
In addition, the Company has granted certain stockholders "demand"
registration rights pursuant to the agreements referred to in clauses (i),
(ii) and (iii) of the preceding paragraph. In general, such stockholders may
request registration of their shares at the Company's expense 180 days after
the effective date of the Registration Statement of which this Prospectus is a
part, subject to a minimum amount of the requesting stockholder's shares per
requested registration, and subject to the Company's right to register its own
shares or shares of other requesting stockholders, which may limit the total
number of shares that may be sold in a single offering. However, the Company
is not obligated to register any of such stockholders' shares that may
immediately be sold under Rule 144 in full during any 90 day period. Such
rights are being waived in connection with the Offering.
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS FOR NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Class A
Common Stock applicable to Non-U.S. Holders. In general, a "Non-U.S. Holder"
is any holder other than (i) a citizen or resident of the United States, (ii)
a corporation or partnership created or organized in the United States or
under the laws of the United States or of any state, or (iii) an estate or
trust, the income of which is includable in gross income for United States
federal income tax purposes regardless of its source.
Milbank, Tweed, Hadley & McCloy, special tax counsel to the Company, is of
the opinion that the statements in the following discussion, to the extent
they constitute matters of law or legal conclusions, are correct in all
material respects. This discussion is based on current law and is for general
information only. This discussion does not address aspects of United States
federal taxation other than income and estate taxation and does not address
all aspects of income and estate taxation, nor does it consider any specific
facts or circumstances that may apply to a particular Non-U.S. Holder.
ACCORDINGLY, PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS
REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL, AND NON-UNITED STATES
INCOME AND OTHER TAX CONSEQUENCES OF HOLDING AND DISPOSING OF SHARES OF CLASS
A COMMON STOCK.
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An individual may, subject to certain exceptions, be deemed to be a resident
alien (as opposed to a non-resident alien) by virtue of being present in the
United States on at least 31 days in the calendar year and for an aggregate of
at least 183 days during a three year period ending in the current calendar
year (counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year). Resident aliens are subject
to U.S. federal tax as if they were U.S. citizens.
DIVIDENDS
In general, dividends paid to a Non-U.S. Holder will be subject to United
States withholding tax at a 30% rate (or a lower rate prescribed by an
applicable tax treaty) unless the dividends are either (i) effectively
connected with a trade or business carried on by the Non-U.S. Holder within
the United States, or (ii) if certain income tax treaties apply, attributable
to a permanent establishment in the United States maintained by the Non-U.S.
Holder. Dividends effectively connected with such a United States trade or
business or attributable to such a United States permanent establishment
generally will not be subject to United States withholding tax (if the Non-
U.S. Holder files certain forms, including Internal Revenue Service Form 4224,
with the payor of the dividend) and generally will be subject to United States
federal income tax on a net income basis, in the same manner as if the Non-
U.S. Holder were a resident of the United States. A Non-U.S. Holder that is a
corporation may be subject to an additional branch profits tax at a rate of
30% (or such lower rate as may be specified by an applicable treaty) on the
actual or deemed repatriation from the United States of its "effectively
connected earnings and profits," subject to certain adjustments. To determine
the applicability of a tax treaty providing for a lower rate of withholding,
dividends paid to an address in a foreign country are presumed under the
current interpretation of existing Treasury Regulations to be paid to a
resident of that country absent knowledge to the contrary. However, proposed
Treasury Regulations issued April 15, 1996, if finalized, would eliminate this
presumption with respect to payments made after December 31, 1997. These
proposed Treasury Regulations also would require Non-U.S. Holders to provide
the withholding agent with a beneficial owner withholding certificate to
obtain the benefit of any applicable tax treaty providing for a lower rate of
withholding tax on dividends. The beneficial owner withholding certificate
would contain the Non-U.S. Holders' name, permanent residence address and
taxpayer identifying number ("TIN"), certified by the Internal Revenue Service
(the "Service"). The Service would certify the TIN based on a certificate of
residence issued by the competent authority of the treaty country of which a
Non-U.S. Holder claims to be a resident or on certain documentary evidence
establishing residence in the treaty country. A Non-U.S. Holder that is
eligible for a reduced rate of U.S. withholding tax pursuant to a tax treaty
may obtain a refund of any excess amounts withheld by filing an appropriate
claim for refund with the Service.
SALE OF COMMON STOCK
In general, a Non-U.S. Holder will not be subject to United States federal
income tax on any gain realized upon the disposition of such holder's shares
of Class A Common Stock unless (i) the gain is effectively connected with a
trade or business carried on by the Non-U.S. Holder within the United States
or, alternatively, if certain tax treaties apply, attributable to a permanent
establishment in the United States maintained by the Non-U.S. Holder (and in
either such case, the United States branch profits tax may also apply upon
actual or deemed repatriation of the gain if the Non-U.S. Holder is a
corporation); (ii) in the case of Non-U.S. Holder who is a nonresident alien
individual and holds shares of Class A Common Stock as a capital asset, such
individual is present in the United States for 183 days or more in the taxable
year of disposition, and either (a) such individual has a "tax home" (as
defined for United States federal income tax purposes) in the United States
(unless the gain from the disposition is attributable to an office or other
fixed place of business maintained by such Non-U.S. Holder in a foreign
country and such gain has been subject to a foreign income tax equal to at
least 10% of the gain derived from such disposition), or (b) the gain is
attributable to an office or other fixed place of business maintained by such
individual in the United States; (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of United States tax law applicable to certain
United States expatriates whose loss of United States citizenship had as one
of its principal purposes the avoidance of United States taxes; or (iv) the
Company is or has been a United States real property holding corporation (a
"USRPHC") for United States federal income tax purposes (which the Company
does not believe that it is or is likely to become) at any time within the
shorter of the five-year period preceding such disposition or such Non-U.S.
Holder's holding period. If the Company were
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or were to become a USRPHC, gains realized upon a disposition of Class A
Common Stock by a Non-U.S. Holder which did not directly or indirectly own
more than 5% of the Class A Common Stock during the shorter of the periods
described above generally would not be subject to United States federal income
tax, provided that the Class A Common Stock is "regularly traded" on an
established securities market. The Company intends to make an application to
list the Class A Common Stock on the New York Stock Exchange. Assuming the
application is made and approved, the Company believes that the Class A Common
Stock will be "regularly traded" on an established market.
ESTATE TAX
Class A Common Stock owned or treated as owned by an individual who is not a
citizen or resident (as defined for United States federal estate tax purposes)
of the United States at the time of death will be includable in the
individual's gross estate for United States federal estate tax purposes
(unless an applicable estate tax treaty provides otherwise), and therefore may
be subject to United States federal estate tax.
BACKUP WITHHOLDING, INFORMATION REPORTING AND OTHER REPORTING REQUIREMENTS
The Company must report annually to the Service and to each Non-U.S. Holder
the amount of dividends paid to, and the tax withheld with respect to, each
Non-U.S. Holder. These reporting requirements apply regardless of whether
withholding was reduced or eliminated by an applicable tax treaty. Copies of
this information also may be made available under the provisions of a specific
treaty or agreement with the tax authorities in the country in which the Non-
U.S. Holder resides or is established.
United States backup withholding (which generally is imposed at the rate of
31% on certain payments to persons that fail to furnish the information
required under the United States information reporting requirements) and
information reporting generally will not apply to dividends paid on Class A
Common Stock to a Non-U.S. Holder at an address outside the United States.
If the proceeds of the disposition of Class A Common Stock by a Non-U.S.
Holder are paid over, by or through a United States office of a broker, the
payment is subject to information reporting and to backup withholding unless
the disposing holder certifies as to its name, address and status as a Non-
U.S. Holder under penalties of perjury or otherwise establishes an exemption.
Generally, United States information reporting and backup withholding will not
apply to a payment of disposition proceeds if the payment is made outside the
United States through a non-U.S. office of a non-U.S. broker. However, United
States information reporting requirements (but not backup withholding) will
apply to a payment of disposition proceeds outside the United States if (a)
the payment is made through a non-U.S. office of a broker that is (i) a United
States person for United States federal income tax purposes, (ii) a
"controlled foreign corporation" for United States federal income tax purposes
or (iii) a foreign person 50% or more of whose gross income from certain
periods is effectively connected with a United States trade or business, and
(b) the broker fails to maintain documentary evidence in its files that the
holder is a Non-U.S. Holder or certain conditions are not met.
Backup withholding is not an individual tax. Any amounts withheld under the
backup withholding rules from a payment to a Non-U.S. Holder will be refunded
or credited against the Non-U.S. Holder's United States federal income tax
liability, if any, provided that the required information is furnished to the
Service.
These backup withholding tax and information reporting rules are currently
under review by the United States Treasury Department and proposed Treasury
Regulations issued on April 15, 1996, would modify certain of such rules
generally with respect to payments made after December 31, 1997. Accordingly,
the application of such rules to the Class A Common Stock could be changed.
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UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and
Donaldson, Lufkin & Jenrette Securities Corporation are acting as
representatives (the "U.S. Representatives") of each of the Underwriters named
below (the "U.S. Underwriters"). Subject to the terms and conditions set forth
in a U.S. purchase agreement (the "U.S. Purchase Agreement") among the
Company, each of the Selling Stockholders and the U.S. Underwriters, and
concurrently with the sale of 838,000 shares of Class A Common Stock to the
International Managers (as defined below), the Company, for its own account,
and the Selling Stockholders severally have agreed to sell to the U.S.
Underwriters, and each of the U.S. Underwriters severally has agreed to
purchase from the Company and the Selling Stockholders, the number of shares
of Class A Common Stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
----------------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................
Donaldson, Lufkin & Jenrette Securities Corporation...................
---------
Total............................................................ 3,352,000
=========
</TABLE>
The Company and the Selling Stockholders have also entered into an
international purchase agreement (the "International Purchase Agreement") with
certain underwriters outside the United States and Canada (the "International
Managers" and, together with the U.S. Underwriters, the "Underwriters") for
whom Merrill Lynch International and Donaldson, Lufkin & Jenrette Securities
Corporation are acting as lead managers (the "Lead Managers"). Subject to the
terms and conditions set forth in the International Purchase Agreement, and
concurrently with the sale of 3,352,000 shares of Class A Common Stock to the
U.S. Underwriters pursuant to the U.S. Purchase Agreement, the Company and the
Selling Stockholders have agreed to sell to the International Managers, and
the International Managers severally have agreed to purchase from the Company
and the Selling Stockholders, an aggregate of 838,000 shares of Class A Common
Stock. The initial public offering price per share and the total underwriting
discount per share of Class A Common Stock are identical under the U.S.
Purchase Agreement and the International Purchase Agreement.
In the U.S. Purchase Agreement and the International Purchase Agreement, the
several U.S. Underwriters and the several International Managers,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Class A Common Stock being sold
pursuant to each such agreement if any of the shares of Class A Common Stock
being sold pursuant to such agreement are purchased. Under certain
circumstances, the commitments of non-defaulting U.S. Underwriters or
International Mangers (as the case may be) may be increased. The closings with
respect to the sale of Class A Common Stock to be purchased by the U.S.
Underwriters and the International Managers are conditioned upon one another.
70
<PAGE>
The U.S. Representatives have advised the Company and the Selling
Stockholders that the U.S. Underwriters propose initially to offer the shares
of Class A Common Stock to the public at the initial public offering price set
forth on the cover page of this Prospectus, and to certain dealers at such
price less a concession not in excess of $ per share of Class A Common
Stock. The U.S. Underwriters may allow, and such dealers may allow, a discount
not in excess of $ per share of Class A Common Stock on sales to certain
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
The Company has granted an option to the U.S. Underwriters, exercisable for
30 days after the date of this Prospectus, to purchase up to an aggregate of
502,800 additional shares of Class A Common Stock at the initial public
offering price set forth on the cover page of this Prospectus, less the
underwriting discount. The U.S. Underwriters may exercise this option only to
cover over-allotments, if any, made on the sale of the Class A Common Stock
offered hereby. To the extent that the U.S. Underwriters exercise this option,
each U.S. Underwriter will be obligated, subject to certain conditions, to
purchase the same percentage of such additional shares of Class A Common Stock
as such U.S. Underwriter's initial amount reflected in the foregoing table
bears to the total number of shares of Class A Common Stock initially offered
by the U.S. Underwriters. The Company also has granted an option to the
International Managers, exercisable for 30 days after the date of this
Prospectus, to purchase up to an aggregate of 125,700 additional shares of
Class A Common Stock to cover over-allotments, if any, on terms similar to
those granted to the U.S. Underwriters.
At the request of the Company, the U.S. Underwriters have reserved for sale,
at the initial public offering price, up to 400,000 shares to be issued by the
Company and offered hereby for directors, officers, employees, business
associates and related persons of the Company. The number of shares of Class A
Common Stock available for sale to the general public will be reduced to the
extent such persons purchase such reserved shares. Any reserved shares which
are not so purchased will offered by the Underwriters to the general pubic on
the same basis as the other shares offered hereby. Such persons will be
required to agree not to sell or otherwise dispose of any shares of Class A
Common Stock, or securities convertible into or exchangeable or exercisable
for Class A Common Stock for a period of 90 days following the date of this
Prospectus.
The Company, its directors and executive officers, the Selling Stockholders
and all other existing stockholders have agreed, subject to certain
exceptions, not to directly or indirectly sell, offer to sell, grant any
option for the sale of or otherwise dispose of any shares of Class A Common
Stock or securities or rights convertible into or exercisable or exchangeable
for Class A Common Stock, without the prior written consent of Merrill Lynch,
on behalf of the Underwriters, for a period of 180 days after the date of this
Prospectus. In addition, all existing stockholders have agreed not to make any
demand for or exercise any rights with respect to the registration of Common
Stock and have waived all rights (including demand and "piggyback"
registration rights) to register securities owned by them for such 180 day
period and rights to purchase additional shares of Common Stock in connection
with the Offerings. See "Shares Eligible for Future Sale."
The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for
the coordination of their activities. Pursuant to the Intersyndicate
Agreement, the U.S. Underwriters and the International Managers are permitted
to sell shares of Class A Common Stock to each other for purposes of resale at
the initial public offering price, less an amount not greater than the selling
concession. Under the terms of the Intersyndicate Agreement, the U.S.
Underwriters and any dealer to whom they sell shares of Class A Common Stock
will not offer to sell or sell shares of Class A Common Stock to persons who
are non-U.S. or non-Canadian persons or to persons they believe intended to
resell to persons who are non-U.S. or non-Canadian persons, and the
International Managers and any dealer to whom they sell shares of Class A
Common Stock will not offer to sell or sell shares of Class A Common Stock to
U.S. persons or to Canadian persons or to persons they believe intended to
resell to United States or Canadian persons, except in the case of
transactions pursuant to the Intersyndicate Agreement.
Prior to the Offerings, there has been no public market for the Class A
Common Stock of the Company. The initial public offering price will be
determined through negotiations among the Company, the Selling Stockholders
and the U.S. Representatives and the Lead Managers. Among the facts considered
in determining
71
<PAGE>
the initial public offering price, in addition to prevailing market
conditions, are price-earnings ratios of publicly traded companies that the
Representatives believe to be comparable to the Company, certain financial
information of the Company, the history of, and the prospects for, the Company
and the industry in which it competes, and assessment of the company's
management, its past and present operations, the prospects for, and timing of,
future revenues of the Company, the present state of the Company's
development, and the above factors in relation to market values and various
valuation measures of other companies engaged in activities similar to the
Company. There can be no assurance that an active trading market will develop
for the Class A Common Stock or that the Class A Common Stock will trade in
the public market subsequent to the Offerings at or above the initial public
offering price.
Application has been made to list the Class A Common Stock on the New York
Stock Exchange under the symbol "CIC," subject to official notice of issuance.
In order to meet the requirements for listing of the Class A Common Stock on
that exchange, the U.S. Underwriters have undertaken to sell lots of 100 or
more shares to a minimum of 2,000 beneficial owners.
The Underwriters do not intend to confirm sales of the Class A Common Stock
offered hereby to any accounts over which they exercise discretionary
authority.
The Company and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the International Managers against certain liabilities,
including liabilities under the Securities Act.
Merrill Lynch has been retained to act as financial advisor and provide
investment banking advice to the Company and may be retained in the future to
provide additional investment banking services to the Company. Merrill Lynch
will receive customary fees in connection with such services.
LEGAL MATTERS
The validity of the Class A Common Stock being offered hereby and certain
other legal matters relating to the Offerings will be passed upon for the
Company by Milbank, Tweed, Hadley & McCloy, New York, New York. Certain legal
matters will be passed upon for the Underwriters by Cahill Gordon & Reindel (a
partnership including a professional corporation), New York, New York.
EXPERTS
The financial statements of the Predecessor as of March 31, 1995 and for
each of the two years in the period ended March 31, 1995 included in this
Prospectus and the financial statement schedule for the two years ended March
31, 1995 included in this Registration Statement have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in accounting and auditing.
The consolidated balance sheet as of March 31, 1996 and the consolidated
statements of operations, stockholders' equity and cash flows of the Company
for the period from August 23, 1995 through March 31, 1996 and the
consolidated statements of income, stockholders' equity, and cash flows of the
Predecessor for the period from April 1, 1995 to August 22, 1995 and the
related financial statement schedule have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports appearing herein and
elsewhere in the registration statement, and are included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
On August 23, 1995 the Company engaged Deloitte & Touche LLP as its
independent public accountants, replacing the Predecessor's independent public
accountants, Price Waterhouse LLP. There were no disagreements with Price
Waterhouse LLP regarding accounting principles or practices, financial
statement disclosure, or auditing scope or procedure during each of the two
fiscal years ended March 31, 1995 and the period from April 1, 1995 to August
22, 1995. The decision to change accountants was approved by the Company's
Board of Directors.
72
<PAGE>
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-1 with respect to
the Class A Common Stock being offered hereby with the Commission under the
Securities Act. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain items of which are omitted in accordance with the rules and
regulations of the Commission. Statements contained in this Prospectus
concerning the provisions of documents filed with the Registration Statement
as exhibits are necessarily summaries of such documents, and each such
statement is qualified in its entirety by reference to the copy of the
applicable document filed as an exhibit to the Registration Statement. Upon
the consummation of the Offerings, the Company will be subject to the
informational requirements of the Exchange Act and, in accordance therewith,
will file reports and other information with the Commission. The Registration
Statement and the exhibits and schedules thereto filed by the Company with the
Commission, as well as such reports and other information filed by the Company
with the Commission, may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549; at its Chicago Regional Office, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511; and at its New York Regional Office, Seven
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can be obtained from the public reference section of the Commission,
450 Fifth Street, N.W., Washington D.C. 20549, at prescribed rates. Such
material may also be accessed electronically by means of the Commission's home
page on the Internet at http://www.sec.gov. The Class A Common Stock is
expected to be listed on the New York Stock Exchange, and copies of such
material will be available for inspection at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005. The Company intends to
furnish to its stockholders annual reports containing audited consolidated
financial statements and a report thereon by the Company's independent
accountants and quarterly reports containing unaudited consolidated financial
data for the first three quarters of each fiscal year.
73
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED FINANCIAL STATEMENTS FOR THE COMPANY
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheet at March 31, 1996............................. F-3
Consolidated Statement of Operations--Period from August 23, 1995 to
March 31, 1996.......................................................... F-4
Consolidated Statement of Changes in Stockholders' Equity--Period from
August 23, 1995 to March 31, 1996....................................... F-5
Consolidated Statement of Cash Flows--Period from August 23, 1995 to
March 31, 1996.......................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
AUDITED FINANCIAL STATEMENTS FOR THE PREDECESSOR
Report of Independent Accountants........................................ F-16
Independent Auditors' Report............................................. F-17
Consolidated Balance Sheet at March 31, 1995............................. F-18
Consolidated Statements of Income--Years Ended March 31, 1994 and 1995
and Period from April 1, 1995 to August 22, 1995........................ F-19
Consolidated Statements of Changes in Stockholders' Equity--Years Ended
March 31, 1994 and 1995 and Period from April 1, 1995 to August 22,
1995.................................................................... F-20
Consolidated Statements of Cash Flows--Years Ended March 31, 1994 and
1995 and Period from April 1, 1995 to August 22, 1995................... F-21
Notes to Consolidated Financial Statements .............................. F-22
UNAUDITED FINANCIAL STATEMENTS FOR THE PREDECESSOR AND THE COMPANY
Consolidated Balance Sheet at June 30, 1996.............................. F-31
Consolidated Statements of Operations--Three Months Ended June 30, 1995
and 1996................................................................ F-32
Consolidated Statements of Cash Flows--Three Months Ended June 30, 1995
and 1996................................................................ F-33
Notes to Consolidated Financial Statements............................... F-34
</TABLE>
F-1
<PAGE>
THE ACCOMPANYING FINANCIAL STATEMENTS REFLECT CHANGES TO THE TYPE AND NUMBER
OF COMMON SHARES AUTHORIZED AND A CONVERSION OF PREVIOUSLY OUTSTANDING COMMON
STOCK INTO NEWLY CREATED CLASSES OF COMMON STOCK, ALL OF WHICH IS TO BE
EFFECTED PRIOR TO THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT. THE
FOLLOWING OPINION IS IN THE FORM WHICH WILL BE SIGNED BY DELOITTE & TOUCHE LLP
UPON CONSUMMATION OF THE ABOVE EVENTS, WHICH ARE DESCRIBED IN NOTE 14 OF NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AND ASSUMING THAT FROM JUNE 21, 1996 TO
THE DATE OF SUCH EVENTS, NO OTHER EVENTS HAVE OCCURRED WHICH WOULD AFFECT THE
ACCOMPANYING FINANCIAL STATEMENTS AND NOTES THERETO.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
September 20, 1996
INDEPENDENT AUDITORS' REPORT
Board of Directors of Carson, Inc.:
We have audited the accompanying consolidated balance sheet of
Carson, Inc. (formerly DNL Savannah Holding Corp.) and its
subsidiaries as of March 31, 1996 and the related consolidated
statements of operations, changes in stockholders' equity, and cash
flows for the period from August 23, 1995 to March 31, 1996.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Carson,
Inc. and its subsidiaries as of March 31, 1996 and the results of
their operations and their cash flows for the period from August 23,
1995 to March 31, 1996 in conformity with generally accepted
accounting principles.
Atlanta, Georgia
June 21, 1996 ( , 1996 as to Note 14)
F-2
<PAGE>
CARSON, INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents............................................ $ 1,553
Accounts receivable, net of allowance for doubtful accounts of $531.. 12,611
Inventories.......................................................... 8,663
Other................................................................ 3,094
-------
Total current assets............................................... 25,921
PROPERTY, PLANT, AND EQUIPMENT--Net.................................... 11,986
GOODWILL--Net of accumulated amortization of $688...................... 46,633
OTHER ASSETS........................................................... 3,542
-------
$88,082
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
</TABLE>
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Accounts payable..................................................... $ 3,600
Accrued expenses..................................................... 5,354
Current maturities of long-term debt................................. 3,010
-------
Total current liabilities.......................................... 11,964
LONG-TERM DEBT......................................................... 63,778
OTHER LIABILITIES...................................................... 1,678
DEFERRED INCOME TAXES.................................................. 785
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 10,000,000 shares authorized, none
issued.............................................................. --
Common stock:
Class A, voting, $.01 par value, 150,000,000 shares authorized, no
shares issued and outstanding..................................... --
Class B, nonvoting, $.01 par value, 2,000,000 shares authorized,
1,859,677 shares issued and outstanding........................... 19
Class C, voting, $.01 par value, 10,000,000 shares authorized,
9,510,323 shares issued and outstanding........................... 95
Paid-in capital...................................................... 8,557
Retained earnings.................................................... 1,206
-------
Total stockholders' equity......................................... 9,877
-------
$88,082
=======
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
CARSON, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD FROM AUGUST 23, 1995 TO MARCH 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<S> <C>
NET SALES.............................................................. $41,465
COST OF SALES.......................................................... 18,629
-------
Gross profit......................................................... 22,836
OPERATING EXPENSES:
Selling.............................................................. 9,581
General and administrative........................................... 5,061
Depreciation and amortization........................................ 1,331
-------
15,973
-------
OPERATING INCOME....................................................... 6,863
INTEREST EXPENSE....................................................... 4,487
OTHER INCOME........................................................... 182
-------
INCOME BEFORE INCOME TAXES............................................. 2,558
INCOME TAX PROVISION................................................... 1,352
-------
NET INCOME............................................................. $ 1,206
=======
NET INCOME PER SHARE................................................... $ .10
=======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING............................. 11,871
=======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CARSON, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
PERIOD FROM AUGUST 23, 1995 TO MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------
CLASS B CLASS C
------------- -------------
PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ------ ------ ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Sale of common stock.... 569 $ 6 5,799 $58 $11,936 $12,000
Issuance of common stock
in connection with
acquisition
of Predecessor......... 1,291 13 2,006 20 2,717 2,750
Carryover of Predecessor
basis.................. 1,705 17 (6,096) (6,079)
Net income.............. $1,206 1,206
----- --- ----- --- ------- ------ -------
BALANCE--March 31,
1996................... 1,860 $19 9,510 $95 $ 8,557 $1,206 $ 9,877
===== === ===== === ======= ====== =======
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
CARSON, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD FROM AUGUST 23, 1995 TO MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net income.......................................................... $ 1,206
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization..................................... 1,443
Provision for deferred income taxes............................... 805
Changes in assets and liabilities (excluding effects of acquisi-
tion):
Accounts receivable............................................. (2,385)
Inventories..................................................... (1,586)
Other current assets............................................ (970)
Other noncurrent assets......................................... 617
Accounts payable................................................ 1,360
Accrued expenses................................................ (1,677)
Other liabilities............................................... (28)
-------
Total adjustments............................................. (2,421)
-------
Net cash used in operating activities......................... (1,215)
INVESTING ACTIVITIES:
Acquisition of Predecessor (net of cash acquired)................... (65,300)
Purchases of property, plant, and equipment......................... (1,470)
-------
Net cash used in investing activities......................... (66,770)
FINANCING ACTIVITIES:
Proceeds from long-term borrowings.................................. 58,550
Principal payments on long-term debt................................ (1,012)
Sale of common stock................................................ 12,000
-------
Net cash provided by financing activities..................... 69,538
-------
NET INCREASE IN CASH AND CASH EQUIVALENTS............................. 1,553
CASH AND CASH EQUIVALENTS at August 23, 1995.......................... --
-------
CASH AND CASH EQUIVALENTS at March 31, 1996........................... $ 1,553
=======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.......................................................... $ 3,991
=======
Income taxes...................................................... $ 2,497
=======
Non-cash financing activities:
Long-term debt issued in Acquisition.............................. $11,753
=======
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
CARSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND FOR THE PERIOD FROM
AUGUST 23, 1995 TO MARCH 31, 1996
1. ORGANIZATION AND BUSINESS
Carson, Inc. (formerly DNL Savannah Holding Corp. and also referred to
herein as the Company) was established in May 1995 and until August 1995
its operations were de minimus. On August 23, 1995, the Company acquired
all of the outstanding stock of Aminco, Inc. (also referred to as the
Predecessor). Aminco's operations were principally conducted by its wholly
owned subsidiary, Carson Products Company. Subsequent to the acquisition of
Aminco, Carson Products Company was merged into Aminco; the surviving
entity was renamed Carson Products Company. The accompanying financial
statements include the operating results of the Carson Products Company
from the acquisition date.
The Company is the leading manufacturer and marketer in the U.S. retail
ethnic hair care market for African-Americans. The Company is also a
leading global manufacturer and marketer of ethnic hair care products for
persons of African descent. The Company's more than 60 products are
marketed under five principal brand names. Certain of the Company's
international activities are conducted by its South African subsidiary.
The Company's acquisition of the Predecessor for approximately $95 million
in cash (including $6 million for fees and other costs directly associated
with the acquisition) has been accounted for as a purchase. Accordingly,
the purchase price has been allocated to the Predecessor's identifiable
assets and liabilities based on fair values at the acquisition date. The
excess of the purchase price over the fair value of the Predecessor's
identifiable net assets has been classified as goodwill.
The Company borrowed $56 million from various institutions, issued $11.8
million of Junior Subordinated Notes to certain previous shareholders of
the Predecessor, and sold $12 million of its common stock to finance the
acquisition (also see Note 7).
Certain previous shareholders of the Predecessor received 1,705,500 shares
of Class A Common Stock in the acquisition. Such share interest has been
carried over at such shareholders' proportionate equity in the book value
of Aminco (predecessor basis) in accordance with Emerging Issues Task Force
Issue No. 88-16, "Basis in Leveraged Buyout Transactions."
The purchase price of the Predecessor (net of the carryover of the negative
predecessor basis of approximately $6.1 million) has been allocated as
follows (in millions):
<TABLE>
<S> <C>
Current assets (including $17.9 of cash acquired)................... $37.9
Property, plant, and equipment...................................... 10.8
Goodwill............................................................ 47.2
Other assets........................................................ 4.5
Liabilities assumed................................................. (11.4)
-----
$89.0
=====
</TABLE>
In connection with the acquisition and its associated financing, the
Company also issued shares of its common stock to certain lenders and
individuals as follows:
(i)1,187,483 shares of Class C Common Stock and 1,291,177 shares of Class B
Common Stock were issued to lenders at the acquisition date with an
aggregate fair value of approximately $2.4 million and which has been
recorded as debt discount and netted against the carrying value of the
associated debt instrument. Such discount is being amortized using the
interest method over the life of the underlying debt.
F-7
<PAGE>
CARSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND FOR THE PERIOD FROM
AUGUST 23, 1995 TO MARCH 31, 1996--(CONTINUED)
(ii) 818,640 shares of Class C Common Stock were issued to certain
individuals who assisted the Company in securing the acquisition and had a
fair value of approximately $360,000. These shares are being held in a
trust and are subject to certain voting and other restrictions. The fair
value of all shares issued to individuals has been recorded as additional
purchase price.
The fair value of all shares issued above was based on valuations obtained
from a third-party appraiser.
Entities affiliated with certain stockholders of the Company received $1.7
million in cash for their fees associated with assisting the Company with
its purchase of the Predecessor. Also, the Company paid consulting fees of
$219,000 to certain of such affiliated entities during the period from
August 23, 1995 to March 31, 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation--The accompanying financial statements include
the accounts of the Company and its wholly owned subsidiaries. All
significant intercompany transactions and accounts have been eliminated.
Inventories--Inventories in the U.S. are valued at the lower of Last-In,
First-Out (LIFO) cost or market. Inventories of the South African
subsidiary are valued at the lower of First-In, First-Out (FIFO) cost or
market.
Property, Plant, and Equipment--Property, plant, and equipment is recorded
at assigned values or cost less an allowance for depreciation. The Company
capitalizes eligible expenditures with a cost greater than $1,000.
Depreciation is computed using the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
Buildings......................................................... 42 years
Land improvements................................................. 20 years
Machinery and equipment........................................... 12 years
Furniture and fixtures............................................ 10 years
Office equipment.................................................. 8 years
Vehicles.......................................................... 5 years
Information systems............................................... 5 years
</TABLE>
Intangible Assets--Goodwill is amortized over 40 years using the straight-
line method. Debt issue costs are amortized on the interest method over the
life of the related debt. Patents are amortized using the straight-line
method over 17 years. The Company periodically assesses the recoverability
of goodwill based on judgments as to future undiscounted cash flows from
operations.
Income Taxes--Deferred income taxes are recognized for the tax consequences
of "temporary differences" by applying currently enacted statutory rates to
differences between the financial statement carrying amounts and the tax
basis of existing assets and liabilities. The effect on deferred taxes of a
change in tax rates is recognized in the results of operations in the
period that includes the enactment date.
Revenue Recognition--Revenue from sales of manufactured goods are
recognized upon shipment to customers.
Research and Development Costs--Research and development costs (principally
for new products) are expensed as incurred and aggregated $250,000 for the
period from August 23, 1995 to March 31, 1996. These costs are included in
general and administrative expenses in the accompanying statement
of operations.
F-8
<PAGE>
CARSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND FOR THE PERIOD FROM
AUGUST 23, 1995 TO MARCH 31, 1996--(CONTINUED)
Self-Insurance--The Company is self-insured for employee medical costs (up
to $35,000 annually per employee) and for product liability claims (up to
$500,000 annually in the aggregate). The Company carries medical and
liability insurance for amounts exceeding the self-insured limits in
medical and product liability claims. Medical claim costs are accrued based
upon the Company's estimates of the aggregate liability for medical claims
incurred using certain actuarial assumptions followed in the insurance
industry and based on Company experience.
Estimates of accrued liabilities for self-insured product liability claims
are based on an evaluation of the merits of individual claims and
historical claims experience; thus, the Company's ultimate liability may
exceed or be less than the amounts accrued. The methods of making such
estimates and establishing the resulting accrued liability are reviewed
continually and any adjustments resulting therefrom are reflected in
current earnings.
Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Foreign Currency Translation--Assets and liabilities of the Company's South
African operations are translated from South African Rand into U.S. dollars
at the rate of currency exchange at the end of the fiscal period. Revenues
and expenses are translated at average monthly exchange rates prevailing
during the year. Resulting translation differences are recognized as a
component of stockholders' equity. Adjustments resulting from translations
are immaterial to the accompanying financial statements.
Net Income Per Share--Net income per share is computed by dividing net
income by weighted average common shares outstanding. In accordance with
the rules of the Securities and Exchange Commission, all shares of common
stock issued prior to the Company's initial public offering are included in
weighted average shares outstanding as if they were issued at the Company's
formation.
Cash and Cash Equivalents--Cash and investments with maturities of three
months or less when purchased are considered cash and cash equivalents.
Fair Value of Financial Instruments--The carrying values of cash and cash
equivalents, accounts receivable, inventories, accounts payable, and
accrued liabilities approximate fair values due to the short-term
maturities of the instruments.
3. INVENTORIES
Inventories at March 31, 1996 are summarized as follows (in thousands):
<TABLE>
<S> <C>
Raw materials....................................................... $4,562
Work-in-process..................................................... 1,002
Finished goods...................................................... 3,099
------
Total............................................................. $8,663
======
</TABLE>
There were no material differences between inventories valued on a LIFO
basis or their valuation on a FIFO basis at March 31, 1996.
4. OTHER CURRENT ASSETS
Other current assets at March 31, 1996 consist of the following (in
thousands):
<TABLE>
<S> <C>
Prepaid interest (Note 7).......................................... $1,090
Deferred income taxes.............................................. 785
Other.............................................................. 1,219
------
Total............................................................ $3,094
======
</TABLE>
F-9
<PAGE>
CARSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND FOR THE PERIOD FROM
AUGUST 23, 1995 TO MARCH 31, 1996--(CONTINUED)
5. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment at March 31, 1996 is summarized as follows
(in thousands):
<TABLE>
<S> <C>
Land.............................................................. $ 545
Buildings and improvements........................................ 5,427
Machinery and equipment........................................... 5,806
Furniture and fixtures............................................ 277
Construction-in-progress.......................................... 282
-------
12,337
Less accumulated depreciation..................................... 351
-------
Total........................................................... $11,986
=======
</TABLE>
Depreciation expense for property, plant, and equipment was $351,000 for
the period from August 23, 1995 to March 31, 1996.
6. OTHER ASSETS
Other assets at March 31, 1996 are summarized as follows (in thousands):
<TABLE>
<S> <C>
Deferred financing costs........................................... $3,275
Prepaid interest (Note 7).......................................... 433
Patents............................................................ 152
------
3,860
Less accumulated amortization...................................... 318
------
Total............................................................ $3,542
======
</TABLE>
7. LONG-TERM DEBT
Long-term debt at March 31, 1996 is summarized as follows (in thousands):
<TABLE>
<S> <C>
Term loan......................................................... $29,000
Revolving line of credit.......................................... 7,500
Senior Subordinated Notes, interest at 12.5%, due 2002, net of
unamortized discount of $1,307................................... 16,693
Subordinated Notes, interest at 15%, due 2003, net of unamortized
discount of $996................................................. 2,004
Junior Subordinated Notes, interest at 10%, due 2002, net of
unamortized discount of $209..................................... 11,544
Other............................................................. 47
-------
66,788
Less current portion.............................................. 3,010
-------
$63,778
=======
</TABLE>
During August 1995, the Company entered into various borrowing arrangements
in connection with its acquisition of the Predecessor (Note 1). The
principal terms of such arrangements are as follows:
F-10
<PAGE>
CARSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND FOR THE PERIOD FROM
AUGUST 23, 1995 TO MARCH 31, 1996--(CONTINUED)
Term Loan and Revolving Line of Credit--The Company has a $40 million
credit facility (the "Senior Bank Facility") with a commercial bank. This
facility is comprised of a $30 million term loan repayable in quarterly
installments through 2001 and a $10 million revolving line of credit which
expires in July 2001. The Senior Bank Facility requires compliance with
certain financial tests and restricts certain activities including, but not
limited to, capital expenditures, creation of indebtedness, and payment of
dividends by Carson Products Company. Substantially all assets of the
Company, including the stock of its wholly owned subsidiaries, are pledged
as collateral under the Senior Bank Facility.
Borrowings under the Senior Bank Facility bear interest at a base rate as
defined (8.25% at March 31, 1996) plus 1.5% or LIBOR (5.4% at March 31,
1996) plus 3%. The weighted average rate on borrowings under the Senior
Bank Facility was 9.4% for the period from August 23, 1995 to March 31,
1996.
Borrowings under the line of credit are limited to percentages of certain
eligible assets. The line can also be used for letters of credit which,
when issued, reduce availability under the line; no letters of credit were
outstanding at March 31, 1996. At March 31, 1996, the Company had $2.5
million of unused capacity under the line of credit.
Subordinated Notes--The Senior Subordinated Notes, the Subordinated Notes,
and the Junior Subordinated Notes (collectively, the "Subordinated
Financing") are subordinate to debt outstanding under the term loan and
revolving line of credit. The terms of the Subordinated Financing contain
certain cross default provisions with the Senior Bank Facility. The Company
believes that it is not practicable to estimate the fair value of the
Subordinated Financing due to the lack of comparable securities and the
lack of a credit rating of the Company by an established rating agency.
Interest on the Senior Subordinated Notes is payable quarterly in arrears.
Interest on the Subordinated Notes and the Junior Subordinated Notes is
payable semi-annually in arrears and can be paid in cash or, at the
Company's option, by the issuance of additional subordinated notes with
similar terms. The Junior Subordinated Notes were issued to certain former
shareholders of the Predecessor and the Company prepaid interest thereon in
cash aggregating $2.2 million. The effective interest rate for the Senior
Subordinated Notes, Subordinated Notes, and Junior Subordinated Notes was
14.2%, 24.5%, and 10.5%, respectively.
Annual maturities of outstanding indebtedness at March 31, 1996 are as
follows (in thousands):
<TABLE>
<S> <C>
1997............................................................... $ 3,010
1998............................................................... 4,255
1999............................................................... 5,214
2000............................................................... 5,664
2001............................................................... 6,119
Thereafter......................................................... 42,526
-------
$66,788
=======
</TABLE>
At March 31, 1996, the Company did not comply with certain covenants of the
Senior Bank Facility and the Senior Subordinated Notes related to capital
expenditures and net worth. The Company has received waivers of these
events of default from its lenders (Note 14).
F-11
<PAGE>
CARSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND FOR THE PERIOD FROM
AUGUST 23, 1995 TO MARCH 31, 1996--(CONTINUED)
8. ACCRUED LIABILITIES
Accrued liabilities at March 31, 1996 consist of the following (in
thousands):
<TABLE>
<S> <C>
Compensation and benefits.......................................... $2,227
Advertising........................................................ 1,340
Self insurance..................................................... 927
Interest........................................................... 384
Other.............................................................. 476
------
$5,354
======
</TABLE>
9.INCOME TAXES
Income tax expense for the period from August 23, 1995 to March 31, 1996
consists of (in thousands):
<TABLE>
<S> <C>
Current:
Federal.......................................................... $ 204
State............................................................ 33
Foreign.......................................................... 310
------
Total current provision........................................ 547
Deferred:
Federal.......................................................... 609
State............................................................ 114
Foreign.......................................................... 82
------
Total deferred provision....................................... 805
------
Total provision................................................ $1,352
======
</TABLE>
The following is a reconciliation of the statutory tax rate to the
Company's effective tax rate for the period from August 23, 1995 to March
31, 1996:
<TABLE>
<S> <C>
Statutory rate......................................................... 34%
State income taxes (net of federal benefit)............................ 4
Permanent differences (primarily nondeductible goodwill)............... 15
---
Effective rate......................................................... 53%
===
</TABLE>
F-12
<PAGE>
CARSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND FOR THE PERIOD FROM
AUGUST 23, 1995 TO MARCH 31, 1996--(CONTINUED)
The effects of temporary differences which gave rise to the deferred tax
asset and liability at March 31, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
CURRENT LONG-TERM
------- ---------
<S> <C> <C>
Deferred tax assets related to:
Accrued expenses....................................... $522 $ 826
Allowance for doubtful accounts........................ 199
Package design costs................................... 412
Inventories............................................ 50
Other.................................................. 14
---- ------
785 1,238
Deferred tax liabilities related to:
Inventories............................................ (801)
Property, plant, and equipment......................... (1,222)
------
(2,023)
---- ------
$785 $ (785)
==== ======
</TABLE>
Deferred income taxes were not provided on undistributed earnings of
certain foreign subsidiaries ($1.0 million at March 31, 1996) because such
undistributed earnings are expected to be reinvested indefinitely overseas.
If these amounts were not considered permanently reinvested, additional
deferred taxes of approximately $125,000 would have been provided.
10. EMPLOYEE BENEFIT PLANS
The Company has a profit sharing plan which covers substantially all U.S.
employees. Contributions to the plan are discretionary, as determined by
the Board of Directors. Contributions are made on an annual basis. The
Company contributed $246,000 to the plan for the period from August 23,
1995 to March 31, 1996.
The Company is obligated for retirement benefits to a former employee for
the remainder of his (and his spouse's) life. The expected present value of
this obligation ($1.7 million at March 31, 1996) is classified in other
liabilities in the accompanying balance sheet.
The Company provides postretirement health care benefits to a limited
number of key executives. The accumulated postretirement benefit obligation
("APBO") was $499,000 at March 31, 1996. For measurement purposes, the cost
of providing medical benefits was assumed to increase by 10% in the fiscal
year ended March 31, 1996, decreasing to an annual rate of 8% after March
31, 2000. The medical cost trend rate assumption could have an effect on
amounts reported. For example, an increase of 1% in the assumed rate of
increase would have an effect of increasing the APBO by $78,000 and the net
periodic postretirement benefit cost by $21,000. The weighted average
discount rate used in determining the APBO was 8%. Net periodic
postretirement benefit cost for the period from August 23, 1995 to March
31, 1996 was $9,000.
Certain members of senior management are eligible to receive incentive
compensation based on the future fair market value of the Company in excess
of $50 million subject to five year vesting requirements and payable in
cash in the year 2000 (or earlier upon a public offering or sale of the
Company). No expense was recognized for such incentives during the period
from August 23, 1995 to March 31, 1996 (based on management's estimate of
the Company's fair market value at March 31, 1996. Such estimate of fair
market value was based upon the same methodology and factors used to
determine the purchase price of the Predecessor, i.e. a multiple of annual
cash flow).
F-13
<PAGE>
CARSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND FOR THE PERIOD FROM
AUGUST 23, 1995 TO MARCH 31, 1996--(CONTINUED)
11. COMMITMENTS AND CONTINGENCIES
The Company is a party to lawsuits incidental to its business. Management
believes that the ultimate resolution of these matters will not have a
materially adverse impact on the business or financial condition and
operations of the Company.
12. U.S. AND FOREIGN OPERATIONS
The Company's operations are located in the United States and South Africa.
Financial information by geographic area for the period from August 23,
1995 to March 31, 1996 is as follows (in thousands):
<TABLE>
<S> <C>
Net sales by:
United States:
Domestic...................................................... $31,775
Export........................................................ 5,227
South Africa.................................................... 4,463
-------
$41,465
=======
Operating Profit:
United States................................................... $ 5,861
South Africa.................................................... 1,002
-------
$ 6,863
=======
Identifiable assets (at end of period):
United States................................................... $83,538
South Africa.................................................... 4,404
-------
$87,942
=======
</TABLE>
Transfers of product from the United States to South Africa were not
material during the period presented above. Export sales from the United
States include sales to customers in Europe, the Carribean, and Africa.
The Company is in the process of effecting an initial public offering of
approximately 25% of the common stock of its South African subsidiary. The
subsidiary expects to receive net proceeds of approximately $4.2 million
from this sale (which will result in a gain to the Company of approximately
$2.8 million which will be recorded in retained earnings upon the
completion of the public offering). Proceeds from the offering will be used
by the subsidiary to acquire a manufacturing facility in South Africa and
for general corporate purposes.
13. FINANCIAL INFORMATION OF CARSON, INC. (PARENT COMPANY)
The assets of Carson, Inc. on an unconsolidated basis consist solely of its
investment in Carson Products Company. During the period from August 23,
1995 to March 31, 1996, the results of operations of Carson, Inc. consisted
solely of its equity in the earnings of Carson Products Company and its
cash flows consisted solely of the cash provided by financing activities of
$12 million from the sale of its common stock and cash used in investing
activities of $12 million for its investment in Carson Products Company.
F-14
<PAGE>
CARSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND FOR THE PERIOD FROM
AUGUST 23, 1995 TO MARCH 31, 1996--(CONTINUED)
14. SUBSEQUENT EVENTS
During August 1996, the long-term incentive compensation agreements (Note
10) were restructured to allow such employees to purchase shares of the
Company's common stock as described below; certain future cash awards under
the restructured agreements are still possible. The Company may record
additional compensation charges through 2000 for possible cash awards under
the restructured agreements.
During August 1996, several outside directors and members of senior
management purchased 501,191 shares of the Company's Common Stock. The
purchase of such shares by senior management was financed with $1.3 million
(net of discount) in non-interest bearing long-term full recourse loans
from the Company. The Company will record additional non-cash compensation
expense of approximately $6.8 million (with no associated income tax
benefits) during the three months ended September 30, 1996 for the excess
of the estimated initial public offering price over the actual purchase
price of such shares.
During August 1996, the Company received waivers of noncompliance with
certain covenants of its various borrowing arrangements from its lenders
(Note 7.)
On , 1996, the Company amended its Certificate of Incorporation to change
the authorized capital stock to Class A Common Stock, Class B Common Stock,
Class C Common Stock, and Preferred Stock (each with a par value of $.01
per share). Each share of the Company's former Class A Common Stock was
converted into 11,370 shares of newly created Class C Common Stock, and
each share of former Class B Common Stock was converted into 11,370 shares
of newly created Class B Common Stock. These stock conversions have been
given retroactive recognition in the accompanying financial statements.
F-15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Directors of Aminco, Inc. and Subsidiaries:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Aminco, Inc. and its subsidiaries (the "Company") at March 31, 1995, and the
results of their operations and their cash flows for each of the two years in
the period ended March 31, 1995 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Notes 2 and 10 to the financial statements, the Company
changed its methods of accounting for investment securities and accounting for
postretirement benefits other than pensions during the fiscal year ended March
31, 1995. As discussed in Note 6 to the financial statements, the Company
changed its method of accounting for income taxes during the fiscal year ended
March 31, 1994.
PRICE WATERHOUSE LLP
Atlanta, Georgia
May 8, 1995
F-16
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors of Carson, Inc.:
We have audited the accompanying consolidated statements of income, changes
in stockholders' equity, and cash flows of Aminco, Inc. and its subsidiaries
(the "Company") for the period from April 1, 1995 to August 22, 1995. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the results of operations and cash flows of Aminco,
Inc. and its subsidiaries for the period from April 1, 1995 to August 22, 1995
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
August 2, 1996
F-17
<PAGE>
AMINCO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash.............................................................. $ 1,620
Investments available for sale, at market (Note 2)................ 4,699
Accounts receivable (less allowance for doubtful accounts of
$242)............................................................ 10,338
Inventories (Note 3).............................................. 5,980
Other current assets.............................................. 696
-------
Total current assets............................................ 23,333
PROPERTY, PLANT, AND EQUIPMENT--Net of accumulated depreciation
(Note 4)........................................................... 9,696
INVESTMENTS AVAILABLE FOR SALE--At market (Note 2).................. 9,702
OTHER NONCURRENT ASSETS............................................. 1,132
-------
$43,863
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................................. $ 2,685
Accrued expenses (Note 7)......................................... 5,508
-------
Total current liabilities....................................... 8,193
OTHER LIABILITIES (Note 9).......................................... 1,312
COMMITMENTS AND CONTINGENCIES (Note 12)
SHAREHOLDERS' EQUITY (Notes 8 and 9):
Preferred stock, $10 par value, 700,000 shares authorized, 606,752
issued (liquidation preference of $15,243)....................... 6,068
Common stock, $3 par value, 500,000 shares authorized, 406,699 is-
sued............................................................. 1,220
Additional paid-in capital........................................ 308
Retained earnings................................................. 33,187
Valuation adjustment, investments available for sale, net of in-
come taxes....................................................... 283
-------
41,066
Treasury stock, at cost........................................... (6,708)
-------
34,358
-------
$43,863
=======
</TABLE>
See notes to consolidated financial statements.
F-18
<PAGE>
AMINCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD FROM
MARCH 31, APRIL 1, 1995
--------------- TO
1994 1995 AUGUST 22, 1995
------- ------- ---------------
<S> <C> <C> <C>
NET SALES.................................... $50,108 $58,126 $26,854
COST OF GOODS SOLD........................... 23,622 25,692 11,513
------- ------- -------
Gross margin............................... 26,486 32,434 15,341
EXPENSES:
Selling.................................... 14,639 17,888 7,467
General and administrative................. 6,834 5,246 2,276
Depreciation and amortization.............. 828 1,085 502
------- ------- -------
22,301 24,219 10,245
------- ------- -------
INCOME FROM CONTINUING OPERATIONS............ 4,185 8.215 5,096
OTHER INCOME--Net............................ 108 150 17
INTEREST EXPENSE............................. 97 136 56
------- ------- -------
OPERATING INCOME............................. 4,196 8,229 5,057
INVESTMENT INCOME:
Dividends and interest..................... 396 549 297
Net gain on sales and maturities of invest-
ments..................................... 195 84 823
------- ------- -------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND CHANGES IN ACCOUNTING
PRINCIPLES.................................. 4,787 8,862 6,177
PROVISION FOR INCOME TAXES (Note 6).......... 1,704 3,174 2,243
------- ------- -------
INCOME FROM CONTINUING OPERATIONS BEFORE
CHANGES IN ACCOUNTING PRINCIPLES............ 3,083 5,688 3,934
DISCONTINUED OPERATIONS (Note 11):
Loss from operations of Fine Products (net
of income tax benefit of $314)............ 574 -- --
Loss on disposal of assets of Fine Products
(net of income tax benefit of $354)....... 635 -- --
------- ------- -------
INCOME BEFORE CHANGES IN ACCOUNTING PRINCI-
PLES........................................ 1,874 5,688 3,934
EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES--
Net of income taxes (Notes 1, 6, and 10).... 23 (250) --
------- ------- -------
NET INCOME................................... 1,897 5,438 3,934
DIVIDENDS ON PREFERRED STOCK--Declared $2.00
per share in 1994 and 1995.................. 1,113 1,109 554
------- ------- -------
INCOME AVAILABLE TO ALL SHAREHOLDERS......... $ 784 $ 4,329 $ 3,380
======= ======= =======
50% OF INCOME ALLOCABLE TO COMMON STOCK...... $ 392 $ 2,164 $ 1,690
INCOME ALLOCABLE TO PREFERRED STOCK.......... 1,505 3,274 2,244
------- ------- -------
NET INCOME................................... $ 1,897 $ 5,438 $ 3,934
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-19
<PAGE>
AMINCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1994 AND 1995 AND
PERIOD FROM APRIL 1, 1995 TO AUGUST 22, 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PREFERRED
STOCK COMMON STOCK ADDITIONAL
-------------- -------------- PAID-IN RETAINED VALUATION ESOP DEBT TREASURY
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT GUARANTEE STOCK TOTAL
------- ------ ------- ------ ---------- -------- ---------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE--March 31,
1993................... 606,752 $6,068 406,699 $1,220 $187 $28,074 $(552) $(4,524) $30,473
Net income.............. 1,897 1,897
Cash dividends, pre-
ferred stock........... (1,113) (1,113)
Reduction in ESOP debt
guarantee.............. 264 264
Purchase of treasury
stock.................. (1,913) (1,913)
Issuance of treasury
stock.................. 27 64 91
------- ------ ------- ------ ---- ------- ---- ----- ------- -------
BALANCE--March 31,
1994................... 606,752 6,068 406,699 1,220 214 28,858 (288) (6,373) 29,699
Net income.............. 5,438 5,438
Cash dividends, pre-
ferred stock........... (1,109) (1,109)
Reduction in ESOP debt
guarantee.............. 288 288
Purchase of treasury
stock.................. (567) (567)
Issuance of treasury
stock.................. 94 232 326
Unrealized gains on in-
vestments available for
sale, net of income
taxes.................. $283 283
------- ------ ------- ------ ---- ------- ---- ----- ------- -------
BALANCE--March 31,
1995................... 606,752 6,068 406,699 1,220 308 33,187 283 (6,708) 34,358
Net income.............. 3,934 3,934
Cash dividends, pre-
ferred stock........... (554) (554)
Purchase of treasury
stock.................. 296 296
------- ------ ------- ------ ---- ------- ---- ----- ------- -------
BALANCE--August 22,
1995................... 606,752 $6,068 406,699 $1,220 $308 $36,567 $283 $ -- $(6,412) $38,034
======= ====== ======= ====== ==== ======= ==== ===== ======= =======
</TABLE>
See notes to consolidated financial statements.
F-20
<PAGE>
AMINCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD FROM
MARCH 31, APRIL 1, 1995
---------------- TO
1994 1995 AUGUST 22, 1995
------- ------- ---------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................. $ 1,897 $ 5,438 $ 3,934
Adjustments to reconcile net income to net
cash provided by operating activities:
Stock issued for compensation............ 91 326
Depreciation and amortization............ 1,020 1,085 502
Cumulative effect of accounting change,
net of income taxes..................... (23) 250 62
Provision (benefit) for deferred income
taxes................................... (145) 25
Loss on disposal of Fine Products........ 989
Loss on sale of assets................... 101
Net gain on sales of investments......... (195) (84) (823)
Gain on sale of trademark................ (328) (299)
(Decrease) increase in cash due to
changes in:
Accounts receivable.................... (800) (1,275) (588)
Inventories............................ (607) 467 190
Other current assets................... (675) 313 (546)
Other noncurrent assets................ 150 172 (630)
Accounts payable....................... 399 755 (732)
Accrued expenses....................... 1,813 479 1,688
Other liabilities...................... (465) 29 (77)
------- ------- -------
Total adjustments.................... 1,224 2,243 (853)
------- ------- -------
Net cash provided by operating activ-
ities............................... 3,121 7,681 3,081
INVESTING ACTIVITIES:
Purchases of investments................... (12,055) (15,704) (6,760)
Proceeds from sale of assets of Fine Prod-
ucts...................................... 1,073
Proceeds from sale of trademark............ 328 299
Proceeds from sales and maturities of in-
vestments................................. 10,520 12,498 21,428
Purchase of property, plant, and equip-
ment...................................... (1,515) (979) (483)
Package design costs....................... (984) (356) (244)
Proceeds from sale of property, plant, and
equipment................................. 5 108
------- ------- -------
Net cash (used in) provided by investing
activities................................. (2,633) (4,237) 14,049
FINANCING ACTIVITIES:
Dividends paid, preferred stock............ (1,113) (1,109) (554)
Purchases of treasury stock................ (1,913) (567) (296)
Checks outstanding......................... 1,043 (1,043)
------- ------- -------
Net cash used in financing activi-
ties................................ (1,983) (2,719) (850)
------- ------- -------
NET INCREASE (DECREASE) IN CASH.............. (1,495) 725 16,280
CASH--Beginning of period.................... 2,390 895 1,620
------- ------- -------
CASH--End of period.......................... $ 895 $ 1,620 $17,900
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-21
<PAGE>
AMINCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1994 AND 1995 AND THE PERIOD
FROM APRIL 1, 1995 TO AUGUST 22, 1995
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Aminco, Inc.
and subsidiaries (the "Company"). The principal subsidiaries are Aminco,
Inc. (a Georgia corporation), Carson Products Company ("Carson Products"),
and Carson South Africa ("Carson-South Africa"). Carson Products is a
manufacturer and marketer of ethnic health and beauty-aid products. Carson-
South Africa, a subsidiary formed on May 18, 1993, is a foreign subsidiary
which distributes ethnic health and beauty-aid products, produced under
contract, in the southern cone of Africa. Fine Products Company, a
subsidiary which manufactured and distributed candy products, is inactive;
the majority of its assets were sold in 1994 (see Note 11).
Significant accounting policies followed by the Company are summarized
below:
a. Consolidation--The consolidated financial statements include the
accounts of the Company. All significant intercompany transactions and
balances have been eliminated in the consolidation.
b. Changes in Accounting Principles--As discussed in Note 2, the Company
adopted Financial Accounting Standard No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("FAS 115"), effective April
1, 1994, the first day of the year ended March 31, 1995.
As discussed in Note 10, the Company adopted Financial Accounting
Standard No. 106 "Accounting for Postretirement Benefits Other than
Pensions" ("FAS 106"), effective April 1, 1994, the first day of the
year ended March 31, 1995.
As discussed in Note 6, the Company adopted Financial Accounting
Standard No. 109, "Accounting for Income Taxes" ("FAS 109"), effective
April 1, 1993, the first day of the year ended March 31, 1994. The
adoption of FAS 109 changed the Company's method of accounting for
income taxes from the deferred method ("APB 11") to an asset and
liability approach.
c. Revenue Recognition--Revenues from sales of manufactured goods are
recognized as these goods are shipped to customers. Net export sales
aggregated $5,918,000, $7,383,000, and $4,467,000 or 11.8%, 12.7%, and
16.6% of net sales for the years ended March 31, 1994 and 1995 and the
period from April 1, 1995 to August 23, 1995, respectively.
d. Investments Available for Sale--In conjunction with the adoption of FAS
115, management has classified all investments as available for sale.
Investments available for sale are carried at estimated fair value with
unrealized gains and losses, net of deferred income taxes, recorded as a
separate component of shareholders' equity.
Investments available for sale, current, include money market funds and
U.S. Treasury securities which mature within one year. These assets are
retained to meet the Company's current cash operating requirements.
F-22
<PAGE>
AMINCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1994 AND 1995 AND FOR THE PERIOD
FROM APRIL 1, 1995 TO AUGUST 22, 1995--(CONTINUED)
Investments available for sale, noncurrent, include money market funds,
U.S. Treasury securities, corporate bonds, foreign investments,
marketable equity securities, and other long-term investments primarily
consisting of precious metals. Most of these assets are managed by an
investment advisor and are assets which management currently intends to
hold to meet future obligations related to the Carson Employee Stock
Ownership Plan ("ESOP") upon the retirement of employees. U.S. Treasury
securities included in investments available for sale, noncurrent,
mature at various times during the period through March 1, 1999.
In determining gains and losses, the specific identification method is
used to determine the cost of investments.
e. Inventories--Inventories are valued at the lower of cost (last-in,
first-out method) ("LIFO") or market.
f. Depreciation and Amortization--Depreciation of property and equipment is
computed on the straight-line method for financial reporting purposes
and accelerated methods for income tax purposes over estimated useful
lives ranging from three to forty-five years. Goodwill, formulae,
trademarks, and package design costs of $1,128,000 at March 31, 1995,
net of accumulated amortization, are included in other noncurrent assets
in the accompanying balance sheet and are amortized on a straight-line
method over estimated useful lives ranging from four to twenty years.
g. Advertising--Advertising costs are expensed as incurred by the Company.
Advertising costs, included in selling expense in the accompanying
income statements, aggregated $4,922,000, $7,181,000, and $3,501,000 for
the years ended March 31, 1994 and 1995 and the period from April 1,
1995 to August 22, 1995, respectively.
h. Statements of Cash Flows--Supplemental disclosures of cash flows
information follows (in thousands):
<TABLE>
<CAPTION>
PERIOD
FROM
YEAR ENDED APRIL 1,
MARCH 31, 1995 TO
------------- AUGUST 22,
1994 1995 1995
------ ------ ----------
<S> <C> <C> <C>
Cash paid during the year for:
Interest........................................ $ 176 $ 136 $ 56
Income taxes.................................... 1,602 2,654 457
Stock issued for compensation..................... 91 326 --
</TABLE>
i. Research and Development Costs--Research and development costs
(principally for new products) are expensed as incurred and aggregated
$404,000, $323,000, and $160,000 for the years ended March 31, 1994 and
1995 and the period from April 1, 1995 to August 22, 1995, respectively,
and are included in general and administrative expenses in the
Consolidated Statements of Income.
2. INVESTMENTS AVAILABLE FOR SALE
Effective April 1, 1994, the Company adopted FAS 115. The effect of the
adoption was to increase investments available for sale by $186,000 for net
unrealized gains, reduce the net deferred tax asset by $69,000, calculated
using an effective tax rate of 37%, and to increase shareholders' equity by
$117,000. For the year ended March 31, 1995, investments available for sale
increased by an additional $263,000 for
F-23
<PAGE>
AMINCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1994 AND 1995 AND FOR THE PERIOD
FROM APRIL 1, 1995 TO AUGUST 22, 1995--(CONTINUED)
net unrealized gains, the net deferred tax asset decreased by an additional
$97,000, and shareholders' equity increased by $166,000 to $283,000.
The aggregate cost and market values of investments available for sale
carried at fair market value as of March 31, 1995 were as follows (in
thousands):
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
------ ---------- ---------- ------
<S> <C> <C> <C> <C>
Investments available for sale, cur-
rent:
Money market funds................. $3,718 $3,718
U.S. Treasury securities........... 957 $ 24 981
------ ----- ------
Total current.................... $4,675 $ 24 $4,699
====== ===== ======
Investments available for sale,
noncurrent:
Money market funds................. $ 376 $ 376
U.S. Treasury securities........... 3,528 $ 8 $ (54) 3,482
Corporate bonds.................... 752 14 766
Foreign investments................ 1,263 (119) 1,144
Marketable equity securities....... 2,862 704 (31) 3,535
Other.............................. 496 (97) 399
------ ----- ----- ------
Total noncurrent................. $9,277 $ 726 $(301) $9,702
====== ===== ===== ======
</TABLE>
For the year ended March 31, 1994, proceeds from the sales and maturities
of investment securities were $10,520,000, resulting in gross realized
gains of $195,000 and no gross realized losses. For the year ended March
31, 1995, proceeds from the sale and maturities of investments available
for sale were $12,498,000, resulting in gross realized gains of $100,000
and gross realized losses of $16,000.
For the period from April 1, 1995 to August 22, 1995, proceeds from the
sale and maturity of investments available for sale were $21,428,000,
resulting in gross realized gains of $1,029,000 and gross realized losses
of $206,000.
3. INVENTORIES
The components of inventories at March 31, 1995 are summarized as follows
(in thousands):
<TABLE>
<S> <C>
Raw materials...................................................... $3,403
Work-in-process.................................................... 909
Finished goods..................................................... 3,081
LIFO reserve....................................................... (1,413)
------
$5,980
======
</TABLE>
If valued on the first-in, first-out ("FIFO") method, inventories would
have been $1,413,000 higher as of March 31, 1995. Income before income
taxes would have been $600,000 and $85,000 higher for the years ended March
31, 1994 and 1995, respectively.
During the period from April 1, 1995 to August 22, 1995, inventory
quantities were reduced which resulted in a liquidation of LIFO inventory
layers carried at lower costs which prevailed in prior years. The effect of
this liquidation was to decrease cost of goods sold by $399,000 and to
increase net income by approximately $240,000.
F-24
<PAGE>
AMINCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1994 AND 1995 AND FOR THE PERIOD
FROM APRIL 1, 1995 TO AUGUST 22, 1995--(CONTINUED)
4. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment at March 31, 1995 is summarized as follows
(in thousands):
<TABLE>
<S> <C>
Buildings and improvements......................................... $7,367
Machinery and equipment............................................ 6,397
Furniture and fixtures............................................. 327
Construction-in-progress........................................... 125
------
14,216
Less accumulated depreciation...................................... 5,138
------
9,078
Land............................................................... 618
------
$9,696
======
</TABLE>
Depreciation expense for property, plant, and equipment was $678,000,
$679,000, and $322,000 for the years ended March 31, 1994 and 1995 and for
the period from April 1, 1995 to August 22, 1995, respectively.
5. LINES OF CREDIT
At March 31, 1995, the Company had lines of credit totaling $5,000,000 with
banks. Interest is payable at the prime rate. There were no borrowings
under lines of credit during the years ended March 31, 1994 and 1995. The
prime rate at March 31, 1995 was 9%.
6. INCOME TAXES
In April 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("FAS 109"). The adoption
of FAS 109 changes the Company's method of accounting for income taxes from
the deferred method APB 11 to an asset and liability approach. Previously,
the Company deferred the past tax effects of timing differences between
financial reporting and taxable income. The asset and liability approach
requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of other assets and liabilities.
The difference at April 1, 1993 between deferred taxes accounted for under
APB 11 and deferred taxes accounted for under FAS 109 resulted in a benefit
of $23,000 and is reflected in the accompanying income statement for the
year ended March 31, 1994 as the effect of a change in accounting
principle.
F-25
<PAGE>
AMINCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1994 AND 1995 AND FOR THE PERIOD
FROM APRIL 1, 1995 TO AUGUST 22, 1995--(CONTINUED)
The provision for income taxes is summarized as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED PERIOD FROM
MARCH 31, APRIL 1, 1995
-------------- TO
1994 1995 AUGUST 22, 1995
------ ------ ---------------
<S> <C> <C> <C>
Provision for income taxes on continuing
operations:
Current:
Federal............................. $1,678 $2,760 $1,744
State............................... 162 294 333
Foreign............................. 9 95 104
------ ------ ------
1,849 3,149 2,181
Deferred:
Federal............................. (135) 23 52
State............................... (10) 2 10
------ ------ ------
(145) 25 62
------ ------ ------
1,704 3,174 2,243
Benefit for income taxes on discontinued
operations:
Loss from operations on Fine Prod-
ucts................................. (314)
Loss on disposal on Fine Products..... (354)
------
(668)
Benefit for adoption of FAS 106......... (147)
------ ------ ------
Net provision for income taxes...... $1,036 $3,027 $2,243
====== ====== ======
The following is a reconciliation of the statutory tax rate to the Company's
effective tax rate:
<CAPTION>
YEAR ENDED PERIOD FROM
MARCH 31, APRIL 1, 1995
-------------- TO AUGUST 22,
1994 1995 1995
------ ------ ---------------
<S> <C> <C> <C>
Statutory rate.......................... 34.0% 34.0% 34.0%
State income taxes (net of federal bene-
fit)................................... 4.0 4.0 4.0
Other items............................. (2.4) (2.2) (1.7)
------ ------ ------
Effective rate.......................... 35.6% 35.8% 36.3%
====== ====== ======
</TABLE>
F-26
<PAGE>
AMINCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1994 AND 1995 AND FOR THE PERIOD
FROM APRIL 1, 1995 TO AUGUST 22, 1995--(CONTINUED)
The effects of the temporary differences which gave rise to deferred tax
assets and liabilities at March 31, 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
CURRENT LONG-TERM
------- ---------
<S> <C> <C>
Deferred tax assets related to:
Accrued expenses....................................... $312
Allowance for doubtful accounts........................ 78
Deferred compensation.................................. $640
Other.................................................. 15 153
---- ----
405 793
Deferred tax liabilities related to:
Property, plant, and equipment......................... (694)
Other.................................................. (111) (167)
---- ----
(111) (861)
---- ----
$294 $(68)
==== ====
</TABLE>
Deferred income taxes were not provided on undistributed earnings of
certain foreign subsidiaries because such undistributed earnings have been
immaterial and are expected to be reinvested indefinitely overseas.
The current deferred tax assets of $294,000 at March 31, 1995 are included
in the accompanying financial statements in other current assets. The long-
term deferred tax liabilities of $68,000 at March 31, 1995 are included in
other liabilities.
7. ACCRUED EXPENSES
Accrued expenses at March 31, 1995 consist of (in thousands):
<TABLE>
<S> <C>
Compensation and benefits.......................................... $2,532
Advertising........................................................ 1,355
Self-insurance..................................................... 818
Other.............................................................. 803
------
$5,508
======
</TABLE>
F-27
<PAGE>
AMINCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1994 AND 1995 AND FOR THE PERIOD
FROM APRIL 1, 1995 TO AUGUST 22, 1995--(CONTINUED)
8.CAPITAL STOCK
<TABLE>
<CAPTION>
MARCH 31, 1995
--------------
<S> <C>
Preferred stock ($10.00 par):
Number of shares:
Authorized............................................... 700,000
=======
Issued................................................... 606,752
=======
Common stock ($3.00 par):
Number of shares:
Authorized............................................... 500,000
=======
Issued................................................... 406,699
=======
Treasury stock:
Number of shares:
Preferred................................................ 52,461
=======
Common................................................... 84,445
=======
Cost (in thousands):
Preferred................................................ $ 1,344
Common................................................... 5,364
-------
$ 6,708
=======
Liquidation preference of preferred shares outstanding (in
thousands).................................................. $15,243
=======
</TABLE>
Seven hundred thousand shares of preferred stock are authorized with the
first 675,000 shares designated as Series A. The voting rights and dividend
rights of the preferred stock other than Series A will be determined by the
Company's Board of Directors when and if they are issued.
Dividends on the Series A preferred stock at an annual rate of $2 are
payable in preference to dividends on shares of regular common stock.
Series A preferred stock participates as a class in any further dividends
and receives 50% of such further dividends, with the remaining 50% being
attributed to common stock. The Series A preferred stock is redeemable at
the option of the Company at a price of $27.50 per share. Upon redemption,
no current or accumulated dividends shall be paid. No dividends can be paid
on common stock until all current Series A preferred dividends, as well as
dividends in arrears, have been satisfied.
There are no dividends in arrears on Series A preferred stock at March 31,
1995. Votes per share are 15 for Series A preferred stock and one for
common stock.
9.STOCK AND OTHER COMPENSATION PLANS
Carson Products has a defined contribution profit sharing plan covering
substantially all Carson Products employees. Contributions to the plan,
which are discretionary, are determined by the Board of Directors and
funded annually. Profit sharing contributions were $220,000, $190,000, and
$176,000 in the years ended March 31, 1994 and 1995 and for the period from
April 1, 1995 to August 22, 1995, respectively.
F-28
<PAGE>
AMINCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1994 AND 1995 AND FOR THE PERIOD
FROM APRIL 1, 1995 TO AUGUST 22, 1995--(CONTINUED)
The Company has entered into a deferred compensation agreement with an
officer who retired in 1991 which provides for annual benefits equal to a
percentage of his average salary for the two years preceding his
retirement. Such benefits continue for as long as he or his spouse shall
live. The Company has accrued an amount equal to the present value of the
computed future payments under the agreement ($1,241,000 at March 31,
1995), which is classified in other liabilities in the accompanying balance
sheet.
During the years ended March 31, 1994 and 1995, respectively, the Company
issued, from treasury stock, 1,100 and 1,210 shares of common stock with an
independently-appraised value of $91,000 and $107,000 to a key executive in
accordance with his employment agreement. Additional shares may be issued
in future years contingent upon continued employment.
During the year ended March 31, 1995, the Company issued 2,460 shares of
common stock with an appraised value of $219,000 to a major shareholder
employed by the Company.
During the year ended March 31, 1985, Carson Products established an ESOP
which covers substantially all Carson Products employees. In February 1985,
the ESOP borrowed $2,000,000 from a bank and acquired 232,410 shares of the
Company's common stock from certain existing shareholders. Under the loan
agreement, the Company guaranteed the loan and was obligated to make annual
contributions sufficient to enable the ESOP to repay the loan, including
interest. This obligation of the ESOP was recorded in the Company's
accounts as a liability and as a reduction of shareholders' equity. The
liability and the reduction of shareholders' equity were both decreased
when the ESOP made payments on the loan. The liability was paid in full by
February 1995. The Company made contributions to the ESOP of $298,000 and
$254,000 for the years ended March 31, 1994 and 1995, respectively.
10.POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Carson Products provides postretirement health care benefits to a limited
number of key executives who meet applicable eligibility requirements.
Effective April 1, 1994, the first day of the year ended March 31, 1995,
Carson Products adopted FAS 106 which requires accrual of the expected cost
of providing postretirement benefits to these executives and their spouses
during the years that the executives provide services and become eligible
for benefits. Prior to April 1, 1994, Carson Products expensed the costs of
health care benefits provided to retirees in the period in which these
costs were paid.
The cumulative effect of this change in accounting principle was a one-time
charge of $397,000 before taxes, or $250,000 net of tax benefits calculated
at an estimated effective tax rate of 37%.
At March 31, 1995, Carson Products recorded a liability of $420,000
representing the accumulated postretirement benefit obligation (APBO) for
retirees and active executives. This liability was calculated using the
following assumptions.
<TABLE>
<S> <C>
Discount rate.......................................................... 8%
Healthcare cost trend rate:
First five years..................................................... 10%
Next five years...................................................... 8%
Thereafter........................................................... 6%
</TABLE>
The medical cost trend rate assumption could have an effect on amounts
reported. For example, an increase in 1% in the assumed rate of increase
would have an effect of increasing the APBO by $53,000 and the net
postretirement benefit cost by $14,000. The cost of the benefits for the
year ended March 31, 1995 and the period April 1, 1995 to August 22, 1995,
primarily relating to interest cost, was approximately $32,000 and $10,000,
respectively.
F-29
<PAGE>
AMINCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1994 AND 1995 AND FOR THE PERIOD
FROM APRIL 1, 1995 TO AUGUST 22, 1995--(CONTINUED)
11.DISPOSAL OF FINE PRODUCTS
Effective January 31, 1994, the Company discontinued operations of Fine
Products and sold certain assets of Fine Products, to include inventories,
fixed assets, and trademarks for proceeds of $1,073,000. The Company
incurred losses from operations of approximately $574,000, net of tax
benefits of $314,000 for the year ended March 31, 1994. Additionally,
during fiscal year 1994, the Company recorded a loss on the sale of certain
assets of Fine Products of approximately $635,000, net of tax benefits of
approximately $354,000.
12.COMMITMENTS AND CONTINGENCIES
The nature of the Company's business results in a certain amount of
litigation. Accordingly, the Company is a party (as plaintiff and
defendant) to lawsuits incidental to its business. Management believes that
the ultimate resolution of these matters will not have a material adverse
effect on the business, financial condition, results of operations or cash
flows of the Company.
F-30
<PAGE>
CARSON, INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................................... $ 867
Accounts receivable (less allowance for doubtful accounts of
$641)........................................................ 14,169
Inventories................................................... 10,177
Other current assets.......................................... 2,090
-------
Total current assets........................................ 27,303
PROPERTY, PLANT, AND EQUIPMENT--Net of accumulated deprecia-
tion........................................................... 12,337
INVESTMENT...................................................... 3,000
GOODWILL........................................................ 46,335
OTHER........................................................... 3,271
-------
$92,246
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.............................................. $ 3,678
Accrued expenses.............................................. 6,255
Current maturities of long-term debt.......................... 2,510
-------
Total current liabilities................................... 12,443
LONG-TERM DEBT.................................................. 67,219
DEFERRED INCOME TAXES........................................... 827
OTHER LIABILITIES............................................... 1,666
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock............................................... --
Common stock.................................................. 114
Paid-in capital............................................... 8,557
Retained earnings............................................. 1,514
Foreign currency translation adjustment....................... (94)
-------
Total stockholders' equity.................................. 10,091
-------
$92,246
=======
</TABLE>
See notes to consolidated financial statements.
F-31
<PAGE>
CARSON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED JUNE 30, 1995 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------- -------
THREE MONTHS ENDED
JUNE 30,
-------------------
1995 1996
----------- -------
<S> <C> <C>
NET SALES.................................................................................................. $17,271 $18,799
COST OF GOODS SOLD......................................................................................... 7,351 8,135
------- -------
Gross profit........................................................................................... 9,920 10,664
EXPENSES:
Selling.................................................................................................. 4,938 4,713
General and administrative............................................................................... 1,607 1,960
Incentive compensation................................................................................... 800
Depreciation and amortization............................................................................ 301 629
------- -------
6,846 8,102
------- -------
OPERATING INCOME........................................................................................... 3,074 2,562
INTEREST EXPENSE........................................................................................... 34 1,826
OTHER INCOME (EXPENSE)..................................................................................... 77 (6)
INVESTMENT INCOME:
Dividends and interest................................................................................... 157 43
Net gain on sales and maturities of investments.......................................................... 94
------- -------
INCOME BEFORE INCOME TAXES................................................................................. 3,368 773
PROVISION FOR INCOME TAXES................................................................................. 1,230 465
------- -------
NET INCOME................................................................................................. $ 2,138 $ 308
======= =======
NET INCOME PER SHARE....................................................................................... $ .03
=======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING................................................................. 11,871
- --------------------------------------------------
=======
</TABLE>
See notes to consolidated financial statements.
F-32
<PAGE>
CARSON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED JUNE 30, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------- -------
THREE MONTHS ENDED
JUNE 30,
-------------------
1995 1996
----------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income............................................................................................... $2,138 $ 308
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization.......................................................................... 301 682
Net gain on sales and maturities of investments........................................................ (94)
Foreign currency translation adjustment................................................................ (94)
Provision for deferred income taxes.................................................................... 43
(Decrease) increase in cash due to changes in:
Accounts receivable.................................................................................. (1,166) (1,558)
Inventories.......................................................................................... (27) (1,514)
Other current assets................................................................................. 291 1,004
Other noncurrent assets.............................................................................. (3) 271
Accounts payable..................................................................................... (900) 78
Accrued expenses..................................................................................... 26 1,157
Other liabilities.................................................................................... (4) (12)
------ ------
Total adjustments.................................................................................. (1,576) 57
------ ------
Net cash provided by operating activities.......................................................... 562 365
INVESTING ACTIVITIES:
Investment in AM Cosmestics.............................................................................. (3,000)
Purchases of investments................................................................................. (1,109)
Proceeds from sales of maturities of investments......................................................... 1,037
Purchase of property, plant, and equipment............................................................... (263) (540)
Package design costs..................................................................................... (169)
------ ------
Net cash used in investing activities................................................................ (504) (3,540)
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt................................................................. 3,000
Principal payment on long-term debt...................................................................... (511)
Dividends paid on preferred stock........................................................................ (277)
Purchases of treasury stock.............................................................................. (297)
------ ------
Net cash provided by (used in) financing activities.................................................. (574) 2,489
------ ------
NET DECREASE IN CASH AND CASH EQUIVALENTS.................................................................. (516) (686)
CASH AND CASH EQUIVALENTS--Beginning of period............................................................. 1,620 1,553
------ ------
CASH AND CASH EQUIVALENTS--End of period................................................................... $1,104 $ 867
- --------------------------------------------------
====== ======
</TABLE>
See notes to consolidated financial statements.
F-33
<PAGE>
CARSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED JUNE 30, 1995 AND 1996
1. INTERIM FINANCIAL STATEMENTS
The interim financial statements presented herein include the accounts of
the Predecessor (Aminco, Inc.) as of and for the three months ended June
30, 1995 and of the Company as of and for the three months ended June 30,
1996. In the opinion of management, the unaudited condensed consolidated
financial statements reflect all normal recurring adjustments necessary for
a fair statement of the results of the interim periods. The results for the
three months ended June 30, 1996 are not necessarily indicative of the
results to be obtained for the entire fiscal year or any other interim
period. Because of the revaluation of assets and liabilities and related
impact to the statement of operations, the financial statements of the
Predecessor for the periods prior to August 22, 1995 are not strictly
comparable to those of the Company subsequent to that date. Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting
principles have been omitted from these condensed consolidated financial
statements pursuant to applicable rules and regulations of the Securities
and Exchange Commission. These financial statements should be read in
conjunction with the audited Consolidated Financial Statements and the
notes thereto of the Company and Predecessor included elsewhere in this
Prospectus.
2. INVENTORIES
Inventories at June 30, 1996 are summarized as follows (in thousands):
<TABLE>
<S> <C>
Raw materials...................................................... $ 5,587
Work-in-process.................................................... 1,692
Finished goods..................................................... 2,898
-------
$10,177
=======
</TABLE>
3. INVESTMENT IN AM COSMETICS
On June 26, 1996, the Company purchased $3.0 million of 12% cumulative,
payment-in-kind preferred stock of the parent of AM Cosmetics, a leading
low-cost manufacturer of cosmetics, at par value. Certain owners of the
Company are also owners of AM Cosmetics. In connection with the investment,
the Company entered into a management agreement and will enter into certain
related sales agreements and manufacturing agreements with AM Cosmetics.
4. PUBLIC OFFERING OF SOUTH AFRICAN SUBSIDIARY
In July 1996, the Company's South African subsidiary sold 25% of its shares
in an initial public offering on the Johannesburg Stock Exchange. The
subsidiary received net proceeds of approximately $4.2 million from this
sale (which resulted in a gain to the Company of approximately $2.8 million
which will be recorded in retained earnings during the three months ended
September 30, 1996). In conjunction with this public offering, the Company
entered into an amendment to its license agreement with its South African
subsidiary which provides that commencing on April 1, 1998, its South
African subsidiary will pay the Company a royalty in the amount of 3.0% of
the net sales price of all licensed products. The amount of the royalty
increases to 3.5% on April 1, 1999 and 4.0% on April 1, 2000 until the
termination of the agreement.
F-34
<PAGE>
CARSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED JUNE 30, 1995 AND 1996--(CONTINUED)
5. POSSIBLE INITIAL PUBLIC OFFERING
The Company is in process of pursuing an initial public offering of its
common stock. Should such an offering be completed, the Company anticipates
that it will use its proceeds to repay certain indebtedness. This repayment
will result in an extraordinary loss to be recorded at that time currently
estimated to be approximately $3.6 million (net of tax) for prepayment
penalties and the write-off of unamortized debt discount and deferred issue
costs.
6. EMPLOYEE BENEFITS
The Company recognized $800,000 of compensation expense during the quarter
ended June 30, 1996 relating to anticipated costs under certain equity-
based long-term incentive compensation arrangements (in light of the
contemplated initial public offering, such awards and compensation expense
are based upon the fair market value of the Company at the time of the
initial public offering). Such arrangements were awarded originally as
stock appreciation rights ("SARs"). During July 1996 some of the SARs were
amended and converted into accelerated, immediately exercisable stock
purchase rights, on a complete or partial basis, as agreed to by the
Company and the awardee. The SARs entitled the holder to a specified value
(determined as a percentage of the Company's equity value) over a fixed
base value subject to five year vesting requirements (or earlier upon a
public offering or sale of the Company). Upon amendment and conversion, the
SAR rights were cancelled (and replaced with the accelerated, immediately
exercisable stock purchase rights referred to above). These rights have a
fixed purchase price equal in amount to the cancelled SAR's fixed base
value. As a result of the fact that not all SARs were amended and converted
into these accelerated stock purchase rights, future payment of cash awards
under the remaining SAR arrangements are still possible. The Company may
record additional compensation charges through 2000 for possible cash
awards under the remaining SAR arrangements. Should the Company complete
the initial public offering of its common stock, such cash awards would be
payable and the Company would record additional compensation charges of
approximately $600,000 at that time (based on the midpoint of the estimated
range of the initial public offering price) for payments under SAR
arrangements.
During August 1996, several outside directors and members of senior
management (pursuant to the stock purchase rights described above)
purchased 501,191 shares of the Company's Common Stock. The purchase of
such shares by senior management was financed with $1.3 million (net of
discount) in non-interest bearing long-term full recourse loans from the
Company. The Company will record additional non-cash compensation expense
of approximately $6.5 million (with no associated income tax benefits)
during the three months ended September 30, 1996 for the excess of the
estimated initial public offering price over the actual purchase price of
such shares. In connection with the South African offering (Note 4), the
Company also issued shares of the subsidiary to certain members of its
management; the Company will record compensation expense of approximately
$.3 million for these share awards.
F-35
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CON-
NECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS PRO-
SPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO
BUY, THE CLASS A COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET
FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HERE-
OF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 11
The Company............................................................... 16
Use of Proceeds........................................................... 18
Dividend Policy........................................................... 18
Dilution.................................................................. 19
Capitalization............................................................ 20
Unaudited Pro Forma Financial Data........................................ 22
Selected Consolidated Historical Financial Data........................... 25
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 27
Business.................................................................. 35
Management................................................................ 49
Principal and Selling Stockholders........................................ 57
Certain Relationships and Related Transactions............................ 59
Description of Certain Indebtedness....................................... 61
Description of Capital Stock.............................................. 62
Shares Eligible for Future Sale........................................... 66
Certain United States Federal Tax Considerations for Non-United States
Holders.................................................................. 67
Underwriting.............................................................. 70
Legal Matters............................................................. 72
Experts................................................................... 72
Available Information..................................................... 73
Index to Financial Statements............................................. F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4,190,000 SHARES
[LOGO]
CARSON, INC.
CLASS A COMMON STOCK
----------------
PROSPECTUS
----------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 20, 1996
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
4,190,000 SHARES
CARSON, INC.
CLASS A COMMON STOCK
-----------
Of the 4,190,000 shares of Class A Common Stock of Carson, Inc. (the
"Company") offered hereby, 2,484,500 shares are being offered by the Company
and 1,705,500 shares are being offered by the Selling Stockholders. See
"Principal and Selling Stockholders." The Company will not receive any of the
proceeds from the sale of the shares of Common Stock by the Selling
Stockholders.
Of the shares being offered hereby, 3,352,000 shares are being offered for
sale initially outside of the United States and Canada by the International
Managers and 838,000 shares are being offered for sale initially in a
concurrent offering in the United States and Canada by the U.S. Underwriters.
The initial public offering price and the underwriting discount per share are
identical for both Offerings. Of the shares being offered hereby, 400,000 will
be reserved for sale to certain directors, officers, employees, business
associates and related persons of the Company. See "Underwriting."
Upon consummation of the Offerings, the Company's issued and outstanding
capital stock will consist of 4,190,000 shares of Class A Common Stock offered
hereby, 1,859,677 shares of Class B Common Stock and 8,306,014 shares of Class
C Common Stock, each with a par value of $.01 per share (the "Common Stock").
The Class A Common Stock entitles each holder to one vote per share and the
Class C Common Stock entitles each holder to ten votes per share. The Class B
Common Stock generally is not entitled to vote on any matter submitted for the
vote of stockholders.Immediately after the Offerings, the percentage of the
combined voting power with respect to all matters submitted for the vote of all
stockholders held by holders of the Class A Common Stock, Class B Common Stock
and Class C Common Stock will be 4.8%, 0% and 95.2%, respectively. See
"Description of Capital Stock." Immediately after the Offerings, DNL Partners,
Limited Partnership and its affiliates will have approximately 75.8% of the
combined voting power with respect to all matters submitted for the vote of all
stockholders. See "Principal and Selling Stockholders."
Prior to the Offerings, there has been no public market for the Class A
Common Stock. It is currently anticipated that the initial public offering
price will be between $14.00 and $16.00 per share. For a discussion relating to
the factors to be considered in determining the initial public offering price,
see "Underwriting."
The Class A Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "CIC," subject to official notice of issuance.
SEE "RISK FACTORS," BEGINNING ON PAGE 11, FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON
STOCK OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.............. $ $ $ $
- ----------------------------------------------------------------------------------------------
Total(3)............... $ $ $ $
- ----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including certain
liabilities under the Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted the International Managers and the U.S.
Underwriters options, exercisable within 30 days after the date hereof, to
purchase up to an additional 125,700 shares and 502,800 shares of Class A
Common Stock, respectively, solely to cover over-allotments, if any. If
such options are exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and $ , respectively.
See "Underwriting."
-----------
The shares of Class A Common Stock are offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the Underwriters and
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of the shares of Class A Common Stock will be made in
New York, New York on or about , 1996.
-----------
MERRILL LYNCH INTERNATIONAL DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
-----------
The date of this Prospectus is , 1996.
<PAGE>
UNDERWRITING
Merrill Lynch International ("Merrill Lynch") and Donaldson, Lufkin &
Jenrette Securities Corporation are acting as representatives (the
"International Representatives") of each of the International Managers named
below (the "International Managers"). Subject to the terms and conditions set
forth in an international purchase agreement (the "International Purchase
Agreement") among the Company, each of the Selling Stockholders and the
International Managers, and concurrently with the sale of 3,352,000 shares of
Class A Common Stock to the U.S. Underwriters (as defined below), the Company,
for its own account, and the Selling Stockholders severally have agreed to
sell to the International Managers, and each of the International Managers
severally has agreed to purchase from the Company and the Selling
Stockholders, the number of shares of Class A Common Stock set forth opposite
its name below.
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS SHARES
---------------------- ---------
<S> <C>
Merrill Lynch International.........................................
Donaldson, Lufkin & Jenrette Securities Corporation.................
-------
Total.............................................................. 838,000
=======
</TABLE>
The Company and the Selling Stockholders have also entered into a U.S.
purchase agreement (the "U.S. Purchase Agreement") with certain underwriters
in the United States and Canada (the "U.S. Underwriters" and, together with
the International Managers, the "Underwriters") for whom Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Donaldson, Lufkin & Jenrette
Securities Corporation are acting as representatives (the "U.S.
Representatives"). Subject to the terms and conditions set forth in the U.S.
Purchase Agreement, and concurrently with the sale of 838,000 shares of Class
A Common Stock to the International Managers pursuant to the International
Purchase Agreement, the Company and the Selling Stockholders have agreed to
sell to the U.S. Underwriters, and the U.S. Underwriters severally have agreed
to purchase from the Company and the Selling Stockholders, an aggregate of
3,352,000 shares of Class A Common Stock. The initial public offering price
per share and the total underwriting discount per share of Class A Common
Stock are identical under the International Purchase Agreement and the U.S.
Purchase Agreement.
In the International Purchase Agreement and the U.S. Purchase Agreement, the
several International Managers and the several U.S. Underwriters,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Class A Common Stock being sold
pursuant to each such agreement if any of the shares of Class A Common Stock
being sold pursuant to such agreement are purchased. Under certain
circumstances, the commitments of non-defaulting International Managers or
U.S. Underwriters (as the
70
<PAGE>
case may be) may be increased. The closings with respect to the sale of Class
A Common Stock to be purchased by the International Managers and the U.S.
Underwriters are conditioned upon one another.
The International Representatives have advised the Company and the Selling
Stockholders that the International Managers propose initially to offer the
shares of Class A Common Stock to the public at the initial public offering
price set forth on the cover page of this Prospectus, and to certain dealers
at such price less a concession not in excess of $ per share of Class A
Common Stock. The International Managers may allow, and such dealers may
allow, a discount not in excess of $ per share of Class A Common Stock on
sales to certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed.
The Company has granted an option to the International Managers, exercisable
for 30 days after the date of this Prospectus, to purchase up to an aggregate
of 125,700 additional shares of Class A Common Stock at the initial public
offering price set forth on the cover page of this Prospectus, less the
underwriting discount. The International Managers may exercise this option
only to cover over-allotments, if any, made on the sale of the Class A Common
Stock offered hereby. To the extent that the International Managers exercise
this option, each International Manager will be obligated, subject to certain
conditions, to purchase the same percentage of such additional shares of Class
A Common Stock as such International Manager's initial amount reflected in the
foregoing table bears to the total number of shares of Class A Common Stock
initially offered by the International Managers. The Company also has granted
an option to the U.S. Underwriters, exercisable for 30 days after the date of
this Prospectus, to purchase up to an aggregate of 502,800 additional shares
of Class A Common Stock to cover over-allotments, if any, on terms similar to
those granted to the International Managers.
The Company, its directors and executive officers, the Selling Stockholders
and all other existing stockholders have agreed, subject to certain
exceptions, not to directly or indirectly sell, offer to sell, grant any
option for the sale of or otherwise dispose of any shares of Class A Common
Stock or securities or rights convertible into or exercisable or exchangeable
for Class A Common Stock, without the prior written consent of Merrill Lynch,
on behalf of the Underwriters, for a period of 180 days after the date of this
Prospectus. In addition, all existing stockholders have agreed not to make any
demand for or exercise any rights with respect to the registration of Common
Stock and have waived all rights (including demand and "piggyback"
registration rights) to register securities owned by them for such 180 day
period and rights to purchase additional shares of Common Stock in connection
with the Offerings. See "Shares Eligible for Future Sale."
The International Managers and the U.S. Underwriters have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for
the coordination of their activities. Pursuant to the Intersyndicate
Agreement, the International Managers and the U.S. Underwriters are permitted
to sell shares of Class A Common Stock to each other for purposes of resale at
the initial public offering price, less an amount not greater than the selling
concession. Under the terms of the Intersyndicate Agreement, the U.S.
Underwriters and any dealer to whom they sell shares of Class A Common Stock
will not offer to sell or sell shares of Class A Common Stock to persons who
are non-U.S. or non-Canadian persons or to persons they believe intended to
resell to persons who are non-U.S. or non-Canadian persons, and the
International Managers and any dealer to whom they sell shares of Class A
Common Stock will not offer to sell or sell shares of Class A Common Stock to
U.S. persons or to Canadian persons or to persons they believe intended to
resell to United States or Canadian persons, except in the case of
transactions pursuant to the Intersyndicate Agreement.
Each International Manager has agreed that (i) it has not offered or sold,
and will not for a period of six months following consummation of the Offering
offer or sell, in the United Kingdom by means of any document, any shares of
Common Stock offered hereby, other than to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances that do not constitute an offer to the public within the meaning
of the Public Offers of Securities Regulations 1995, (ii) it has complied with
and will comply with all applicable
71
<PAGE>
provisions of the Financial Services Act 1986 with respect to anything done by
it in relation to the shares of Common Stock in, from, or otherwise involving
the United Kingdom and (iii) it has only issued or passed on and will only
issue or pass on to any person in the United Kingdom any document received by
it in connection with the issue of the shares of Common Stock if that person
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995, as amended, or is a
person to whom the document may otherwise lawfully be issued or passed on.
Prior to the Offerings, there has been no public market for the Class A
Common Stock of the Company. The initial public offering price will be
determined through negotiations among the Company, the Selling Stockholders
and the U.S. Representatives and the Lead Managers. Among the facts considered
in determining the initial public offering price, in addition to prevailing
market conditions, are price-earnings ratios of publicly traded companies that
the Representatives believe to be comparable to the Company, certain financial
information of the Company, the history of, and the prospects for, the Company
and the industry in which it competes, and assessment of the company's
management, its past and present operations, the prospects for, and timing of,
future revenues of the Company, the present state of the Company's
development, and the above factors in relation to market values and various
valuation measures of other companies engaged in activities similar to the
Company. There can be no assurance that an active trading market will develop
for the Class A Common Stock or that the Class A Common Stock will trade in
the public market subsequent to the Offerings at or above the initial public
offering price.
Application has been made to list the Class A Common Stock on the New York
Stock Exchange, under the symbol "CIC," subject to official notice of
issuance. In order to meet the requirements for listing of the Class A Common
Stock on that exchange, the U.S. Underwriters have undertaken to sell lots of
100 or more shares to a minimum of 2,000 beneficial owners.
The Underwriters do not intend to confirm sales of the Class A Common Stock
offered hereby to any accounts over which they exercise discretionary
authority.
Purchasers of the Common Stock offered hereby may be required to pay stamp
taxes and other charges in accordance with the laws and practices of the
country of purchase, in addition to the offering price set forth on the cover
page hereof.
The Company and the Selling Stockholders have agreed to indemnify the
International Managers and the U.S. Underwriters against certain liabilities,
including liabilities under the Securities Act.
Merrill Lynch, Pierce, Fenner & Smith Incorporated has been retained to act
as financial advisor and provide investment banking advice to the Company and
may be retained in the future to provide additional investment banking
services to the Company. Merrill Lynch, Pierce, Fenner & Smith Incorporated
will receive customary fees in connection with such services.
LEGAL MATTERS
The validity of the Class A Common Stock being offered hereby and certain
other legal matters relating to the Offerings will be passed upon for the
Company by Milbank, Tweed, Hadley & McCloy, New York, New York. Certain legal
matters will be passed upon for the Underwriters by Cahill Gordon & Reindel (a
partnership including a professional corporation), New York, New York.
EXPERTS
The financial statements of the Predecessor as of March 31, 1995 and for
each of the two years in the period ended March 31, 1995 included in this
Prospectus and the financial statement schedule for the two years ended March
31, 1995 included in this Registration Statement have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in accounting and auditing.
72
<PAGE>
The consolidated balance sheet as of March 31, 1996 and the consolidated
statements of operations, stockholders' equity and cash flows of the Company
for the period from August 23, 1995 through March 31, 1996 and the
consolidated statements of income, stockholders' equity, and cash flows of the
Predecessor for the period from April 1, 1995 to August 22, 1995 and the
related financial statement schedule have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports appearing herein and
elsewhere in the registration statement, and are included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
On August 23, 1995 the Company engaged Deloitte & Touche LLP as its
independent public accountants, replacing the Predecessor's independent public
accountants, Price Waterhouse LLP. There were no disagreements with Price
Waterhouse LLP regarding accounting principles or practices, financial
statement disclosure, or auditing scope or procedure during each of the two
fiscal years ended March 31, 1995 and the period from April 1, 1995 to August
22, 1995. The decision to change accountants was approved by the Company's
Board of Directors.
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-1 with respect to
the Class A Common Stock being offered hereby with the Commission under the
Securities Act. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain items of which are omitted in accordance with the rules and
regulations of the Commission. Statements contained in this Prospectus
concerning the provisions of documents filed with the Registration Statement
as exhibits are necessarily summaries of such documents, and each such
statement is qualified in its entirety by reference to the copy of the
applicable document filed as an exhibit to the Registration Statement. Upon
the consummation of the Offerings, the Company will be subject to the
informational requirements of the Exchange Act and, in accordance therewith,
will file reports and other information with the Commission. The Registration
Statement and the exhibits and schedules thereto filed by the Company with the
Commission, as well as such reports and other information filed by the Company
with the Commission, may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549; at its Chicago Regional Office, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511; and at its New York Regional Office, Seven
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can be obtained from the public reference section of the Commission,
450 Fifth Street, N.W., Washington D.C. 20549, at prescribed rates. Such
material may also be accessed electronically by means of the Commission's home
page on the Internet at http://www.sec.gov. The Class A Common Stock is
expected to be listed on the New York Stock Exchange, and copies of such
material will be available for inspection at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005. The Company intends to
furnish to its stockholders annual reports containing audited consolidated
financial statements and a report thereon by the Company's independent
accountants and quarterly reports containing unaudited consolidated financial
data for the first three quarters of each fiscal year.
73
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CON-
NECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS PRO-
SPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO
BUY, THE CLASS A COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH
IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
IN THIS PROSPECTUS, REFERENCES TO "DOLLARS" AND "$" ARE UNITED STATES DOLLARS.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 11
The Company............................................................... 16
Use of Proceeds........................................................... 18
Dividend Policy........................................................... 18
Dilution.................................................................. 19
Capitalization............................................................ 20
Unaudited Pro Forma Financial Data........................................ 22
Selected Consolidated Historical Financial Data........................... 25
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 27
Business.................................................................. 35
Management................................................................ 49
Principal and Selling Stockholders........................................ 57
Certain Relationships and Related Transactions............................ 59
Description of Certain Indebtedness....................................... 61
Description of Capital Stock.............................................. 62
Shares Eligible for Future Sale........................................... 66
Certain United States Federal Tax Considerations for Non-United States
Holders.................................................................. 67
Underwriting.............................................................. 70
Legal Matters............................................................. 72
Experts................................................................... 72
Available Information..................................................... 73
Index to Financial Statements............................................. F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4,190,000 SHARES
[LOGO]
CARSON, INC.
CLASS A COMMON STOCK
----------------
PROSPECTUS
----------------
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all estimated expenses incurred or
expected to be incurred by the Registrant in connection with the issuance and
distribution of the securities being registered hereby, other than
underwriting discounts and commissions.
<TABLE>
<CAPTION>
ITEM AMOUNT
---- ------
<S> <C>
SEC Registration Fee................................................ $27,759
NASD Filing Fee..................................................... 8,550
NYSE Listing Fee.................................................... *
Blue Sky Filing Fees and Expenses................................... 35,000
Printing and Engraving Costs........................................ *
Transfer Agent Fees................................................. *
Legal Fees and Expenses............................................. *
Accounting Fees and Expenses........................................ *
Miscellaneous....................................................... *
-------
Total........................................................... $
=======
</TABLE>
All amounts are estimated except for the SEC Registration Fee and the NASD
filing fee.
- --------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is incorporated under the laws of the State of Delaware. Section
145 of the General Corporation Law of the State of Delaware ("Section 145")
provides that a Delaware corporation may indemnify any person who is, or is
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of
the fact that such person was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided such person acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the corporation's best interests and, with respect to any criminal action
or proceeding, had no reasonable cause to believe that his conduct was
illegal. A Delaware corporation may indemnify any person who is, or is
threatened to be made, a party to any threatened, pending or completed action
or suit by or in the right of the corporation by reason of the fact that such
person was a director, officer, employee or agent of such corporation, or is
or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit, provided such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests except
that no indemnification is permitted without judicial approval if the officer
or director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
which such officer or director has actually and reasonably incurred.
The Company's Amended and Restated Certificate of Incorporation provides for
the indemnification of directors and officers of the Company to the fullest
extent permitted by Section 145. In that regard, the Amended and Restated
Certificate of Incorporation provides that the Company shall indemnify any
person who was or is a
II-1
<PAGE>
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director or officer of such
corporation, or is or was serving at the request of such corporation as a
director, officer or member of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of such corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. Indemnification in connection with an action or suit by or in the
right of such corporation to procure a judgment in its favor is limited to
payment of settlement of such an action or suit except that no such
indemnification may be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the indemnifying corporation
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine that, despite
the adjudication of liability but in consideration of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
In addition, the by-laws of the Company provide that the Company shall
indemnify to the full extent authorized by law any person made or threatened
to be made a party to an action, suit or proceeding, whether criminal, civil,
administrative or investigative, by reason of the fact that he, his testator
or intestate is or was a director, officer, employee or agent of the Company
or is or was serving, at the request of the Company, as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
The Company has purchased an insurance policy effective upon consummation of
the Offerings covering indemnification of directors and officers of the
Registrant against certain liabilities arising under the Securities Act that
might be incurred by them in such capacities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Pursuant to three subscription agreements dated August 23, 1995, the Company
issued the following securities (as reclassified pursuant to the
Recapitalization) in connection with the Acquisition:
<TABLE>
<CAPTION>
NAME NO. OF SHARES CLASS/TYPE PAR VALUE CONSIDERATION
---- ------------- ---------- --------- -------------
<C> <C> <C> <C> <S>
Indosuez Carson Partners 568,500 Class B Common Stock $.01 $1,000,000 cash
Indosuez CM II, Inc. 460,485 Class B Common Stock $.01 cash and financing
services rendered by
Banque Indosuez
Indosuez CM II, Inc. 830,692 Class B Common Stock $.01 cash and financing
services rendered by
Banque Indosuez
Morgan Guaranty Trust 949,986 Class C Common Stock $.01 cash and financing
Company, as Trustee of a services rendered
Commingled Pension Fund-
Multi-Market Special Investment
Fund II;
Multi-Market Special Investment 118,748 Class C Common Stock $.01 cash and financing
Trust Fund of Morgan Guaranty services rendered
Company of New York;
Morgan Guaranty Trust Company 118,748 Class C Common Stock $.01 cash and financing
of New York as Investment services rendered
Manager and Agent for the
Alfred P. Sloan Foundation
Multi-Market Account
DNL Partners, Limited Partners 5,798,700 Class C Common Stock $.01 $11,000,000 cash
</TABLE>
Additionally, pursuant to the Stock Purchase Agreement dated as of May 31,
1995, as amended, the Minis Family received 1,705,000 shares of Class A Common
Stock for a $5 million reduction in the cash purchase price for the
Acquisition. In connection with services performed in connection with the
Acquisition, Dr. Leroy Keith received 341,100 shares, Northwest Capital
received 159,180 shares and other individuals received 318,360 shares. The
issuances cited above were exempt from registration under the Securities Act
pursuant to Section 4(2) of the Securities Act.
II-2
<PAGE>
In connection with management employment agreements, the Company issued the
following securities:
<TABLE>
<CAPTION>
NAME NO. OF SHARES CLASS/TYPE PAR VALUE CONSIDERATION
---- ------------- ---------- --------- -------------
<S> <C> <C> <C> <C>
Joyce M. Roche 118,713 Class C Common Stock $.01 services rendered and
promissory note
Dennis E. Smith 59,357 Class C Common Stock $.01 services rendered and
promissory note
Miriam Muley 59,357 Class C Common Stock $.01 services rendered and
promissory note
John P. Brown, Jr. 59,357 Class C Common Stock $.01 services rendered and
promissory note
Dr. Donald Cowsar 29,678 Class C Common Stock $.01 services rendered and
promissory note
Arthur P. Gnann 29,678 Class C Common Stock $.01 services rendered and
promissory note
Sharon Davis 29,678 Class C Common Stock $.01 services rendered and
promissory note
</TABLE>
The issuances cited above were exempt from registration under the Securities
Act pursuant to Rule 701 of the Securities Act.
The Company also issued the following securities to certain outside
directors:
<TABLE>
<CAPTION>
NAME NO. OF SHARES CLASS/TYPE PAR VALUE CONSIDERATION
---- ------------- ---------- --------- -------------
<S> <C> <C> <C> <C>
John L. Sabre 23,070 Class C Common Stock $.01 $50,000 cash
Melvyn J. Estrin 11,541 Class C Common Stock $.01 $25,000 cash
Abbey J. Butler 11,541 Class C Common Stock $.01 $25,000 cash
Suzanne de Passe 11,541 Class C Common Stock $.01 $25,000 cash
James L. Hudson 11,541 Class C Common Stock $.01 $25,000 cash
Jack Kemp 46,139 Class C Common Stock $.01 $100,000 cash
</TABLE>
The issuances cited above were exempt from registration under the Securities
Act pursuant to Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
A list of exhibits included as part of this Registration Statement is set
forth in the Exhibit Index which immediately precedes such exhibits and is
hereby incorporated by reference herein.
(b) Financial Statement Schedules.
Schedule II--Valuation and Qualifying Accounts
All other schedules have been omitted as they are inapplicable, or the other
information is included in the financial statements.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes to provide the Underwriters
at the Closing specified in the Purchase Agreements Certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission, such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer
II-3
<PAGE>
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel that matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT AMENDMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN NEW YORK, NEW
YORK, ON THIS 20TH DAY OF SEPTEMBER, 1996.
CARSON, INC.
/s/ Bradford N. Creswell
By: _________________________________
Name:Bradford N. Creswell
Title: Executive Vice President of
Finance, Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement Amendment has been signed by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
Chairman of the
/s/ Dr. Leroy Keith* Board and Chief September 20,
- ------------------------------------- Executive Officer 1996
DR. LEROY KEITH (Principal
Executive Officer)
Executive Vice
/s/ Bradford N. Creswell President of September 20,
- ------------------------------------- Finance and Chief 1996
BRADFORD N. CRESWELL Financial Officer
(Principal
Financial Officer)
Vice President of
/s/ Arthur P. Gnann, III* Finance and September 20,
- ------------------------------------- Comptroller 1996
ARTHUR P. GNANN, III (Principal
Accounting Officer)
II-5
<PAGE>
SIGNATURE TITLE DATE
Director
/s/ Lawrence E. Bathgate, II* September 20,
- ------------------------------------- 1996
LAWRENCE E. BATHGATE, II
Director
/s/ Abbey J. Butler* September 20,
- ------------------------------------- 1996
ABBEY J. BUTLER
Director
/s/ Suzanne de Passe* September 20,
- ------------------------------------- 1996
SUZANNE DE PASSE
Director
/s/ Melvyn J. Estrin* September 20,
- ------------------------------------- 1996
MELVYN J. ESTRIN
Director
/s/ James L. Hudson* September 20,
- ------------------------------------- 1996
JAMES L. HUDSON
Director
/s/ Joyce M. Roche* September 20,
- ------------------------------------- 1996
JOYCE M. ROCHE
Director
/s/ John L. Sabre* September 20,
- ------------------------------------- 1996
JOHN L. SABRE
Director
/s/ Dennis E. Smith* September 20,
- ------------------------------------- 1996
DENNIS E. SMITH
/s/ Vincent A. Wasik Director
- ------------------------------------- September 20,
VINCENT A. WASIK 1996
/s/ Vincent A. Wasik
*By ____________________________
VINCENT A. WASIK
ATTORNEY-IN-FACT
II-6
<PAGE>
SCHEDULE II
CARSON, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED MARCH 31, 1994 AND 1995
AND THE PERIODS ENDED AUGUST 22, 1995 AND MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------------------------ -----------------
YEAR ENDED
-----------------------------
PERIOD FROM PERIOD FROM
APRIL 1, 1995 AUGUST 23, 1995
MARCH 31, 1994 MARCH 31, 1995 TO AUGUST 22, 1995 TO MARCH 31, 1996
-------------- -------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Balance, beginning of
period............... $265 $206 $242 $358
Addition--provisions
charged to income.... 361 629 158 329
Deduction--accounts
written off as
uncollectible........ (420) (593) (42) (156)
---- ---- ---- ----
Balance, end of peri-
od................... $206 $242 $358 $531
==== ==== ==== ====
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S> <C>
1.1 Form of U.S. Purchase Agreement..............................................
*1.2 Form of International Purchase Agreement.....................................
3.1 Form of Amended and Restated Articles of Incorporation of the Registrant.....
3.2 Form of By-laws of Registrant................................................
*4 Form of Common Stock Certificate.............................................
5 Opinion of Milbank, Tweed, Hadley & McCloy...................................
8 Opinion of Milbank, Tweed, Hadley & McCloy re tax matters....................
9 Voting Trust Agreement.......................................................
10.1 Employment Agreement dated as of August 23, 1995, as amended as of July 31,
1996 between Carson Products Company and Dr. Leroy Keith....................
10.2 Employment Agreement dated as of June 7, 1995, as amended as of July 31,
1996, between Carson Products Company and Joyce M. Roche....................
10.3 Employment Agreement dated as of June 7, 1995, as amended as of July 31,
1996, between Carson Products Company and Dennis E. Smith...................
10.4 Employment Agreement dated as of April 1, 1996, as amended July 31, 1996,
between Carson Products Company and Sharon A. Davis.........................
10.5 Employment Agreement dated as of June 7, 1995, as amended July 31, 1996,
between Carson Products Company and John P. Brown, Jr. .....................
10.6 Employment Agreement dated as of June 22, 1995, as amended July 31, 1996,
between the Carson Products Company and Dr. Donald Cowsar...................
10.7 Employment Agreement dated as of September 1, 1995, as amended July 31,
1996, between Carson Products Company and Arthur P. Gnann III...............
10.8 Employment Agreement dated as of September 1, 1995, as amended July 31,
1996, between Carson Products Company and Allena Lee-Brown..................
10.9 Employment Agreement dated as of March 11, 1996, as amended July 31, 1996,
between Carson Products Company and Miriam Muley............................
10.10 Management Assistance Agreement dated as of August 23, 1995 between Carson
Products Company and Morningside Capital Group L.L.C. ......................
10.11 Management Agreement dated as of June 26, 1996 between Carson Products
Company and AM Cosmetics, Inc. .............................................
10.12 Subscription Agreement dated as of June 26, 1996 between Carson Products
Company and Morningside AM Acquisition Corp. ...............................
10.13 Carson, Inc. 1996 Long Term Incentive Plan...................................
10.14 Carson, Inc. 1996 Non-Employee Director's Equity Incentive Program...........
10.15 Subscription Agreement dated as of August 23, 1995 by and among the
Registrant and Investors set forth in Schedule I............................
10.16 Subscription Agreement dated as of August 23, 1995 by and among the
Registrant and DNL Partners, Limited Partnership............................
10.17 Subscription Agreement dated as of August 23, 1995 by and among the
Registrant, Indosuez Carson Partners and Indosuez CM II, Inc. ..............
10.18 Subscription and Registration Rights Agreement dated as of August 15, 1996
between the Registrant and the individuals (outside directors) named
therein.....................................................................
10.19 Subscription and Registration Rights Agreement dated as of August 15, 1996
between the Registrant and the individuals (members of Senior Management)
named therein...............................................................
*10.20 Licensing Agreement dated April 7, 1994, as amended May 14, 1996 between
Carson Products Company and Carson Products Company S.A. (Proprietary)
Limited.....................................................................
*10.21 Distribution Agreement dated May 14, 1996 between Carson Products Company
and Carson Products Company S.A. (Proprietary) Limited......................
*10.22 Letter Agreement dated , 1996 among Carson, Inc., Indosuez Carson
Partners and Indosuez CM II, Inc. ..........................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
*10.23 Letter Agreement dated , 1996 among Carson, Inc. and the investors
named therein...............................................................
*10.24 Letter Agreement dated , 1996 between Carson, Inc. and DNL Partners,
Limited Partnership.........................................................
*10.25 Letter Agreement dated , 1996 between Carson, Inc. and Dr. Leroy
Keith.......................................................................
*10.26 Letter Agreement dated , 1996 among Carson, Inc. and the individual
Stockholders (outside directors) named therein..............................
*10.27 Letter Agreement dated , 1996 among Carson, Inc. and the individual
Stockholders (members of Senior Management) named therein...................
10.28 Promissory note dated , 1996 between Joyce Roche and the Registrant...
10.29 Promissory note dated , 1996 between John P. Brown and the
Registrant..................................................................
10.30 Promissory note dated , 1996 between Dennis Smith and the Registrant..
10.31 Promissory note dated , 1996 between Donald Cowsar and the
Registrant..................................................................
10.32 Promissory note dated , 1996 between Arthur P. Gnann, III and the
Registrant..................................................................
10.33 Promissory note dated , between Sharon A. Davis and the Registrant....
10.34 Pledge Agreement dated August 13, 1996 between Arthur P. Gnann, III and the
Registrant..................................................................
10.35 Pledge Agreement dated August 13, 1996 between Sharon A. Davis and the
Registrant..................................................................
10.36 Pledge Agreement dated August 13, 1996 between Dr. Donald Cowsar and the
Registrant..................................................................
10.37 Pledge Agreement dated August 13, 1996 between John P. Brown Jr. and the
Registrant..................................................................
10.38 Pledge Agreement dated August 13, 1996 between Miriam Muley and the
Registrant..................................................................
10.39 Pledge Agreement dated August 13, 1996 between Joyce Roche and the
Registrant..................................................................
10.40 Pledge Agreement dated August 13, 1996 between Dennis Smith and the
Registrant..................................................................
*10.41 Form of Amended and Restated Credit Facility.................................
11 Computation of earnings per share............................................
16 Letter regarding Change in Certifying Accountant from Price Waterhouse
LLP. .......................................................................
*21 Subsidiaries of the Registrant...............................................
23.1 Consent of Deloitte & Touche LLP.............................................
23.2 Consent of Deloitte & Touche LLP.............................................
23.3 Consent of Price Waterhouse LLP..............................................
23.4 Consent of Milbank, Tweed, Hadley & McCloy
(included in its opinions filed as Exhibits 5 and 8 hereto).................
**24 Powers of Attorney (included on signature pages hereto)......................
27 Financial Data Schedule......................................................
</TABLE>
- --------
*To be filed by amendment.
**Previously filed.
<PAGE>
EXHIBIT 1.1
- --------------------------------------------------------------------------------
CARSON, INC.
(a Delaware corporation)
4,190,000 Shares of Class A Common Stock
FORM OF U.S. PURCHASE AGREEMENT
Dated: , 1996
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
PURCHASE AGREEMENT....................................... 1
SECTION 1. Representations and Warranties............... 4
------------------------------
(a) Representations and Warranties by
the Company.................................. 4
(i) Compliance with
Registration
Requirements....................... 5
(ii) Independent
Accountants........................ 6
(iii) Financial Statements............... 6
(iv) No Material Adverse
Change in Business................. 6
(v) Good Standing of the Company....... 7
(vi) Good Standing of
Subsidiaries....................... 7
(vii) Capitalization..................... 8
(viii) Authorization of
Agreement.......................... 8
(ix) Authorization and Description
of Securities...................... 8
(x) Absence of Defaults and
Conflicts.......................... 9
(xi) Absence of Labor Dispute........... 10
(xii) Absence of Proceedings............. 10
(xiii) Accuracy of Exhibits............... 10
(xiv) Possession of Intellectual
Property........................... 10
(xv) Absence of Further
Requirements....................... 11
(xvi) Possession of Licenses and
Permits............................ 11
(xvii) Title to Property.................. 12
(xviii) Compliance with Cuba Act........... 12
(xix) Investment Company Act............. 12
(xx) Environmental Laws................. 13
(xxi) Registration Rights................ 13
(xxii) Lock-up Letters.................... 13
(b) Representations and Warranties by
the Selling Shareholders..................... 14
(i) Authorization of Agreements........ 14
(ii) Security Ownership................. 15
(iii) Good and Marketable Title.......... 15
(iv) Due Execution of Power of Attorney
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
and Custody Agreement................................... 15
(v) Absence of Manipulation................................. 16
(vi) Absence of Further
Requirements............................................ 16
(vii) Enforceability of [Note Repurchase Agreement]........... 16
(viii) Certificates Suitable for Transfer...................... 16
(ix) No Association with NASD................................ 17
(c) Officer's Certificates............................................ 17
SECTION 2. Sale and Delivery to Underwriters;
----------------------------------
Closing........................................................... 17
-------
(a) Initial Securities................................................ 17
(b) Option Securities................................................. 17
(c) Payment........................................................... 18
(d) Denominations; Registration....................................... 19
SECTION 3. Covenants of the Company 19
------------------------
(a) Compliance with Securities Regulations
and Commission Requests........................................... 19
(b) Filing of Amendments.............................................. 20
(c) Delivery of Registration Statement................................ 20
(d) Delivery of Prospectuses.......................................... 21
(e) Continued Compliance with Securities
Laws.............................................................. 21
(f) Blue Sky Qualifications........................................... 22
(g) Rule 158.......................................................... 22
(h) Use of Proceeds................................................... 22
(i) Listing........................................................... 22
(j) Restriction on Sale of Securities................................. 23
(k) Reporting Requirements............................................ 23
(l) Compliance with Rule 463.......................................... 23
(m) Compliance with NASD Rules........................................ 23
SECTION 4. Payment of Expenses 24
-------------------
(a) Expenses.......................................................... 24
(b) Termination of Agreement.......................................... 25
SECTION 5. Conditions of U.S. Underwriters' Obligations 25
--------------------------------------------
(a) Effectiveness of Registration
Statement......................................................... 25
(b) Opinion of Counsel for Company.................................... 25
(c) Opinion of Counsel for the Selling
Shareholders...................................................... 26
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
(d) Opinion of Counsel for Underwriters............................ 26
(e) Officers' Certificate.......................................... 26
(f) Certificate of Selling Shareholders............................ 27
(g) Accountant's Comfort Letters................................... 27
(h) Bring-down Comfort Letters..................................... 27
(i) Approval of Listing............................................ 28
(j) No Objection................................................... 28
(k) Lock-up Agreements............................................. 28
(l) Purchase of Initial International
Securities......................................................... 28
(m) New Senior Bank Facility........................................... 28
(n) Conditions to Purchase of U.S. Option
Securities......................................................... 28
(i) Officers' Certificate...................................... 29
(ii) Opinion of Counsel for Company............................. 29
(iii) Opinion of Counsel for U.S.
Underwriters............................................... 29
(iv) Bring-down Comfort Letters................................. 29
(o) Additional Documents............................................... 29
(p) Termination of Agreement........................................... 30
SECTION 6. Indemnification.................................................... 30
---------------
(a) Indemnification of U.S. Under-writers.............................. 30
(b) Indemnification of Company, Directors
and Officers....................................................... 32
(c) Actions Against Parties;
Notification....................................................... 32
(d) Settlement Without Consent if Failure
to Reimburse....................................................... 33
(e) Indemnification for Reserved
Securities......................................................... 33
SECTION 7. Contribution....................................................... 34
------------
SECTION 8. Representations, Warranties and
-------------------------------
Agreements to Survive Delivery..................................... 36
------------------------------
SECTION 9. Termination of Agreement........................................... 36
------------------------
(a) Termination; General............................................... 36
(b) Liabilities........................................................ 37
SECTION 10. Default by One or More of the
-----------------------------
U.S. Underwriters.................................................. 37
-----------------
SECTION 11. Default by One or More of the
-----------------------------
Selling Shareholders or the Company................................ 38
-----------------------------------
</TABLE>
iii
<PAGE>
Page
----
SECTION 12. Notices................................... 39
-------
SECTION 13. Parties................................... 39
-------
SECTION 14. Governing Law and Time.................... 39
----------------------
SECTION 15. Effect of Headings........................ 39
------------------
iv
<PAGE>
CARSON, INC.
(a Delaware corporation)
[ ] Shares of Class A Common Stock
(Par Value $.01 Per Share)
PURCHASE AGREEMENT
------------------
, 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
as U.S. Representatives of the several
U.S. Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Carson, Inc., a Delaware corporation (the "Company"), and the persons
listed in Schedule B hereto (the "Selling Shareholders"), confirm their
respective agreements with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") and each of the other Underwriters named in
Schedule A hereto (collectively, the "U.S. Underwriters," which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch and Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") are acting as representatives (in such capacity, Merrill
Lynch and DLJ shall hereinafter be referred to as the "U.S. Representatives"),
with respect to (i) the sale by the Company and the Selling Shareholders, acting
severally and not jointly, and the purchase by the U.S. Underwriters, acting
severally and not jointly, of the respective numbers of shares of Class A Common
Stock, par value $.01 per share, of the Company ("Common Stock") set forth in
Schedules A and B hereto and (ii) the grant by the Company to the U.S.
Underwriters, acting severally and not jointly, of the option described in
Section 2(b) hereof to purchase all or any part of [ ] additional shares
of Common Stock to cover over-allotments, if any. The aforesaid
<PAGE>
-2-
[ ] shares of Common Stock (the "Initial U.S. Securities") to be purchased
by the U.S. Underwriters and all or any part of the [ ] shares of Common Stock
subject to the option described in Section 2(b) hereof (the "U.S. Option
Securities") are hereinafter called, collectively, the "U.S. Securities."
It is understood that the Company and the Selling Shareholders are
concurrently entering into an agreement dated the date hereof (the
"International Purchase Agreement") providing for the offering by the Company
and the Selling Shareholders of an aggregate of [ ] shares of Common Stock (the
"Initial International Securities") through arrangements with certain
underwriters outside the United States and Canada (the "International Managers")
for which Merrill Lynch International Limited and Donaldson, Lufkin & Jenrette
Securities Corporation are acting as lead managers (the "Lead Managers") and the
grant by the Company to the International Managers, acting severally and not
jointly, of an option to purchase all or any part of the International Managers'
pro rata portion of up to [ ] additional shares of Common Stock solely to cover
overallotments, if any (the "International Option Securities" and, together with
the U.S. Option Securities, the "Option Securities"). The Initial International
Securities and the International Option Securities are hereinafter called the
"International Securities." It is understood that the Company and the Selling
Shareholders are not obligated to sell, and the U.S. Underwriters are not
obligated to purchase, any Initial U.S. Securities unless all of the Initial
International Securities are contemporaneously purchased by the International
Managers.
The U.S. Underwriters and the International Managers are hereinafter
collectively called the "Underwriters," the Initial U.S. Securities and the
Initial International Securities are hereinafter collectively called the
"Initial Securities," and the U.S. Securities and the International Securities
are hereinafter collectively called the "Securities."
The Underwriters will concurrently enter into an Intersyndicate Agreement
of even date herewith (the "Intersyndicate Agreement") providing for the
coordination of certain transactions among the Underwriters under the direction
of Merrill Lynch (in such capacity, the "Global Coordinator").
The Company and the Selling Shareholders understand that the U.S.
Underwriters propose to make a public offering of the Securities as soon as the
U.S. Representatives deem advisable after this Agreement has been executed and
delivered.
<PAGE>
-3-
The Company, the Selling Shareholders and the U.S. Underwriters agree
that up to _____ shares of the Securities to be purchased by the U.S.
Underwriters (the "Reserved Securities") shall be reserved for sale by the U.S.
Underwriters to directors, officers, employees, business associates and related
persons of the Company, as part of the distribution of the Securities by the
U.S. Underwriters, subject to the terms of this Agreement, the applicable rules,
regulations and interpretations of the National Association of Securities
Dealers, Inc. (the "NASD") and all other applicable laws, rules and regulations.
To the extent that such Reserved Securities are not orally confirmed for
purchase by such eligible employees and persons having business relationships
with the Company by the end of the first business day after the date of this
Agreement, such Reserved Securities may be offered to the public by the U.S.
Underwriters as part of the public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-10191) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b).
Two forms of prospectus are to be used in connection with the offering and sale
of the Securities: one relating to the U.S. Securities (the "Form of U.S.
Prospectus") and one relating to the International Securities (the "Form of
International Prospectus"). The Form of U.S. Prospectus is identical to the
Form of International Prospectus, except for the front cover and back cover
pages and the information under the caption "Underwriting." The information
included in any such prospectus or in any such Term Sheet, as the case may be,
that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Each Form of U.S. Prospectus and Form of
International Prospectus used before such registration statement became
effective, and any
<PAGE>
-4-
prospectus that omitted, as applicable, the Rule 430A Information or the Rule
434 Information, that was used after such effectiveness and prior to the
execution and delivery of this Agreement, is herein called a "preliminary
prospectus." Such registration statement, including the exhibits thereto and
schedules thereto, if any, as amended, at the time it became effective and
including the Rule 430A Information and the Rule 434 Information, as applicable,
is herein called the "Registration Statement." Any registration statement filed
pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as the
"Rule 462(b) Registration Statement," and after such filing the term
"Registration Statement" shall include the Rule 462(b) Registration Statement.
The Final Form of U.S. Prospectus and the Final Form of International Prospectus
in the forms first furnished to the Underwriters for use in connection with the
offering of the Securities are hereinafter called the "U.S. Prospectus" and the
"International Prospectus," respectively, and collectively the "Prospectuses."
If Rule 434 is relied on, the terms "U.S. Prospectus" and "International
Prospectus" shall refer to the preliminary U.S. prospectus dated ____________,
1996 and the preliminary international prospectus dated ____________, 1996,
respectively, each together with the applicable Term Sheet, and all references
in this Agreement to the date of such Prospectuses shall mean the date of the
applicable Term Sheet. For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus, the U.S. Prospectus, the
International Prospectus or any Term Sheet or any amendment or supplement to any
of the foregoing shall be deemed to include the copy filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval system
("EDGAR").
SECTION 1. Representations and Warranties.
------------------------------
(a) Representations and Warranties by the Company. The Company
---------------------------------------------
represents and warrants to each U.S. Underwriter as of the date hereof, as of
the Closing Time referred to in Section 2(c) hereof, and as of each Date of
Delivery (if any) referred to in Section 2(b) hereof, and agrees with each U.S.
Underwriter, as follows:
(i) Compliance with Registration Requirements. Each of the
-----------------------------------------
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending
<PAGE>
-5-
or, to the knowledge of the Company, are threatened by the Commission,
and any request on the part of the Commission for additional
information has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments
thereto became effective and at the Closing Time (and, if any Option
Securities are purchased, at the Date of Delivery therefor), the
Registration Statement, any Rule 462(b) Registration Statement and any
amendments and supplements thereto complied and will comply in all
material respects with the requirements of the 1933 Act and the 1933
Act Regulations and, as amended or supplemented to such time, did not
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Prospectus, any
preliminary prospectus and any supplement thereto or prospectus
wrapper prepared in connection therewith, at their respective times of
issuance and at the Closing Time, complied and will comply in all
material respects with any applicable laws or regulations of foreign
jurisdictions in which the Prospectus and such preliminary prospectus,
as amended or supplemented, if applicable, are distributed in
connection with the offer and sale of Reserved Securities. Neither of
the Prospectuses nor any amendments or supplements thereto (including
any prospectus wrapper), at the time the Prospectuses or any such
amendment or supplement was issued and at the Closing Time (and, if
any Option Securities are purchased, at the Date of Delivery), as
amended or supplemented to such time, contained or will contain an
untrue statement of a material fact or omitted or will omit to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. If Rule 434 is used, the Company will comply with the
requirements of Rule 434 and the Prospectuses shall not be "materially
different," as such term is used in Rule 434, from the prospectuses
included in the Registration Statement at the time it became
effective. The representations and warranties in this subsection
shall not apply to statements in or omissions from the Registration
Statement or the U.S. Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing
<PAGE>
-6-
by any U.S. Underwriter through Merrill Lynch expressly for use in the
Registration Statement or U.S. Prospectus.
Each preliminary prospectus and the prospectus filed as part of
the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424, complied when so
filed in all material respects with the 1933 Act and the 1933 Act
Regulations and, if applicable, each preliminary prospectus and the
Prospectuses delivered to the Underwriters for use in connection with
this offering were identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
(ii) Independent Accountants. The accountants who certified the
-----------------------
financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.
(iii) Financial Statements. The historical financial statements
--------------------
included in the Registration Statement and the Prospectuses, together
with the related schedules and notes, present fairly in all material
respects the financial position of the Company (or its predecessor, as
the case may be) and its consolidated subsidiaries at the dates
indicated and the statement of operations, stockholders' equity and
cash flows of the Company (or its predecessor, as the case may be) and
its consolidated subsidiaries for the periods specified (subject to
the absence of certain footnotes for the unaudited interim period
financial statements); said financial statements have been prepared in
conformity with U.S. generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The
supporting schedules, if any, included in the Registration Statement
present fairly in all material respects in accordance with GAAP the
information required to be stated therein. The selected financial
data and the summary historical financial information included in the
Prospectuses present fairly in all material respects the information
shown therein and have been compiled on a basis consistent with that
of the audited financial statements included in the Registration
Statement. The pro forma financial statements and the related notes
<PAGE>
-7-
thereto included in the Registration Statement and the Prospectuses
present fairly in all material respects the information shown therein,
have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements and have
been properly compiled in all material respects on the bases described
therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give
effect to the transactions and circumstances referred to therein.
(iv) No Material Adverse Change in Business. Since the
--------------------------------------
respective dates as of which information is given in the Registration
Statement and the Prospectuses, except as otherwise stated therein,
(A) there has been no material adverse change in the business,
financial condition or results of operations or business prospects of
the Company and its subsidiaries considered as one enterprise, whether
or not arising in the ordinary course of business (a "Material Adverse
Effect"), (B) there have been no transactions entered into by the
Company or any of its subsidiaries, other than those in the ordinary
course of business, which are material with respect to the Company and
its subsidiaries considered as one enterprise, and (C) there has been
no dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.
(v) Good Standing of the Company. The Company has been duly
----------------------------
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectuses and to enter into and
perform its obligations under this Agreement; and the Company is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction listed in Annex I hereto, and such
jurisdictions are the only ones in which it owns or leases property or
conducts business so as to require such qualification, except for [
], which does not recognize the legal concepts of good standing or
qualification.
(vi) Good Standing of Subsidiaries. Each subsidiary of the
-----------------------------
Company (each a "Subsidiary" and,
<PAGE>
-8-
collectively, the "Subsidiaries") has been duly organized and is
validly existing as a corporation and, except in [ ], where
the legal concept does not exist, is in good standing under the laws
of the jurisdiction of its incorporation or organization, has
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectuses and is
duly qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction listed in Annex II hereto, and such
jurisdictions are the only ones in which the Subsidiaries own or lease
property or conduct business so as to require such qualification,
except for [ ], which does not recognize the legal concepts
of good standing or qualification; except as otherwise disclosed in
the Registration Statement, all of the issued and outstanding capital
stock of each such Subsidiary has been duly authorized and validly
issued, is fully paid and non-assessable and, except for directors'
qualifying shares and shares owned by foreign nationals, to the extent
required by applicable law, and except as disclosed in the
Prospectuses, is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity except for liens pursuant
to the Credit Agreement dated as of August 23, 1995 among Carson
Products Company, Banque Indosuez, New York Branch, as Agent, and the
lenders party thereto, as amended, and all pledge agreements, security
agreements, mortgages and guarantees related thereto, as amended
(collectively, the "Credit Agreement"); none of the outstanding shares
of capital stock of any Subsidiary was issued in violation of
preemptive or similar rights of any securityholder of such Subsidiary.
The only subsidiaries of the Company are the subsidiaries listed on
Exhibit 21 to the Registration Statement.
(vii) Capitalization. The authorized, issued and outstanding
--------------
capital stock of the Company is as set forth in the Prospectuses in
the column entitled "Actual" under the caption "Capitalization"
(except for subsequent issuances to certain directors and members of
senior management reflected in the "As Adjusted" column under the
caption "Capitalization"). All of the shares of issued and
outstanding capital stock including the Securities to be purchased by
the Underwriters from the Selling Shareholders have been duly
authorized and validly issued and are fully paid
<PAGE>
-9-
and non-assessable; none of the outstanding shares of capital stock,
including the Securities to be purchased by the Underwriters from the
Selling Shareholders, was issued in violation of preemptive or other
similar rights of any securityholder of the Company which have not
been waived.
(viii) Authorization of Agreement. Each of this Agreement and
--------------------------
the International Purchase Agreement has been duly authorized,
executed and delivered by the Company.
(ix) Authorization and Description of Securities. The
-------------------------------------------
Securities to be purchased by the U.S. Underwriters and International
Managers from the Company have been duly authorized for issuance and
sale to the U.S. Underwriters pursuant to this Agreement and the
International Managers pursuant to the International Purchase
Agreement and, when issued and delivered by the Company pursuant to
this Agreement and the International Purchase Agreement, respectively,
against payment of the consideration set forth herein and in the
International Purchase Agreement, will be validly issued and fully
paid and non-assessable. The Common Stock and the Company's other
classes of capital stock conform in all material respects to all
statements relating thereto contained in the Prospectuses and such
descriptions conform in all material respects to the rights set forth
in the instruments defining the same; no holder of such Securities
will be subject to personal liability by reason of being such a
holder; and the issuance of the Securities is not subject to
preemptive or other similar rights of any securityholder of the
Company that will not have been waived, or other than as described in
the Prospectuses.
(x) Absence of Defaults and Conflicts. Neither the Company nor
---------------------------------
any of its Subsidiaries is (A) in violation of its charter or by-laws,
(B) in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or
other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which it or any of them may be bound, or
to which any of the property or assets of the Company or any
Subsidiary are subject (collectively, the "Agreements and
Instruments"),
<PAGE>
-10-
except for such defaults that would not result in a Material Adverse
Effect or that have been waived or consented to and copies of such
waivers or consents provided to the Representatives or (C) in
violation of any applicable law, statute, rule, regulation, judgment,
order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or
any Subsidiary or any of their assets, properties or operations,
except for such violations that would not result in a Material Adverse
Effect; and the execution, delivery and performance of this Agreement
and the International Purchase Agreement and the consummation of the
transactions contemplated in this Agreement, the International
Purchase Agreement and the Registration Statement (including the
issuance and sale of the Securities by the Company and the use of the
proceeds from the sale of the Securities by the Company as described
in the Prospectuses under the caption "Use of Proceeds") and
compliance by the Company with its obligations hereunder and under the
International Purchase Agreement have been duly authorized by all
necessary corporate and shareholder action and do not and will not (i)
whether with or without the giving of notice or passage of time or
both, conflict with or constitute a breach of, or default or Repayment
Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any Subsidiary pursuant to, the Agreements
and Instruments (except for such conflicts, breaches, defaults or
events or liens, charges or encumbrances that have been waived or
consented to that would not result in a Material Adverse Effect), (ii)
violate any of the provisions of the charter or by-laws of the Company
or any Subsidiary or (iii) violate any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any Subsidiary or any of their
assets, properties or operations, except for such violations that
would not result in a Material Adverse Effect. As used herein, a
"Repayment Event" means any event or condition which gives the holder
of any note, debenture or other evidence of indebtedness (or any
person acting on such holder's behalf) the right to require the
repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any Subsidiary.
<PAGE>
-11-
(xi) Absence of Labor Dispute. No labor dispute with the
------------------------
employees of the Company or any Subsidiary exists or, to the knowledge
of the Company, is threatened which may reasonably be expected to
result in a Material Adverse Effect.
(xii) Absence of Proceedings. There is no action, suit,
----------------------
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any Subsidiary which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might reasonably be expected to result in a Material Adverse Effect,
or which might reasonably be expected to materially and adversely
affect the properties or assets thereof or the consummation of the
transactions contemplated in this Agreement and the International
Purchase Agreement or the performance by the Company of its
obligations hereunder or thereunder; the aggregate of all pending
legal or governmental proceedings to which the Company or any
Subsidiary is a party or of which any of their respective property or
assets is the subject which are not described in the Registration
Statement, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material
Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or
--------------------
documents which are required to be described in the Registration
Statement or the Prospectuses or to be filed as exhibits thereto which
have not been so described and filed as required.
(xiv) Possession of Intellectual Property. The Company and its
-----------------------------------
Subsidiaries own or possess or have the right to use the patents,
patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service
marks, trade names or other intellectual property (collectively,
"Intellectual Property") currently employed by them in connection
with the business now operated by them as described in the
Prospectuses, except (i) for restrictions on ownership, if any,
arising out of the security interest in such Intellectual Property
pursuant to the Credit
<PAGE>
-12-
Agreement and (ii) where the failure to so own or possess the right to
use would not result in a Material Adverse Effect, and neither the
Company nor any of its Subsidiaries has received any notice or is
otherwise aware of any infringement of or conflict with asserted
rights of others with respect to any Intellectual Property or of any
facts or circumstances which would render any Intellectual Property
invalid or inadequate to protect the interest of the Company or any of
its Subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations in connection with the offering, issuance or sale of
the Securities to be sold by the Company under this Agreement and the
International Purchase Agreement or the consummation of the
transactions contemplated by this Agreement and the International
Purchase Agreement concerning the issuance and sale of Securities by
the Company to the Underwriters, except (i) such as have been already
obtained or as may be required under the 1933 Act, the 1933 Act
Regulations, the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and the rules and regulations thereunder (the "1934 Act
Regulations") or state or foreign securities laws and the rules and
regulations of the NASD and the New York Stock Exchange, Inc. (the
"NYSE") and (ii) such as have been obtained under the laws and
regulations of jurisdictions outside the United States in which the
Reserved Securities are offered.
(xvi) Possession of Licenses and Permits. The Company and its
----------------------------------
Subsidiaries possess such permits, licenses, approvals, consents and
other authorizations (collectively, "Governmental Licenses") issued by
the appropriate federal, state, local or foreign regulatory agencies
or bodies currently employed by them in connection with the business
now operated by them as described in the Prospectuses, except where
the failure to possess such Governmental Licenses would not have a
Material
<PAGE>
-13-
Adverse Effect; the Company and its Subsidiaries are in compliance
with the terms and conditions of all such Governmental Licenses,
except where the failure so to comply would not, singly or in the
aggregate, have a Material Adverse Effect; all of the Governmental
Licenses are valid and in full force and effect, except where the
invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.
(xvii) Title to Property. The Company and its Subsidiaries have
-----------------
good and marketable title to all real property owned by the Company
and its Subsidiaries and good title to all other properties owned by
them, in each case, free and clear of all mortgages, pledges, liens,
security interests, claims, restrictions or encumbrances of any kind
except such as (a) are described in the Prospectuses, (b) are in
effect pursuant to the Credit Agreement or (c) do not, singly or in
the aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property
by the Company or any of its Subsidiaries; and all of the leases and
subleases material to the business of the Company and its
Subsidiaries, considered as one enterprise, and under which the
Company or any of its Subsidiaries holds properties described in the
Prospectuses are in full force and effect, and neither the Company nor
any Subsidiary has any notice of any material claim of any sort that
has been asserted by anyone adverse to the rights of the Company or
any Subsidiary under any of the leases or subleases mentioned above,
or affecting or questioning the rights of the Company or such
Subsidiary to the continued possession of the leased or subleased
premises under any such lease or sublease.
(xviii) Compliance with Cuba Act. The Company has complied
------------------------
with, and is and will be in compliance with, the provisions of that
certain Florida act relating to disclosure of doing business with
Cuba, codified as Section 517.075 of the Florida statutes,
<PAGE>
-14-
and the rules and regulations thereunder (collectively, the "Cuba
Act") or is exempt therefrom.
(xix) Investment Company Act. The Company is not, and upon the
----------------------
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectuses will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
(xx) Environmental Laws. Except in each case as described in
------------------
the Registration Statement and as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the
Company nor any of its Subsidiaries is in violation of any federal,
state, local or foreign statute, law, rule, regulation, ordinance,
code, policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative
order, consent, decree or judgment, in each case applicable to the
Company or any of its Subsidiaries, relating to pollution or
protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without limitation, laws
and regulations relating to the release or threatened release of
chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum or petroleum products (collectively,
"Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of Hazardous Materials (collectively, "Environmental Laws"), (B) the
Company and its Subsidiaries have all permits, authorizations and
approvals required under any applicable Environmental Laws and are
each in compliance with their requirements, (C) there are no pending
or, to the knowledge of the Company, threatened administrative,
regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of noncompliance or violation, investigation or
proceedings relating to any Environmental Law against the Company or
any of its Subsidiaries and (D) there are no events or circumstances
that might reasonably be expected to form the basis of an order for
clean-up or remediation, or an action, suit or proceeding by any
<PAGE>
-15-
private party or governmental body or agency, against or affecting the
Company or any of its Subsidiaries relating to Hazardous Materials or
any Environmental Laws.
(xxi) Registration Rights. Except as disclosed in the
-------------------
Registration Statement, there are no persons with registration rights
or other similar rights to have any securities registered pursuant to
the Registration Statement or otherwise registered by the Company
under the 1933 Act.
(xxii) Lock-up Letters. The Company has obtained the written
---------------
agreement of each of its existing shareholders listed on Schedule D,
in the form previously furnished to you, that such person has waived
any registration rights or rights to purchase capital stock in
connection with the Offering and such person will not for a period of
180 days from the date hereof sell, grant any option to sell or
otherwise dispose of any capital stock of the Company or any
securities convertible or exchangeable into or exercisable for capital
stock of the Company and such person shall not cause the Company
within such 180-day period to file a registration statement covering
capital stock or securities convertible or exchangeable into or
exercisable for capital stock.
(b) Representations and Warranties by the Selling Shareholders. Each
----------------------------------------------------------
Selling Shareholder severally represents and warrants to each U.S. Underwriter
as of the date hereof and as of the Closing Time, and agrees with each U.S.
Underwriter, as follows:
(i) Authorization of Agreements. Such Selling Shareholder has
---------------------------
the full right, power and authority to enter into this Agreement, a
Power of Attorney (the "Power of Attorney") and a Custody Agreement
(the "Custody Agreement") and to sell, transfer and deliver the
Securities to be sold by such Selling Shareholder hereunder. The
execution and delivery of this Agreement, the Power of Attorney and
the Custody Agreement and the sale and delivery of the Securities to
be sold by such Selling Shareholder and the consummation of the
transactions contemplated herein and compliance by such Selling
Shareholder with its obligations hereunder have been duly authorized
by such Selling Shareholder and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with
or constitute
<PAGE>
-16-
a breach of, or default under, or result in the creation or imposition
of any tax, lien, charge or encumbrance upon the Securities to be sold
by such Selling Shareholder or any property or assets of such Selling
Shareholder pursuant to any material contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, license, lease or other
agreement or instrument to which such Selling Shareholder is a party
or by which such Selling Shareholder may be bound, or to which any of
the property or assets of such Selling Shareholder is subject, nor
will such action result in any violation of the provisions of the
charter or by-laws or other organizational instrument of such Selling
Shareholder, if applicable, or any applicable treaty, law, statute,
rule, regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over such Selling Shareholder or any of its properties.
(ii) Security Ownership. Such Selling Shareholder does not own,
------------------
beneficially or of record, any securities, or options or rights to
acquire securities, of the Company other than the shares of Common
Stock to be sold hereunder and under the International Purchase
Agreement and, if applicable, the Junior Subordinated Notes owned by
such Selling Shareholder as set forth in an exhibit to the Note
Purchase Agreement dated as of September __, 1996 by and among the
Company and the Noteholders defined therein (the "Note Purchase
Agreement").
(iii) Good and Marketable Title. Such Selling Shareholder has
-------------------------
good and marketable title to the Securities to be sold by such Selling
Shareholder hereunder and under the International Purchase Agreement,
free and clear of any security interest, mortgage, pledge, lien,
charge, claim, equity or encumbrance of any kind, other than pursuant
to this Agreement or the International Purchase Agreement; and upon
delivery of such Securities and payment of the purchase price therefor
as herein contemplated, assuming each such Underwriter has no notice
of any adverse claim, each of the Underwriters will receive good and
marketable title to the Securities purchased by it from such Selling
Shareholder, free and clear of any security interest, mortgage,
pledge, lien, charge, claim, equity or encumbrance of any kind.
<PAGE>
-17-
(iv) Due Execution of Power of Attorney and Custody Agreement.
--------------------------------------------------------
Such Selling Shareholder has duly executed and delivered, in the form
heretofore furnished to the Representatives, the Power of Attorney and
the Custody Agreement with [ ] [,or any of them,] as attorney(s)-
in-fact (the "Attorney(s)-in-Fact") and [ ], as custodian (the
"Custodian"); the Custodian is authorized to deliver the Securities to
be sold by such Selling Shareholder hereunder and to accept payment
therefor; and [each] Attorney-in-Fact is authorized to execute and
deliver this Agreement and the certificate referred to in Section 5(f)
or that may be required pursuant to Section 5(l) on behalf of such
Selling Shareholder, to sell, assign and transfer to the Underwriters
the Securities to be sold by such Selling Shareholder hereunder, to
determine the purchase price to be paid by the Underwriters to such
Selling Shareholder, as provided in Section 2(a) hereof, to authorize
the delivery of the Securities to be sold by such Selling Shareholder
hereunder, to accept payment therefor, and otherwise to act on behalf
of such Selling Shareholder in connection with this Agreement.
(v) Absence of Manipulation. Such Selling Shareholder has not
-----------------------
taken, and will not take, directly or indirectly, any action which is
designed to or which has constituted or which might reasonably be
expected to cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Securities.
(vi) Absence of Further Requirements. No filing with, or
-------------------------------
consent, approval, authorization, order, registration, qualification
or decree of, any court or governmental authority or agency, domestic
or foreign, is necessary or required on the part of each Selling
Shareholder for the performance by such Selling Shareholder of its
obligations hereunder or in the Power of Attorney or the Custody
Agreement, or in connection with the sale and delivery of the
Securities under this Agreement and the International Purchase
Agreement or the consummation of the transactions contemplated by this
Agreement and the International Purchase Agreement, except such as may
have previously been made or obtained and are in full force and effect
or as may be required under the 1933 Act, the 1933 Act Regulations,
the 1934 Act, the 1934
<PAGE>
-18-
Act Regulations, state or foreign securities laws and the rules and
regulations of the NASD or the NYSE.
(vii) Enforceability of Note Purchase Agreement. Such Selling
-----------------------------------------
Shareholder has duly authorized, executed and delivered the Note
Purchase Agreement and such agreement is a binding obligation of such
Selling Shareholder enforceable against it in accordance with its
terms.
(viii) Certificates Suitable for Transfer. Certificates for all
----------------------------------
of the Securities to be sold by such Selling Shareholder pursuant to
this Agreement and the International Purchase Agreement, in suitable
form for transfer by delivery or accompanied by duly executed
instruments of transfer or assignment in blank with signatures
guaranteed, have been placed in custody with the Custodian with
irrevocable conditional instructions to deliver such Securities to the
U.S. Underwriters and International Managers pursuant to this
Agreement and the International Purchase Agreement.
(ix) No Association with NASD. Neither such Selling Shareholder
------------------------
nor any of such Selling Stockholder's affiliates (as defined in Rule
2720(b) of the NASD Conduct Rules), directly or indirectly through one
or more intermediaries, controls, or is controlled by, or is under
common control with, or has any other association with, any member
firm of the National Association of Securities Dealers, Inc.
(c) Officer's Certificates. Any certificate signed by any officer of
----------------------
the Company or any of its Subsidiaries delivered to the Global Coordinator, the
U.S. Representatives or to counsel for the U.S. Underwriters shall be deemed a
representation and warranty by the Company to each U.S. Underwriter as to the
matters covered thereby; and any certificate signed by or on behalf of the
Selling Shareholders as such and delivered to the Global Coordinator, the U.S.
Representatives or to counsel for the U.S. Underwriters shall be deemed a
representation and warranty by such Selling Shareholder to the U.S. Underwriters
as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
------------------------------------------
(a) Initial Securities. On the basis of the representations and
------------------
warranties herein contained and subject to the terms and conditions herein set
forth, the Company and each
<PAGE>
-19-
Selling Shareholder, severally and not jointly, agree to sell to each U.S.
Underwriter, severally and not jointly, and each U.S. Underwriter, severally and
not jointly, agrees to purchase from the Company and each Selling Shareholder,
at the price per share set forth in Schedule C, that proportion of the number of
Initial U.S. Securities set forth in Schedule B opposite the name of the Company
or such Selling Shareholder, as the case may be, which the number of Initial
U.S. Securities set forth in Schedule A opposite the name of such Underwriter,
plus any additional number of Initial U.S. Securities which such Underwriter may
become obligated to purchase pursuant to the provisions of Section 10 hereof,
bears to the total number of Initial U.S. Securities, subject, in each case, to
such adjustments among the U.S. Underwriters as the U.S. Representatives in
their sole discretion shall make to eliminate any sales or purchases of
fractional securities.
(b) Option Securities. In addition, on the basis of the
-----------------
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the U.S.
Underwriters, severally and not jointly, to purchase up to an additional [ ]
shares of Common Stock, as set forth in Schedule B, at the price per share set
forth in Schedule C. The option hereby granted will expire 30 days after the
date hereof and may be exercised in whole or in part only for the purpose of
covering over-allotments which may be made in connection with the offering and
distribution of the Initial U.S. Securities upon notice by the U.S.
Representatives to the Company setting forth the number of U.S. Option
Securities as to which the several U.S. Underwriters are exercising the option
and the time and date of payment and delivery for such U.S. Option Securities.
Any such time and date of delivery (a "Date of Delivery") shall be determined by
the U.S. Representatives, but shall not be earlier than three nor later than
seven full business days after the exercise of said option, nor in any event
prior to the Closing Time, as hereinafter defined. If the option is exercised
as to all or any portion of the U.S. Option Securities, each of the U.S.
Underwriters, acting severally and not jointly, will purchase that proportion of
the total number of U.S. Option Securities then being purchased which the number
of Initial U.S. Securities set forth in Schedule A opposite the name of such
U.S. Underwriter bears to the total number of Initial U.S. Securities, subject
in each case to such adjustments as the U.S. Representatives in their discretion
shall make to eliminate any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
-------
certificates for, the Initial U.S. Securities shall
<PAGE>
-20-
be made at the offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New
York 10005, or at such other place as shall be agreed upon by the Global
Coordinator and the Company, at 9:00 A.M. (Eastern time), on the third (fourth,
if the pricing occurs after 4:30 P.M. (Eastern time) on any given day) business
day after the date hereof (unless postponed in accordance with the provisions of
Section 10 or 11), or such other time not later than ten business days after
such date as shall be agreed upon by the Global Coordinator and the Company
(such time and date of payment and delivery being herein called "Closing Time").
In addition, in the event that any or all of the U.S. Option
Securities are purchased by the U.S. Underwriters, payment of the purchase price
for, and delivery of certificates for, such U.S. Option Securities shall be made
at the above-mentioned offices, or at such other place as shall be agreed upon
by the Global Coordinator and the Company, on the Date of Delivery as specified
in the notice from the Global Coordinator to the Company.
Payment shall be made to the Company and the Selling Shareholders by
wire transfer of immediately available funds to bank accounts designated by the
Company and the Custodian (pursuant to written instructions from each Selling
Shareholder), as the case may be, against delivery to the U.S. Representatives
for the respective accounts of the U.S. Underwriters of certificates for the
Securities to be purchased by them. It is understood that each U.S. Underwriter
has authorized the U.S. Representatives, for its account, to accept delivery of,
receipt for, and make payment of the purchase price for, the Initial U.S.
Securities and the U.S. Option Securities, if any, which it has agreed to
purchase. Merrill Lynch, individually and not as representative of the U.S.
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial U.S. Securities or the U.S. Option Securities, if any, to
be purchased by any U.S. Underwriter whose funds have not been received by the
Closing Time or the relevant Date of Delivery, as the case may be, but such
payment shall not relieve such U.S. Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial U.S.
---------------------------
Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the U.S. Representatives may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
U.S. Securities and the U.S. Option Securities, if any, will be made available
for
<PAGE>
-21-
examination and packaging by the U.S. Representatives in The City of New York
not later than 10:00 A.M. (Eastern time) on the business day prior to the
Closing Time or the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
------------------------
U.S. Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests.
--------------------------------------------------------------
The Company, subject to Section 3(b), will comply with the requirements of Rule
430A or Rule 434, as applicable, and will notify the Global Coordinator
immediately, and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement shall become effective, or any
supplement to the Prospectuses or any amended Prospectuses shall have been
filed, (ii) of the receipt of any comments from the Commission, (iii) of any
request by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectuses or for additional information, and
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the filings necessary pursuant to Rule 424(b) and
will take such steps as it deems necessary to ascertain promptly whether the
form of prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will promptly
file such prospectus. The Company will make every reasonable effort to prevent
the issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Global
--------------------
Coordinator notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any Term Sheet
or any amendment, supplement or revision to either the prospectus included in
the Registration Statement at the time it became effective or to the
Prospectuses, will furnish the Global Coordinator with copies of any such
documents a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file or use any such document to which the Global
Coordinator or counsel for the U.S. Underwriters shall reasonably object.
(c) Delivery of Registration Statement. The Company
----------------------------------
<PAGE>
-22-
has furnished or will deliver to the U.S. Representatives and counsel for the
U.S. Underwriters, without charge, signed copies of the Registration Statement
as originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to the U.S.
Representatives, without charge, a conformed copy of the Registration Statement
as originally filed and of each amendment thereto (without exhibits) for each of
the U.S. Underwriters. If applicable, the copies of the Registration Statement
and each amendment thereto furnished to the U.S. Underwriters will be identical
to the electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each U.S.
------------------------
Underwriter, without charge, as many copies of each preliminary prospectus as
such U.S. Underwriter has reasonably requested, and the Company hereby consents
to the use of such copies for purposes permitted by the 1933 Act. The Company
will furnish to each U.S. Underwriter, without charge, during the period when
the U.S. Prospectus is required to be delivered under the 1933 Act or the 1934
Act, such number of copies of the U.S. Prospectus (as amended or supplemented)
as such U.S. Underwriter may reasonably request. If applicable, the U.S.
Prospectus and any amendments or supplements thereto furnished to the U.S.
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will
-----------------------------------------
comply with the 1933 Act and the 1933 Act Regulations so as to permit the
completion of the distribution of the Securities as contemplated in this
Agreement, the International Purchase Agreement and the Prospectuses. If at any
time when a prospectus is required by the 1933 Act to be delivered in connection
with sales of the Securities, any event shall occur or condition shall exist as
a result of which it is necessary, in the opinion of counsel for the U.S.
Underwriters or for the Company, to amend the Registration Statement or amend or
supplement any Prospectus in order that such Prospectus will not include any
untrue statements of a material fact or omit to state a material fact necessary
in order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of such counsel, at any such time to amend
the Registration Statement or amend or supplement the Prospectuses in order to
comply with the requirements of the 1933 Act or the 1933 Act Regulations,
<PAGE>
-23-
the Company will promptly prepare and file with the Commission, subject to
Section 3(b), such amendment or supplement as may be necessary to correct such
statement or omission or to make the Registration Statement or the Prospectuses
comply with such requirements, and the Company will furnish to the U.S.
Underwriters such number of copies of such amendment or supplement as the U.S.
Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its reasonable
-----------------------
best efforts, in cooperation with the U.S. Underwriters, to qualify the
Securities for offering and sale under the applicable securities laws of such
states and other jurisdictions (domestic or foreign) as the Global Coordinator
may designate and to maintain such qualifications in effect for a period of not
less than one year from the later of the effective date of the Registration
Statement and any Rule 462(b) Registration Statement; provided, however, that
-------- -------
the Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities in
any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is not
otherwise so subject. In each jurisdiction in which the Securities have been so
qualified, the Company will file such statements and reports as may be required
by the laws of such jurisdiction to continue such qualification in effect for a
period of not less than one year from the effective date of the Registration
Statement and any Rule 462(b) Registration Statement.
(g) Rule 158. The Company will timely file such reports pursuant to
--------
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable, but in any event not later than eighteen
months after the effective date of the Registration Statement, an earnings
statement for the purposes of, and to provide the benefits contemplated by, the
last paragraph of Section 11(a) of the 1933 Act (including, at the option of the
Company, pursuant to Rule 158).
(h) Use of Proceeds. The Company will use the net proceeds received
---------------
by it from its sale of the Securities in the manner specified in the
Prospectuses under "Use of Proceeds."
(i) Listing. The Company will use its reasonable best efforts to
-------
effect the listing of the Securities on the New York Stock Exchange.
(j) Restriction on Sale of Securities. During a period of 180 days
---------------------------------
from the date of the Prospectuses, the Company will not, without the prior
written consent of the
<PAGE>
-24-
Global Coordinator, (i) directly or indirectly, offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of any share of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or file any registration statement
under the 1933 Act with respect to any of the foregoing or (ii) enter into any
swap or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Securities to be sold hereunder, (B) any shares of Common Stock issued by
the Company upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof and described in the Prospectuses, (C)
any shares of Common Stock or other securities convertible into, or exercisable
or exchangeable for, such shares issued or options to purchase Common Stock or
other securities convertible into, or exercisable or exchangeable for, such
shares granted pursuant to existing employee benefit plans of the Company
described in the Prospectuses or (D) any shares of Common Stock issued pursuant
to any non-employee director stock plan described in the Prospectuses.
(k) Reporting Requirements. The Company, during the period when the
----------------------
Prospectuses are required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to the
1934 Act within the time periods required by the 1934 Act and the rules and
regulations of the Commission thereunder.
(l) Compliance with Rule 463. The Company will file with the
------------------------
Commission such reports on Form SR as may be required pursuant to Rule 463 of
the 1933 Act Regulations.
(m) Compliance with NASD Rules. The Company hereby agrees that it
--------------------------
will ensure that the Reserved Securities will be restricted as required by the
NASD or the NASD rules from sale, transfer, assignment, pledge or hypothecation
for a period of three months following the date of this Agreement. The U.S.
Underwriters will notify the Company as to which persons will need to be so
restricted. At the request of the U.S. Underwriters, the Company will direct
the transfer agent to place a stop transfer restriction upon such securities for
such period of time. Should the Company release, or seek to release, from such
restrictions any of the Reserved Securities,
<PAGE>
-25-
the Company agrees to reimburse the U.S. Underwriters for any reasonable
expenses (including, without limitation, reasonable legal expenses) they incur
in connection with such release.
SECTION 4. Payment of Expenses.
-------------------
(a) Expenses. The Company will pay all expenses incident to the
--------
performance of its and the Selling Shareholders' obligations under this
Agreement and the International Purchase Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other documents customarily
used in connection with the offering, purchase, sale, issuance or delivery of
the Securities, (iii) the preparation, issuance and delivery of the certificates
for the Securities to the Underwriters, including any stock or other transfer
taxes and any stamp or other duties payable upon the sale, issuance or delivery
of the Securities to the Underwriters and the transfer of the Securities between
the U.S. Underwriters and International Managers, (iv) the fees and
disbursements of the Company's and the Selling Shareholders' counsel,
accountants and other advisors, (v) the qualification of the Securities under
securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the preparation,
printing and delivery of the Blue Sky Survey and any supplement thereto, (vi)
the printing and delivery to the Underwriters of copies of each preliminary
prospectus, any Term Sheets and of the Prospectuses and any amendments or
supplements thereto, (vii) the fees and expenses of any transfer agent or
registrar for the Securities, (viii) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in connection
with, the review by the NASD of the terms of the sale of the Securities, (ix)
the fees and expenses incurred in connection with the listing of the Securities
on the New York Stock Exchange and (x) all costs and expenses of the
Underwriters, including the reasonable fees and disbursements of counsel for the
Underwriters, in connection with matters related to the Reserved Securities
which are designated by the Company for sale to employees and others having a
business relationship with the Company.
(b) Termination of Agreement. If this Agreement is terminated by the
------------------------
U.S. Representatives in accordance with the provisions of Section 5, Section
9(a)(i) or Section 11 hereof,
<PAGE>
-26-
the Company shall reimburse the Underwriters for all of their out-of-pocket
expenses, including the reasonable fees and disbursements of counsel for the
U.S. Underwriters.
5. Conditions of U.S. Underwriters' Obligations. The obligations of
--------------------------------------------
the several U.S. Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company and the Selling Shareholders
contained in Section 1 hereof or in certificates of any officer of the Company
or any Subsidiary or on behalf of any Selling Shareholder delivered pursuant to
the provisions hereof, to the performance in all material respects by the
Company of its covenants and other obligations hereunder, and to the following
further conditions:
(a) Effectiveness of Registration Statement. The Registration
---------------------------------------
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the U.S. Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430(A)) or, if the Company has elected to rely upon Rule
434, a Term Sheet shall have been filed with the Commission in accordance with
Rule 424(b).
(b) Opinion of Counsel for Company. At Closing Time, the U.S.
------------------------------
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Milbank, Tweed, Hadley & McCloy, counsel for the Company, in form and
substance reasonably satisfactory to counsel for the U.S. Underwriters, together
with signed or reproduced copies of such letter for each of the other U.S.
Underwriters to the effect set forth in Exhibit A hereto and to such further
effect as counsel to the U.S. Underwriters may reasonably request. In giving
such opinion such counsel may rely, as to all matters governed by the laws of
jurisdictions other than the law of the State of New York, the Federal law of
the United States and the General Corporation Law of the State of Delaware, upon
the opinions of counsel reasonably satisfactory to the U.S. Representatives.
Such counsel may also state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon certificates of
officers of the Company and its Subsidiaries and certificates of public
officials.
<PAGE>
-27-
(c) Opinion of Counsel for the Selling Shareholders. At Closing
-----------------------------------------------
Time, the U.S. Representatives shall have received the favorable opinion, dated
as of Closing Time, of Hunter, MacLean, Exley & Dunn, P.C., counsel for the
Selling Shareholders, in form and substance reasonably satisfactory to counsel
for the U.S. Underwriters and addressed to the Company and the U.S.
Underwriters, together with signed or reproduced copies of such letter for each
of the other U.S. Underwriters to the effect set forth in Exhibit B hereto and
to such further effect as counsel to the U.S. Underwriters may reasonably
request.
(d) Opinion of Counsel for U.S. Underwriters. At Closing Time, the
----------------------------------------
U.S. Representatives shall have received the favorable opinion, dated as of
Closing Time, of Cahill Gordon & Reindel, counsel for the U.S. Underwriters,
together with signed or reproduced copies of such letter for each of the other
U.S. Underwriters with respect to the matters set forth in clauses (i), (ii),
(v), (vi) (solely as to preemptive or other similar rights arising by operation
of law or under the charter or by-laws of the Company), (viii) through (x),
inclusive, (xiv) (solely as to the information in the Prospectuses under
"Description of Capital Stock -- Common Stock") and the penultimate paragraph of
Exhibit A hereto. In giving such opinion such counsel may rely, as to all
matters governed by the laws of jurisdictions other than the law of the State of
New York, the Federal law of the United States and the General Corporation Law
of the State of Delaware, upon the opinions of counsel reasonably satisfactory
to the U.S. Representatives. Such counsel may also state that, insofar as such
opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and its Subsidiaries and
certificates of public officials.
(e) Officers' Certificate. At Closing Time, there shall not have
---------------------
been, since the date hereof or since the respective dates as of which
information is given in the Prospectuses, any material adverse change in the
business, financial condition, results of operations or business prospects of
the Company and its Subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, and the U.S. Representatives shall
have received a certificate of the President or a Vice President of the Company
and of the chief financial officer of the Company, dated as of Closing Time, to
the effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1(a) hereof are true and correct with
the same force and effect as though expressly made at and as of Closing Time,
(iii) the Company has complied in all material
<PAGE>
-28-
respects with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to Closing Time, and (iv) no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending or, to such
person's knowledge, threatened by the Commission.
(f) Certificate of Selling Shareholders. At Closing Time, the U.S.
-----------------------------------
Representatives shall have received a certificate of an Attorney-in-Fact on
behalf of each Selling Shareholder, dated as of Closing Time, to the effect that
(i) the representations and warranties of each Selling Shareholder contained in
Section 1(b) hereof are true and correct in all respects with the same force and
effect as though expressly made at and as of Closing Time and (ii) each Selling
Shareholder has complied in all material respects with all agreements and
satisfied all conditions on its part to be performed or satisfied under this
Agreement at or prior to Closing Time.
(g) Accountant's Comfort Letters. At the time of the execution of
----------------------------
this Agreement, the U.S. Representatives shall have received from each of
Deloitte & Touche, L.L.P. and Price Waterhouse LLP letters dated such date, in
form and substance reasonably satisfactory to the U.S. Representatives, together
with signed or reproduced copies of such letters for each of the other U.S.
Underwriters containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectuses.
(h) Bring-down Comfort Letters. At Closing Time, the U.S.
--------------------------
Representatives shall have received from each of Deloitte & Touche, L.L.P. and
Price Waterhouse LLP letters, dated as of Closing Time, to the effect that they
reaffirm the statements made in the letters furnished pursuant to subsection (g)
of this Section, except that the specified date referred to shall be a date not
more than three business days prior to Closing Time.
(i) Approval of Listing. At Closing Time, the Securities shall have
-------------------
been approved for listing on the New York Stock Exchange, subject only to
official notice of issuance.
(j) No Objection. The NASD shall not have raised any objection with
------------
respect to the fairness and reasonableness of the underwriting terms and
arrangements.
(k) Lock-up Agreements. At the date of this
------------------
<PAGE>
-29-
Agreement, the U.S. Representatives shall have received an agreement
substantially in the form of Exhibit C hereto signed by the persons listed on
Schedule D hereto.
(l) Purchase of Initial International Securities. Contemporaneously
--------------------------------------------
with the purchase by the U.S. Representatives of the Initial U.S. Securities
under this Agreement, the International Managers shall have purchased the
Initial International Securities under the International Purchase Agreement.
(m) New Senior Bank Facility. At or prior to Closing Time, the
------------------------
Company shall have entered into the [Credit Agreement with ]
substantially on the terms described in the Prospectuses and shall have borrowed
amounts thereunder sufficient, together with a portion of the proceeds of the
sale of Securities by the Company, to repay all amounts outstanding under its
existing credit facility; and such amounts shall have been or will be, at
Closing Time, applied to repay the existing credit facility in full and such
facility shall have been or will be, at Closing Time, terminated.
(n) Conditions to Purchase of U.S. Option Securities. In the event
------------------------------------------------
that the U.S. Underwriters exercise their option provided in Section 2(b) hereof
to purchase all or any portion of the U.S. Option Securities, the
representations and warranties of the Company contained herein and the
statements in any certificates furnished by the Company or any Subsidiary of the
Company hereunder shall be true and correct as of each Date of Delivery and, at
the relevant Date of Delivery, the U.S. Representatives shall have received:
(i) Officers' Certificate. A certificate, dated such Date of
---------------------
Delivery, of the President or a Vice President of the Company and of
the chief financial officer of the Company confirming that the
certificate delivered at Closing Time pursuant to Section 5(e) hereof
remains true and correct as of such Date of Delivery.
(ii) Opinion of Counsel for Company. The favorable opinion of
------------------------------
Milbank, Tweed, Hadley & McCloy, counsel for the Company, in form and
substance reasonably satisfactory to counsel for the U.S.
Underwriters, dated such Date of Delivery, relating to the U.S. Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinion required by Section 5(b) hereof.
(iii) Opinion of Counsel for U.S. Underwriters.
----------------------------------------
<PAGE>
-30-
The favorable opinion of Cahill Gordon & Reindel, counsel for the U.S.
Underwriters, dated such Date of Delivery, relating to the U.S. Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinion required by Section 5(d) hereof.
(iv) Bring-down Comfort Letters. Letters from each of Deloitte
--------------------------
& Touche, L.L.P. and Price Waterhouse LLP, in form and substance
reasonably satisfactory to the U.S. Representatives and dated such
Date of Delivery, substantially in the same form and substance as the
letters furnished to the U.S. Representatives pursuant to Section 5(g)
hereof, except that the "specified date" in the letters furnished
pursuant to this paragraph shall be a date not more than five days
prior to such Date of Delivery.
(o) Additional Documents. At Closing Time and at each Date of
--------------------
Delivery, counsel for the U.S. Underwriters shall have been furnished with such
documents and opinions as they may require for the purpose of enabling them to
pass upon the issuance and sale of the Securities as herein contemplated, or in
order to evidence the accuracy of any of the representatives or warranties, or
the fulfillment of any of the conditions herein contained; and all proceedings
taken by the Company and the Selling Shareholders in connection with the
issuance and sale of the Securities as herein contemplated shall be reasonably
satisfactory in form and substance to the U.S. Representatives and counsel for
the U.S. Underwriters.
(p) Termination of Agreement. If any condition specified in this
------------------------
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement or, in the case of any condition to the purchase of U.S. Option
Securities on a Date of Delivery which is after the Closing Time, the
obligations of the several U.S. Underwriters to purchase the relevant U.S.
Option Securities, may be terminated by the U.S. Representatives by notice to
the Company at any time at or prior to Closing Time or such Date of Delivery, as
the case may be, and such termination shall be without liability of any party to
any other party except as provided in Section 4 and except that Sections 1, 6
and 7 shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
---------------
(a) Indemnification of U.S. Underwriters. The Company and the
------------------------------------
Selling Shareholders, severally and not
<PAGE>
-31-
jointly, agree to indemnify and hold harmless each U.S. Underwriter and each
person, if any, who controls any U.S. Underwriter within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act to the extent and in the manner
set forth in clauses (i), (ii), (iii) and (iv) below:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus
or the Prospectuses (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of (A) the violation of
any applicable laws or regulations of foreign jurisdictions where
Reserved Securities have been offered and (B) any untrue statement or
alleged untrue statement of a material fact included in the
supplement or prospectus wrapper material distributed in foreign
jurisdictions in connection with the reservation and sale of the
Reserved Securities to eligible employees of the Company and certain
other persons or the omission or alleged omission therefrom of a
material fact necessary to make the statements therein, when
considered in conjunction with the Prospectus or preliminary
prospectus, not misleading;
(iii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission or in connection with any violation of the nature referred to
in
<PAGE>
-32-
Section 6(a)(ii)(A) hereof; provided that (subject to Section 6(d)
below) any such settlement is effected with the prior written consent
of the Company; and
(iv) against any and all expense whatsoever, as incurred
(including the reasonable fees and disbursements of counsel chosen by
Merrill Lynch), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission or in connection with
any violation of the nature referred to in Section 6(a)(ii)(A) hereof,
to the extent that any such expense is not paid under (i), (ii) or
(iii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
- -------- -------
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
U.S. Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto). The obligations of the
Company and the Selling Shareholders pursuant to this Section 6 are joint and
several; provided, however, that the Selling Shareholders' aggregate liability
-------- -------
under this Section 6 shall be limited to an amount equal to the net proceeds
(after deducting the underwriting discount, but before deducting expenses)
received by the Selling Shareholders in the aggregate from the sale of
Securities pursuant to this Agreement.
(b) Indemnification of Company, Directors and Officers. Each U.S.
--------------------------------------------------
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of section 15 of the
1933 Act or Section 20 of the 1934 Act, and each Selling Shareholder against any
and all loss, liability, claim, damage and expense described in the indemnity
contained in subsection (a) of this Section, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in the Registration Statement (or any amendment thereto), including the
Rule 430A Information and the Rule 434 Information, if applicable, or any
preliminary
<PAGE>
-33-
prospectus or the Prospectuses (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such U.S. Underwriter through Merrill Lynch expressly for use in the
Registration Statement (or any amendment thereto), or such preliminary
prospectus or the Prospectuses (or any amendment or supplement thereto).
(c) Actions Against Parties; Notification. Each indemnified party
-------------------------------------
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section
6(a) above, counsel to the indemnified parties shall be selected by Merrill
Lynch and, in the case of parties indemnified pursuant to Section 6(b) above,
counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
-------- -------
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to one local counsel in
any relevant jurisdiction) separate from their own counsel for all indemnified
parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent
of the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) Settlement Without Consent if Failure to Reimburse. If at any
--------------------------------------------------
time an indemnified party shall have
<PAGE>
-34-
requested an indemnifying party to reimburse the indemnifying party for fees and
expenses of counsel, such indemnifying party agrees that it shall be liable for
any settlement of the nature contemplated by Section 6(a)(iii) effected without
its written consent if (i) such settlement is entered into more than 45 days
after receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnifying party in
accordance with such request prior to the date of such settlement.
(e) The provisions of this Section shall not affect any agreement
among the Company and the Selling Shareholders with respect to indemnification.
SECTION 7. Contribution. If the indemnification provided for in
------------
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Shareholders on the one hand and the U.S. Underwriters
on the other hand from the offering of the Securities pursuant to this Agreement
or (ii) if the allocation provided by clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company and the Selling Shareholders on the one hand and of the U.S.
Underwriters on the other hand in connection with the statements or omissions,
or in connection with any failure of the nature referred to in Section
6(a)(ii)(A) hereof, which resulted in such losses, liabilities, claims, damages
or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Selling
Shareholders on the one hand and the U.S. Underwriters on the other hand in
connection with the offering of the Securities pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the Selling Shareholders and the total
underwriting discount received by the U.S. Underwriters, in each case as set
forth on the cover of the U.S. Prospectus, or, if Rule 434 is used, the
<PAGE>
-35-
corresponding location on the Term Sheet, bear to the aggregate initial public
offering price of the Securities as set forth on such cover.
The relative fault of the Company and the Selling Shareholders on the
one hand and the U.S. Underwriters on the other hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or the Selling Shareholders
or by the U.S. Underwriters and the parties' relevant intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission
or any failure of the nature referred to in Section 6(a)(ii)(A) hereof.
The Company, the Selling Shareholders and the U.S. Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
7 were determined by pro rata allocation (even if the U.S. Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 7. The aggregate amount of losses, liabilities, claims, damages
and expenses incurred by an indemnified party and referred to above in this
Section 7 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any
such untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no U.S. Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to the
public exceeds the amount of any damages which such U.S. Underwriter has
otherwise been required to pay by reason of any such untrue or alleged untrue
statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a
U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such U.S.
Underwriter, and each
<PAGE>
-36-
director of the Company, each officer of the Company who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as the Company. The U.S. Underwriters' respective
obligations to contribute pursuant to this Section 7 are several in proportion
to the number of Initial U.S. Securities set forth opposite their respective
names in Schedule A hereto and not joint.
The provisions of this Section shall not affect any agreement among
the Company and the Selling Shareholders with respect to contribution.
SECTION 8. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. All representations, warranties and agreements contained in this
- --------
Agreement or in certificates of officers of the Company and the Selling
Shareholders submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any U.S.
Underwriter or controlling person, or by or on behalf of the Company and the
Selling Shareholders, and shall survive delivery of the Securities to the U.S.
Underwriters.
SECTION 9. Termination of Agreement.
------------------------
(a) Termination; General. The U.S. Representatives may terminate
--------------------
this Agreement, by notice to the Company and the Attorney-in-Fact for the
Selling Shareholders, at any time at or prior to Closing Time (i) if there has
been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the Prospectuses, any material adverse
change in the business, financial condition, results of operations or business
prospects of the Company and its Subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, or (ii) if there has
occurred any material adverse change in the financial markets in the United
States or the international financial markets, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political, financial
or economic conditions, in each case the effect of which is such as to make it,
in the judgment of the U.S. Representatives, impracticable to market the
Securities or to enforce contracts for the sale of the Securities, or (iii) if
trading in any securities of the Company has been suspended or limited by the
Commission or the New York Stock Exchange, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in the Nasdaq National
Market has been
<PAGE>
-37-
suspended or limited, or minimum or maximum prices for trading have been fixed,
or maximum ranges for prices have been required, by any of said exchanges or by
such system or by order of the Commission, the National Association of
Securities Dealers, Inc. or any other governmental authority, or (iv) if a
banking moratorium has been declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
-----------
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6 and 7 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the U.S. Underwriters. If one
-----------------------------------------------
or more of the U.S. Underwriters shall fail at Closing Time or a Date of
Delivery to purchase the Securities which it or they are obligated to purchase
under this Agreement (the "Defaulted Securities"), the U.S. Representatives
shall have the right, within 24 hours thereafter, to make arrangements for one
or more of the non-defaulting U.S. Underwriters, or any other underwriters, to
purchase all, but not less than all, of the Defaulted Securities in such amounts
as may be agreed upon and upon the terms herein set forth; if, however, the U.S.
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, each of the non-defaulting
U.S. Underwriters shall be obligated, severally and not jointly, to purchase the
full amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all non-defaulting
U.S. Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number
of Securities to be purchased on such date, this Agreement or, with respect to
any Date of Delivery which occurs after the Closing Time, the obligation of the
U.S. Underwriters to purchase and of the Company to sell the U.S. Option
Securities to be purchased and sold on such Date of Delivery shall terminate
without liability on the part of any non-defaulting U.S. Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
U.S. Underwriter from liability in respect of its default.
<PAGE>
-38-
In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the obligation
of the U.S. Underwriters to purchase and the Company to sell the relevant U.S.
Option Securities, as the case may be, either the U.S. Representatives or the
Company shall have the right to postpone Closing Time or the relevant Date of
Delivery, as the case may be, for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements. As used herein, the term "U.S.
Underwriter" includes any person substituted for a U.S. Underwriter under this
Section 10.
SECTION 11. Default by One or More of the Selling Shareholders or the
---------------------------------------------------------
Company. (a) If a Selling Shareholder shall fail at Closing Time to sell and
- -------
deliver the number of Securities which such Selling Shareholder is obligated to
sell hereunder, then the U.S. Underwriters may, at option of the U.S.
Representatives, by notice from the Representatives to the Company and the non-
defaulting Selling Shareholders, either (i) terminate this Agreement without any
liability on the fault of any non-defaulting party except that the provisions of
Sections 1, 4, 6 and 7 shall remain in full force and effect or (ii) elect to
purchase the Securities which the non-defaulting Selling Shareholders have
agreed to sell hereunder. No action taken pursuant to this Section 11 shall
relieve any Selling Shareholder so defaulting from liability, if any, in respect
of such default.
In the event of a default by any Selling Shareholder as referred to in
this Section 11, each of the U.S. Representatives and the Company shall have the
right to postpone Closing Time for a period not exceeding seven days in order to
effect any required change in the Registration Statement or Prospectus or in any
other documents or arrangements.
(b) If the Company shall fail at Closing Time or at the Date of
Delivery to sell the number of Securities that it is obligated to sell
hereunder, then this Agreement shall terminate without any liability on the part
of any non-defaulting party; provided, however, that the provisions of Sections
-------- -------
1, 4, 6 and 7 shall remain in full force and effect. No action taken pursuant
to this Section shall relieve the Company from liability, if any, in respect of
such default.
SECTION 12. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any
<PAGE>
-39-
standard form of telecommunication. Notices to the U.S. Underwriters shall be
directed to the U.S. Representatives at North Tower, World Financial Center, New
York, New York 10281-1201, attention of Scott Elaine Haggard; notices to the
Company shall be directed to it at 64 Ross Road, Savannah, Georgia 31405,
attention of Dr. Leroy Keith, with a copy to Morningside Capital Group, L.L.C.,
One Morningside Drive North, Suite 200, Westport, Connecticut 06880, Attention:
Vincent A. Wasik; and notices to the Selling Shareholders shall be directed to
their Attorney-in-Fact at [ ], attention of [ ].
SECTION 13. Parties. This Agreement shall inure to the benefit of
-------
and be binding upon the U.S. Underwriters, the Company and the Selling
Shareholders and their respective successors. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the U.S. Underwriters, the Company and the Selling
Shareholders and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the U.S. Underwriters, the Company and the Selling
Shareholders and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of securities
from any U.S. Underwriter shall be deemed to be a successor by reason merely of
such purchase.
SECTION 14. Governing Law and Time. THIS AGREEMENT SHALL BE GOVERNED
----------------------
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Article and Section headings
------------------
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
<PAGE>
-40-
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Attorney-in-Fact for
the Selling Shareholders a counterpart hereof, whereupon this instrument, along
with all counterparts, will become a binding agreement among the U.S.
Underwriters, the Company and the Selling Shareholders in accordance with its
terms.
Very truly yours,
CARSON, INC.
By
----------------------------------
Name:
Title:
[Selling Shareholders]
By
----------------------------------
As Attorney-in-Fact acting on
behalf of the Selling
Shareholders named in
Schedule B hereto
<PAGE>
-41-
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By ____________________________________
Authorized Signatory
For itself and as Representatives of the other Underwriters named in Schedule A
hereto.
<PAGE>
SCHEDULE A
Number of
Initial
Name of Underwriter Securities
- ------------------- ----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................
Donaldson, Lufkin & Jenrette Securities
Corporation......................................
---------
Total..............................................
=========
Sch A - 1
<PAGE>
SCHEDULE B
Maximum Number of U.S.
Number of Initial U.S. Option Securities to
Securities to Be Sold Be Sold
---------------------- ----------------------
CARSON, INC.
[Selling Shareholders]
Total ...................
Sch B - 2
<PAGE>
SCHEDULE C
CARSON, INC.
[ ] Shares of Class A Common Stock
(Par Value $.01 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $[ ].
2. The purchase price per share for the Initial U.S. Securities to be
paid by the several U.S. Underwriters shall be $[ ], being an amount equal
to the initial public offering price set forth above less $[ ] per share.
Sch C - 1
<PAGE>
[SCHEDULE D]
[List of persons and entities
subject to lock-up]
Sch D - 1
<PAGE>
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the U.S. Purchase
Agreement and the International Purchase Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus in the column entitled "Actual" under
the caption "Capitalization" (except for subsequent issuances to certain
directors and members of senior management reflected in the "As Adjusted" column
under the caption "Capitalization"); all of the shares of issued and outstanding
capital stock of the Company, including the Securities to be purchased by the
Underwriters from the Selling Shareholders, have been duly authorized and
validly issued and are fully paid and non-assessable; and none of the
outstanding shares of capital stock of the Company was issued in violation of
preemptive or other similar rights of any securityholder of the Company.
(v) The Securities to be purchased by the Underwriters from the
Company have been duly authorized for issuance and sale to the Underwriters
pursuant to the Purchase Agreement and the International Purchase Agreement and,
when issued and delivered by the Company pursuant to the Purchase Agreement and
the International Purchase Agreement against payment of the consideration set
forth in the Purchase Agreement and the International Purchase Agreement, will
be validly issued and fully paid and non-assessable and no holder of the
Securities is or will be subject to personal liability
A-1
<PAGE>
by reason of being such a holder.
(vi) The issuance and sale of the Securities by the Company and the
sale of the Securities by the Selling Shareholders is not subject to preemptive
or other similar rights of any securityholder of the Company.
(vii) Each Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation or organization, has corporate power and authority to own,
lease and operate its properties and to conduct its business as described in the
Prospectuses and is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect; except as otherwise
disclosed in the Registration Statement, all of the issued and outstanding
capital stock of each Subsidiary has been duly authorized and validly issued, is
fully paid and non-assessable and, to the best of our knowledge, is owned by the
Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; none of the
outstanding shares of capital stock of any Subsidiary was issued in violation of
preemptive or similar rights of any securityholder of such Subsidiary.
(viii) Each of the Purchase Agreement and the International Purchase
Agreement has been duly authorized, executed and delivered by the Company.
(ix) The Registration Statement, including any Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act; any
required filing of the Prospectus pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); and, to the best of
our knowledge, no stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement has been issued under the
1933 Act and no proceedings for that purpose have been instituted or are pending
or threatened by the Commission.
(x) The Registration Statement, including any Rule 462(b)
Registration Statement, the Rule 430A Information and the Rule 434 Information,
as applicable, the Prospectuses, and each amendment or supplement to the
Registration Statement and Prospectuses, as of their respective effective or
issue dates (other than the financial statements, the notes thereto, supporting
schedules and other financial or statistical data included therein or omitted
therefrom, as to which we need
A-2
<PAGE>
express no opinion) complied as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations.
(xi) If Rule 434 has been relied upon, the Prospectuses were not
"materially different," as such term is used in Rule 434, from the prospectus
included in the Registration Statement at the time it became effective.
(xii) The form of certificate used to evidence the Common Stock
complied in all material respects with all applicable Delaware statutory
requirements, with any applicable requirements of the charter and by-laws of the
Company and the requirements of the New York Stock Exchange.
(xiii) To the best of our knowledge and other than as disclosed in
the Prospectuses, there is not pending or threatened any action, suit,
proceeding, inquiry or investigation to which the Company or the Delaware
Subsidiary is a party, or to which the property of the Company or the Delaware
Subsidiary is subject, before or brought by any Federal or state court or
governmental agency or body which would, if determined adversely to the Company
or any Subsidiary, have a Material Adverse Effect, or which would materially and
adversely affect the properties or assets thereof or the consummation of the
transactions contemplated in the Purchase Agreement or the International
Purchase Agreement or the performance by the Company of its obligations
thereunder.
(xiv) The information in the Prospectus under "Risk Factors --
Consumer Laws and Government Regulation" and "-- Environmental," "Business --
Patents and Trademarks," "--Government and Industry Regulations" and "--
Environmental Matters," "Description of Capital Stock," "Shares Eligible for
Future Sale," "Certain United States Federal Tax Considerations for Non-United
States Holders" and in Part II of the Registration Statement under Item 14, to
the extent that it constitutes matters of law, summaries of legal matters, the
Company's charter and bylaws or legal proceedings, or legal conclusions, has
been reviewed by us and is correct in all material respects.
(xv) To the best of our knowledge, there are no statutes or
regulations that are required to be described in the Prospectus that are not
described as required.
(xvi) All descriptions in the Registration Statement of contracts and
other documents to which the Company or its subsidiaries are a party are
accurate in all material respects; to the best of our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes,
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<PAGE>
leases or other instruments required to be described or referred to in the
Registration Statement or to be filed as exhibits thereto other than those
described or referred to therein or filed as exhibits thereto, and the
descriptions thereof or references thereto are correct in all material respects.
(xvii) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any Federal or state court or
governmental authority or agency having jurisdiction over the Company or any
Subsidiary or any of their properties (other than under the 1933 Act, the 1933
Act Regulations, the 1934 Act and the 1934 Act Regulations, which have been
obtained, or as may be required under the securities or blue sky laws of the
various states or foreign jurisdictions, as to which we need express no opinion)
is necessary or required in connection with the due authorization, execution and
delivery of the Purchase Agreement or the International Purchase Agreement by
the Company or for the offering, issuance, sale or delivery of the Securities by
the Company.
(xviii) The execution, delivery and performance of the Purchase
Agreement and the International Purchase Agreement and the consummation of the
transactions contemplated in the Purchase Agreement and the International
Purchase Agreement and in the Registration Statement concerning the issuance and
sale of the Securities by the Company and the use of the proceeds from the sale
of the Securities by the Company as described in the Prospectuses under the
caption "Use Of Proceeds" and compliance by the Company with its obligations
under the Purchase Agreement and the International Purchase Agreement do not and
will not (i) whether with or without the giving of notice or passage of time or
both, conflict with or constitute a breach of, or default or Repayment Event (as
defined in Section 1(a)(x) of the Purchase Agreement) under or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any Subsidiary pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument, known to us, to which the Company or any Subsidiary is
a party or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any Subsidiary is subject (except for such
conflicts, breaches, defaults or events or liens, charges or encumbrances that
have been consented to or waived or that would not have a Material Adverse
Effect), and (ii) violate the provisions of the charter or by-laws of the
Company or any Subsidiary, or any applicable law, statute, regulation, judgment,
order, writ or decree, known to us, of any Federal or state government,
government instrumentality or court having jurisdiction over the Company or any
Subsidiary or any of their respective properties, assets
A-4
<PAGE>
or operations (except for such violations that would not have a Material Adverse
Effect).
(xix) To the best of our knowledge, except as disclosed in the
Registration Statement, there are no persons with registration rights or other
similar rights to have any securities registered pursuant to the Registration
Statement or otherwise registered by the Company under the 1933 Act.
(xx) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
In the course of the Company's preparation of the Registration
Statement and the Prospectuses, we have participated in conferences with
officers and other representatives of the Company, representatives of the
independent public accountants for the Company, representatives of the
Underwriters, and representatives of counsel to the Underwriters, at which the
contents of the Registration Statement and the Prospectuses and related matters
were discussed. We have not independently verified the accuracy, completeness
or fairness of the statements contained in the Registration Statement or the
Prospectuses, and the limitations inherent in the review made by us and the
knowledge available to us are such that we are unable to assume, and do not
assume, any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectuses except as
otherwise specifically stated herein. However, on the basis of the foregoing,
nothing has come to our attention that would lead us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable) (except for financial
statements and the notes thereto, and schedules and other financial or
statistical data included therein or omitted therefrom, as to which we need make
no statement), at the time such Registration Statement or any such amendment
became effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectuses or any amendment or
supplement thereto (except for financial statements and the notes thereto, and
schedules and other financial or statistical data included therein or omitted
therefrom, as to which we need make no statement), at the time the Prospectus
was issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included or includes an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
A-5
<PAGE>
In rendering such opinion, such counsel may rely, as to matters of
fact (but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion may state that it is limited to matters involving the Federal laws of
the United States of America, the Delaware General Corporation Law and the law
of the State of New York. Such opinion shall not state that it is to be
governed or qualified by, or that it is otherwise subject to, any treatise,
written policy or other document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).
A-6
<PAGE>
Exhibit B
FORM OF OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS
TO BE DELIVERED PURSUANT TO SECTION 5(c)
(i) No filing with, or consent, approval, authorization, order,
registration, qualification or decree of, any court or governmental authority or
agency, domestic or foreign (other than the issuance of the order of the
Commission declaring the Registration Statement effective and such
authorizations, approvals or consents as may be necessary under state securities
laws, as to which we need express no opinion) is necessary or required to be
obtained by the Selling Shareholders for the performance by each Selling
Shareholder of its obligations under the Purchase Agreement or in the Power of
Attorney and Custody Agreement, or in connection with the offer, sale or
delivery of the Securities.
(ii) Each Power of Attorney and Custody Agreement has been duly
executed and delivered by the respective Selling Shareholders named therein and
constitutes the valid and binding agreement of such Selling Shareholder in
accordance with its terms.
(iii) The Purchase Agreement has been duly authorized, executed and
delivered by or on behalf of each Selling Shareholder.
(iv) Each Attorney-in-Fact has been duly authorized by the Selling
Shareholders to deliver the Securities on behalf of the Selling Shareholders in
accordance with the terms of the Purchase Agreement.
(v) The execution, delivery and performance of the Purchase Agreement
and the Power of Attorney and Custody Agreement and the sale and delivery of the
Securities and the consummation of the transactions contemplated in the Purchase
Agreement and in the Registration Statement and compliance by the Selling
Shareholders with its obligations under the Purchase Agreement have been duly
authorized by all necessary action on the part of the Selling Shareholders and
do not and will not, whether with or without the giving of notice or passage of
time or both, conflict with or constitute a breach of, or default under or
result in the creation or imposition of any tax, lien, charge or encumbrance
upon the Securities or any property or assets of the Selling Shareholders
pursuant to, any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, license, lease or other instrument or
B-1
<PAGE>
agreement to which any Selling Shareholder is a party or by which they may be
bound, or to which any of the property or assets of the Selling Shareholders may
be subject nor will such action result in any violation of the provisions of the
charter or by-laws of the Selling Shareholders, if applicable, or any law,
administrative regulation, judgment or order of any governmental agency or body
or any administrative or court decree having jurisdiction over such Selling
Shareholder or any of its properties.
(vi) Each Selling Shareholder is, and immediately prior to Closing
Time will be, the sole registered owner of the Securities to be sold by such
Selling Shareholder; upon consummation of the sale of the Securities pursuant to
the Purchase Agreement, each of the Underwriters will be the registered owner of
the Securities purchased by it from such Selling Shareholder and, assuming the
Underwriters purchased the Securities for value in good faith and without notice
of any adverse claim, the Underwriters will have acquired all rights of such
Selling Shareholder in the Securities free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity, and the owner of the
Securities, if other than such Selling Shareholder, is precluded from asserting
against the Underwriters the ineffectiveness of any unauthorized endorsement;
and such Selling Shareholder has the full right, power and authority (A) to
enter into the Purchase Agreement and the Power of Attorney and Custody
Agreement and (B) to sell, transfer and deliver the Securities to be sold by
such Selling Shareholder under the Purchase Agreement.
(vii) Such Selling Shareholder has duly authorized, executed and
delivered the [Note Repurchase Agreement] and such agreement is a binding
obligation of such Selling Shareholder, enforceable against it in accordance
with its terms.
Nothing has come to our attention that would lead us to believe that
the Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable) (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time such Registration
Statement or any such amendment became effective, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time the Prospectus
was issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included or includes an untrue statement of a material
fact or
B-2
<PAGE>
omitted or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
B-3
<PAGE>
[FORM OF LOCK-UP FROM DIRECTORS, OFFICERS OR OTHER
STOCKHOLDERS PURSUANT TO SECTION 5(k)]
Exhibit C
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
Donaldson, Lufkin & Jenrette
Securities Corporation,
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
C/O MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Public Offering by Carson, Inc.
---------------------------------------
Dear Sirs:
The undersigned, a stockholder [and an officer and/or director] of
Carson, Inc., a Delaware corporation (the "Company"), understands that Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") and Donaldson, Lufkin & Jenrette Securities Corporation propose to enter
into a Purchase Agreement (the "Purchase Agreement")) with the Company and the
Selling Shareholders providing for the public offering of shares (the
"Securities") of the Company's Class A Common Stock, par value $.01 per share
(the "Common Stock"). In recognition of the benefit that such an offering will
confer upon the undersigned as a stockholder and an officer and/or director of
the Company, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees with each
underwriter to be named in the Purchase Agreement that, during a period of [
] days from the date of the Purchase Agreement, the undersigned will not,
without the prior written consent of Merrill Lynch, directly or indirectly, (i)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer any shares of the Company's
Common Stock or any securities convertible into or exchangeable or exercisable
for
C-1
<PAGE>
Common Stock, whether now owned or hereafter acquired by the undersigned or with
respect to which the undersigned has or hereafter acquires the power of
disposition, or file any registration statement under the Securities Act of
1933, as amended, with respect to any of the foregoing or (ii) enter into any
swap or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction is to be settled by delivery
of Common Stock or other securities, in cash or otherwise.
Very truly yours,
Signature:
--------------
Print Name:
--------------
<PAGE>
EXHIBIT 3.1
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CARSON, INC.
1. The name of the corporation (which is hereinafter referred to
as the "Corporation") is "Carson, Inc."
2. The original Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on May 10, 1995
under the name DNL Savannah Holding Corp. A Restated Certificate of
Incorporation of the Corporation was filed with the Secretary of State of the
State of Delaware on August 22, 1995 under the name DNL Savannah Holding Corp.
A Certificate of Amendment of Restated Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
August 14, 1996, which Certificate of Amendment changed the name of the
Corporation to Carson, Inc.
3. This Amended and Restated Certificate of Incorporation has been
duly proposed by resolutions adopted and declared advisable by the Board of
Directors of the Corporation, duly adopted by written consent of the
stockholders of the Corporation in lieu of a meeting and vote and duly executed
and acknowledged by the officers of the Corporation in accordance with the
provisions of Sections 103, 228, 242 and 245 of the General Corporation Law of
the State of Delaware (the "GCL") and, upon filing with the Secretary of State
in accordance with Section 103, shall thenceforth supersede the original
Certificate of Incorporation, as previously restated and amended, and shall, as
it may thereafter be amended in accordance with its terms and by law, be the
Amended and Restated Certificate of Incorporation of the Corporation.
4. Upon the filing (the "Effective Time") of this Amended and
Restated Certificate of Incorporation pursuant to the GCL, (i) each share of the
Corporation's Class A Common Stock, par value $.01 per share, issued and
outstanding immediately prior to the Effective Time ("Old Class A Common Stock")
shall be reclassified as and changed into 11,370 validly issued, fully paid, and
non-assessable shares of Class C Common Stock authorized by Article FOURTH of
the Amended and Restated Certificate of Incorporation ("New Class C Common
Stock") (totalling 10,011,512.4 shares of New Class C Common Stock), and (ii)
each share of the Corporation's Class B Common Stock, par value $.01 per share,
issued and outstanding immediately prior to
<PAGE>
2
the Effective Time ("Old Class B Common Stock") shall be reclassified as and
changed into 11,370 validly issued, fully paid, and non-assessable shares of
Class B Common Stock authorized by Article FOURTH of the Amended and Restated
Certificate of Incorporation ("New Class B Common Stock") (totalling
1,859,667.20 shares of New Class B Common Stock"), without any action on the
part of the holder thereof (the "Reclassification"). Each certificate that
theretofore represented a share or shares of Old Class A Common Stock or Old
Class B Common Stock shall thereafter represent that number of shares of New
Class C Common Stock or New Class B Common Stock, respectively, into which the
share or shares of Old Class A Common Stock or Old Class B Common Stock, as
applicable, represented by such certificate shall have been reclassified.
5. The text of the Certificate of Incorporation of the
Corporation, as previously restated and amended, is hereby amended and restated
to read in its entirety as follows:
FIRST: The name of the corporation is Carson, Inc. (hereinafter
referred to as the "Corporation").
SECOND: The address of the Corporation's registered office in the
State of Delaware is The Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801, County of New Castle. The name of its registered
agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware (hereinafter referred to as the "GCL").
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is One hundred seventy-two million (172,000,000)
shares, consisting of (i) One hundred fifty million (150,000,000) shares of
Class A Common Stock, par value $.01 per share (hereinafter referred to as the
"Class A Common Stock"), (ii) two million (2,000,000) shares of Class B Common
Stock, par value $.01 per share (hereinafter referred to as the "Class B Common
Stock"), (iii) ten million (10,000,000) shares of Class C Common Stock, par
value $.01 per share (hereinafter referred to as the "Class C Common Stock", and
collectively with the Class A Common Stock and the Class B Common Stock, the
"Common Stock"), and (iv) ten million (10,000,000) shares of preferred stock,
par value $.01 per share (hereinafter referred to as the "Preferred Stock").
The designation, relative rights, preferences and limitations of the Preferred
Stock and the Common Stock are as follows:
<PAGE>
3
(a) Preferred Stock.
---------------
The Board of Directors of the Corporation (hereinafter referred to as
the "Board of Directors") is hereby expressly authorized at any time, and from
time to time, to create and provide for the issuance of shares of Preferred
Stock in one or more series and, by filing a certificate pursuant to the GCL
(hereinafter referred to as a "Preferred Stock Designation"), to establish the
number of shares to be included in each such series, and to fix the
designations, preferences and relative, participating, optional or other special
rights of the shares of each such series and the qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the resolution or
resolutions providing for the issue thereof adopted by the Board of Directors,
including, but not limited to, the following:
(A) the designation of (by distinguishing number, letter or title) and
the number of shares constituting such series, which number the Board of
Directors may thereafter (except as otherwise provided in the Preferred
Stock Designation) increase or decrease (but not below the number of shares
of such series then outstanding);
(B) the dividend rate for the payment of dividends on such series, if
any, the conditions and dates upon which such dividends shall be payable,
the preference or relation which such dividends, if any, shall bear to the
dividends payable on any other class or classes of or any other series of
capital stock, the conditions and dates upon which such dividends, if any,
shall be payable, and whether such dividends, if any, shall be cumulative
or non-cumulative;
(C) whether the shares of such series shall be subject to redemption by
the Corporation, and, if made subject to such redemption, the times, prices
and other terms and conditions of such redemption;
(D) the terms and amount of any sinking fund provided for the purchase
or redemption of the shares of such series;
(E) the amounts payable on the preferences, if any, of shares of the
series in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation;
(F) whether or not the shares of such series shall be convertible into
or exchangeable for shares of any other class or classes of, any other
series of any class or classes of capital stock of, or any other security
of, the Corporation or any other corporation, and, if provision be made for
any such conversion or exchange, the times, prices,
<PAGE>
4
rates, adjustments and any other terms and conditions of such conversion or
exchange;
(G) the extent, if any, to which the holders of the shares of such
series shall be entitled to vote as a class or otherwise with respect to
the election of directors or otherwise;
(H) the restrictions, if any, on the issue or reissue of shares of the
same series or of any other class or series;
(I) the amounts payable on and the preferences, if any, of the shares of
such series in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; and
(J) any other relative rights, preferences and limitations of that
series.
(b) Common Stock.
------------
The Class A Common Stock, Class B Common Stock and Class C Common
Stock shall be subject to the express terms of any series of Preferred Stock set
forth in the Preferred Stock Designation relating thereto.
(i) Voting Rights.
-------------
(A) Each share of Class A Common Stock shall be entitled to one vote on
all matters submitted to the vote of the stockholders of the Corporation.
Each share of Class C Common Stock shall be entitled to ten votes on all
matters submitted to the vote of the stockholders of the Corporation.
(B) Holders of shares of Class A Common Stock and Class C Common Stock
will vote as a single class on all matters submitted to a vote of the
stockholders.
(C) Except as otherwise required by law or expressly provided herein,
each holder of Class B Common Stock shall not be entitled to vote on any
matter submitted to a vote of the stockholders of the Corporation. The
holders of Class B Common Stock shall be entitled to vote as a separate
class on any amendment, repeal or modification of any provision of this
Amended and Restated Certificate of Incorporation that adversely affects
the powers, preferences or special rights of the Class B Common Stock in a
manner different from the adverse effect on the powers, preferences or
special rights of the Class A Common Stock or the Class C Common Stock.
<PAGE>
5
(D) On any matter on which the holders of Class A Common Stock,
Class B Common Stock (other than as provided in the second sentence of
subparagraph (b)(i)(C) of this Article FOURTH) and Class C Common Stock are
entitled to vote, such holders shall vote together as a single class with
each share of Class A Common Stock being entitled to one vote and each
share of Class B Common Stock and Class C Common Stock being entitled to
ten votes, except as otherwise required by law. Holders of Common Stock
shall not be entitled to cumulate votes in the election of Directors.
(ii) Common Stock Conversion Rights.
------------------------------
(A) In accordance with the terms of subparagraphs (b)(ii)(C) and
(b)(ii)(D) of this Article FOURTH, (I) each share of Class B Common Stock
is convertible, at the option of its holder, into one share of Class A
Common Stock or, subject to the provisions of subparagraph (b)(vi)(C) of
this Article FOURTH, one share of Class C Common Stock at any time and (II)
each share of Class C Common Stock is convertible, at the option of its
holder, into one share of Class A Common Stock at any time.
(B) Upon compliance with the provisions of this subparagraph (b)(ii)(B),
any Regulated Stockholder (as hereinafter defined) shall be entitled to
convert, at any time and from time to time, any and all of the shares of
Class C Common Stock held by such holder into the same number of shares of
Class B Common Stock.
(I) As used herein, (x) "Regulated Stockholder" means (a) any
stockholder that is subject to the provisions of Regulation Y of the
Board of Governors of the Federal Reserve System (12 C.F.R. Part 225)
or any successor to such regulation ("Regulation Y"), so long as such
stockholder shall hold, and only with respect to, any Class C Common
Stock, Class B Common Stock or Class A Common Stock, or shares issued
upon conversion of such stock, (b) any Affiliate (as hereinafter
defined) of a Regulated Stockholder that is a transferee of any Class
C Common Stock, Class B Common Stock or Class A Common Stock, so long
as such Affiliate shall hold, and only with respect to, any such
shares of stock or shares issued upon conversion of such shares and
(c) an individual, partnership, joint venture, corporation,
association, trust or any other entity or organization, including a
government or political subdivision or any agency or instrumentality
thereof (a "Person"), to which a Regulated Stockholder or any of its
Affiliates has transferred any Class C Common Stock, Class B Common
Stock or Class A Common
<PAGE>
6
Stock, so long as such transferee shall hold, and only with respect
to, any shares of such stock transferred by such stockholder or
Affiliates or any shares issued upon conversion of such shares but
only if such Person is (or any Affiliate of such Person is) subject to
the provisions of Regulation Y or such shares are deemed controlled by
the transferor pursuant to Section 2(g)(3) of the Bank Holding Company
Act of 1956, as amended (the "BHCA"); and (y) "Affiliate" means, with
respect to any Person, any other Person directly or indirectly
controlling, controlled by or under common control with such Person;
for the purpose of the foregoing definition, the term "control"
(including with correlative meanings, the terms "controlling",
"controlled by", and "under common control with") as used with respect
to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.
(II) The Corporation shall not convert or directly or indirectly
purchase or otherwise acquire any shares of Class C Common Stock or
Class A Common Stock or take any other action affecting the voting
rights of the holders of such shares, if such action will increase the
percentage of outstanding Class C Common Stock or Class A Common Stock
owned by or controlled by any Regulated Stockholder (other than the
stockholder which requested that the Corporation take such action, or
which otherwise waives in writing its rights under this subpart (II))
unless the Corporation gives written notice (the "First Notice") of
such action to each Regulated Stockholder. The Corporation will defer
making any such conversion, purchase or other acquisition or taking
any such other action for a period of 30 days (the "Deferral Period")
after giving the First Notice in order to allow each such Regulated
Stockholder to determine whether it wishes to convert or take any
other action with respect to the Class C Common Stock or the Class A
Common Stock it owns, controls or has the power to vote, and if any
such Regulated Stockholder then elects to convert any shares of the
Class C Common Stock or the Class A Common Stock, it shall notify the
Corporation in writing within 20 days of the issuance of the First
Notice, in which case the Corporation shall (x) promptly notify from
time to time each other Regulated Stockholder holding shares of Class
C Common Stock or Class A Common Stock of each such proposed
conversion by a Regulated Stockholder, and (y) effect the conversion
requested by all Regulated Stockholders in response to
<PAGE>
7
the notices given pursuant to subpart (D) below at the end of the
Deferral Period or as soon thereafter as is reasonably practicable.
Notwithstanding anything to the contrary contained in this Amended and
Restated Certificate of Incorporation, the Corporation will not
directly or indirectly redeem, purchase, acquire or take any other
action affecting outstanding Class C Common Stock or Class A Common
Stock if such action will increase above 24.9% the percentage of
outstanding Common Stock owned by or controlled by any Regulated
Stockholder and its Affiliates (other than a stockholder which waives
in writing its rights under this paragraph).
(C) Upon compliance with the provisions of subpart (D) below, (I) any
holder of shares of Class B Common Stock shall be entitled to convert, at
any time and from time to time, any and all shares of Class B Common Stock
into the same number of shares of Class C Common Stock, (II) any holder of
shares of Class B Common Stock shall be entitled to convert, at any time
and from time to time, any and all shares of Class B Common Stock into the
same number of shares of Class A Common Stock, and (III) any holder of
shares of Class C Common Stock shall be entitled to convert, at any time
and from time to time, any and all shares of Class C Common Stock into the
same number of shares of Class A Common Stock; provided, however, that no
-------- -------
holder of any shares of Class B Common Stock shall be entitled to convert
any such shares into shares of Class C Common Stock or Class A Common
Stock, and the Corporation shall not be required to record any such
conversion, to the extent that, as a result of such conversion, such holder
and its Affiliates, directly or indirectly, would own, control or have the
power to vote a greater number of shares of Class C Common Stock or Class A
Common Stock or other securities of any kind issued by the Corporation than
such holder and its Affiliates shall be permitted to own, control or to
have the power to vote under any law, regulation, rule or other requirement
of any governmental authority at the time applicable to such holder or its
Affiliates unless such conversion is in connection with the consummation of
the disposition of such shares of Class C Common Stock or Class A Common
Stock, as the case may be, pursuant to an effective registration statement
under the Securities Act of 1933, as amended.
If the Corporation shall in any manner subdivide (by stock split,
reclassification, stock dividend or otherwise) or combine (by reverse stock
split, reclassification or otherwise) the outstanding shares of the Class C
Common Stock, Class B Common Stock or Class A Common Stock, the outstanding
shares of the other class shall be proportionately subdivided, reclassified
or combined, as the
<PAGE>
8
case may be, and effective provision shall be made for the protection of
all conversion rights hereunder. In case of any reorganization,
reclassification or change of shares of Class C Common Stock, Class B
Common Stock or Class A Common Stock (other than a change in par value, or
from par value to no par value as a result of a subdivision or
combination), or in case of any consolidation of the Corporation with one
or more other corporations or a merger of the Corporation with another
entity (other than a consolidation or merger in which the Corporation is
the continuing corporation and which does not result in any
reclassification or change of outstanding shares of Class C Common Stock,
Class B Common Stock or Class A Common Stock), or in case of any sale,
lease or other disposition to another entity (other than a wholly-owned
subsidiary of the Corporation) of all or substantially all of the assets of
the Corporation, each holder of a share of Class C Common Stock or Class B
Common Stock shall have the right at any time thereafter, so long as the
conversion right hereunder with respect to such share of Class C Common
Stock or Class B Common Stock would exist had such event not occurred, to
convert such share into the kind and amount of shares of stock and other
securities and property (including cash) receivable upon such
reorganization, reclassification, change, consolidation, merger, sale,
lease or other disposition by a holder of the number of shares of Class A
Common Stock into which such shares of Class C Common Stock or Class B
Common Stock, as the case may be, might have been converted immediately
prior to such reorganization, reclassification, change, consolidation,
merger, sale, lease or other disposition. In the event of such
reorganization, reclassification, change, consolidation, merger, sale,
lease or other disposition, effective provision shall be made in the
certificate of incorporation of the resulting or surviving corporation or
otherwise for the protection of the conversion right of the shares of Class
C Common Stock or Class B Common Stock that shall be applicable, as nearly
as reasonably may be, to any such other shares of stock and other
securities and property deliverable upon conversion of the shares of Class
C Common Stock or Class B Common Stock into which such shares of Common
Stock might have been converted immediately prior to such event. The
Corporation shall not have the power to be a party to any merger,
consolidation or recapitalization pursuant to which any holder of shares of
Common Stock would be required to take (x) any voting securities, the
voting provisions of which would cause such holder to violate any law,
regulation or other requirement of any governmental body of the United
States of America or any political subdivision thereof, applicable to such
holder or (y) any securities convertible into voting securities, the voting
provisions of which if such conversion took place would cause such holder
to
<PAGE>
9
violate any law, regulation or other requirement of any governmental body
of the United States of America or any political subdivision thereof,
applicable to such holder other than securities which are specifically
provided to be convertible only in the event that such conversion may occur
without any such violation.
(D) To convert (I) Class C Common Stock into Class A Common Stock or
(II) Class B Common Stock into Class C Common Stock or Class A Common
Stock, as the case may be, as provided in this subparagraph (b)(ii) of this
Article FOURTH, a holder must: (w) deliver written notice to the
Corporation (or, if a conversion agent has been designated, to such agent);
(x) surrender the Common Stock certificate to the officer or agent
designated by the Corporation, in a written notice to such person, as
conversion agent or if no such officer or agent is so designated, to the
Corporation (the "Common Stock Conversion Agent"); (y) if the shares are
being issued in a name other than that of the holder, furnish appropriate
endorsements and transfer documents if required by the registrar for the
Corporation's stock or the Common Stock Conversion Agent; and (z) if the
shares are being issued in a name other than that of the holder, pay any
transfer tax or similar tax if required by subpart (E) below. Except in
the case of a conversion subject to paragraph (II) of subpart (B) above,
the date on which the holder of Common Stock satisfies all of the foregoing
requirements (w) through (y) is the conversion date. In the case of a
conversion subject to paragraph (II) of subpart (B) above, the conversion
shall be deemed effective upon expiration of the Deferral Period referred
to therein, and, at such time, the person(s) in whose name or names any
certificate(s) evidencing the converted shares are to be issued upon such
conversion shall be deemed to have become the holder(s) of record of the
converted shares. As soon as practicable, the Corporation shall deliver
through the Common Stock Conversion Agent a certificate for the number of
shares of Common Stock issuable upon the conversion. The person or persons
in whose name the certificate or certificates are registered shall be
treated as a stockholder or stockholders of record on or after the
conversion date. If less than all the shares represented by the Common
Stock certificate are being converted, a new stock certificate representing
the unconverted shares shall be promptly issued by the Corporation to the
holder thereof.
(E) If a holder converts shares of Common Stock, the Corporation shall
pay any documentary, stamp or similar issue or transfer tax due on the
issue of shares of Class B Common Stock or Class C Common Stock, as the
case may be, upon such conversion. However, the holder shall pay any
<PAGE>
10
such tax which is due if and because the shares are issued in a name other
than that of such holder.
(F) The Corporation shall reserve out of its authorized but unissued
Class C Common Stock, Class B Common Stock and Class A Common Stock and its
Class C Common Stock, Class B Common Stock and Class A Common Stock held in
treasury sufficient shares of Class C Common Stock, Class B Common Stock
and Class A Common Stock to permit the conversion of all Common Stock
pursuant to this subpart (ii). All shares of Class C Common Stock, Class B
Common Stock and Class A Common Stock issued upon such conversion shall be
fully paid and non-assessable.
Shares of Class C Common Stock and Class B Common Stock that are
converted into shares of the other class shall thereupon be canceled, shall
cease to be issued shares and shall to the extent thereof increase the
number of authorized but necessary shares of such first class.
(G) Notwithstanding any other provision of this subpart (ii), the
Corporation shall be entitled to rely for all corporate purposes
exclusively and without independent verification and without regard to any
other information of which it may at any time have knowledge upon the most
recent certification it shall at any time have received from any holder as
to (1) whether or not such holder is a Regulated Stockholder, (2) the
number of shares of Class B Common Stock or Class C Common Stock owned or
controlled by such holder, (3) the number of shares of Common Stock owned
or controlled by such holder and its Affiliates, (4) whether or not any
conversion proposed by such holder would result in such holder and its
Affiliates, directly or indirectly, owning, controlling or having the power
to vote a greater number of shares of Common Stock issued by the
Corporation than such holder and its Affiliates shall be permitted to own,
control or to have the power to vote under any law, regulation, rule or
other requirement of any governmental authority at the time applicable to
such holder or its Affiliates and (5) whether or not any proposed merger,
consolidation or recapitalization referred to in the last sentence of
subpart (C) above of which the Corporation has given such holder at least
thirty (30) days' prior written notice would result in a violation referred
to in such sentence. The Corporation shall promptly provide any
information reasonably requested by any holder to enable such holder to
certify as to the matters referred to in subclauses (4) and (5) above. If
the Corporation shall not have received a certification as to any of the
matters referred to in clauses (1) through (5) above from any holder, the
Corporation shall be entitled to assume for all corporate purposes, without
independent verification and
<PAGE>
11
without regard to any other information of which it may have knowledge,
that (1) such holder is not a Regulated Stockholder, (2) such holder does
not own or control any shares of Class B Common Stock or Class C Common
Stock other than shares owned of record by such holder, (3) such holder and
its Affiliates do not own or control any shares of Common Stock other than
shares owned of record by such holder, (4) any conversion proposed by such
holder will not result in such holder and its Affiliates, directly or
indirectly, owning, controlling or having the power to vote a greater
number of shares of Common Stock issued by the Corporation than such holder
and its Affiliates are permitted to own, control or have the power to vote
under any law, regulation, rule or other requirement of any governmental
authority at the time applicable to such holder or its Affiliates, and (5)
such merger, consolidation or recapitalization will not result in such a
violation, respectively.
(iii) Liquidation Rights. In the event of any liquidation,
------------------
dissolution or winding up of the affairs of the Corporation, whether voluntary
or involuntary, the assets of the Corporation shall be available for
distribution, ratably, to the holders of Class A Common Stock, Class B Common
Stock and Class C Common Stock share and share alike, after payment in full of
creditors and payment in full to any holders of Preferred Stock then outstanding
of any amount required to be paid under the terms of the Preferred Stock.
(iv) Dividend Rights. The holders of Class A Common Stock, Class B
---------------
Common Stock and Class C Common Stock shall be entitled to receive dividends
when and as declared by the Board of Directors of the Corporation out of funds
legally available therefor, subject to the rights of the holders of any series
of Preferred Stock. Any such dividends shall be payable on shares of Class A
Common Stock, Class B Common Stock and Class C Common Stock share and share
alike; provided that no dividends shall be payable, with respect to the Class A
--------
Common Stock, Class B Common Stock or Class C Common Stock, in either shares of
Class A Common Stock, Class B Common Stock or Class C Common Stock, or options,
warrants or rights to acquire such stock, or securities convertible into or
exchangeable for such stock, unless the shares, options, warrants, rights or
------
securities so payable are payable, with respect to Class A Common Stock, Class B
Common Stock or Class C Common Stock, in shares of, or options, warrants or
rights to acquire or securities convertible into or exchangeable for, Class A
Common Stock, Class B Common Stock or Class C Common Stock of the same type upon
which the dividend is being paid.
<PAGE>
12
(v) Transfer Restriction; Change of Control of Holders.
--------------------------------------------------
(A) Except as provided in subparagraph (b)(v)(D) of this Article FOURTH,
no person holding record ownership of shares of Class C Common Stock may
transfer, and the Corporation shall not register the transfer of, such
shares of Class C Common Stock, except to a Permitted Transferee of such
holder. For the purposes hereof, a "Permitted Transferee" means any holder
of Class C Common Stock who beneficially owned Class C Common Stock as of
October [__], 1996, any Affiliate of such holder, any member of such
holder's immediate family, or any trust or foundation for the benefit of
any of the foregoing.
(B) Notwithstanding anything to the contrary set forth herein, but
subject to the provisions of subparagraph (b)(v)(D) of this Article FOURTH,
in the event of any direct or indirect transfer of beneficial ownership of
any shares of Class C Common Stock which, had such transfer also been a
transfer of record ownership of such shares of Class C Common Stock, would
not have been to a Permitted Transferee, each share of Class C Common Stock
transferred shall be deemed, without further act on the part of the holder
thereof or the Corporation, to be converted into one share of Class A
Common Stock, and stock certificates formerly representing each share of
Class C Common Stock shall thereupon and thereafter be deemed to represent
such number of shares of Class A Common Stock as equals the number of
shares of Class A Common Stock into which such shares of Class C Common
Stock could be converted pursuant to the terms hereof.
(C) Notwithstanding anything to the contrary set forth herein, any event
which would result in the automatic conversion of shares of Class C Common
Stock into shares of Class A Common Stock shall not result in such
conversion if, after such event, the record holder of such shares of Class
C Common Stock is a corporation, limited liability company or partnership
as to which, with respect to the shares of Class C Common Stock held by
such corporation, limited liability company or partnership, any Permitted
Transferee of the holder of Class C Common Stock prior to such event has,
directly or indirectly, both investment power (which includes the power to
dispose, or direct the disposition of, such shares of Class C Common Stock)
and voting power (which includes the power to vote, or direct the voting
of, such shares of Class C Common Stock); provided that no transaction or
--------
event intended to avoid the automatic conversion provision of this
subparagraph (b)(v) of Article FOURTH shall in any event be entitled to the
benefit of this subparagraph (b)(v)(C) of Article FOURTH.
<PAGE>
13
(D) Notwithstanding anything to the contrary set forth herein, any
holder of Class C Common Stock may pledge such holder's shares of Class C
Common Stock to a pledgee pursuant to a bona fide pledge of such shares as
collateral security for any indebtedness or other obligation of any person;
provided that, even if such shares are registered in the name of the
--------
pledgee or its nominee (which registration is hereby expressly permitted
and shall not be considered a transfer hereunder), such shares shall remain
subject to the provisions of this subparagraph (b)(v) of Article FOURTH.
In the event that such pledged shares of Class C Common Stock (the "Pledged
Stock") are foreclosed upon, each share of such Pledged Stock shall be
deemed, without further act on the part of the holder thereof or the
Corporation, to be converted into one share of Class A Common Stock, and
stock certificates formerly representing one share of Class C Common Stock
shall thereupon and thereafter be deemed to represent such number of shares
of Class A Common Stock as equals the number of shares of Class A Common
Stock into which such shares of Class C Common Stock could be converted
pursuant to the terms hereof upon the earlier of (i) if the pledgor is
contesting the foreclosure on such shares of Pledged Stock, 30 days after
the date on which the foreclosure on such Pledged Stock becomes final and
non-appealable or (ii) if the pledgor is not contesting the foreclosure on
such shares of Pledged Stock, 30 days after the date on which such Pledged
Stock is foreclosed upon; provided, that the Pledged Stock shall not be
--------
automatically converted as provided in this subparagraph (b)(v)(D) of
Article FOURTH hereof as a result of such foreclosure if, prior to
expiration of either such 30-day period, the Pledged Stock shall be
transferred by the pledgee or the purchaser in such foreclosure to a holder
of Class C Common Stock or one or more Permitted Transferees of a holder of
Class C Common Stock.
(E) Notwithstanding anything to the contrary herein, the Corporation
shall not register the transfer of any shares of Class C Common Stock,
unless the transferee and the transferor of such Class C Common Stock have
furnished such affidavits and other proof as the Corporation may reasonably
request to establish that such proposed transferee is a Permitted
Transferee. In addition, upon any purported transfer of shares of Class C
Common Stock not permitted hereunder, each share of Class C Common Stock
purported to be so transferred shall be deemed, without further act on the
part of the holder thereof or the Corporation, to be converted into one
share of Class A Common Stock, and stock certificates formerly representing
shares of Class C Common Stock shall thereupon and thereafter be deemed to
represent such number of shares of Class A Common Stock as equals the
number of shares of Class
<PAGE>
14
A Common Stock into which such shares of Class C Common Stock could be
converted pursuant to the terms hereof, and the Corporation shall register
such shares of Class A Common Stock in the name of the person to whom such
shares of Class C Common Stock were purported to be transferred.
(F) The Corporation shall include on the certificates for shares of
Class C Common Stock a legend referring to the restrictions on transfer and
registration of transfer imposed by this subparagraph (b)(v) of Article
FOURTH.
(vi) Automatic Conversion.
--------------------
(A) In the event the aggregate number of shares of Class C Common Stock
issued and outstanding at any time shall constitute less than nine percent
(9%) of the total number of shares of Common Stock issued and outstanding
at such time, then, without any further act on the part of any holder
thereof or the Corporation, each share of Class C Common Stock then issued
and outstanding shall be converted automatically into one share of Class A
Common Stock, and stock certificates formerly representing each share of
Class C Common Stock shall thereupon and thereafter be deemed to represent
such number of shares of Class A Common Stock as equals the number of
shares of Class A Common Stock into which such shares of Class C Common
Stock could be converted pursuant to the terms hereof. For purposes of the
immediately preceding sentence, any shares of Class C Common Stock
repurchased or otherwise acquired by the Corporation and not subsequently
sold or otherwise transferred by the Corporation shall no longer be deemed
"outstanding" from and after the date of repurchase. Any event set forth
in subparagraph (b)(v) or (vi) of this Article FOURTH pursuant to which
shares of Class C Common Stock have been automatically converted into
shares of Class A Common Stock is hereafter referred to as an "Event of
Automatic Conversion."
(B) Conversion pursuant to an Event of Automatic Conversion shall be
deemed to have been effected at the time the Event of Automatic Conversion
occurred (the "Conversion Time"). The person entitled to receive the
shares of Class A Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such shares of Class A
Common Stock at and as of the Conversion Time, and the rights of such
person as a holder of shares of Class C Common Stock with respect to the
shares of Class C Common Stock that have been converted, shall cease and
terminate at and as of the Conversion Time.
(C) Upon the occurrence of an Event of Automatic Conversion, the holders
of shares of issued and outstanding
<PAGE>
15
Class B Common Stock will no longer have the option to convert such shares
into Class C Common Stock pursuant to subparagraph (b)(ii) of this Article
FOURTH.
FIFTH: The Board of Directors is hereby authorized to create and
issue, whether or not in connection with the issuance and sale of any of its
stock or other securities or property, rights entitling the holders thereof to
purchase from the Corporation shares of stock or other securities of the
Corporation or any other corporation, recognizing that, under certain
circumstances, the creation and issuance of such rights could have the effect of
discouraging third parties from seeking, or impairing their ability to seek, to
acquire a significant portion of the outstanding securities of the Corporation,
to engage in any transaction which might result in a change of control of the
Corporation or to enter into any agreement, arrangement or understanding with
another party to accomplish the foregoing or for the purpose of acquiring,
holding, voting or disposing of any securities of the Corporation. The times at
which and the terms upon which such rights are to be issued will be determined
by the Board of Directors and set forth in the contracts or instruments that
evidence such rights. The authority of the Board of Directors with respect to
such rights shall include, but not be limited to, determination of the
following:
(A) the initial purchase price per share or other unit of the stock or
other securities or property to be purchased upon exercise of such rights;
(B) provisions relating to the times at which and the circumstances under
which such rights may be exercised or sold or otherwise transferred, either
together with or separately from, any other stock or other securities of
the Corporation;
(C) provisions which adjust the number or exercise price of such rights
or amount or nature of the stock or other securities or property receivable
upon exercise of such rights in the event of a combination, split or
recapitalization of any stock of the Corporation, a change in ownership of
the Corporation's stock or other securities or a reorganization, merger,
consolidation, sale of assets or other occurrence relating to the
Corporation or any stock of the Corporation, and provisions restricting the
ability of the Corporation to enter into any such transaction absent an
assumption by the other party or parties thereto of the obligations of the
Corporation under such rights;
(D) provisions which deny the holder of a specified percentage of the
outstanding stock or other securities of
<PAGE>
16
the Corporation the right to exercise such rights and/or cause the rights
held by such holder to become void;
(E) provisions which permit the Corporation to redeem or exchange such
rights, which redemption or exchange may be within the sole discretion of
the Board of Directors, if the Board of Directors reserves such right to
itself; and
(F) the appointment of a rights agent with respect to such rights.
Notwithstanding anything contained in this Amended and Restated
Certificate of Incorporation to the contrary, the affirmative vote of at least
80 percent of the voting power of the then outstanding Voting Stock (as defined
below), voting together as a single class, shall be required to amend, repeal or
adopt any provision inconsistent with this Article FIFTH. For the purposes of
this Amended and Restated Certificate of Incorporation, "Voting Stock" shall
mean the outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors.
SIXTH: (A) In furtherance, and not in limitation, of the powers
conferred by law, the Board of Directors is expressly authorized and empowered:
(i) to adopt, amend or repeal the Bylaws of the Corporation, provided,
--------
however, that any Bylaws adopted by the Board of Directors under the powers
-------
hereby conferred may be altered, amended or repealed by the Board of
Directors or by the stockholders having voting power with respect thereto,
provided further, that in the case of amendments by stockholders, the
-------- -------
affirmative vote of the holders of at least 80 percent of the voting power
of the then outstanding Voting Stock, voting together as a single class,
shall be required to alter, amend or repeal the Bylaws; and
(ii) from time to time to determine whether and to what extent, and at
what times and places, and under what conditions and regulations, the
accounts and books of the Corporation, or any of them, shall be open to
inspection of stockholders; and, except as so determined, or as expressly
provided in this Amended and Restated Certificate of Incorporation or in
any Preferred Stock Designation, no stockholder shall have any right to
inspect any account, book or document of the Corporation other than such
rights as may be conferred by law.
(B) The Corporation may in its Bylaws confer powers upon the Board of
Directors in addition to the foregoing and in addition to the powers and
authorities expressly conferred upon the Board of Directors by law.
<PAGE>
17
(C) Notwithstanding anything contained in this Amended and Restated
Certificate of Incorporation to the contrary, the affirmative vote of the
holders of at least 80 percent of the voting power of the then outstanding
Voting Stock, voting together as a single class, shall be required to amend,
repeal or adopt any provision inconsistent with this Article SIXTH or to adopt,
amend or repeal the Bylaws of the Corporation.
SEVENTH: (A) Subject to the rights of the holders of any series of
Preferred Stock or any other series or class of stock as set forth in this
Amended and Restated Certificate of Incorporation to elect additional directors
under specified circumstances or to consent to specific actions taken by the
Corporation, any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing in lieu of a meeting of such stockholders.
(B) Subject to the rights of the holders of any series of Preferred
Stock or any other series or class of stock as set forth in this Amended and
Restated Certificate of Incorporation to elect additional directors under
specified circumstances, a special meeting of the holders of stock of the
Corporation entitled to vote on any business to be considered at any such
meeting may be called only by the Chairman of the Board of the Corporation, and
shall be called by the Secretary of the Corporation at the request of the Board
of Directors pursuant to a resolution adopted by a majority of the total number
of directors which the Corporation would at the time have if there were no
vacancies (the "Whole Board").
(C) Notwithstanding anything contained in this Amended and Restated
Certificate of Incorporation to the contrary, the affirmative vote of at least
80 percent of the voting power of the then outstanding Voting Stock, voting
together as a single class, shall be required to amend, repeal or adopt any
provision inconsistent with this Article SEVENTH.
EIGHTH: (A) Subject to the rights of the holders of any series of
Preferred Stock or any other series or class of stock as set forth in this
Amended and Restated Certificate of Incorporation to elect additional directors
under specified circumstances, the Board shall consist of 10 to 15 directors,
and may be increased or decreased from time to time, in such a manner as may be
prescribed by the Bylaws of the Corporation.
(B) Unless and except to the extent that the Bylaws of the Corporation
shall so require, the election of directors of the Corporation need not be by
written ballot.
<PAGE>
18
(C) The directors, other than those who may be elected by the holders
of any series of Preferred Stock or any other series or class of stock as set
forth in this Amended and Restated Certificate of Incorporation, shall be
divided into three classes as nearly equal in number as possible, and designated
as Class I, Class II and Class III. Class I directors shall be initially
elected for a term expiring at the 1997 annual meeting of stockholders, Class II
directors shall be initially elected for a term expiring at the 1998 annual
meeting of stockholders, and Class III directors shall be initially elected for
a term expiring at the 1999 annual meeting of stockholders. Members of each
class shall hold office until their successors are elected and qualified. At
each succeeding annual meeting of the stockholders of the Corporation, the
successors of the class of directors whose term expires at that meeting shall be
elected by a plurality vote of all votes cast at such meeting to hold office for
a term expiring at the annual meeting of stockholders held in the third year
following the year of their election, and until their successors are elected and
qualified.
(D) Subject to the rights of the holders of any series of Preferred
Stock or any other series or class of stock as set forth in this Amended and
Restated Certificate of Incorporation to elect additional directors under
specified circumstances, any director may be removed from office at any time,
but only for cause and only by the affirmative vote of the holders of at least
80 percent of the voting power of the then outstanding Voting Stock, voting
together as a single class.
(E) Advance notice of stockholder nominations for the election of
directors shall be given in the manner provided in the Bylaws of the
Corporation.
(F) Subject to the rights of the holders of any series of Preferred
Stock or any other series or class of stock as set forth in this Amended and
Restated Certificate of Incorporation to elect additional directors under
specified circumstances, vacancies resulting from death, resignation,
retirement, disqualification, removal from office or other cause, and newly
created directorships resulting from any increase in the authorized number of
directors, may be filled only by the affirmative vote of a majority of the
remaining directors, though less than a quorum of the Board of Directors, and
directors so chosen shall hold office for a term expiring at the annual meeting
of stockholders at which the term of office of the class to which they have been
elected expires and until such director's successor shall have been duly elected
and qualified. No decrease in the number of authorized directors constituting
the Whole Board shall shorten the term of any incumbent director.
(G) Notwithstanding anything contained in this Amended and Restated
Certificate of Incorporation to the contrary, the
<PAGE>
19
affirmative vote of the holders of at least 80 percent of the voting power of
the then outstanding Voting Stock, voting together as a single class, shall be
required to amend, repeal or adopt any provisions inconsistent with this Article
EIGHTH.
NINTH: A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the GCL or (iv) for any
transaction from which the director derived an improper personal benefit. No
amendment or repeal of this Article NINTH shall adversely affect any right or
protection of a director of the Corporation existing hereunder in respect of any
act or omission occurring prior to such amendment or repeal.
TENTH: Except as may be expressly provided in this Amended and
Restated Certificate of Incorporation, the Corporation reserves the right at any
time and from time to time to amend, alter, change or repeal any provision
contained in this Amended and Restated Certificate of Incorporation or a
Preferred Stock Designation, and any other provisions authorized by the laws of
the State of Delaware at the time in force may be added or inserted, in the
manner now or hereafter prescribed herein or by law, and all powers, preferences
and rights of whatsoever nature conferred upon stockholders, directors or any
other persons whomsoever by and pursuant to this Amended and Restated
Certificate of Incorporation in its present form or as hereafter amended are
granted subject to the right reserved in this Article TENTH, provided, however,
-------- -------
that no Preferred Stock Designation shall be amended after the issuance of any
shares of the series of Preferred Stock created thereby, except in accordance
with the terms of such Preferred Stock Designation and the requirements of law.
<PAGE>
20
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be signed by its President and attested
by its Secretary and has caused its corporate seal to be hereunto affixed, this
____ day of __________, 1996.
CARSON, INC.
By: ______________________________
Name:
Title:
Attest: ___________________________________
Name:
Title:
<PAGE>
EXHIBIT 3.2
FORM OF
RESTATED BYLAWS
OF
CARSON, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
Office and Records
Section 1.1 Delaware Office..... 1
Section 1.2 Other Offices....... 1
Section 1.3 Books and Records... 1
ARTICLE II
Stockholders
Section 2.1 Annual Meeting...................... 1
Section 2.2 Special Meetings.................... 1
Section 2.3 Notice of Meetings.................. 2
Section 2.4 Quorum.............................. 2
Section 2.5 Voting.............................. 3
Section 2.6 Proxies............................. 3
Section 2.7 Notice of Stockholder Business and
Nominations..................................... 4
Section 2.8 Inspectors of Elections; Opening and
Closing the Polls...............................
Section 2.9 List of Stockholders................ 7
Section 2.10 No Stockholder Action by Written
Consent......................................... 7
ARTICLE III
Directors
Section 3.1 General Powers............................. 8
Section 3.2 Number, Tenure and Qualifications.......... 8
Section 3.3 Vacancies and Newly Created
Directorships...........................
Section 3.4 Resignation................................ 9
Section 3.5 Removal.................................... 9
Section 3.6 Meetings................................... 9
Section 3.7 Quorum and Voting.......................... 10
Section 3.8 Written Consent of Directors in Lieu of a
Meeting................................................ 10
Section 3.9 Compensation............................... 10
Section 3.10 Committees of the Board of Directors...... 10
<PAGE>
ARTICLE IV
Officers
Section 4.1 Elected Officers.............. 11
Section 4.2 Election and Term of Office... 12
Section 4.3 Resignation and Removal....... 12
Section 4.4 Compensation and Bond......... 12
Section 4.5 Chairman of the Board......... 12
Section 4.6 President..................... 13
Section 4.7 Vice Presidents............... 13
Section 4.8 Treasurer..................... 13
Section 4.9 Secretary..................... 13
Section 4.10 Assistant Treasurers......... 14
Section 4.11 Assistant Secretaries........ 14
Section 4.12 Delegation of Duties......... 14
ARTICLE V
Indemnification and Insurance
Section 5.1 Right to Indemnification.................... 14
Section 5.2 Right to Advancement of Expenses............ 15
Section 5.3 Right of Indemnitee to Bring Suit........... 15
Section 5.4 Non-Exclusivity of Rights................... 16
Section 5.5 Insurance................................... 16
Section 5.6 Indemnification of Employees and Agents of
the Corporation......................................... 16
Section 5.7 Contract Rights............................. 17
ARTICLE VI
Stock
Section 6.1 Certificates............................. 17
Section 6.2 Transfers of Stock....................... 17
Section 6.3 Lost, Stolen or Destroyed Certificates... 17
Section 6.4 Stockholder Record Date.................. 18
ARTICLE VII
Seal
Section 7.1 Seal. 19
<PAGE>
ARTICLE VIII
Waiver of Notice
Section 8.1 Waiver of Notice. 19
ARTICLE IX
Checks, Notes, Drafts, Audits
Section 9.1 Checks, Notes, Drafts, Etc. 19
Section 9.2 Audits. 19
ARTICLE X
Amendments
Section 10.1 Amendments. 20
<PAGE>
RESTATED BYLAWS
OF
CARSON, INC.
ARTICLE I
Office and Records
------------------
Section 1.1 Delaware Office. The principal office of the Corporation
----------- ---------------
in the State of Delaware shall be located in the City of Wilmington, County of
New Castle, and the name and address of its registered agent is The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware.
Section 1.2 Other Offices. The Corporation may have such other
----------- -------------
offices, either within or without the State of Delaware, as the Board of
Directors may designate or as the business of the Corporation may from time to
time require.
Section 1.3 Books and Records. The books and records of the
----------- -----------------
Corporation may be kept at the Corporation's principal executive offices in
Savannah, Georgia or at such other locations outside the State of Delaware as
may from time to time be designated by the Board of Directors.
ARTICLE II
Stockholders
------------
Section 2.1 Annual Meeting. The annual meeting of stockholders of
----------- --------------
the Corporation shall be held on such date, at such time and at such place as
may be fixed by the Board of Directors.
Section 2.2 Special Meetings. A special meeting of the holders of
----------- ----------------
stock of the Corporation entitled to vote on any business to be considered at
any such meeting may be called only by the Chairman of the Board of the
Corporation, and shall be called by the Secretary of the Corporation at the
request of the Board of Directors pursuant to a resolution adopted by a majority
of the total number of directors which the Corporation would at the time have if
there were no vacancies (the "Whole Board"). The Board of Directors may
designate the place of meeting for any special meeting of the stockholders, and
if no such designation is made, the place of meeting shall be the principal
executive offices of the Corporation.
<PAGE>
Section 2.3 Notice of Meetings. Whenever stockholders are required
----------- ------------------
or permitted to take any action at a meeting, unless all stockholders entitled
to vote are present or unless notice is waived as provided in Section 8.1 of
these Restated Bylaws, a written notice of the meeting shall be given which
shall state the place, date and hour of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called.
Unless otherwise provided by law, and except as to any stockholder
duly waiving notice, the written notice of any meeting shall be given personally
or by mail, not less than ten (10) nor more than sixty (60) days before the date
of the meeting to each stockholder entitled to vote at such meeting. If mailed,
notice shall be deemed given when deposited in the mail, postage prepaid,
directed to the stockholder at his or her address as it appears on the records
of the Corporation. Any previously scheduled meeting of the stockholders may be
postponed by resolution of the Board of Directors upon public notice given prior
to the time previously scheduled for such meeting of stockholders.
When a meeting is adjourned to another time or place, notice need not
be given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. At the adjourned meeting the
Corporation may transact any business which might have been transacted at the
original meeting. If, however, the adjournment is for more than thirty (30)
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 2.4 Quorum. Except as otherwise provided by law or by the
----------- ------
Amended and Restated Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation") or by these Restated Bylaws, at any meeting of
stockholders the holders of a majority of the voting power of the outstanding
shares of the Corporation entitled to vote generally in the election of
directors (the "Voting Stock"), either present or represented by proxy, shall
constitute a quorum for the transaction of any business at such meeting, except
that when specified business is to be voted on by a class or series voting as a
class, the holders of a majority of the shares of such class or series shall
constitute a quorum for the transaction of such business. The chairman of the
meeting or a majority of the voting power of the shares of Voting Stock so
represented may adjourn the meeting from time to time, whether or not there is
such a quorum (or in the case of specified business to be voted on as a class or
<PAGE>
series, the chairman or a majority of the shares of such class or series so
represented may adjourn the meeting with respect to such specified business).
No notice of the time and place of adjourned meetings need be given except as
provided in the last paragraph of Section 2.3 of these Restated Bylaws. The
stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
Section 2.5 Voting. Whenever directors are to be elected at a
----------- ------
meeting, they shall be elected by a plurality of the votes cast at the meeting
by the holders of stock entitled to vote. Whenever any corporate action, other
than the election of directors, is to be taken by vote of stockholders at a
meeting, it shall, except as otherwise required by law or by the Certificate of
Incorporation or by these Restated Bylaws, be authorized by a majority of the
votes cast with respect thereto at the meeting by the holders of stock entitled
to vote thereon.
Except as otherwise provided by law, or by the Certificate of
Incorporation, each holder of record of stock of the Corporation entitled to
vote on any matter at any meeting of stockholders shall be entitled to one vote
for each share of such stock standing in the name of such holder on the stock
ledger of the Corporation on the record date for the determination of the
stockholders entitled to vote at the meeting.
Upon the demand of any stockholder entitled to vote, the vote for
directors or the vote on any other matter at a meeting shall be by written
ballot, but otherwise the method of voting and the manner in which votes are
counted shall be discretionary with the presiding officer at the meeting.
Section 2.6 Proxies. Each stockholder entitled to vote at a meeting
----------- -------
of stockholders may authorize another person or persons to act for him or her by
proxy, but no such proxy shall be voted or acted upon after three (3) years from
its date, unless the proxy provides for a longer period. Every proxy shall be
signed by the stockholder or by his duly authorized attorney.
<PAGE>
Such proxy must be filed with the Secretary of the Corporation or his or her
representative at or before the time of the meeting.
Section 2.7 Notice of Stockholder Business and Nominations.
----------- ----------------------------------------------
(A) Annual Meeting of Stockholders.
------------------------------
(1) Nominations of persons for election to the Board of Directors of
the Corporation and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (a) pursuant to
the Corporation's notice of meeting delivered pursuant to Section 2.3 of these
Restated Bylaws, (b) by or at the direction of the Chairman of the Board or the
Board of Directors pursuant to a resolution adopted by a majority of the Whole
Board or (c) by any stockholder of the Corporation who is entitled to vote at
the meeting with respect to the election of directors or the business to be
proposed by such stockholder, as the case may be, who complies with the notice
procedures set forth in clauses (2) and (3) of paragraph (A) of this Section 2.7
and who is a stockholder of record at the time such notice is delivered to the
Secretary of the Corporation as provided below.
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of
this Section 2.7, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation and such business must be a proper
subject for stockholder action under the Delaware General Corporation Law (the
"GCL"). To be timely, a stockholder's notice shall be delivered to the
Secretary of the Corporation at the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90) days prior
to the first anniversary of the preceding year's annual meeting; provided,
--------
however, that in the event that the date of the annual meeting is advanced by
- -------
more than thirty (30) days, or delayed by more than sixty (60) days, from such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the ninetieth (90th) day prior to such annual meeting and not
later than the close of business on the later of the sixtieth (60th) day prior
to such annual meeting or the tenth (10th) day following the day on which public
announcement of the date of such meeting is first made. Notwithstanding
anything herein to the contrary, if less than seventy (70) days' notice was
given for such annual meeting, a stockholder's notice shall be timely if
delivered to the Secretary of the Corporation at the principal executive offices
of the Corporation not more than ten (10) days following the date on which such
notice was given. Such
<PAGE>
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), including such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected; (b) as
to any other business that the stockholder proposes to bring before the meeting,
a brief description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meeting and any material
interest in such business of such stockholder and the beneficial owner, if any,
on whose behalf the proposal is made; and (c) as to the stockholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made (i) the name and address of such stockholder, as they appear on
the Corporation's books, and of such beneficial owner and (ii) the class and
number of shares of the Corporation which are owned beneficially and of record
by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this Section 2.7 to the contrary, in the event that the number of
directors to be elected to the Board of Directors is increased and there is no
public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Corporation at least eighty
(80) days prior to the first anniversary of the preceding year's annual meeting,
a stockholder's notice required by paragraph (A)(2) of this Section 2.7 shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary of
the Corporation at the principal executive offices of the Corporation not later
than the close of business on the tenth (10th) day following the day on which
such public announcement is first made by the Corporation.
(B) Special Meeting of Stockholders. Only such business shall be
-------------------------------
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting pursuant to Section
2.3 of these Restated Bylaws. Nominations of persons for election to the Board
of Directors may be made at a special meeting of stockholders at which directors
are to be elected pursuant to the Corporation's notice of meeting (i) by or at
the direction of the Chairman of the Board or the Board of Directors pursuant to
a resolution adopted by a majority of the Whole Board or (ii) by any stockholder
of the Corporation who is entitled to vote at the
<PAGE>
meeting with respect to the election of directors, who complies with the notice
procedures set forth in this paragraph (B) and who is a stockholder of record at
the time such notice is delivered to the Secretary of the Corporation as
provided below. Nominations by stockholders of persons for election to the
Board of Directors may be made at such a special meeting of stockholders if the
stockholder's notice as required by paragraph (A)(2) of this Section 2.7 shall
be delivered to the Secretary of the Corporation at the principal executive
offices of the Corporation not earlier than the ninetieth (90th) day prior to
such special meeting and not later than the close of business on the later of
the sixtieth (60th) day prior to such special meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
(C) General. (1) Only persons who are nominated in accordance with
-------
the procedures set forth in this Section 2.7 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 2.7.
(2) Except as otherwise provided by law, the Certificate of
Incorporation or this Section 2.7, the chairman of the meeting shall have the
power and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures set forth
in this Section 2.7 and, if any proposed nomination or business is not in
compliance with this Section 2.7, to declare that such defective nomination or
proposal shall be disregarded.
(3) For purposes of this Section 2.7, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(4) Notwithstanding the foregoing provisions of this Section 2.7, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 2.7. Nothing in this Section 2.7 shall be deemed to
affect any rights of stockholders to request inclusion of proposals in the
Corporation's proxy materials with respect to a meeting of stockholders pursuant
to Rule 14a-8 under Exchange Act.
<PAGE>
Section 2.8 Inspectors of Elections; Opening and Closing the Polls.
----------- ------------------------------------------------------
(A) The Board of Directors by resolution shall appoint one or more
inspectors, which inspector or inspectors may include individuals who serve the
Corporation in other capacities, including, without limitation, as officers,
employees, agents or representatives of the Corporation, to act at the meeting
and make a written report thereof. One or more persons may be designated as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate has been appointed to act, or if all inspectors or alternates who
have been appointed are unable to act, at a meeting of stockholders, the
chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before discharging his or her duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability. The inspectors
shall have the duties prescribed by the GCL.
(B) The chairman of the meeting shall fix and announce at the meeting
the time of the opening and the closing of the polls for each matter upon which
the stockholders will vote at a meeting.
Section 2.9 List of Stockholders. The officer who has charge of the
----------- --------------------
stock ledger of the Corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
Section or the books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
Section 2.10 No Stockholder Action by Written Consent. Subject to
------------ ----------------------------------------
the rights of the holders of any series of preferred
<PAGE>
stock, par value $.01 per share, of the Corporation (the "Preferred Stock") or
any other series or class of stock as set forth in the Certificate of
Incorporation to consent to specific actions taken by the Corporation, any
action required or permitted to be taken by the stockholders of the Corporation
must be taken at an annual or special meeting of the stockholders and may not be
taken by any consent in writing by such stockholders.
ARTICLE III
Directors
---------
Section 3.1 General Powers. The business and affairs of the
----------- --------------
Corporation shall be managed by or under the direction of its Board of
Directors. In addition to the powers and authorities by these Restated Bylaws
expressly conferred upon it, the Board of Directors may exercise all such powers
of the Corporation and do all such lawful acts and things as are not by law or
by the Certificate of Incorporation or by these Restated Bylaws required to be
exercised or done by the stockholders.
Section 3.2 Number, Tenure and Qualifications. The number of
----------- ---------------------------------
directors shall be fixed from time to time exclusively pursuant to a resolution
adopted by a majority of the Whole Board, but shall consist of not more than 15
nor less than 10 directors. The directors shall be divided into three classes
as nearly equal in number as possible, and designated as Class I, Class II and
Class III. Class I directors shall be initially elected for a term expiring at
the 1997 annual meeting of stockholders, Class II directors shall be initially
elected for a term expiring at the 1998 annual meeting of stockholders and Class
III directors shall be initially elected for a term expiring at the 1999 annual
meeting of stockholders. Members of each class shall hold office until their
successors shall have been duly elected and qualified. At each succeeding
annual meeting of stockholders of the Corporation, the successors of the class
of directors whose term expires at that meeting shall be elected by a plurality
vote of all votes cast at such meeting to hold office for a term expiring at the
annual meeting of stockholders held in the third year following the year of
their election, and until their successors are elected and qualified.
Section 3.3 Vacancies and Newly Created Directorships. Unless the
----------- -----------------------------------------
Board of Directors otherwise determines, vacancies resulting from death,
resignation, retirement, disqualification, removal from office or other cause,
and newly created directorships resulting from any increase in the authorized
number of directors, may be filled only by the affirmative vote
<PAGE>
of a majority of the remaining directors, though less than a quorum of the Board
of Directors, and directors so chosen shall hold office for a term expiring at
the annual meeting of stockholders at which the term of office of the class to
which they have been elected expires and until such director's successor shall
have been duly elected and qualified. No decrease in the number of authorized
directors constituting the Whole Board shall shorten the term of any incumbent
director.
Section 3.4 Resignation. Any director may resign at any time upon
----------- -----------
written notice to the Corporation. Any such resignation shall take effect at
the time specified therein or, if the time be not specified, upon receipt
thereof, and the acceptance of such resignation, unless required by the terms
thereof, shall not be necessary to make such resignation effective.
Section 3.5 Removal. Any director may be removed from office at any
----------- -------
time, but only for cause and only by the affirmative vote of the holders of at
least 80 percent of the voting power of the then outstanding Voting Stock,
voting together as a single class.
Section 3.6 Meetings. Meetings of the Board of Directors, regular or
----------- --------
special, may be held at any place within or without the State of Delaware.
Members of the Board of Directors, or of any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting by such means shall constitute presence in person
at such meeting. An annual meeting of the Board of Directors shall be held at
the same place and immediately following each annual meeting of stockholders,
and no further notice thereof need be given other than this Bylaw. The Board of
Directors may, by resolution, fix times and places for additional regular
meetings of the Board of Directors and no further notice of such meetings other
than such resolution need be given. A special meeting of the Board of Directors
shall be held whenever called by the Chairman of the Board, the President, or by
a majority of the Whole Board, at such time and place as shall be specified in
the notice or waiver thereof. The person or persons authorized to call special
meeting of the Board of Directors may fix the place and time of the meetings.
Notice of any special meeting shall be given to each director at his or her
business or residence in writing or by telegram or by telephone communication.
If mailed, such notice shall be deemed adequately delivered when deposited in
the United States mails so addressed,
<PAGE>
with postage thereon prepaid, at least five (5) days before such meeting. If by
telegram, such notice shall be deemed adequately delivered when the telegram is
delivered to the telegraph company at least twenty-four hours before such
meeting. If by facsimile transmission, such notice shall be transmitted at
least twenty-four hours before such meeting. If by telephone, the notice shall
be given at least twelve hours prior to the time set for the meeting. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice of such
meeting, except for amendments to these Restated Bylaws as provided under
Section 10.1 of these Restated Bylaws.
Section 3.7 Quorum and Voting. A whole number of directors equal to
----------- -----------------
at least a majority of the Whole Board shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors, but if there
be less than a quorum, a majority of the directors present may adjourn the
meeting from time to time, and no further notice thereof need be given other
than announcement at the meeting which shall be so adjourned. Except as
otherwise provided by law, by the Certificate of Incorporation, or by these
Restated Bylaws, the vote of a majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors.
Section 3.8 Written Consent of Directors in Lieu of a Meeting. Any
----------- -------------------------------------------------
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board of Directors or of such committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or of such committee.
Section 3.9 Compensation. Directors may receive compensation for
----------- ------------
services to the Corporation in their capacities as directors or otherwise in
such manner and in such amounts as may be fixed from time to time by the Board
of Directors.
Section 3.10 Committees of the Board of Directors. The Board of
------------ ------------------------------------
Directors may from time to time, by resolution passed by majority of the Whole
Board, designate one or more committees, each committee to consist of one or
more directors of the Corporation. The Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. The resolution of the
Board of Directors may, in addition or alternatively, provide that in the
absence or disqualification of a member of a committee, the member or
<PAGE>
members thereof present at any meeting and not disqualified from voting, whether
or not he, she or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent provided in
the resolution of the Board of Directors, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it, except as otherwise provided by
law. Unless the resolution of the Board of Directors expressly so provides, no
such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Any such committee may adopt rules governing
the method of calling and time and place of holding its meetings. Unless
otherwise provided by the Board of Directors, a majority of any such committee
(or the member thereof, if only one) shall constitute a quorum for the
transaction of business, and the vote of a majority of the members of such
committee present at a meeting at which a quorum is present shall be the act of
such committee. Each such committee shall keep a record of its acts and
proceedings and shall report thereon to the Board of Directors whenever
requested so to do. Any or all members of any such committee may be removed,
with or without cause, by resolution of the Board of Directors, passed by a
majority of the Whole Board.
ARTICLE IV
Officers
--------
Section 4.1 Elected Officers. The elected officers of the
----------- ----------------
Corporation shall be a Chairman of the Board, a President, a Secretary and a
Treasurer, and may also include one or more Vice Presidents, one or more
Assistant Secretaries and one or more Assistant Treasurers. All officers chosen
by the Board of Directors shall each have such powers and duties as generally
pertain to their respective offices, subject to the specific provisions of this
Article IV, together with such other powers and duties as from time to time may
be conferred by the Board of Directors or any committee thereof. The Chairman
of the Board shall be chosen from among the directors. Any number of such
offices may be held by the same person, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity. The Board of
Directors may appoint, and may delegate power to appoint, such other officers,
agents and employees as it may deem necessary or proper, who shall hold their
offices or positions for such terms, have such authority and perform such
<PAGE>
duties as may from time to time be determined by or pursuant to authorization of
the Board of Directors.
Section 4.2 Election and Term of Office. The elected officers of the
----------- ---------------------------
Corporation shall be elected annually by the Board of Directors at the regular
meeting of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Subject to
Section 4.3 of these Restated Bylaws, each officer shall hold office until his
or her successor shall have been duly elected and shall have qualified or until
his or her death or until such officer shall resign.
Section 4.3 Resignation and Removal. Any officer may resign at any
----------- -----------------------
time upon written notice to the Corporation. Any elected officer may be removed
by a majority of the members of the Whole Board, with or without cause, at any
time. The Board of Directors may delegate such power of removal as to officers,
agents and employees not elected by the Board of Directors. Such removal shall
be without prejudice to a person's contract rights, if any, but the appointment
of any person as an officer, agent or employee of the Corporation shall not of
itself create contract rights for compensation by virtue of such appointment
beyond the date of such officer's death, resignation, removal or the election of
such officer's successor, whichever event shall first occur, except as otherwise
provided in an employment contract or an employee plan.
Section 4.4 Compensation and Bond. The compensation of the officers
----------- ---------------------
of the Corporation shall be fixed by the Board of Directors, but this power may
be delegated to any officer in respect of other officers under his or her
control. The Corporation may secure the fidelity of any or all of its officers,
agents or employees by bond or otherwise.
Section 4.5 Chairman of the Board. The Chairman of the Board shall
----------- ---------------------
preside at all meetings of stockholders and of the Board of Directors. The
Chairman of the Board shall be responsible for the general management of the
affairs of the Corporation, shall make reports to the Board of Directors and the
stockholders and shall perform all duties incidental to such office which may be
required by law and all such other duties as are properly required by the Board
of Directors. Except where by law the signature of the President is required,
the Chairman of the Board shall possess the same power as the President to sign
all certificates, contracts and other instruments of the Corporation which may
be authorized by the Board of Directors. The Chairman of the Board shall see
that all orders and
<PAGE>
resolutions of the Board of Directors and of any committee thereof are carried
into effect.
Section 4.6 President. The President shall act in a general
----------- ---------
executive capacity and shall assist the Chairman of the Board in the
administration and operation of the Corporation's business and general
supervision of its policies and affairs. The President shall, in the absence of
or because of the inability to act of the Chairman of the Board, perform all
duties of the Chairman of the Board and preside at all meetings of stockholders
and of the Board of Directors. The President may sign, alone or with the
Secretary or any other proper officer of the Corporation authorized by the Board
of Directors, certificates, contracts and other instruments of the Corporation
as authorized by the Board of Directors.
Section 4.7 Vice Presidents. Each Vice President shall have such
----------- ---------------
powers and perform such duties as the Board of Directors, the Chairman of the
Board or the President may from time to time prescribe. In the absence or
inability to act of the President, unless the Board of Directors shall otherwise
provide, the Vice President who has served in that capacity for the longest time
and who shall be present and able to act, shall perform all the duties and may
exercise any of the powers of the President.
Section 4.8 Treasurer. The Treasurer shall have charge of all funds
----------- ---------
and securities of the Corporation, shall endorse the same for deposit or
collection when necessary and deposit the same to the credit of the Corporation
in such banks or depositaries as the Board of Directors may authorize. He or
she may endorse all commercial documents requiring endorsements for or on behalf
of the Corporation and may sign all receipts and vouchers for payments made to
the Corporation. He or she shall have all such further powers and duties as
generally are incident to the position of Treasurer or as may be assigned to him
or her by the Chairman of the Board, the President or the Board of Directors.
Section 4.9 Secretary. The Secretary shall record all the
----------- ---------
proceedings of the meetings of the stockholders, directors, and any committee
thereof in a book to be kept for that purpose and shall also record therein all
action taken by written consent of directors in lieu of a meeting. He or she
shall attend to the giving and serving of all notices of the Corporation. He or
she shall have custody of the seal of the Corporation and shall attest the same
by his or her signature whenever required. He or she shall have charge of the
stock ledger and such other books and papers as the Board of Directors may
direct, but he or she
<PAGE>
may delegate responsibility for maintaining the stock ledger to any transfer
agent appointed by the Board of Directors. He or she shall have all such
further powers and duties as generally are incident to the position of Secretary
or as may be assigned to him or her by the President, the Chairman of the Board
or the Board of Directors.
Section 4.10 Assistant Treasurers. In the absence or inability to
------------ --------------------
act of the Treasurer, any Assistant Treasurer may perform all the duties and
exercise all the powers of the Treasurer. An Assistant Treasurer shall also
perform such other duties as the Treasurer or the Board of Directors may assign
to him or her.
Section 4.11 Assistant Secretaries. In the absence or inability to
------------ ---------------------
act of the Secretary, any Assistant Secretary may perform all the duties and
exercise all the powers of the Secretary. An Assistant Secretary shall also
perform such other duties as the Secretary or the Board of Directors may assign
to him or her.
Section 4.12 Delegation of Duties. In case of the absence of any
------------ --------------------
officer of the Corporation, or for any other reason that the Board of Directors
may deem sufficient, the Board of Directors may confer for the time being the
powers or duties, or any of them, of such officer upon any other officer or upon
any director.
ARTICLE V
Indemnification and Insurance
-----------------------------
Section 5.1 Right to Indemnification. Each person who was or is made
----------- ------------------------
a party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
or a person of whom he or she is the legal representative is or was a director
or an officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of any other corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to any employee benefit plan (hereinafter an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by
<PAGE>
the GCL, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment), against all expense, liability
and loss (including, without limitation, attorneys' fees, judgments, fines,
excise taxes or penalties under the Employee Retirement Income Security Act of
1974, as amended, and amounts paid or to be paid in settlement) reasonably
incurred by such indemnitee in connection therewith; provided, however, that
-------- -------
except as provided in Section 5.3 with respect to proceedings seeking to enforce
rights to indemnification, the Corporation shall indemnify any such indemnitee
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors.
Section 5.2 Right to Advancement of Expenses. The right to
----------- --------------------------------
indemnification conferred in Section 5.1 shall include the right to be paid by
the Corporation the expenses (including attorneys' fees) incurred in defending
any such proceeding in advance of its final disposition (hereinafter an
"advancement of expenses"); provided, however, that, if the GCL requires, an
-------- -------
advancement of expenses incurred by an indemnitee in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an
employee benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal (hereinafter a
"final adjudication") that such indemnitee is not entitled to be indemnified for
such expenses under this Section 5.2 or otherwise.
Section 5.3 Right of Indemnitee to Bring Suit. If a claim under
----------- ---------------------------------
Section 5.1 or Section 5.2 is not paid in full by the Corporation within thirty
(30) days after a written claim has been received by the Corporation, except in
the case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty (20) days, the indemnitee may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim.
If successful in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (i) any suit brought by the indemnitee
to enforce a right to indemnification
<PAGE>
hereunder (but not in a suit brought by the indemnitee to enforce a right of an
advancement of expenses) it shall be a defense that, and (ii) in any suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the Corporation shall be entitled to recover such
expenses upon a final adjudication that, the indemnitee has not met any
applicable standard for indemnification set forth in the GCL. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel or stockholders) to have made a determination prior to the commencement
of such action that indemnification of the indemnitee is proper in the
circumstances because the indemnitee has met the applicable standard of conduct
set forth in the GCL, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel or stockholders) that the
indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the indemnitee, be a defense to such
suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Article V or
otherwise shall be on the Corporation.
Section 5.4 Non-Exclusivity of Rights. The right to indemnification
----------- -------------------------
and the advancement of expenses conferred in this Article V shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, provision of the Certificate of Incorporation, provision of
these Restated Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 5.5 Insurance. The Corporation may maintain insurance, at
----------- ---------
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the GCL.
Section 5.6 Indemnification of Employees and Agents of the
----------- ----------------------------------------------
Corporation. The Corporation may, to the extent authorized from time to time by
- -----------
the Board of Directors, grant rights to indemnification, and rights to the
advancement of expenses, to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article V with respect to the
<PAGE>
indemnification and advancement of expenses of directors and officers of the
Corporation.
Section 5.7 Contract Rights. The rights to indemnification and to
----------- ---------------
the advancement of expenses conferred in Section 5.1 and Section 5.2 shall be
contract rights and such rights shall continue as to an indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
ARTICLE VI
Stock
-----
Section 6.1 Certificates. Certificates for stock of the Corporation
----------- ------------
shall be in such form as shall be approved by the Board of Directors and shall
be signed in the name of the Corporation by the Chairman of the Board, the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary. Such certificates may be sealed
with the seal of the Corporation or a facsimile thereof. Any of or all the
signatures on a certificate may be a facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if he or she were such officer, transfer agent or
registrar at the date of issue.
Section 6.2 Transfers of Stock. Transfers of stock shall be made
----------- ------------------
only upon the books of the Corporation by the holder, in person or by duly
authorized attorney, and on the surrender of the certificate or certificates for
the same number of shares, with an assignment and power of transfer endorsed
thereon or attached thereto, duly executed, with such proof of the authenticity
of the signature as the Corporation or its agents may reasonably require. The
Board of Directors shall have the power to make all such rules and regulations,
not inconsistent with the Certificate of Incorporation and these Restated Bylaws
and the GCL, as the Board of Directors may deem appropriate concerning the
issue, transfer and registration of certificates for stock of the Corporation.
The Board of Directors may appoint one or more transfer agents or registrars of
transfers, or both, and may require all stock certificates to bear the signature
of either or both.
Section 6.3 Lost, Stolen or Destroyed Certificates. The Corporation
----------- --------------------------------------
may issue a new stock certificate in the place of
<PAGE>
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate or his or her legal representative to give the Corporation
a bond sufficient to indemnify it against any claim that may be made against it
on account of the alleged loss, theft or destruction of any such certificate or
the issuance of any such new certificate. The Board of Directors may require
such owner to satisfy other reasonable requirements as it deems appropriate
under the circumstances.
Section 6.4 Stockholder Record Date. In order that the Corporation
----------- -----------------------
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which shall not be more than sixty nor less than ten (10) days before the date
of such meeting, nor more than sixty (60) days prior to any other action.
If no record date is fixed by the Board of Directors, (l) the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
date on which notice is given, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held, and (2) the
record date for determining stockholders for any other purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
- -------- -------
adjourned meeting.
Only such stockholders as shall be stockholders of record on the date
so fixed shall be entitled to notice of, and to vote at, such meeting and any
adjournment thereof, or to receive payment of such dividend or other
distribution, or to exercise such rights in respect of any such change,
conversion or exchange of stock, or to participate in such action, as the case
may be, notwithstanding any transfer of any stock on the books of the
Corporation after any record date so fixed.
<PAGE>
ARTICLE VII
Seal
----
Section 7.1 Seal. The seal of the Corporation shall be circular in
----------- ----
form and shall bear, in addition to any other emblem or device approved by the
Board of Directors, the name of the Corporation, the year of its incorporation
and the words "Corporate Seal" and "Delaware". The seal may be used by causing
it or a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
ARTICLE VIII
Waiver of Notice
----------------
Section 8.1 Waiver of Notice. Whenever notice is required to be
----------- ----------------
given to any stockholder or director of the Corporation under any provision of
the GCL or the Certificate of Incorporation or these Restated Bylaws, a written
waiver thereof, signed by the person or persons entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. In the case of a stockholder, such waiver of notice may
be signed by such stockholder's attorney or proxy duly appointed in writing.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors or members of a committee of directors need be specified
in any written waiver of notice.
ARTICLE IX
Checks, Notes, Drafts, Audits
-----------------------------
Section 9.1 Checks, Notes, Drafts, Etc. Checks, notes, drafts,
----------- ---------------------------
acceptances, bills of exchange and other orders or obligations for the payment
of money shall be signed by such officer or officers or person or persons as the
Board of Directors or a duly authorized committee thereof may from time to time
designate.
Section 9.2 Audits. The accounts, books and records of the
----------- ------
Corporation shall be audited upon the conclusion of each
<PAGE>
fiscal year by an independent certified public accountant selected by the Board
of Directors, and it shall be the duty of the Board of Directors to cause such
audit to be made annually.
ARTICLE X
Amendments
----------
Section 10.1 Amendments. These Restated Bylaws may be amended, added
------------ ----------
to, rescinded or repealed at any meeting of the Board of Directors or of the
stockholders, provided that notice of the proposed change was given in the
--------
notice of the meeting and, in the case of the Board of Directors, in a notice
given no less than twenty-four hours prior to the meeting; provided, however,
-------- -------
that, in the case of amendments by stockholders, notwithstanding any other
provisions of these Restated Bylaws or any provision of law which might
otherwise permit a lesser vote or no vote, but in addition to any affirmative
vote of the holders of any particular class or series of stock required by law,
the Certificate of Incorporation or these Restated Bylaws, the affirmative vote
of the holders of at least 80 percent of the voting power of the then
outstanding shares of Voting Stock, either present or represented by proxy,
voting together as a single class, shall be required to alter, amend or repeal
any provision of these Restated Bylaws.
<PAGE>
EXHIBIT 5
September 20, 1996
Carson Products Company
64 Ross Road
Savannah Industrial Park
Savannah, Georgia 31405
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 filed by you
with the Securities and Exchange Commission on August 15, 1996 (Registration No.
333-10191) and Amendment No. 1 thereto filed on September [20], 1996 (as so
amended, the "Registration Statement"), in connection with the public offering
of 4,818,500 shares (including the Underwriters' over-allotment option) (the
"Shares") of the Common Stock, $0.01 par value per share, of Carson, Inc. (the
"Company"). The Shares are to be sold to the Underwriters for resale to the
public as described in the Registration Statement and pursuant to Purchase
Agreements in the forms filed as Exhibit 1.1 and 1.2 thereto. As your counsel in
connection with this transaction, we have examined the proceedings proposed to
be taken in connection with said sale and issuance of the Shares.
Based on these examinations, it is our opinion that upon completion of
the proceedings being taken or which we, as your counsel, contemplate will be
taken prior to the issuance of the Shares, the Shares, when issued and sold in
the manner referred to in the Registration Statement, will be legally and
validly issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement and further consent to the use of our name, whenever
appearing in the Registration Statement, including any Prospectus constituting a
part thereof, and any amendments thereto. This opinion is furnished to you in
connection with the registration of the Shares, is solely for your benefit and
may not be relied upon by, nor copies delivered to, any other person or entity
without our prior written consent.
Very truly yours,
MILBANK, TWEED, HADLEY & McCLOY
<PAGE>
EXHIBIT 8
[LETTERHEAD OF MILBANK, TWEED, HADLEY & MCCLOY]
September 20, 1996
Carson, Inc.
64 Ross Road
Savannah Industrial Park
Savannah, Georgia 31405
Re: Federal Income Tax Considerations
Relating to the Exchange Offer
---------------------------------
Dear Sirs:
We have acted as special counsel to Carson, Inc. ("Carson") in connection
with the proposed initial public offering of Class A Common Stock, as described
in Carson's Registration Statement on Form S-1 (the "Registration Statement"),
filed on this date with the Securities and Exchange Commission, and any
amendments and supplements thereto. We hereby consent to the filing of this
opinion as an exhibit to the Registration Statement and to the reference to us
under the headings "Certain United States Federal Tax Considerations for non-
United States Holders" in the prospectus contained in the Registration
Statement.
<PAGE>
2
In rendering our opinion, we have examined and are familiar with originals
or copies, certified or otherwise identified to our satisfaction, of such
documents as we have deemed necessary or appropriate as a basis for the opinion
set forth below. In our examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies. As to any facts material to this
opinion that we did not independently establish or verify, we have relied upon
statements and representations of officers and other representatives of Carson.
Subject to the assumptions, qualifications and comments in this letter, we
are of the opinion that the statements in the prospectus contained in the
Registration Statement with respect to United States Federal income taxation
under the heading "Certain United States Federal Income Tax Considerations for
non-United States Holders," to the extent they constitute matters of law or
legal conclusions, are correct in all material respects.
Very truly yours,
MILBANK, TWEED, HADLEY & MCCLOY
BK/ABP
<PAGE>
EXHIBIT 9
VOTING TRUST AGREEMENT
AGREEMENT dated as of August 23, 1995, by and among Dr. Leroy Keith,
S. Garrett Stonehouse, Harrow-Lewis Corporation, a Delaware corporation, and
Northwest Capital, Inc., an Oregon corporation, (collectively, the
"Subscribers"), who are certain of the stockholders of DNL Savannah Holding
-----------
Corp., a Delaware corporation (the "Company"), and DNL Partners, Limited
-------
Partnership, a Delaware limited partnership ("DNL Partners"), as Trustee (the
------------
"Trustee").
- --------
WHEREAS, the Subscribers are owners of the number of shares (the
"Shares") of the Class A Common Stock, par value $.01 per share ("Class A Common
- ------- --------------
Stock"), of the Company set opposite their respective signatures hereto;
- -----
WHEREAS, DNL Partners, in its individual capacity, is the holder of a
majority of the outstanding shares of Class A Common Stock.
WHEREAS, with a view to the safe and competent management of the
Company in the interests of the Subscribers, DNL Partners and the Company, the
Subscribers desire to create a Trust in the following manner:
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. TRANSFER OF SHARES TO THE TRUSTEE. Each of the Subscribers is,
simultaneously herewith, transferring his Shares to the Trustee by delivering to
the Trustee the certificate representing such Shares and a stock power in
respect thereof executed by such Subscriber.
2. TRUSTEE TO HOLD SUBJECT TO AGREEMENT. The Trustee shall hold the
Shares so transferred to the Trustee for the common benefit of the Subscribers,
under the terms and conditions hereinafter set forth.
3. ISSUANCE OF STOCK CERTIFICATES TO TRUSTEE. The Trustee shall
surrender to the proper officers of the Company for cancellation all
certificates representing the Shares which shall be assigned and delivered to it
as hereinafter provided, and in their stead shall procure new certificates to be
issued to it as Trustee under this Agreement.
4. VOTING TRUST CERTIFICATES. The Trustee shall issue to each of the
Subscribers a certificate (a "Voting Trust Certificate") for the number of
------------------------
Shares represented by the
<PAGE>
certificates of stock transferred by such Subscriber to the Trustee pursuant
hereto. Each such Voting Trust Certificate shall state that it is issued under
this Agreement, and shall set forth the nature and proportional amount of the
beneficial interest thereunder of the person to whom it is issued, and shall not
be transferable or assignable without the prior written consent of the Trustee,
with consent shall not be unreasonably withheld. The Trustee shall keep a list
of the Shares transferred to it, and shall also keep a record of all Voting
Trust Certificates issued or transferred on its books, which records shall
contain the names and addresses of the holders of the Voting Trust Certificates
and the number of Shares represented by each such Voting Trust Certificate.
Such list and record shall be open at all reasonable times to inspection by the
Subscribers. Upon any transfer on the books of the Trustee of any Voting Trust
Certificate, the transferee of a Voting Trust Certificate shall succeed to all
the rights hereunder of the transferor.
Each Voting Trust Certificate shall be substantially in the form of
Exhibit A hereto.
- ---------
5. TRUSTEE TO VOTE SHARES. The Trustee shall have full power and
authority, and it is hereby fully empowered and authorized, to represent the
holders of the Voting Trust Certificates and the Shares transferred to the
Trustee as aforesaid, and to vote upon the Shares, as in the judgment of the
Trustee may be for the best interests of the Company, at all meetings of the
stockholders of the Company, or by written consent in lieu of such a meeting, in
the election of Directors and upon any and all matters in question which may be
brought before such meetings, or may be the subject of such a consent, as fully
as any stockholder might do if personally present or executing such a consent.
6. TRUSTEE'S LIABILITY. The Trustee shall use its best judgment in
voting the Shares transferred to it, but shall not be liable for any vote cast,
or consent given by it, in good faith, and in the absence of gross negligence.
7. DIVIDENDS. The Trustee shall collect and receive all dividends
that may be paid upon the Shares subject to this Agreement, and subject to
deduction as provided in paragraph 9 and less any taxes imposed thereon which
the Trustee may be required by law to pay thereon or to withhold therefrom,
shall divide the same among the holders of the Voting Trust Certificates in
proportion to the number of Shares respectively represented by such Voting Trust
Certificates.
8. SALE OF SHARES. The Trustee is authorized to sell or otherwise
dispose of the Shares subject to this Agreement in whole or in part at such time
or times and on such terms and conditions as in the judgement of the Trustee,
after consultation with the Subscribers, may be in the best interests of the
2
<PAGE>
Subscribers and the Company. The net proceeds of such sale shall, subject to
deduction as provided in paragraph 9 and less any taxes imposed thereon which
the Trustee may be required by law to pay thereon or to withhold therefrom, be
paid over to the respective Subscribers whose Shares subject to this Agreement
are so sold or disposed of.
9. TRUSTEE'S INDEMNITY. The Trustee shall be entitled to be
indemnified fully out of the dividends and sales proceeds coming to its hands
against all costs, charges, expenses and other liabilities properly incurred by
it in the exercise of any power conferred upon it by this Agreement; and the
Subscribers jointly and severally covenant with the Trustee that in the event of
the monies and securities in its hands being insufficient for that purpose, the
Subscribers will, jointly and severally, in proportion to the amount of their
respective Shares and interests, hold harmless and keep indemnified the Trustee
of and from all loss or damage which it may sustain or be put to by reason of
anything it may lawfully do in the execution of this Agreement.
10. CONTINUANCE AND TERMINATION OF TRUST. The trust hereby created
shall be continued until, and shall terminate on, August 22, 2005 or, if
earlier, the date upon which (a) the Trustee resigns or becomes unable or
refuses to act as such, (b) a registration statement for the public offering of
the common stock of the Company (or any successor thereto) under the Securities
Act of 1933, as amended, is declared effective by the Securities and Exchange
Commission or (c) all or substantially all of the assets of Holding or at least
80% of the outstanding common stock of Holding is sold in a single transaction
or series of related transactions. Upon termination of the trust, the Trustee
shall, upon the surrender of the Voting Trust Certificates by the respective
holders thereof, assign and transfer to them the number of Shares thereby
represented.
3
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto as of the date first above written.
NUMBER OF
SUBSCRIBERS: SHARES OWNED:
___________________________ 30
Dr. Leroy Keith
___________________________ 14
S. Garrett Stonehouse
HARROW-LEWIS CORPORATION
By:_______________________ 14
Name: John M. Lewis
Title: President
NORTHWEST CAPITAL, INC.
By:________________________ 14
Name: Bradford Creswell
Title:
TRUSTEE:
DNL PARTNERS,
LIMITED PARTNERSHIP,
as Trustee
By DNL GROUP, L.L.C.,
the General Partner
By: _________________________
Vincent A. Wasik
Managing Member
4
<PAGE>
Exhibit A
FORM OF VOTING TRUST CERTIFICATE
DNL SAVANNAH HOLDING CORP.
(A DELAWARE CORPORATION)
No. ___________ ____________ Shares of Class A Common Stock
VOTING TRUST CERTIFICATE FOR SHARES OF STOCK
THIS IS TO CERTIFY that __________________ (the "Holder") or the
------
Holder's transferor has deposited under the Voting Trust Agreement referred to
below a certificate or certificates for ______ shares of Class A Common Stock,
par value $.01 per share ("Class A Common Stock"), of DNL Savannah Holding
--------------------
Corp., a Delaware corporation (the "Company"), and, until the termination of the
-------
Voting Trust Agreement, is entitled to receive payments in respect of the shares
of stock represented by this Voting Trust Certificate as provided in the Voting
Trust Agreement. The shares of stock deposited hereunder are certain of the
shares of the Class A Common Stock issued and outstanding at the date of the
Voting Trust Agreement, and this Voting Trust Certificate shall likewise
represent any and all shares of Class A Common Stock or of any other class or
classes which, upon any increase or reclassification of the class or classes of
stock of the Company, shares of which are at the time deposited under the Voting
Trust Agreement, shall be issued in lieu of, or in respect of, the shares of
stock so originally deposited, which stock shall have been received by the
Trustee on account of the Trustee's ownership as Trustee of the stock
theretofore held by it under the Voting Trust Agreement and represented by this
Voting Trust Certificate.
Upon the termination of the Voting Trust Agreement, the Holder, or
registered assigns, shall be entitled to receive a certificate or certificates
for the number of shares of stock of each class or classes represented by this
Voting Trust Certificate. Until the actual delivery to the Holder of the stock
certificate or certificates represented or called for hereby, the Trustee shall
possess, and shall be entitled to exercise, all rights and powers of absolute
owners and holders of record of said stock deposited hereunder, including the
right to vote for every purpose and to consent to or waive any corporate act of
the Company of any kind; it being expressly stipulated that no voting right, or
right to give consents or waivers in respect of such stock, passes to the Holder
hereof or such
<PAGE>
Holder's assigns by or under this Voting Trust Certificate or by or under any
agreement, express or implied.
This Voting Trust Certificate is issued under and pursuant to, and the
rights of the Holder are subject to and limited by, the terms and conditions of
a Voting Trust Agreement dated as of August 23, 1995, as amended, by and among
the owners and holders of certain shares of the stock of the Company, and DNL
Partners, Limited Partnership, as Trustee (the "Voting Trust Agreement"), a copy
----------------------
of which has been filed in and will be found at the office of the Company, at
all times during business hours is and will be open to inspection by any
stockholder of the Company or the attorney of any stockholder.
Stock certificates shall be due for delivery and shall be delivered by
the Trustee at the office of the Company, in exchange for Voting Trust
Certificates, upon the termination of the Voting Trust Agreement, in accordance
with its provisions or in accordance with law.
In the event of the dissolution or total or partial liquidation of the
Company, the money and other property received by the Trustee in respect of the
stock represented by this Voting Trust Certificate shall be paid or delivered to
the Holder, but only upon surrender of this Voting Trust Certificate in case of
dissolution or the presentation of this Voting Trust Certificate for the
notation thereon of the distribution in case of a partial liquidation.
This Voting Trust Certificate and the right, title and interest in and
to the shares of stock in respect of which this Voting Trust Certificate is
issued, are transferable, subject to the restrictions thereon contained in the
Voting Trust Agreement, on the books of the Trustee by the registered Holder in
person or by an attorney duly authorized, according to the rules established for
that purpose by the Trustee and on surrender hereof properly assigned; and until
so transferred the Trustee may treat the registered Holder hereof as the owner
for all purposes whatsoever except that no delivery of stock certificates
hereunder shall be made without the surrender hereof.
As a condition of making or permitting any transfer or delivery of
stock certificates or Voting Trust Certificates, the Trustee may require the
payment of a sum sufficient to pay or reimburse it for any stamp tax or other
governmental charge in connection therewith and for its expenses as Trustee.
2
<PAGE>
IN WITNESS WHEREOF, the Trustee has executed and delivered this Voting
Trust Certificate as of August 23, 1995.
DNL PARTNERS,
LIMITED PARTNERSHIP,
as Trustee
By DNL GROUP, L.L.C.,
the General Partner
By:_____________________
Vincent A. Wasik
Managing Member
3
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of August 23, 1995, by and between Carson Products
Company, a Delaware corporation (the "Company"), and Dr. Leroy Keith
("Executive").
WITNESSETH:
----------
WHEREAS, all of the outstanding capital stock of the Company has on
the date hereof (the "Closing Date") been purchased pursuant to a Stock Purchase
Agreement dated as of May 11, 1995, as amended (the "Stock Purchase Agreement"),
among DNL Savannah Acquisition Corp., a Delaware corporation ("DNL"), the prior
owners of such stock and the Company (under its then name Aminco, Inc.); and
WHEREAS, the Company wishes to retain the services of Executive from
and after the Closing Date and Executive wishes to be employed in the service of
the Company from and after the Closing Date, on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows :
1. TERM OF COVERED EMPLOYMENT. The term of Executive's employment
--------------------------
covered under this Agreement (the "Term of Covered Employment") shall commence
on the Closing Date and shall end on the third anniversary of the Closing Date
(the "Expiration Date"), unless terminated earlier under Section 5.
2. EMPLOYMENT AND DUTIES. Subject to the terms and conditions
---------------------
hereinafter set forth, during the Term of Covered Employment, the Company shall
employ Executive, and Executive shall serve, as Chairman and Chief Executive
Officer of the Company. In such capacity, Executive shall report to the Board
of Directors of the Company (the "Board"). Executive shall devote substantially
all his regular working time to such employment. Executive may continue to
serve on the corporate or other organizational boards listed in Appendix B
hereto, but shall be required to obtain the prior written consent of the Board
before accepting any appointment to a board of any other organization.
3. COMPENSATION AND BENEFITS.
-------------------------
3.1 Compensation. For all services to be rendered during the Term of
------------
Covered Employment, the Company shall pay Executive a salary ("Base
Salary") of $325,000 per annum, payable bi-weekly in arrears. In addition,
within 30 days
<PAGE>
- 2 -
after the Closing Date, the Company shall pay Executive a one-time bonus of
$125,000. In addition, for each fiscal year of the Company ending within
the Term of Covered Employment, Executive shall receive a bonus (the
"Bonus) in an amount equal to (i) thirty percent (30%) of his Base Salary
if the "base case" objectives (but not the "anticipated case" objectives)
for that fiscal year specified in the business plan attached as Appendix A
hereto are met, and (ii) fifty percent (50%) of his Base Salary if the
"anticipated case" objectives for that fiscal year specified in the
business plan attached as Appendix A hereto are met. The Bonus shall be
paid in a single lump sum no later than 120 days after the end of the
fiscal year for which the applicable objectives have been met.
3.2 Pension and Welfare Plans. During the Term of Covered
-------------------------
Employment, Executive shall also be eligible to participate in any pension
and welfare plans maintained by the Company for its employees, subject to
the requirements of applicable law.
3.3 Fringe Benefits.
---------------
(a) Automobile. During the Term of Covered Employment, Executive
----------
shall be entitled to an automobile allowance from the Company of
$1,000 for each month during the Term of Covered Employment. In
addition, the Company shall pay for all insurance on the automobile to
which the monthly allowance is applied. However, Executive shall be
solely responsible for all maintenance, repair and other expenses with
respect to such automobile.
(b) Relocation Expenses/Allowance. The Company shall reimburse
-----------------------------
Executive for all expenses incurred by him in relocating to Savannah,
Georgia or its vicinity. The Company shall reimburse Executive for
all travel and temporary lodging expenses incurred by him prior to the
first anniversary of the Closing Date for up to three trips to
Savannah, Georgia to secure his new permanent residence in Savannah,
Georgia or its vicinity. In addition, the Company shall pay Executive
$50,000 as a general relocation allowance.
(c) Other Fringe Benefits. During the Term of Covered Employment,
---------------------
Executive shall also receive any other fringe benefits generally
provided by the Company to its employees.
4. LONG-TERM INCENTIVE AWARD. On the Closing Date, the Company
-------------------------
shall award and issue to Executive 30 shares of the Class A Common Stock of DNL
Savannah Holding Corp., a Delaware corporation ("DNL Holding") which, after the
Closing Date, is the
<PAGE>
- 3 -
parent corporation of the Company, (or any successor thereto) (such awarded
stock, the "Restricted Shares"), such shares to constitute three percent (3%) of
the total number of shares of common stock of DNL Holding then outstanding.
Executive shall be fully vested in the Restricted Shares immediately upon their
issuance.
The Restricted Shares, immediately after their issuance, shall be
transferred by Executive to DNL Partners, Limited Partnership, a Delaware
limited partnership, as Trustee (the "Voting Trustee") under the Voting Trust
Agreement dated as of the date hereof (the "Voting Trust Agreement") by and
among the Voting Trustee, Executive and certain other stockholders, and
Executive shall in exchange therefor receive Voting Trust Certificates (the
"Certificates") pursuant to the Voting Trust Agreement. Executive shall have no
right to transfer the Certificates, or if the voting trust established pursuant
to the Voting Trust Agreement shall be terminated and Executive is issued share
certificates in respect of the Restricted Shares, such Restricted Shares, until
the earlier of (i) the expiration unexercised of the Company's option referred
to below following Executive's termination of employment with the Company for
any reason (including death or disability) or (ii) the time a registration
statement for the public offering of the common stock of DNL Holding (or any
successor thereto) under the Securities Act of 1933, as amended, is declared
effective by the Securities and Exchange Commission (the event described in this
clause (ii), an "IPO Event"). In addition, in the event of Executive's
termination of employment with the Company for any reason (including death or
disability), the Company shall have the option, but not the obligation, to
purchase from Executive or his estate, and the Executive or his estate, as the
case may be, shall be obligated to sell to the Company, upon the exercise of its
option, all of the Certificates or Restricted Shares at the fair market value of
such Certificates or Restricted Shares as of the date of the Company's giving
notice to Executive or his estate, as the case may be, that the Company intends
to exercise such option, which fair market value shall be as determined by DNL
Holding's independent certified public accountants or, if such accountants are
unwilling or unable to make such determination, by an independent appraiser
reasonably satisfactory to the parties hereto. To exercise such option (the
"Option"), the Company shall give written notice to Executive or his estate, as
the case may be, not later than 180 days after such termination of Executive's
employment stating that the Company intends to exercise the Option and
specifying a date, not later than 210 days after such termination, on which the
Company will so purchase such Certificates or Restricted Shares.
Notwithstanding the foregoing provisions of this Section 4, in the event of an
IPO Event while Executive remains employed by the Company (which, under the
terms of the Voting Trust Agreement, will result in the termination of the
voting trust created thereby, effective at the time of the IPO Event) (i) the
Option
<PAGE>
- 4 -
of the Company shall be terminated and (ii) Executive shall (subject to the
provisions of the Registration Rights Agreement hereinafter referred to) have
the right to transfer the Restricted Shares, including the right to sell the
Restricted Shares in connection with the anticipated public offering. Executive
shall have the rights with respect to the registration of the Restricted Shares
under the Securities Act of 1933, as amended, as provided in the Registration
Rights Agreement being entered into simultaneously herewith between DNL Holding
and the Executive.
5. TERMINATION OF EMPLOYMENT. Notwithstanding any other provision
-------------------------
of this Agreement, but subject to the notice provisions contained in this
Section 5, the Company retains the right to terminate Executive's employment,
and Executive retains the right to resign from employment with the Company, at
any time and for any reason.
5.1 Termination for Cause. The Company may terminate Executive's
---------------------
employment with the Company for "Cause" (as hereinafter defined) in the
manner specified in this Section 5.1. In the event that on or after the
Closing Date and prior to the Expiration Date, the Company terminates
Executive's employment with the Company for Cause, the Term of Covered
Employment shall end on the date of such termination (which shall be the
date specified in the notice described in this Section 5.1) and Executive
shall be entitled only to any unpaid amount of Base Salary for his
employment with the Company through and including the date of such
termination. In any event, Executive shall not be entitled to receive any
amount of Base Salary with respect to any period following the date of such
termination, or any portion of the Bonus for the fiscal year of the Company
in which such date of termination occurs.
For purposes of this Agreement, termination for "Cause" means termination
by the Company due to Executive's gross dereliction of his duties under
this Agreement, including, without limitation, his refusal to follow or
gross neglect of the directions of the Board, or any willful misconduct by
Executive that is materially injurious to the Company, or the indictment of
Executive for a felony involving moral turpitude.
To terminate Executive for Cause, the Company shall give a written notice
of such termination to Executive ("Notice of Termination"), which notice
shall have been authorized by a vote of the majority of the Board and shall
specify the date of such termination, which shall not be earlier than the
date on which such notice is given to Executive. Such notice shall be
given to Executive no later than 10 days after a member of the Board (other
than Executive) has actual knowledge of the events or circumstances which
<PAGE>
- 5 -
purportedly constitute Cause for such termination, and shall specify the
particular act or acts, or failure to act, or other events or circumstances
constituting Cause for such termination. Executive shall be given the
opportunity within 30 days after receiving such notice to meet with the
Board to explain why Cause for such termination does not exist. Within 15
days after any such meeting, the Board shall give Executive its final
decision regarding whether Cause exists. If the Board's final decision is
that Cause exists, Executive's employment with the Company shall be
terminated under this Section 5.1 pursuant to the Notice of Termination as
of the date of termination specified in such Notice. If the Board's final
decision is that Cause does not exist, Executive's employment with the
Company shall not be terminated under this Section 5.1.
5.2 Resignation. Executive may resign from employment with the
-----------
Company by giving the Company written notice of such resignation, which
notice shall specify the date of resignation, which shall not be earlier
than 30 days after the date such written notice is given to the Company.
(a) Resignation for Good Reason. In the event the Executive's
---------------------------
resignation is for "Good Reason", as hereinafter defined, the Term of
Covered Employment shall end on the date of resignation specified in
his notice of resignation and the Company shall pay Executive, within
15 days after the later of such date of resignation or the "Final
Determination Date" (as hereinafter defined), an additional lump sum
amount equal to 200% of one year's Base Salary. Executive shall not
be eligible to participate in any of the Company's employee benefit
plans following such date of resignation, except as may be required by
applicable law.
For purposes of this Agreement, "Good Reason" for resignation means
any of the following actions taken by the Company without Executive's
express prior written consent: (i) assignment to Executive of any
duties or responsibilities inconsistent in any material respect with
the scope of the duties or responsibilities associated with
Executive's title and position; (ii) diminution of Executive's title
or position; (iii) decrease in Executive's annual Base Salary or an
adverse change in the terms governing the amount and availability of
the Bonus; (iv) material diminution, in the aggregate, of the benefits
provided to Executive; (v) material breach of the Company's
obligations under this Agreement; and (vi) any action by the Company,
its directors or its employees subjecting the Company to publicity or
governmental sanctions which are
<PAGE>
- 6 -
materially adverse to the interests of Executive hereunder.
If Executive claims to have resigned for Good Reason, he shall
expressly state in his written notice of resignation that he is
resigning for Good Reason. Such notice must be delivered to the
Board no later than ninety (90) days after the date Executive has
actual knowledge of the events or circumstances which purportedly
constitute Good Reason for such resignation, and shall specify the
particular act or acts, or failure to act, or other events or
circumstances constituting Good Reason for such resignation. If the
Board does not respond in writing to Executive within 30 days after
receiving such notice, Executive's resignation shall be deemed to be
for Good Reason. If the Board notifies Executive in writing, within
30 days after receiving such notice, that it has determined that Good
Reason does not exist, then Executive shall be given the opportunity
within 30 days after receiving such notice from the Board to meet with
the Board to explain why Good Reason exists. Within 15 days after any
such meeting, the Board shall give Executive its final decision
regarding whether Good Reason exists (the date the Board gives
Executive such final decision, the "Final Determination Date"). If
the Board's final decision is that Good Reason exists, Executive shall
be entitled to the payment specified in the first paragraph of this
Section 5.2(a). If the Board's final decision is that Good Reason
does not exist, Executive shall not be entitled to such payment, and
his resignation shall be governed by Section 5.2(b).
(b) Resignation Other Than for Good Reason. In the event that
--------------------------------------
Executive's resignation is other than for Good Reason, the Term of
Covered Employment shall end on the date of resignation specified in
his notice of resignation, and Executive shall be entitled only to any
unpaid amount of Base Salary for his employment with the Company
through and including such date of resignation. Executive shall not
be entitled to receive any amount of Base Salary with respect to any
period following such date of resignation, or any portion of the Bonus
for the fiscal year of the Company in which such date of resignation
occurs.
5.3 Termination Other Than For Cause. The Company may terminate
--------------------------------
Executive's employment with the Company other than for Cause by giving
Executive written notice of such termination, which notice shall specify
the date of such termination, which shall not be earlier than 30 days after
such written notice is given to Executive. In the event
<PAGE>
- 7 -
that on or after the Closing Date and prior to the Expiration Date
Executive's employment with the Company is terminated by the Company other
than for Cause, the Term of Covered Employment shall end upon such
specified date of termination and the Company shall pay Executive, within
15 days after such date of termination, an additional lump sum amount equal
to 150% of one year's Base Salary. Executive shall not be eligible to
participate in any of the Company's employee benefit plans following such
date of termination of employment, except as may be required by applicable
law.
5.4 Termination Due to Death or Disability. The Company may
--------------------------------------
terminate Executive's employment with the Company due to "Disability", as
hereinafter defined, by giving Executive written notice of such
termination, which notice shall specify the date of such termination, which
shall not be earlier than 30 days after such written notice is given to
Executive. If on or after the Closing Date and prior to the Expiration
Date Executive's employment with the Company is terminated due to
Disability, or if during such period Executive dies, the Term of Covered
Employment shall end upon such specified date of termination or date of
death, as applicable, and the Company shall pay Executive, or his
beneficiary or estate, as the case may be, within 15 days after such date
of termination or death, an additional lump sum amount equal to 150% of one
year's Base Salary.
For purposes of this Agreement, "Disability" means Executive's
inability to perform his duties under this Agreement for a period of at
least six consecutive months because of medically determinable physical or
mental impairment, as determined by a physician mutually agreeable to
Executive and the Company. If Executive and the Company are unable to
agree on such a physician, each shall appoint one physician and those two
physicians shall appoint a third physician who shall make such a
determination.
6. NON-COMPETITION; NON-SOLICITATION. While Executive is employed
---------------------------------
by the Company (including any period of such employment following the expiration
of the Term of Covered Employment), Executive shall not directly or indirectly
(i) own, manage, operate, represent, promote, consult for, control or
participate in the ownership, operation, acquisition or management of any
business manufacturing and/or distributing ethnic hair care products or
cosmetics within a 500-mile radius of the Company's headquarters, (ii) solicit
(other than on behalf of the Company or any of its affiliates), divert or take
away the business of any customers of the Company or any of its affiliates, or
any prospective customers of the Company or any of its affiliates whose business
the Company or any of its affiliates is actively soliciting during Executive's
employment with the Company with whom Executive had any material personal
contact, or (iii) solicit or induce any employee of the Company
<PAGE>
- 8 -
or any of its affiliates to terminate such employee's employment with the
Company or such affiliate. It is expressly acknowledged that a breach of this
covenant may result in irreparable harm to the Company for which there is no
adequate remedy at law and that, therefore, in the event of such a breach, the
Company shall be entitled to obtain injunctive relief restraining Executive from
engaging in activities prohibited by this Section 6 or any other relief as may
be required to specifically enforce this covenant.
7. CONFIDENTIALITY. While employed by the Company and at all times
---------------
thereafter, Executive shall maintain the confidentiality of all information of
and relating to, and all material of, the Company and its affiliates that have
not been made available to the public (other than by reason of a breach by
Executive of his obligations under this Section 7) and shall not, without the
Company's prior written permission, disclose to any person outside of the
Company and its affiliates any such information or material. Without limiting
the foregoing sentence, such information and material shall include pricing
plans and price policies, business plans, sales forecasts, research and
development, formulas, procedures and the identity of customers and suppliers
and the terms upon which the Company or any of its affiliates deals with them.
Upon termination of employment with the Company, Executive shall return to the
Company all property in his possession, whether or not containing confidential
information, including but not limited to originals and copies of any written
documents, drawings and reports, diskettes and other storage media, belonging to
the Company or any of its affiliates or received from the Company or any of its
affiliates. It is expressly acknowledged that a breach of this covenant may
result in irreparable harm to the Company for which there is no adequate remedy
at law and that, therefore, in the event of such a breach, the Company shall be
entitled to obtain injunctive relief restraining Executive from engaging in
activities prohibited by this Section 7 or any other relief as may be required
to specifically enforce this covenant.
8. TAXES. The Company shall be entitled to deduct and withhold from
-----
all amounts payable under this Agreement all applicable Federal, state and local
taxes which the Company determines are required by law to be deducted and
withheld.
<PAGE>
- 9 -
9. NOTICES. All notices and other communications under this
-------
Agreement shall be in writing and shall be given by hand delivery to the party
receiving such notice or by certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to Executive: Dr. Leroy Keith
c/o Carson Products Company
65 Ross Road
Savannah, Georgia 31405
If to the Company: Carson Products Company
c/o DNL Savannah Holding
Corp.
1 Morningside Drive, North
Suite 200
Westport, CT 06880
Attention: Vincent A. Wasik
or to such other address as either party shall have furnished to the other party
in writing as the address to send future notices and communications in
accordance herewith. Any notice or communication shall be deemed given when
actually received by the party who is its intended recipient.
10. SEVERABILITY. If any provision of this Agreement is held to be
------------
invalid under applicable law, such provision shall be ineffective only to the
extent of such invalidity, and the remaining provisions of this Agreement shall
be unimpaired.
11. WAIVERS. The waiver by either party of a breach of any provision
-------
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision, or as a waiver of any other provision of
this Agreement.
12. ASSIGNABILITY. The Company may assign its rights and obligations
-------------
hereunder to any of its affiliates, or to any successor of the Company;
provided, that this Agreement shall, without further action of the Company,
- --------
automatically be assumed by the surviving entity in any merger transaction or
transactions to which the Company is a party. Executive may not assign any of
his rights, duties, obligations or interests hereunder to any other person
without the prior express written consent of the Board of Directors of the
Company.
13. ENTIRE AGREEMENT. This instrument contains the entire agreement
----------------
of the parties with respect to, and supersedes all prior agreements relating to,
Executive's employment with the Company.
<PAGE>
- 10 -
14. GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed and enforced under, the laws of the State of Georgia.
15. EFFECTIVENESS OF AGREEMENT . This Agreement shall be and become
---------------------------
effective as of the Closing Date; provided, that if the Stock Purchase Agreement
--------
is terminated, this Agreement shall be canceled and be of no force or effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
EXECUTIVE CARSON PRODUCTS COMPANY
__________________________ _____________________________
Dr. Leroy Keith By: Bradford Creswell
<PAGE>
Appendix A
Business Plan
Executive Level Bonus Targets for FY1996
----------------------------------------
Anticipated Case Base Case
---------------- ---------
Sales $68.8 $66.3
EBITDA $15.9 $13.1
<PAGE>
Appendix B
Existing Board Memberships
Keystone Investment Group
Mutual Funds Board of the Phoenix Home Life Mutual Life Insurance Company
Board of Directors of the One to One Foundation
Baylor School
Public Education Foundation
<PAGE>
CARSON PRODUCTS COMPANY
P.O. Box 22309
Savannah, Georgia 31403-2309
July 31, 1996
PERSONAL AND CONFIDENTIAL
- -------------------------
Dr. Leroy Keith
c/o Carson Products Company
65 Ross Road
Savannah, Georgia 31405
Re: Employment Agreement Modification
---------------------------------
Dear Dr. Keith:
I am pleased to advise you that the Board of Directors of Carson Products
Company (the "Company") has agreed to modify your employment agreement, dated as
of August 23, 1995, with the Company (the "Employment Agreement") to (i) extend
your term of employment thereunder, (ii) increase your base salary, and (iii)
effect certain other changes thereto.
Accordingly, the Employment Agreement is hereby modified, effective as of
the dates set forth below, as follows:
1. Effective as of the closing of the Offerings (as that term is defined
in the Form S-1 Registration Statement filed by Carson, Inc. under the
Securities Act of 1933), Section 1 of the Employment Agreement is hereby amended
by deleting it in its entirety and replacing it with a new Section 1 to read in
its entirety as follows:
"1. Term of Covered Employment. The term of Executive's
--------------------------
employment covered under this Agreement (the "Term of Covered Employment")
shall commence on the Closing Date and shall end on the third anniversary
of the closing of the Offerings, as that term is defined in the Form S-1
Registration Statement filed by Carson, Inc. under the Securities Act of
1933, (the "Expiration Date"), unless earlier terminated under Section 5 of
this Agreement."
<PAGE>
- 2 -
2. Effective as of [the date hereof], Section 3.1 of the Employment
Agreement is hereby amended by deleting it in its entirety and replacing it with
a new Section 3.1 to read as follows:
"3.1 Compensation. For all services to be rendered during the
------------
Term of Covered Employment, the Company shall pay Executive a salary
("Base Salary") of $385,000 per annum, payable bi-weekly in arrears.
In addition, for each fiscal year of the Company ending within the
Term of Covered Employment, Executive shall receive a bonus (the
"Bonus") in an amount equal to (i) thirty percent (30%) of Base Salary
if the "base case" objectives (but not the "anticipated case"
objectives) for that fiscal year, as specified by the Board (as
defined in Section 2 of this Agreement), or a committee thereof, are
achieved, or (ii) fifty percent (50%) of Base Salary if the
"anticipated case" objectives for that fiscal year, as specified by
the Board (or a committee thereof) are met. The objectives utilized
in determining the Bonus shall be net revenue growth, net income,
earnings per share and/or stock price growth, each as defined by the
Board (or a committee thereof) in its sole discretion. A lesser
percentage of Base Salary may be paid hereunder if one or more, but
not all, of the targeted objectives for a fiscal year are achieved.
If the "base case" objectives are met, the value of the Bonus, if any,
shall be paid seventy-five percent (75%) in a single lump sum cash
payment and twenty-five percent (25%) in shares of restricted stock of
Carson, Inc. If the "anticipated case" objectives are met, the value
of the Bonus, if any, shall be paid fifty percent (50%) in a single
lump sum cash payment and fifty percent (50%) in shares of restricted
stock of Carson, Inc. Such restricted stock shall vest as to one-
third (1/3) of the aggregate number of shares delivered to Executive
on each of the first three anniversaries of the date of payment of the
Bonus (if Executive is employed by the Company on such dates). The
Bonus shall be paid no later than 120 days after the end of the fiscal
year for which the applicable objectives have been met."
3. Effective as of [the date hereof], Section 3.2 of the Employment
Agreement is hereby amended by adding at the end thereof the following proviso:
", provided, however, that, unless otherwise determined by the Company
-------- -------
and Carson, Inc., Executive shall not be eligible to participate in
any profit-sharing plan maintained, sponsored or contributed to by the
Company or Carson, Inc. that is intended to qualify under Section
401(a) of the Internal Revenue Code of 1986, as amended."
<PAGE>
- 3 -
4. Effective as of the date hereof, Appendix A to the Employment
Agreement is hereby deleted in its entirety.
5. Except as expressly modified herein, the Employment Agreement
shall remain in full force and effect in accordance with its terms and
provisions as the same are set forth on the date hereof.
Please indicate your acceptance of and agreement to the above
modifications by signing this modification agreement in the space provided
below.
CARSON PRODUCTS COMPANY
By:___________________________
Name:
Title:
AGREED TO AND ACCEPTED:
____________________________
Dr. Leroy Keith
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of June 7, 1995, by and between Carson Products
Company, a Georgia Corporation (the "Company"), and Joyce Roche ("Executive").
WITNESSETH:
----------
WHEREAS, the current owners of all of the outstanding capital stock of
Aminco, Inc., the parent of the Company, have entered into a Stock Purchase
Agreement dated as of May 11, 1995 (the "Stock Purchase Agreement") with DNL
Savannah Acquisition Corp., a Delaware Corporation ("DNL"), under which such
shareholders shall sell, and DNL shall purchase, all of the outstanding capital
stock of Aminco, Inc.; and
WHEREAS, the Company wishes to retain the services of Executive from and
after the date of the closing of the sale of Aminco, Inc.'s capital stock to DNL
as contemplated under the Stock Purchase Agreement (the "Closing Date"), and
Executive wishes to be employed in the service of the Company from and after the
Closing Date, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. TERM OF COVERED EMPLOYMENT. The term of Executive's employment covered
--------------------------
under this Agreement (the "Term of Covered Employment") shall commence on the
Closing Date and shall end on the fifth anniversary of the Closing Date (the
"Expiration Date"), unless terminated earlier under Section 5.
2. EMPLOYMENT AND DUTIES. Subject to the terms and conditions hereinafter
---------------------
set forth and any promotion of Executive by the Company, during the Term of
Covered Employment, the Company shall employ Executive, and Executive shall
serve, as Executive Vice President, Global Marketing of the Company. In such
capacity, Executive shall perform the duties and responsibilities assigned by
the Company, and such performance shall be Executive's principal activity to
which she shall devote substantially all her working hours. Executive shall
report to the Chief Executive Officer of the Company.
<PAGE>
- 2 -
3. COMPENSATION AND BENEFITS.
-------------------------
3.1 Compensation. For all services to be rendered during the Term of
------------
Covered Employment, the Company shall pay Executive a salary ("Base
Salary") of $200,000 per annum, payable bi-weekly in arrears. In addition,
within 30 days after the Closing Date, the Company shall pay Executive a
one-time bonus of $25,000. In addition, for each fiscal year of the
Company ending within the Term of Covered Employment, Executive shall
receive a bonus (the "Bonus) in an amount equal to (i) thirty percent (30%)
of her Base Salary if the "base case" objectives (but not the "anticipated
case" objectives) for that fiscal year specified in the business plan
attached as Appendix A hereto are met, and (ii) fifty percent (50%) of her
Base Salary if the "anticipated case" objectives for that fiscal year
specified in the business plan attached as Appendix A hereto are met. The
Bonus shall be paid in a single lump sum no later than 120 days after the
end of the fiscal year for which the applicable objectives have been met.
3.2 Pension and Welfare Plans. During the Term of Covered
-------------------------
Employment, Executive shall also be eligible to participate in any pension
and welfare plans maintained by the Company for its employees, subject to
the requirements of applicable law.
3.3 Fringe Benefits.
---------------
(a) Automobile. During the Term of Covered Employment, Executive
----------
shall be entitled to use of a Buick LeSabre, Oldsmobile 88 or a
similar automobile purchased or leased by the Company. In lieu
thereof, at Executive's election communicated to the Company prior to
the Closing Date, Executive shall be entitled to an automobile
allowance from the Company of $500 for each month during the Term of
Covered Employment. In addition, the Company shall pay for all
insurance on the automobile provided by the Company to Executive, or
to which the monthly allowance is applied, as the case may be.
However, Executive shall be solely responsible for all maintenance,
repair and other expenses with respect to such automobile.
(b) Relocation Expenses/Allowance. The Company shall reimburse
-----------------------------
Executive for all expenses incurred by her in relocating to Savannah,
Georgia or its vicinity. The Company shall reimburse Executive for
all travel and temporary lodging expenses incurred by her prior to the
first anniversary of the Closing Date for up to three
<PAGE>
- 3 -
trips to Savannah, Georgia to secure her new permanent residence in
Savannah, Georgia or its vicinity. In addition, the Company shall pay
Executive $10,000 as a general relocation allowance.
(c) Other Fringe Benefits. During the Term of Covered Employment,
---------------------
Executive shall also receive any other fringe benefits generally
provided by the Company to its employees.
4. LONG-TERM INCENTIVE AWARD. In the event a "Triggering Event", as
-------------------------
hereinafter defined, occurs while Executive is employed by the Company, the
Company shall pay Executive, within 90 days after such Triggering Event, a lump
sum amount in cash equal to one percent of the value of Aminco, Inc. (or any
successor thereto) at the time of such Triggering Event, minus $500,000. A
-----
"Triggering Event" means the earliest to occur of (i) an initial public offering
of the common stock of Aminco, Inc. (or any successor thereto), (ii) a sale of
substantially all of the stock or assets of Aminco, Inc. (or any successor
thereto), or (iii) the fifth anniversary of the Closing Date. For purposes of
this Section 4, the value of Aminco, Inc. (or any successor thereto) at the time
of the Triggering Event means (x) if the Triggering Event is the initial public
offering of the common stock of Aminco, Inc. (or any successor thereto), the
value determined on the basis of the price set for the sale of such common stock
to the public in such initial public offering, as established by the managing
underwriters to such public offering, (y) if the Triggering Event is the sale of
substantially all of the stock or assets of Aminco, Inc. (or any successor
thereto), the price being paid by the acquiror of such stock or assets, and (z)
if the Triggering Event is the fifth anniversary of the Closing Date, the value
established as of such date under a valuation of Aminco, Inc. (or any successor
thereto) conducted by an independent appraiser.
5. TERMINATION OF EMPLOYMENT. Notwithstanding any other provision
-------------------------
of this Agreement, but subject to the notice provisions contained in this
Section 5, the Company retains the right to terminate Executive's employment,
and Executive retains the right to resign from employment with the Company, at
any time and for any reason.
5.1 Termination for Cause. The Company may terminate Executive's
---------------------
employment with the Company for "Cause" (as hereinafter defined) in the
manner specified in this Section 5.1. In the event that on or after the
Closing Date and prior to the Expiration Date, the Company terminates
Executive's employment with the Company for Cause, the Term of Covered
Employment shall end on the date of such termination (which shall be the
date specified in the notice described in this Section 5.1) and Executive
shall be
<PAGE>
- 4 -
entitled only to any unpaid amount of Base Salary for her employment with
the Company through and including the date of such termination. In any
event, Executive shall not be entitled to receive any amount of Base Salary
with respect to any period following the date of such termination, or any
portion of the Bonus for the fiscal year of the Company in which such date
of termination occurs.
For purposes of this Agreement, termination for "Cause" means termination
by the Company due to Executive's gross dereliction of her duties under
this Agreement, including, without limitation, her refusal to follow or
gross neglect of the directions of the Board of Directors of the Company or
any other executive of the Company senior to Executive, or any willful
misconduct by Executive that is materially injurious to the Company, or the
indictment of Executive for a felony involving moral turpitude.
To terminate Executive for Cause, the Company shall give a written notice
of such termination to Executive ("Notice of Termination"), which notice
shall have been authorized by a vote of the majority of the Company's Board
of Directors (the "Board") and shall specify the date of such termination,
which shall not be earlier than the date on which such notice is given to
Executive. Such notice shall be given to Executive no later than 10 days
after a member of the Board (other than Executive) has actual knowledge of
the events or circumstances which purportedly constitute Cause for such
termination, and shall specify the particular act or acts, or failure to
act, or other events or circumstances constituting Cause for such
termination. Executive shall be given the opportunity within 30 days after
receiving such notice to meet with the Board to explain why Cause for such
termination does not exist. Within 15 days after any such meeting, the
Board shall give Executive its final decision regarding whether Cause
exists. If the Board's final decision is that Cause exists, Executive's
employment with the Company shall be terminated under this Section 5.1
pursuant to the Notice of Termination as of the date of termination
specified in such Notice. If the Board's final decision is that Cause does
not exist, Executive's employment with the Company shall not be terminated
under this Section 5.1.
5.2 Resignation. Executive may resign from employment with the
-----------
Company by giving the Company written notice of such resignation, which
notice shall specify the date of resignation, which shall not be earlier
than 30 days after the date such written notice is given to the Company.
(a) Resignation for Good Reason. In the event the Executive's
---------------------------
resignation is for "Good Reason", as
<PAGE>
- 5 -
hereinafter defined, the Term of Covered Employment shall end on the
date of resignation specified in her notice of resignation and the
Company shall pay Executive, within 15 days after the later of such
date of resignation or the "Final Determination Date" (as hereinafter
defined), an additional lump sum amount equal to 200% of one year's
Base Salary. Executive shall not be eligible to participate in any of
the Company's employee benefit plans following such date of
resignation, except as may be required by applicable law.
For purposes of this Agreement, "Good Reason" for resignation means
any of the following actions taken by the Company (or, in the case of
clause (vi), failure to act by the Company) without Executive's
express prior written consent: (i) assignment to Executive of any
duties or responsibilities inconsistent in any material respect with
the scope of the duties or responsibilities associated with
Executive's title and position; (ii) diminution of Executive's title
or position; (iii) decrease in Executive's annual Base Salary or an
adverse change in the terms governing the amount and availability of
the Bonus; (iv) material diminution, in the aggregate, of the benefits
provided to Executive; (v) material breach of the Company's
obligations under this Agreement; (vi) failure of the Company to make
Executive President and Chief Operating Officer of the Company on or
before the third anniversary of the Effective Date and (vii) any
action by the Company, its directors or its employees subjecting the
Company to publicity or governmental sanctions which are materially
adverse to the interests of Executive hereunder.
If Executive claims to have resigned for Good Reason, she shall
expressly state in her written notice of resignation that she is
resigning for Good Reason. Such notice must be delivered to the
Board no later than ninety (90) days after the date Executive has
actual knowledge of the events or circumstances which purportedly
constitute Good Reason for such resignation, and shall specify the
particular act or acts, or failure to act, or other events or
circumstances constituting Good Reason for such resignation. If the
Board does not respond in writing to Executive within 30 days after
receiving such notice, Executive's resignation shall be deemed to be
for Good Reason. If the Board notifies Executive in writing, within
30 days after receiving such notice, that it has determined that Good
Reason does not exist,
<PAGE>
- 6 -
then Executive shall be given the opportunity within 30 days after
receiving such notice from the Board to meet with the Board to explain
why Good Reason exists. Within 15 days after any such meeting, the
Board shall give Executive its final decision regarding whether Good
Reason exists (the date the Board gives Executive such final decision,
the "Final Determination Date"). If the Board's final decision is
that Good Reason exists, Executive shall be entitled to the payment
specified in the first paragraph of this Section 5.2(a). If the
Board's final decision is that Good Reason does not exist, Executive
shall not be entitled to such payment, and her resignation shall be
governed by Section 5.2(b).
(b) Resignation Other Than for Good Reason. In the event that
--------------------------------------
Executive's resignation is other than for Good Reason, the Term of
Covered Employment shall end on the date of resignation specified in
her notice of resignation, and Executive shall be entitled only to any
unpaid amount of Base Salary for her employment with the Company
through and including such date of resignation. Executive shall not
be entitled to receive any amount of Base Salary with respect to any
period following such date of resignation, or any portion of the Bonus
for the fiscal year of the Company in which such date of resignation
occurs.
5.3 Termination Other Than For Cause. The Company may terminate
--------------------------------
Executive's employment with the Company other than for Cause by giving
Executive written notice of such termination, which notice shall specify
the date of such termination, which shall not be earlier than 30 days after
such written notice is given to Executive. In the event that on or after
the Closing Date and prior to the Expiration Date Executive's employment
with the Company is terminated by the Company other than for Cause, the
Term of Covered Employment shall end upon such specified date of
termination and the Company shall pay Executive, within 15 days after such
date of termination, an additional lump sum amount equal to 150% of one
year's Base Salary. Executive shall not be eligible to participate in any
of the Company's employee benefit plans following such date of termination
of employment, except as may be required by applicable law.
5.4 Termination Due to Death or Disability. The Company may
--------------------------------------
terminate Executive's employment with the Company due to "Disability", as
hereinafter defined, by giving Executive written notice of such
termination, which notice shall specify the date of such termination, which
shall not be earlier than 30 days after such written notice is given to
Executive. If on or after the Closing Date and
<PAGE>
- 7 -
prior to the Expiration Date Executive's employment with the Company is
terminated due to Disability, or if during such period Executive dies, the
Term of Covered Employment shall end upon such specified date of
termination or date of death, as applicable, and the Company shall pay
Executive, or her beneficiary or estate, as the case may be, within 15 days
after such date of termination or death, an additional lump sum amount
equal to 150% of one year's Base Salary.
For purposes of this Agreement, "Disability" means Executive's
inability to perform her duties under this Agreement for a period of at
least six consecutive months because of medically determinable physical or
mental impairment, as determined by a physician mutually agreeable to
Executive and the Company. If Executive and the Company are unable to
agree on such a physician, each shall appoint one physician and those two
physicians shall appoint a third physician who shall make such a
determination.
6. NON-COMPETITION; NON-SOLICITATION. While Executive is employed
---------------------------------
by the Company (including any period of such employment following the expiration
of the Term of Covered Employment), Executive shall not directly or indirectly
(i) own, manage, operate, represent, promote, consult for, control or
participate in the ownership, operation, acquisition or management of any
business manufacturing and/or distributing ethnic hair care products or
cosmetics within a 500-mile radius of the Company's headquarters, (ii) solicit
(other than on behalf of the Company or any of its affiliates), divert or take
away the business of any customers of the Company or any of its affiliates, or
any prospective customers of the Company or any of its affiliates whose business
the Company or any of its affiliates is actively soliciting during Executive's
employment with the Company with whom Executive had any material personal
contact, or (iii) solicit or induce any employee of the Company or any of its
affiliates to terminate such employee's employment with the Company or such
affiliate. It is expressly acknowledged that a breach of this covenant may
result in irreparable harm to the Company for which there is no adequate remedy
at law and that, therefore, in the event of such a breach, the Company shall be
entitled to obtain injunctive relief restraining Executive from engaging in
activities prohibited by this Section 6 or any other relief as may be required
to specifically enforce this covenant.
7. CONFIDENTIALITY. While employed by the Company and at all times
---------------
thereafter, Executive shall maintain the confidentiality of all information of
and relating to, and all material of, the Company and its affiliates that have
not been made available to the public (other than by reason of a breach by
Executive of her obligations under this Section 7) and shall not, without the
Company's prior written permission, disclose to any
<PAGE>
- 8 -
person outside of the Company and its affiliates any such information or
material. Without limiting the foregoing sentence, such information and
material shall include pricing plans and price policies, business plans, sales
forecasts, research and development, formulas, procedures and the identity of
customers and suppliers and the terms upon which the Company or any of its
affiliates deals with them. Upon termination of employment with the Company,
Executive shall return to the Company all property in her possession, whether or
not containing confidential information, including but not limited to originals
and copies of any written documents, drawings and reports, diskettes and other
storage media, belonging to the Company or any of its affiliates or received
from the Company or any of its affiliates. It is expressly acknowledged that a
breach of this covenant may result in irreparable harm to the Company for which
there is no adequate remedy at law and that, therefore, in the event of such a
breach, the Company shall be entitled to obtain injunctive relief restraining
Executive from engaging in activities prohibited by this Section 7 or any other
relief as may be required to specifically enforce this covenant.
8. TAXES. The Company shall be entitled to deduct and withhold from
-----
all amounts payable under this Agreement all applicable Federal, state and local
taxes which the Company determines are required by law to be deducted and
withheld.
9. NOTICES. All notices and other communications under this
-------
Agreement shall be in writing and shall be given by hand delivery to the party
receiving such notice or by certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to Executive: Joyce Roche
If to the Company: Carson Products Company
71 A Ross Road
Savannah, Georgia 31405
Attention: Chief Executive
Officer
or to such other address as either party shall have furnished to the other party
in writing as the address to send future notices and communications in
accordance herewith. Any notice or communication shall be deemed given when
actually received by the party who is its intended recipient.
10. SEVERABILITY. If any provision of this Agreement is held to be
------------
invalid under applicable law, such provision shall
<PAGE>
- 9 -
be ineffective only to the extent of such invalidity, and the remaining
provisions of this Agreement shall be unimpaired.
11. WAIVERS. The waiver by either party of a breach of any provision
-------
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision, or as a waiver of any other provision of
this Agreement.
12. ASSIGNABILITY. The Company may assign its rights and obligations
-------------
hereunder to any of its affiliates, or to any successor of the Company.
Executive may not assign any of her rights, duties, obligations or interests
hereunder to any other person without the prior express written consent of the
Board of Directors of the Company.
13. ENTIRE AGREEMENT. This instrument contains the entire agreement
----------------
of the parties with respect to, and supersedes all prior agreements relating to,
Executive's employment with the Company.
14. GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed and enforced under, the laws of the State of Georgia.
15. EFFECTIVENESS OF AGREEMENT . This Agreement shall be and become
---------------------------
effective as of the Closing Date; provided, that if the Stock Purchase Agreement
--------
is terminated, this Agreement shall be canceled and be of no force or effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
EXECUTIVE CARSON PRODUCTS COMPANY
________________________ __________________________
Joyce Roche By:_______________________
<PAGE>
CARSON PRODUCTS COMPANY
P.O. Box 22309
Savannah, Georgia 31403-2309
July 31, 1996
PERSONAL AND CONFIDENTIAL
- -------------------------
Ms. Joyce Roche
c/o Carson Products Company
65 Ross Road
Savannah, Georgia 31405
Re: Employment Agreement Modification
---------------------------------
Dear Joyce:
I am pleased to advise you that the Board of Directors of Carson Products
Company (the "Company") has agreed to modify your employment agreement, dated as
of June 7, 1995, with the Company (the "Employment Agreement") to (i) extend
your term of employment thereunder, (ii) increase your base salary, (iii)
convert your stock-based long-term incentive opportunity into the right to
purchase Class A Common Stock of the Company, and (iv) effect certain other
changes thereto.
Accordingly, the Employment Agreement is hereby modified, effective as of
the dates set forth below, as follows:
1. Effective as of the closing of the Offerings (as that term is defined
in the Form S-1 Registration Statement filed by Carson, Inc. under the
Securities Act of 1933), Section 1 of the Employment Agreement is hereby amended
by deleting it in its entirety and replacing it with a new Section 1 to read in
its entirety as follows:
"1. Term of Covered Employment. The term of Executive's
--------------------------
employment covered under this Agreement (the "Term of Covered Employment")
shall commence on the Closing Date and shall end on the third anniversary
of the closing of the Offerings, as that term is defined in the Form S-1
Registration Statement filed by Carson, Inc. under the Securities Act of
<PAGE>
- 2 -
1933, (the "Expiration Date"), unless earlier terminated under Section 5 of
this Agreement."
2. Effective as of [the date hereof], Section 3.1 of the Employment
Agreement is hereby amended by deleting it in its entirety and replacing it with
a new Section 3.1 to read as follows:
"3.1 Compensation. For all services to be rendered during the
------------
Term of Covered Employment, the Company shall pay Executive a salary
("Base Salary") of $260,000 per annum, payable bi-weekly in arrears.
In addition, for each fiscal year of the Company ending within the
Term of Covered Employment, Executive shall receive a bonus (the
"Bonus") in an amount equal to (i) thirty percent (30%) of Base Salary
if the "base case" objectives (but not the "anticipated case"
objectives) for that fiscal year, as specified by the Board (as
defined in Section 5.1 of this Agreement), or a committee thereof, are
achieved, or (ii) fifty percent (50%) of Base Salary if the
"anticipated case" objectives for that fiscal year, as specified by
the Board (or a committee thereof) are met. The objectives utilized
in determining the Bonus shall be net revenue growth, net income,
earnings per share and/or stock price growth, each as defined by the
Board (or a committee thereof) in its sole discretion. A lesser
percentage of Base Salary may be paid hereunder if one or more, but
not all, of the targeted objectives for a fiscal year are achieved.
If the "base case" objectives are met, the value of the Bonus, if any,
shall be paid seventy-five percent (75%) in a single lump sum cash
payment and twenty-five percent (25%) in shares of restricted stock of
Carson, Inc. If the "anticipated case" objectives are met, the value
of the Bonus, if any, shall be paid fifty percent (50%) in a single
lump sum cash payment and fifty percent (50%) in shares of restricted
stock of Carson, Inc. Such restricted stock shall vest as to one-
third (1/3) of the aggregate number of shares delivered to Executive
on each of the first three anniversaries of the date of payment of the
Bonus (if Executive is employed by the Company on such dates). The
Bonus shall be paid no later than 120 days after the end of the fiscal
year for which the applicable objectives have been met."
3. Effective as of [the date hereof], Section 3.2 of the Employment
Agreement is hereby amended by adding at the end thereof the following proviso:
", provided, however, that, unless otherwise determined by the Company
-------- -------
and Carson, Inc., Executive shall not be eligible to
<PAGE>
- 3 -
participate in any profit-sharing plan maintained, sponsored or
contributed to by the Company or Carson, Inc. that is intended to
qualify under Section 401(a) of the Internal Revenue Code of 1986, as
amended."
4. Effective as of the date hereof, Section 4 of the Employment
Agreement is hereby amended by deleting it in its entirety and replacing it with
a new Section 4 to read as follows:
"4. Stock Purchase Right. Executive shall have the right to
--------------------
acquire 10.4409 shares of Carson, Inc.'s Class A Common Stock at a per
share purchase price equal to the fair market value per hare of the Class A
Common Stock on the date of purchase, as determined by the Board (as
defined in Section 5.1 of this Agreement). Executive may satisfy the
aggregate purchase price for the shares of the Class A Common Stock by
tendering cash or a promissory note (in the form attached hereto as Exhibit
1). If Executive elects to tender such a promissory note, Executive shall
execute and deliver a pledge agreement, in the form attached hereto as
Exhibit 2, pursuant to which Executive shall pledge the purchased shares of
the Class A Common Stock acquired to Carson, Inc. to secure payment of such
promissory note. As a condition of any such purchase, Executive shall also
execute and deliver a shareholders agreement, if required by the Company or
Carson, Inc., and a registration rights agreement (in the form attached
hereto as Exhibit 3)."
5. Effective as of the date hereof, Appendix A to the Employment
Agreement is hereby deleted in its entirety.
6. Except as expressly modified herein, the Employment Agreement
shall remain in full force and effect in accordance with its terms and
provisions as the same are set forth on the date hereof.
Please indicate your acceptance of and agreement to the above
modifications by signing this modification agreement in the space provided
below.
CARSON PRODUCTS COMPANY
By:___________________________
Name:
Title:
<PAGE>
- 4 -
AGREED TO AND ACCEPTED:
____________________________
Joyce Roche
<PAGE>
Exhibit 10.3
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of June 7, 1995, by and between Carson Products
Company, a Georgia Corporation (the "Company"), and Dennis E. Smith
("Executive").
WITNESSETH:
----------
WHEREAS, Executive currently serves as Vice President, Sales of the
Company; and
WHEREAS, the current owners of all of the outstanding capital stock of
Aminco, Inc., the parent of the Company, have entered into a Stock Purchase
Agreement dated as of May 11, 1995 (the "Stock Purchase Agreement") with DNL
Savannah Acquisition Corp., a Delaware Corporation ("DNL"), under which such
shareholders shall sell, and DNL shall purchase, all of the outstanding capital
stock of Aminco, Inc.; and
WHEREAS, the Company wishes to retain the services of Executive from
and after the date of the closing of the sale of Aminco, Inc.'s capital stock to
DNL as contemplated under the Stock Purchase Agreement (the "Closing Date"), and
Executive wishes to continue in the service of the Company from and after the
Closing Date, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. TERM OF COVERED EMPLOYMENT. The term of Executive's employment
--------------------------
covered under this Agreement (the "Term of Covered Employment") shall commence
on the Closing Date and shall end on the third anniversary of the Closing Date
(the "Expiration Date"), unless terminated earlier under Section 5.
2. EMPLOYMENT AND DUTIES. Subject to the terms and conditions
---------------------
hereinafter set forth, during the Term of Covered Employment, the Company shall
employ Executive, and Executive shall serve, as Executive Vice President, Sales
of the Company. In such capacity, Executive shall perform the duties and
responsibilities assigned by the Company and such performance shall be
Executive's principal activity to which he shall devote substantially all his
working hours. Executive shall report to the Chief Executive Officer of the
Company.
<PAGE>
- 2 -
3. COMPENSATION AND BENEFITS.
-------------------------
3.1 Compensation. For all services to be rendered during the Term of
------------
Covered Employment, the Company shall pay Executive a salary ("Base
Salary") of $175,000 per annum, payable bi-weekly in arrears. In addition,
within 30 days after the Closing Date, the Company shall pay Executive a
one-time bonus of $25,000. In addition, for each fiscal year of the
Company ending within the Term of Covered Employment, Executive shall
receive a bonus (the "Bonus) in an amount equal to (i) thirty percent (30%)
of his Base Salary if the "base case" objectives (but not the "anticipated
case" objectives) for that fiscal year specified in the business plan
attached as Appendix A hereto are met, and (ii) fifty percent (50%) of his
Base Salary if the "anticipated case" objectives for that fiscal year
specified in the business plan attached as Appendix A hereto are met. The
Bonus shall be paid in a single lump sum no later than 120 days after the
end of the fiscal year for which the applicable objectives have been met.
3.2 Pension and Welfare Plans. During the Term of Covered
-------------------------
Employment, Executive shall also be eligible to participate in any pension
and welfare plans maintained by the Company for its employees, subject to
the requirements of applicable law.
3.3 Fringe Benefits.
---------------
(a) Automobile. During the Term of Covered Employment, Executive
----------
shall be entitled to use of a Buick LeSabre, Oldsmobile 88 or a
similar automobile purchased or leased by the Company. In lieu
thereof, at Executive's election communicated to the Company prior to
the Closing Date, Executive shall be entitled to an automobile
allowance from the Company of $500 for each month during the Term of
Covered Employment. In addition, the Company shall pay for all
insurance on the automobile provided by the Company to Executive, or
to which the monthly allowance is applied, as the case may be.
However, Executive shall be solely responsible for all maintenance,
repair and other expenses with respect to such automobile.
(b) College Tuition. For the school year beginning in the autumn of
---------------
1995 and ending in the spring of 1996 only, the Company shall
reimburse Executive for all tuition and room and board expenses for
Executive's son, Blair Smith, at Morehouse College.
(c) Other Fringe Benefits. During the Term of Covered
---------------------
<PAGE>
- 3 -
Employment, Executive shall also receive any other fringe benefits
generally provided by the Company to its employees.
4. LONG-TERM INCENTIVE AWARD. In the event a "Triggering Event", as
-------------------------
hereinafter defined, occurs while Executive is employed by the Company
(including any such employment following the expiration of the Term of Covered
Employment), the Company shall pay Executive, within 90 days after such
Triggering Event, a lump sum amount in cash equal to one percent of the value of
Aminco, Inc. (or any successor thereto) at the time of such Triggering Event,
minus $500,000. A "Triggering Event" means the earliest to occur of (i) an
- -----
initial public offering of the common stock of Aminco, Inc. (or any successor
thereto), (ii) a sale of substantially all (90%) of the stock or assets of
Aminco, Inc. (or any successor thereto), or (iii) the fifth anniversary of the
Closing Date. For purposes of this Section 4, the value of Aminco, Inc. (or any
successor thereto) at the time of the Triggering Event means (x) if the
Triggering Event is the initial public offering of the common stock of Aminco,
Inc. (or any successor thereto), the value determined on the basis of the price
set for the sale of such common stock to the public in such initial public
offering, as established by the managing underwriters to such public offering,
(y) if the Triggering Event is the sale of substantially all of the stock or
assets of Aminco, Inc. (or any successor thereto), the price being paid by the
acquiror of such stock or assets, and (z) if the Triggering Event is the fifth
anniversary of the Closing Date, the value established as of such date under a
valuation of Aminco, Inc. (or any successor thereto) conducted by and
independent appraiser to be selected by Executive and the Company by mutual
consent. However, if Executive and the Company cannot mutually consent to said
appraiser, then Executive shall select an independent appraiser and the Company
shall select an independent appraiser who will then jointly select an
independent appraiser to establish the valuation of Aminco, Inc. an independent
appraiser.
5. TERMINATION OF EMPLOYMENT. Notwithstanding any other provision
-------------------------
of this Agreement, but subject to the notice provisions contained in this
Section 5, the Company retains the right to terminate Executive's employment,
and Executive retains the right to resign from employment with the Company, at
any time and for any reason.
5.1 Termination for Cause. The Company may terminate Executive's
---------------------
employment with the Company for "Cause" (as hereinafter defined) in the
manner specified in this Section 5.1. In the event that on or after the
Closing Date and prior to the Expiration Date, the Company terminates
Executive's employment with the Company for Cause, the Term of Covered
Employment shall end on the date of such
<PAGE>
- 4 -
termination (which shall be the date specified in the notice described in
this Section 5.1) and Executive shall be entitled only to any unpaid amount
of Base Salary for his employment with the Company through and including
the date of such termination. In any event, Executive shall not be
entitled to receive any amount of Base Salary with respect to any period
following the date of such termination, or any portion of the Bonus for the
fiscal year of the Company in which such date of termination occurs.
For purposes of this Agreement, termination for "Cause" means termination
by the Company due to Executive's gross dereliction of his duties under
this Agreement, including, without limitation, his refusal to follow legal
orders or gross neglect of the legal directions of the Chief Executive
Officer of the Company or any other Executive of the Company senior to
Executive or any willful misconduct by Executive that is materially
injurious to the Company, or the indictment of Executive for a felony
involving moral turpitude.
To terminate Executive for Cause, the Company shall give a written notice
of such termination to Executive ("Notice of Termination"), which notice
shall have been authorized by a vote of the majority of a quorum of the
Company's Board of Directors (the "Board") and shall specify the date of
such termination, which shall not be earlier than the date on which such
notice is given to Executive. Such notice shall be given to Executive no
later than 10 days after a member of the Board (other than Executive) has
actual knowledge of the events or circumstances which purportedly
constitute Cause for such termination, and shall specify the particular act
or acts, or failure to act, or other events or circumstances constituting
Cause for such termination. Executive shall be given the opportunity
within thirty (30) days after receiving such notice to meet with a quorum
of the Board to explain why Cause for such termination does not exist.
Executive shall have a right to counsel and the right to be represented by
counsel at such meeting. Within 15 days after any such meeting, the Board
shall give Executive its final decision regarding whether Cause exists. If
the Board's final decision is that Cause exists, Executive's employment
with the Company shall be terminated under this Section 5.1 pursuant to the
Notice of Termination as of the date of termination specified in such
Notice. If a quorum of the Board votes to terminate Executive for "Cause",
Executive's employment with the Company shall be terminated under this
Section 5.1 pursuant to the Notice of Termination as of the date of
termination specified in such Notice of Termination. If a quorum of the
Board renders a final decision that "Cause" does not exist, Executive's
employment with the Company shall not be terminated under
<PAGE>
- 5 -
this Section 5.1. Further, the Company agrees that if Executive was
represented by counsel then Executive shall be reimbursed for his
reasonable attorneys fees and cost.
5.2 Resignation. Executive may resign from employment with the
-----------
Company by giving the Company written notice of such resignation, which
notice shall specify the date of resignation, which shall not be earlier
than 30 days after the date such written notice is given to the Company.
(a) During First Year. In the event that Executive's date of
-----------------
resignation is after the Closing Date and prior to the first
anniversary of the Closing Date, the Term of Covered Employment shall
end upon such date of resignation, but the Company shall continue to
make payments to Executive of his Base Salary until the first
anniversary of the Closing Date as if he continued to be employed by
the Company until such first anniversary. Executive shall not be
entitled to any portion of the Bonus for the fiscal year of the
Company in which such date of resignation occurs. Executive shall not
be entitled to participate in any of the Company's employee benefit
plans following such date of resignation, except as may be required by
applicable law.
(b) After First Year. In the event that Executive's date of
----------------
resignation is after the first anniversary of the Closing Date and
prior to the Expiration Date, the Term of Covered Employment shall end
on such date of resignation, and Executive shall be entitled only to
any unpaid amount of Base Salary for his employment with the Company
through and including such date of resignation. Executive shall not
be entitled to receive any amount of Base Salary with respect to any
period following such date of resignation, or any portion of the Bonus
for the fiscal year of the Company in which such date of resignation
occurs.
5.3 Termination Other Than For Cause. The Company may terminate
--------------------------------
Executive's employment with the Company other than for Cause by giving
Executive written notice of such termination, which notice shall specify
the date of such termination, which shall not be earlier than 30 days after
such written notice is given to Executive. In the event that on or after
the Closing Date and prior to the Expiration Date Executive's employment
with the Company is terminated by the Company other than for Cause, the
Term of Covered Employment shall end upon such specified date of
termination and the Company shall pay Executive, within 15 days after such
date of termination, an additional lump sum amount equal to 200% of one
year's Base Salary. Executive
<PAGE>
- 6 -
shall not be eligible to participate in any of the Company's other employee
benefit plans following such date of termination of employment, except
those as mentioned herein or as required by applicable law. Executive
shall not be eligible to participate in any of the Company's employee
benefit plans following such date of termination of employment, except as
may be required by applicable law.
5.4 Termination Due to Death or Disability. The Company may
--------------------------------------
terminate Executive's employment with the Company due to "Disability", as
hereinafter defined, by giving Executive written notice of such
termination, which notice shall specify the date of such termination, which
shall not be earlier than 30 days after such written notice is given to
Executive. If on or after the Closing Date and prior to the Expiration
Date Executive's employment with the Company is terminated due to
Disability, or if during such period Executive dies, the Term of Covered
Employment shall end upon such specified date of termination or date of
death, as applicable, and the Company shall pay Executive, or his
beneficiary or estate, as the case may be, within 15 days after such date
of termination or death, an additional lump sum amount equal to 200% of one
year's Base Salary. Executive shall not be eligible to participate in any
of the Company's other employee benefit plans following such date of
disability except those mentioned herein or as required by applicable law.
For purposes of this Agreement, "Disability" means Executive's
inability to perform his duties under this Agreement for a period of at
least six consecutive months because of medically determinable physical or
mental impairment, as determined by a physician mutually agreeable to
Executive and the Company. If Executive and the Company are unable to
agree on such a physician, each shall appoint one physician and those two
physicians shall appoint a third physician who shall make such a
determination.
6. NON-COMPETITION; NON-SOLICITATION. While Executive is employed
---------------------------------
by the Company (including any period of such employment following the expiration
of the Term of Covered Employment), and during the period in which Executive is
receiving payments of Base Salary from the Company (regardless of whether or not
Executive is then employed by the Company), Executive shall not directly or
indirectly (i) own, manage, operate, represent, promote, consult for, control or
participate in the ownership, operation, acquisition or management of any
business manufacturing and/or distributing ethnic hair care products or
cosmetics within a 500-mile radius of the Company's headquarters, (ii) solicit
(other than on behalf of the Company or any of its affiliates), divert or take
away the business of any customers of the Company or any of its affiliates, or
any
<PAGE>
- 7 -
prospective customers of the Company or any of its affiliates whose business the
Company or any of its affiliates is actively soliciting during Executive's
employment with the Company with whom Executive had any material personal
contact, or (iii) solicit or induce any employee of the Company or any of its
affiliates to terminate such employee's employment with the Company or such
affiliate. It is expressly acknowledged that a breach of this covenant may
result in irreparable harm to the Company for which there is no adequate remedy
at law and that, therefore, in the event of such a breach, the Company shall be
entitled to obtain injunctive relief restraining Executive from engaging in
activities prohibited by this Section 6 or any other relief as may be required
to specifically enforce this covenant.
7. CONFIDENTIALITY. While employed by the Company and at all times
---------------
thereafter, Executive shall maintain the confidentiality of all information of
and relating to, and all material of, the Company and its affiliates that have
not been made available to the public (other than by reason of a breach by
Executive of his obligations under this Section 7) and shall not, without the
Company's prior written permission, disclose to any person outside of the
Company and its affiliates any such information or material. Without limiting
the foregoing sentence, such information and material shall include pricing
plans and price policies, business plans, sales forecasts, research and
development, formulas, procedures and the identity of customers and suppliers
and the terms upon which the Company or any of its affiliates deals with them.
Upon termination of employment with the Company, Executive shall return to the
Company all property in his possession, whether or not containing confidential
information, including but not limited to originals and copies of any written
documents, drawings and reports, diskettes and other storage media, belonging to
the Company or any of its affiliates or received from the Company or any of its
affiliates. It is expressly acknowledged that a breach of this covenant may
result in irreparable harm to the Company for which there is no adequate remedy
at law and that, therefore, in the event of such a breach, the Company shall be
entitled to obtain injunctive relief restraining Executive from engaging in
activities prohibited by this Section 7 or any other relief as may be required
to specifically enforce this covenant.
8. CONDITIONS PRECEDENT. This Agreement shall not take effect
--------------------
unless, prior to the Closing Date, (i) Executive has executed a power of
attorney appointing the law firm of Hunter, Maclean, Exley & Dunn, P.C. as his
attorney-in-fact to consummate the sale of all of the common stock of Aminco,
Inc. held by Executive pursuant to the Stock Purchase Agreement, and (ii) the
Company or Aminco, Inc. and Executive enter into a mutual release of all claims
against each other, and under which Executive agrees not to pursue or take part
in any lawsuit, claim, proceeding or other action relating in any fashion to the
Stock
<PAGE>
- 8 -
Purchase Agreement or the transactions contemplated thereunder including,
without limitation, consideration received by any party thereto in respect of
the sale of shares of Aminco, Inc. under the Stock Purchase Agreement.
9. TAXES. The Company shall be entitled to deduct and withhold from
-----
all amounts payable under this Agreement all applicable Federal, state and local
taxes which the Company determines are required by law to be deducted and
withheld.
10. NOTICES. All notices and other communications under this
-------
Agreement shall be in writing and shall be given by hand delivery to the party
receiving such notice or by certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to Executive: Dennis E. Smith
24 Cardiff Road
Savannah, Georgia 31419
If to the Company: Carson Products Company
71 A Ross Road
Savannah, Georgia 31405
Attention: Chief Executive
Officer
or to such other address as either party shall have furnished to the other party
in writing as the address to send future notices and communications in
accordance herewith. Any notice or communication shall be deemed given when
actually received by the party who is its intended recipient.
11. SEVERABILITY. If any provision of this Agreement is held to be
------------
invalid under applicable law, such provision shall be ineffective only to the
extent of such invalidity, and the remaining provisions of this Agreement shall
be unimpaired.
12. WAIVERS. The waiver by either party of a breach of any provision
-------
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision, or as a waiver of any other provision of
this Agreement.
13. ASSIGNABILITY. The Company may assign its rights and obligations
-------------
hereunder to any of its affiliates, or to any successor of the Company.
Executive may not assign any of his rights, duties, obligations or interests
hereunder to any other person without the prior express written consent of the
Board of Directors of the Company.
14. ENTIRE AGREEMENT. This instrument contains the entire agreement
----------------
of the parties with respect to, and supersedes
<PAGE>
- 9 -
all prior agreements relating to, Executive's employment with the Company.
15. GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed and enforced under, the laws of the State of Georgia.
16. EFFECTIVENESS OF AGREEMENT . This Agreement shall be and become
---------------------------
effective as of the Closing Date; provided, that if the Stock Purchase Agreement
--------
is terminated, this Agreement shall be canceled and be of no force or effect.
17. AMENDMENTS TO EMPLOYMENT AGREEMENT . Nothing herein shall be
-----------------------------------
construed to prohibit amendments to the Agreement, however, any amendment shall
be void unless evidenced by a written memorandum executed by the Executive and
the Company.
18. FEES. Company agrees to reimburse Executive up to $2,500.00 for
----
his attorney fees and cost associated with the consummation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
EXECUTIVE CARSON PRODUCTS COMPANY
________________________ __________________________
Dennis E. Smith By:_______________________
<PAGE>
CARSON PRODUCTS COMPANY
P.O. Box 22309
Savannah, Georgia 31403-2309
July 31, 1996
PERSONAL AND CONFIDENTIAL
- -------------------------
Mr. Dennis Smith
24 Cardiff Road
Savannah, Georgia 31419
Re: Employment Agreement Modification
---------------------------------
Dear Dennis:
I am pleased to advise you that the Board of Directors of Carson Products
Company (the "Company") has agreed to modify your employment agreement, dated as
of June 7, 1995, with the Company (the "Employment Agreement") to (i) extend
your term of employment thereunder, (ii) increase your base salary, (iii)
convert one-half of your stock-based long-term incentive opportunity into the
right to purchase Class A Common Stock of the Company, and (iv) effect certain
other changes thereto.
Accordingly, the Employment Agreement, in accordance with Section 17
thereof, is hereby modified, effective as of the dates set forth below, as
follows:
1. Effective as of the closing of the Offerings (as that term is defined
in the Form S-1 Registration Statement filed by Carson, Inc. under the
Securities Act of 1933), Section 1 of the Employment Agreement is hereby amended
by deleting it in its entirety and replacing it with a new Section 1 to read in
its entirety as follows:
"1. Term of Covered Employment. The term of Executive's
--------------------------
employment covered under this Agreement (the "Term of Covered
<PAGE>
- 2 -
Employment") shall commence on the Closing Date and shall end on the third
anniversary of the closing of the Offerings, as that term is defined in the
Form S-1 Registration Statement filed by Carson, Inc. under the Securities
Act of 1933, (the "Expiration Date"), unless earlier terminated under
Section 5 of this Agreement."
2. Effective as of [the date hereof], Section 3.1 of the Employment
Agreement is hereby amended by deleting it in its entirety and replacing it with
a new Section 3.1 to read as follows:
"3.1 Compensation. For all services to be rendered during the
------------
Term of Covered Employment, the Company shall pay Executive a salary
("Base Salary") of $200,000 per annum, payable bi-weekly in arrears.
In addition, for each fiscal year of the Company ending within the
Term of Covered Employment, Executive shall receive a bonus (the
"Bonus") in an amount equal to (i) thirty percent (30%) of Base Salary
if the "base case" objectives (but not the "anticipated case"
objectives) for that fiscal year, as specified by the Board (as
defined in Section 5.1 of this Agreement), or a committee thereof, are
achieved, or (ii) fifty percent (50%) of Base Salary if the
"anticipated case" objectives for that fiscal year, as specified by
the Board (or a committee thereof) are met. The objectives utilized
in determining the Bonus shall be net revenue growth, net income,
earnings per share and/or stock price growth, each as defined by the
Board (or a committee thereof) in its sole discretion. A lesser
percentage of Base Salary may be paid hereunder if one or more, but
not all, of the targeted objectives for a fiscal year are achieved.
If the "base case" objectives are met, the value of the Bonus, if any,
shall be paid seventy-five percent (75%) in a single lump sum cash
payment and twenty-five percent (25%) in shares of restricted stock of
Carson, Inc. If the "anticipated case" objectives are met, the value
of the Bonus, if any, shall be paid fifty percent (50%) in a single
lump sum cash payment and fifty percent (50%) in shares of restricted
stock of Carson, Inc. Such restricted stock shall vest as to one-
third (1/3) of the aggregate number of shares delivered to Executive
on each of the first three anniversaries of the date of payment of the
Bonus (if Executive is employed by the Company on such dates). The
Bonus shall be paid no later than 120 days after the end of the fiscal
year for which the applicable objectives have been met."
3. Effective as of the date hereof, Section 3.2 of the Employment
Agreement is hereby amended by adding at the end thereof the following proviso:
<PAGE>
- 3 -
", provided, however, that, unless otherwise determined by the Company
-------- -------
and Carson, Inc., Executive shall not be eligible to participate in
any profit-sharing plan maintained, sponsored or contributed to by the
Company or Carson, Inc. that is intended to qualify under Section
401(a) of the Internal Revenue Code of 1986, as amended."
4. Effective as of the date hereof, Section 4 of the Employment
Agreement is hereby amended by deleting it in its entirety and replacing it with
a new Section 4 to read as follows:
"4. STOCK PURCHASE RIGHT AND LONG-TERM INCENTIVE AWARD.
--------------------------------------------------
"4.1 Stock Purchase Right. Executive shall have the right to
--------------------
acquire 5.2205 shares of Carson, Inc.'s Class A Common Stock at a per
share purchase price equal to the fair market value per hare of the
Class A Common Stock on the date of purchase, as determined by the
Board (as defined in Section 5.1 of this Agreement). Executive may
satisfy the aggregate purchase price for the shares of the Class A
Common Stock by tendering cash or a promissory note (in the form
attached hereto as Exhibit 1). If Executive elects to tender such a
promissory note, Executive shall execute and deliver a pledge
agreement, in the form attached hereto as Exhibit 2, pursuant to which
Executive shall pledge the purchased shares of the Class A Common
Stock acquired to Carson, Inc. to secure payment of such promissory
note. As a condition of any such purchase, Executive shall also
execute and deliver a shareholders agreement, if required by the
Company or Carson, Inc., and a registration rights agreement (each in
the form attached hereto as Exhibit 3).
"4.2 Long-Term Incentive Award. In the event a "Triggering
-------------------------
Event", as hereinafter defined, occurs while Executive is employed by
the Company (including any such employment following the expiration of
the Term of Covered Employment), the Company shall pay Executive,
within 90 days after such Triggering Event, a lump sum amount in cash
equal to (A) the product of (i) one-half of one percent of the value
of Aminco, Inc. (or any successor thereto) at the time of such
Triggering Event (as that value is reduced by the aggregate
underwriting discount in connection with the Offerings) and (ii) the
Dilution Percentage (as defined below), minus (B) $250,000. A
-----
"Triggering Event" means the earliest to occur of (i) an initial
public offering of the common stock of Aminco, Inc. (or any successor
thereto), (ii) sale of substantially all (90%) of the stock or assets
of Aminco, Inc. (or any successor thereto), or (iii) the fifth
anniversary of the Closing Date. For purposes of this Section 4, the
value of Aminco, Inc. (or any successor thereto) at the time of
<PAGE>
- 4 -
the Triggering Event means (x) if the Triggering Event is the initial
public offering of the common stock of Aminco, Inc. (or any successor
thereto), the value determined on the basis of the price set for the
sale of such common stock to the public in such initial public
offering, as established by the managing underwriters to such public
offering, (y) if the Triggering Event is the sale of substantially all
of the stock or assets of Aminco, Inc. (or any successor thereto), the
price being paid by the acquiror of such stock or assets, and (z) if
the Triggering Event is the fifth anniversary of the Closing Date, the
value established as of such date under a valuation of Aminco, Inc.
(or any successor thereto) conducted by an independent appraiser to be
selected by Executive and the Company by mutual consent. However, if
Executive and the Company cannot mutually consent to said appraiser,
then Executive shall select an independent appraiser and the Company
shall an independent appraiser who will then jointly select an
independent appraiser to establish the valuation of Aminco, Inc. and
independent appraiser. For purposes of this Agreement, the Dilution
Percentage is equal to the quotient resulting when (i) the number of
shares of all classes of the Company's Common Stock outstanding on
July 31, 1996 is divided by (ii) the number of shares of all classes
of the Company's Common Stock outstanding immediately after the
closing of the Offerings, as defined in Section 1 above."
5. Effective as of the date hereof, Appendix A to the Employment
Agreement is hereby deleted in its entirety.
6. Except as expressly modified herein, the Employment Agreement
shall remain in full force and effect in accordance with its terms and
provisions as the same are set forth on the date hereof.
Please indicate your acceptance of and agreement to the above
modifications by signing this modification agreement in the space provided
below.
CARSON PRODUCTS COMPANY
By:___________________________
Name:
Title:
AGREED TO AND ACCEPTED:
____________________________
Dennis Smith
<PAGE>
Exhibit 10.4
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of April 1, 1996, by and between Carson Products
Company, a Delaware Corporation (the "Company"), and Sharon A. Davis
("Executive").
WITNESSETH:
----------
WHEREAS, Executive currently serves as Vice President - Operations of
the Company; and
WHEREAS, the Company wishes to retain the services of Executive from
and after the date hereof (the "Effective Date"), and Executive wishes to
continue in the service of the Company from and after the Effective Date, on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Term of Covered Employment. The term of Executive's employment
--------------------------
covered under this Agreement (the "Term of Covered Employment") shall commence
on the Effective Date and shall end on the third anniversary of the Effective
Date (the "Expiration Date"), unless terminated earlier under Section 5.
2. Employment and Duties. Subject to the terms and conditions
---------------------
hereinafter set forth, during the Term of Covered Employment, the Company shall
employ Executive, and Executive shall serve, as Vice President - Operations of
the Company. In such capacity, Executive shall perform the duties the duties
and responsibilities assigned by the Company, and such performance shall be
Executive's principal activity to which she shall devote substantially all of
her working hours. Executive shall report to the Chief Executive Officer of the
Company.
3. Compensation and Benefits.
-------------------------
3.1 Compensation. For all services to be rendered during the Term of
------------
Covered Employment, the Company shall pay Executive a salary ("Base Salary") of
$90,000 per annum, payable bi-weekly in arrears. In addition, for each fiscal
year of the Company ending within the Term of Covered Employment, Executive
shall receive a bonus (the "Bonus") in an amount equal to (i) thirty percent
(30%) of the Base Salary if the "base case" objectives (but not the "anticipated
case" objectives) for such fiscal year as specified in the business plan
attached as Appendix A hereto (as the same may be supplemented from time to
time) are met, and (ii) fifty percent (50%) of her Base Salary if the
"anticipated case" objectives for such fiscal year as specified in said business
plan are met. The Bonus shall be paid in a single lump sum no later than 120
days after the end of the fiscal year for which the applicable objectives have
been met.
3.2 Pension and Welfare Plans. During the Term of Covered
-------------------------
Employment, Executive shall also be eligible to participate in any pension and
welfare plans maintained by the Company for its employees, subject to the
requirements of applicable law.
3.3 Fringe Benefits. During the Term of Covered Employment,
---------------
Executive shall receive any fringe benefits generally provided by the Company to
its employees.
<PAGE>
4. Long-Term Incentive Award. In the event a "Triggering Event", as
-------------------------
hereinafter defined, occurs while Executive is employed by the Company
(including any such employment following the expiration of the Term of Covered
Employment), the Company shall pay Executive, within 90 days after such
Triggering Event, a lump sum amount in cash equal to one-quarter of one percent
(0.25%) of the value of DNL Savannah Holding Corp., a Delaware corporation ("DNL
Holding"), the parent corporation of the Company, or any successor thereto, at
the time of such Triggering Event, minus $125,000. A "Triggering Event" means
-----
the earliest to occur of (i) an initial public offering of the common stock of
DNL Holding (or any successor thereto), (ii) a sale of substantially all of the
stock or assets of DNL Holding or the Company (or any successor thereto), or
(iii) the fifth anniversary of the Effective Date. For purposes of this Section
4, the value of DNL Holding (or any successor thereto) at the time of the
Triggering Event means (x) if the Triggering Event is the initial public
offering of the common stock of DNL Holding (or any successor thereto), the
value determined on the basis of the price set for the sale of such common stock
to the public in such initial public offering, as established by the managing
underwriters to such public offering, (y) if the Triggering Event is the sale of
substantially all of the stock or assets of DNL Holding or the Company (or any
successor thereto), the price being paid by the acquiror of such stock or
assets, and (z) if the Triggering Event is the fifth anniversary of the
Effective Date, the value established as of such date under a valuation of DNL
Holding (or any successor thereto) conducted by an independent appraiser.
5. Termination of Employment. Notwithstanding any other provision of
-------------------------
this Agreement, but subject to the notice provisions contained in this Section
5, the Company retains the right to terminate Executive's employment, and
Executive retains the right to resign from employment with the Company, at any
time and for any reason.
5.1 Termination for Cause. The Company may terminate Executive's
---------------------
employment with the Company for "Cause" (as hereinafter defined) in the manner
specified in this Section 5.1. In the event that on or after the Effective Date
and prior to the Expiration Date, the Company terminates Executive's employment
with the Company for Cause, the Term of Covered Employment shall end on the date
of such termination (which shall be the date specified in the notice described
in this Section 5.1) and Executive shall be entitled only to any unpaid amount
of Base Salary for her employment with the Company through and including the
date of such termination. In any event, Executive shall not be entitled to
receive any amount of Base Salary with respect to any period following the date
of such termination, or any portion of the Bonus for the fiscal year of the
Company in which such date of termination occurs.
For purposes of this Agreement, termination for "Cause" means
termination by the Company due to Executive's gross dereliction of her duties
under this Agreement, including without limitation, her refusal to follow or
gross neglect of the directions of the Chief Executive Officer of the Company or
any other executive of the Company senior to Executive, or any willful
misconduct by Executive that is materially injurious to the Company, or the
indictment of Executive for a felony involving moral turpitude.
To terminate Executive for Cause, the Company shall give a written
notice of such termination to Executive ("Notice of Termination"), which notice
shall have been authorized by a vote of the majority of the Company's Board of
Directors (the "Board") and shall specify the date of such termination, which
shall no be earlier than the date on which such notice is given to Executive.
Such notice shall be given to Executive no later than 10 days after a member of
the Board (other than Executive) has actual knowledge of the events or
circumstances which purportedly constitute Cause for such termination, and shall
specify the particular act or acts, or failure to act, or other events or
2
<PAGE>
circumstances constituting Cause for such termination. Executive shall be given
the opportunity within 30 days after receiving such notice to meet with the
Board to explain why Cause for such termination does not exist. Within 15 days
after any such meeting, the Board shall give Executive its final decision
regarding whether Cause exists. If the Board's final decision is that Cause
exists, Executive's employment with the Company shall be terminated under this
Section 5.1 pursuant to the Notice of Termination as of the date of termination
specified in such Notice. If the Board's final decision is that Cause does not
exist, Executive's employment with the Company shall not be terminated under
this Section 5.1.
5.2 Resignation. Executive may resign from employment with the
-----------
Company by giving the Company written notice of such resignation, which notice
shall specify the date of resignation, which shall not be earlier than 30 days
after the date such written notice is given to the Company. In the event of
Executive's resignation on or after the Effective Date and prior to the
Expiration Date, the Term of Covered Employment shall end on the date of
resignation (which shall be the date specified in Executive's notice of
resignation), and Executive shall be entitled only to any unpaid amount of Base
Salary for her employment with the Company through and including such date of
resignation. Executive shall not be entitled to receive any amount of Base
Salary with respect to any period following such date of resignation, or any
portion of the Bonus for the fiscal year of the Company in which such date of
resignation occurs.
5.3 Termination Other Than For Cause. The Company may terminate
--------------------------------
Executive's employment with the Company other than for Cause by giving Executive
written notice of such termination, which notice shall specify the date of such
termination, which shall not be earlier than 30 days after such written notice
is given to Executive. In the event that on or after the Effective Date and
prior to the Expiration Date Executive's employment with the Company is
terminated by the Company other than for Cause, the Term of Covered Employment
shall end upon such specified date of termination and the Company shall pay
Executive, within 15 days after such date of termination, an additional lump sum
amount equal to 150% of one year's Base Salary. Executive shall not be eligible
to participate in any of the Company's employee benefit plans following such
date of termination of employment, except as may be required by applicable law.
5.4 Termination Due to Death or Disability. The Company may
--------------------------------------
terminate Executive's employment with the Company due to "Disability", as
hereinafter defined, by giving Executive written notice of such termination,
which notice shall specify the date of such termination, which shall not be
earlier than 30 days after such written notice is given to Executive. If on or
after the Effective Date and prior to the Expiration Date Executive's employment
with the Company is terminated due to Disability, or if during such period
Executive dies, the Term of Covered Employment shall end upon such specified
date of termination or date of death, as applicable, and the Company shall pay
Executive, or her beneficiary or estate, as the case may be, within 15 days
after such date of termination or death, an additional lump sum amount equal to
150% of one year's Base Salary.
For purposes of this Agreement, "Disability" means Executive's
inability to perform her duties under this Agreement for a period of at least
six consecutive months because of medically determinable physical or mental
impairment, as determined by a physician mutually agreeable to Executive and the
Company. If Executive and the Company are unable to agree on such a physician,
each shall appoint one physician and those two physicians shall appoint a third
physician who shall make such a determination.
3
<PAGE>
6. Non-Competition; Non-Solicitation. While Executive is employed by
---------------------------------
the Company (including any period of such employment following the expiration of
the Term of Covered Employment), and during the period in which Executive is
receiving payment of Base Salary from the Company (regardless of whether or not
Executive is then employed by the Company), Executive shall not directly or
indirectly (i) own, manage, operate, represent, promote, consult for, control or
participate in the ownership, operation, acquisition or management of any
business which manufactures and/or distributes ethnic hair care products or
cosmetics within a 500-mile radius of the Company's headquarters, (ii) solicit
(other than on behalf of the company or any of its affiliates), divert or take
away the business of any customers of the Company or any of it affiliates, or
any prospective customers of the Company or any of its affiliates whose business
the Company or any of its affiliates is actively soliciting, or has actively
solicited, during Executive's employment with the Company with whom Executive
had any material personal contract, or (iii) solicit or induce any employee of
the Company or any of its affiliates to terminate such employee's employment
with the Company or such affiliate. It is expressly acknowledged that a breach
of this covenant may result in irreparable harm to the Company for which there
is no adequate remedy at law and that, therefore, in the event of such a breach,
the Company shall be entitled to obtain injunctive relief restraining Executive
from engaging in activities prohibited by this Section 6 or any other relief as
may be required to specifically enforce this covenant.
7. Confidentiality. While employed by the Company and at all times
---------------
thereafter, Executive shall maintain the confidentiality of all information of
and relating to, and all material of, the Company and its affiliates that have
not been made available to the public (other than by reason of a reach by
Executive of her obligations under this Section 7) and shall not, without the
Company's prior written permission, disclose to any person outside of the
Company and its affiliates any such information or material. Without limiting
the foregoing sentence, such information and material shall include pricing
plans and price policies, business plans, sales forecasts, research and
development, formulas, procedures and the identity of customers and suppliers
and the terms upon which the Company or any of its affiliates deals with them.
Upon termination of employment with the Company, Executive shall return to the
Company all property in her possession, whether or not containing confidential
information, including but not limited to originals and copies of any written
documents, drawings and reports, diskettes and other storage media, belonging to
the Company or any of its affiliates or received from the Company or any of its
affiliates. It is expressly acknowledged that breach of this covenant may
result in irreparable harm to the Company for which there is no adequate remedy
at law and that, therefore, in the event of such a breach, the Company shall be
entitled to obtain injunctive relief restraining Executive from engaging in
activities prohibited by this Section 7 or any other relief as may be required
to specifically enforce this covenant.
8. Taxes. The Company shall be entitled to deduct and withhold from
-----
all amounts payable under this Agreement all applicable Federal, state and local
taxes which the Company determines are required by law to be deducted and
withheld.
9. Notices. All notices and other communications under this
-------
Agreement shall be in writing and shall be given by hand delivery to the party
receiving such notice or by certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to Executive: Sharon A. Davis
c/o Carson Products Company
71 A Ross Road
Savannah, Georgia 31405
4
<PAGE>
If to Company: Carson Products Company
71 A Ross Road
Savannah, Georgia 31405
Attention: Chief Executive Officer
or to such other address as either party shall have furnished to the other party
in writing as the address to send future notices and communications in
accordance herewith. Any notice or communications shall be deemed given when
actually received by the party who is its intended recipient.
10. Severability. If any provision of this Agreement is held to be
------------
invalid under applicable law, such provision shall be ineffective only to the
extent of such invalidity, and the remaining provisions of this Agreement shall
be unimpaired.
11. Waivers. The waiver by either party of a breach of any provision
-------
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision, or as a waiver of any other provision of
this Agreement.
12. Assignability. The Company may assign its rights and obligations
-------------
hereunder to any of its affiliates, or to any successor of the Company;
provided, that this Agreement shall, without further action of the Company,
- --------
automatically be assumed by the surviving entity in any merger transaction or
transactions to which the Company is a party. Executive may not assign any of
her rights, duties, obligations or interests hereunder to any other person
without the prior express written consent of the Board of Directors of the
Company.
13. Entire Agreement. This instrument contains the entire agreement
----------------
of the parties with respect to, and supersedes all prior agreements relating to,
Executive's employment with the Company.
14. Governing Law. This Agreement shall be governed by, and
-------------
construed and enforced under, the laws of the State of Georgia.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Carson Products Company
By______________________________
Leroy Keith
Chairman & CEO
_____________________________
Sharon A. Davis
5
<PAGE>
Appendix A
Business Plan
Executive Level Bonus Targets for FY 1997
-----------------------------------------
Anticipated Case Base Case
---------------- ---------
Sales $80.3 million $75.5 million
EBIDTA $20.8 million $15.8 million
6
<PAGE>
CARSON PRODUCTS COMPANY
P.O. Box 22309
Savannah, Georgia 31403-2309
July 31, 1996
PERSONAL AND CONFIDENTIAL
- -------------------------
Ms. Miriam Muley
6 Arthur's Court
Warwick, New York 10990
Re: Employment Agreement Modification
---------------------------------
Dear Miriam:
I am pleased to advise you that the Board of Directors of Carson Products
Company (the "Company") has agreed to modify your employment agreement, dated as
of March 11, 1996, with the Company (the "Employment Agreement") to (i) extend
your term of employment thereunder, (ii) increase your base salary, (iii)
convert your stock-based long-term incentive opportunity into the right to
purchase Class A Common Stock of the Company, and (iv) effect certain other
changes thereto.
Accordingly, the Employment Agreement is hereby modified, effective as of
the dates set forth below, as follows:
1. Effective as of the closing of the Offerings (as that term is defined
in the Form S-1 Registration Statement filed by Carson, Inc. under the
Securities Act of 1933), Section 1 of the Employment Agreement is hereby amended
by deleting it in its entirety and replacing it with a new Section 1 to read in
its entirety as follows:
"1. Term of Covered Employment. The term of Executive's
--------------------------
employment covered under this Agreement (the "Term of Covered Employment")
shall commence on the Closing Date and shall end on the third anniversary
of the closing of the Offerings, as that term is defined in the Form
<PAGE>
- 2 -
S-1 Registration Statement filed by Carson, Inc. under the Securities Act
of 1933, (the "Expiration Date"), unless earlier terminated under Section 5
of this Agreement."
2. Effective as of [the date hereof], Section 3.1 of the Employment
Agreement is hereby amended by deleting it in its entirety and replacing it with
a new Section 3.1 to read as follows:
"3.1 Compensation. For all services to be rendered during the
------------
Term of Covered Employment, the Company shall pay Executive a salary
("Base Salary") of $155,000 per annum, payable bi-weekly in arrears.
In addition, for each fiscal year of the Company ending within the
Term of Covered Employment, Executive shall receive a bonus (the
"Bonus") in an amount equal to (i) thirty percent (30%) of Base Salary
if the "base case" objectives (but not the "anticipated case"
objectives) for that fiscal year, as specified by the Board (as
defined in Section 5.1 of this Agreement), or a committee thereof, are
achieved, or (ii) fifty percent (50%) of Base Salary if the
"anticipated case" objectives for that fiscal year, as specified by
the Board (or a committee thereof) are met. The objectives utilized
in determining the Bonus shall be net revenue growth, net income,
earnings per share and/or stock price growth, each as defined by the
Board (or a committee thereof) in its sole discretion. A lesser
percentage of Base Salary may be paid hereunder if one or more, but
not all, of the targeted objectives for a fiscal year are achieved.
If the "base case" objectives are met, the value of the Bonus, if any,
shall be paid seventy-five percent (75%) in a single lump sum cash
payment and twenty-five percent (25%) in shares of restricted stock of
Carson, Inc. If the "anticipated case" objectives are met, the value
of the Bonus, if any, shall be paid fifty percent (50%) in a single
lump sum cash payment and fifty percent (50%) in shares of restricted
stock of Carson, Inc. Such restricted stock shall vest as to one-
third (1/3) of the aggregate number of shares delivered to Executive
on each of the first three anniversaries of the date of payment of the
Bonus (if Executive is employed by the Company on such dates). The
Bonus shall be paid no later than 120 days after the end of the fiscal
year for which the applicable objectives have been met."
3. Effective as of the date hereof, Section 3.2 of the Employment
Agreement is hereby amended by adding at the end thereof the following proviso:
", provided, however, that, unless otherwise determined by the Company
-------- -------
and Carson, Inc., Executive shall not be eligible to
<PAGE>
- 3 -
participate in any profit-sharing plan maintained, sponsored or
contributed to by the Company or Carson, Inc. that is intended to
qualify under Section 401(a) of the Internal Revenue Code of 1986, as
amended."
4. Effective as of the date hereof, Section 4 of the Employment
Agreement is hereby amended by deleting it in its entirety and replacing it with
a new Section 4 to read as follows:
"4. Stock Purchase Right. Executive shall have the right to
--------------------
acquire 5.2205 shares of Carson, Inc.'s Class A Common Stock at a per share
purchase price equal to the fair market value per hare of the Class A
Common Stock on the date of purchase, as determined by the Board (as
defined in Section 5.1 of this Agreement). Executive may satisfy the
aggregate purchase price for the shares of the Class A Common Stock by
tendering cash or a promissory note (in the form attached hereto as Exhibit
1). If Executive elects to tender such a promissory note, Executive shall
execute and deliver a pledge agreement, in the form attached hereto as
Exhibit 2, pursuant to which Executive shall pledge the purchased shares of
the Class A Common Stock acquired to Carson, Inc. to secure payment of such
promissory note. As a condition of any such purchase, Executive shall also
execute and deliver a shareholders agreement, if required by the Company or
Carson, Inc., and a registration rights agreement (in the form attached
hereto as Exhibit 3)."
5. Effective as of the date hereof, Appendix A to the Employment
Agreement is hereby deleted in its entirety.
6. Except as expressly modified herein, the Employment Agreement
shall remain in full force and effect in accordance with its terms and
provisions as the same are set forth on the date hereof.
Please indicate your acceptance of and agreement to the above
modifications by signing this modification agreement in the space provided
below.
CARSON PRODUCTS COMPANY
By:___________________________
Name:
Title:
AGREED TO AND ACCEPTED:
____________________________
Miriam Muley
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of June 7, 1995, by and between Carson Products
Company, a Georgia Corporation (the "Company"), and John P. Brown, Jr.
("Executive").
WITNESSETH:
----------
WHEREAS, the current owners of all of the outstanding capital stock of
Aminco, Inc., the parent of the Company, have entered into a Stock Purchase
Agreement dated as of May 11, 1995 (the "Stock Purchase Agreement") with DNL
Savannah Acquisition Corp., a Delaware Corporation ("DNL"), under which such
shareholders shall sell, and DNL shall purchase, all of the outstanding capital
stock of Aminco, Inc.; and
WHEREAS, the Company wishes to retain the services of Executive from and
after the date of the closing of the sale of Aminco, Inc.'s capital stock to DNL
as contemplated under the Stock Purchase Agreement (the "Closing Date"), and
Executive wishes to be employed in the service of the Company from and after the
Closing Date, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. TERM OF COVERED EMPLOYMENT. The term of Executive's employment covered
--------------------------
under this Agreement (the "Term of Covered Employment") shall commence on the
Closing Date and shall end on the third anniversary of the Closing Date (the
"Expiration Date"), unless terminated earlier under Section 5.
2. EMPLOYMENT AND DUTIES. Subject to the terms and conditions hereinafter
---------------------
set forth, during the Term of Covered Employment, the Company shall employ
Executive, and Executive shall serve, as Vice President, Strategic Planning of
the Company. In such capacity, Executive shall perform the duties and
responsibilities assigned by the Company, and such performance shall be
Executive's principal activity to which he shall devote substantially all his
working hours. Executive shall report to the Chief Executive Officer of the
Company.
<PAGE>
- 2 -
3. COMPENSATION AND BENEFITS.
-------------------------
3.1 Compensation. For all services to be rendered during the Term of
------------
Covered Employment, the Company shall pay Executive a salary ("Base
Salary") of $95,000 per annum, payable bi-weekly in arrears. In addition,
for each fiscal year of the Company ending within the Term of Covered
Employment, Executive shall receive a bonus (the "Bonus) in an amount equal
to (i) thirty percent (30%) of his Base Salary if the "base case"
objectives (but not the "anticipated case" objectives) for such fiscal year
as specified in the business plan attached as Appendix A hereto are met,
and (ii) fifty percent (50%) of his Base Salary if the "anticipated case"
objectives for such fiscal year as specified in the business plan attached
as Appendix A hereto are met. The Bonus shall be paid in a single lump sum
no later than 120 days after the end of the fiscal year for which the
applicable objectives have been met.
3.2 Pension and Welfare Plans. During the Term of Covered
-------------------------
Employment, Executive shall also be eligible to participate in any pension
and welfare plans maintained by the Company for its employees, subject to
the requirements of applicable law.
3.3 Fringe Benefits.
---------------
(a) Relocation Expenses/Allowance. The Company shall reimburse
-----------------------------
Executive for all expenses incurred by him in relocating to Savannah,
Georgia or its vicinity. The Company shall reimburse Executive for
all travel and temporary lodging expenses incurred by him prior to his
commencement of employment with the Company for up to two trips to
Savannah, Georgia to secure his new permanent residence in Savannah,
Georgia or its vicinity. In addition, the Company shall pay Executive
$10,000 as a general relocation allowance.
(b) Other Fringe Benefits. During the Term of Covered Employment,
--------------------------
Executive shall receive any fringe benefits generally provided by the
Company to its employees.
4. LONG-TERM INCENTIVE AWARD. In the event a "Triggering Event", as
-------------------------
hereinafter defined, occurs while Executive is employed by the Company
(including any such employment following the expiration of the Term of Covered
Employment), the Company shall pay Executive, within 90 days after such
Triggering Event, a lump sum amount in cash equal to one-half of one percent
(0.5%) of the value of Aminco, Inc. (or any successor thereto) at the time of
such Triggering Event, minus $250,000. A "Triggering Event" means the earliest
-----
to occur
<PAGE>
- 3 -
of (i) an initial public offering of the common stock of Aminco, Inc. (or any
successor thereto), (ii) a sale of substantially all of the stock or assets of
Aminco, Inc. (or any successor thereto), or (iii) the fifth anniversary of the
Closing Date. For purposes of this Section 4, the value of Aminco, Inc. (or any
successor thereto) at the time of the Triggering Event means (x) if the
Triggering Event is the initial public offering of the common stock of Aminco,
Inc. (or any successor thereto), the value determined on the basis of the price
set for the sale of such common stock to the public in such initial public
offering, as established by the managing underwriters to such public offering,
(y) if the Triggering Event is the sale of substantially all of the stock or
assets of Aminco, Inc. (or any successor thereto), the price being paid by the
acquiror of such stock or assets, and (z) if the Triggering Event is the fifth
anniversary of the Closing Date, the value established as of such date under a
valuation of Aminco, Inc. (or any successor thereto) conducted by an independent
appraiser.
5. TERMINATION OF EMPLOYMENT. Notwithstanding any other provision
-------------------------
of this Agreement, but subject to the notice provisions contained in this
Section 5, the Company retains the right to terminate Executive's employment,
and Executive retains the right to resign from employment with the Company, at
any time and for any reason.
5.1 Termination for Cause. The Company may terminate Executive's
---------------------
employment with the Company for "Cause" (as hereinafter defined) in the
manner specified in this Section 5.1. In the event that on or after the
Closing Date and prior to the Expiration Date, the Company terminates
Executive's employment with the Company for Cause, the Term of Covered
Employment shall end on the date of such termination (which shall be the
date specified in the notice described in this Section 5.1) and Executive
shall be entitled only to any unpaid amount of Base Salary for his
employment with the Company through and including the date of such
termination. In any event, Executive shall not be entitled to receive any
amount of Base Salary with respect to any period following the date of such
termination, or any portion of the Bonus for the fiscal year of the Company
in which such date of termination occurs.
For purposes of this Agreement, termination for "Cause" means termination
by the Company due to Executive's gross dereliction of his duties under
this Agreement, including, without limitation, his refusal to follow or
gross neglect of the directions of the Chief Executive Officer of the
Company or any other executive of the Company senior to Executive, or any
willful misconduct by Executive that is materially injurious to the
Company, or the indictment of Executive for a felony involving moral
turpitude.
<PAGE>
- 4 -
To terminate Executive for Cause, the Company shall give a written notice
of such termination to Executive ("Notice of Termination"), which notice
shall have been authorized by a vote of the majority of the Company's Board
of Directors (the "Board") and shall specify the date of such termination,
which shall not be earlier than the date on which such notice is given to
Executive. Such notice shall be given to Executive no later than 10 days
after a member of the Board (other than Executive) has actual knowledge of
the events or circumstances which purportedly constitute Cause for such
termination, and shall specify the particular act or acts, or failure to
act, or other events or circumstances constituting Cause for such
termination. Executive shall be given the opportunity within 30 days after
receiving such notice to meet with the Board to explain why Cause for such
termination does not exist. Within 15 days after any such meeting, the
Board shall give Executive its final decision regarding whether Cause
exists. If the Board's final decision is that Cause exists, Executive's
employment with the Company shall be terminated under this Section 5.1
pursuant to the Notice of Termination as of the date of termination
specified in such Notice. If the Board's final decision is that Cause does
not exist, Executive's employment with the Company shall not be terminated
under this Section 5.1.
5.2 Resignation. Executive may resign from employment with the
-----------
Company by giving the Company written notice of such resignation, which
notice shall specify the date of resignation, which shall not be earlier
than 30 days after the date such written notice is given to the Company.
In the event of Executive's resignation on or after the Closing Date and
prior to the Expiration Date, the Term of Covered Employment shall end on
the date of resignation (which shall be the date specified in Executive's
notice of resignation), and Executive shall be entitled only to any unpaid
amount of Base Salary for his employment with the Company through and
including such date of resignation. Executive shall not be entitled to
receive any amount of Base Salary with respect to any period following such
date of resignation, or any portion of the Bonus for the fiscal year of the
Company in which such date of resignation occurs.
5.3 Termination Other Than For Cause. The Company may terminate
--------------------------------
Executive's employment with the Company other than for Cause by giving
Executive written notice of such termination, which notice shall specify
the date of such termination, which shall not be earlier than 30 days after
such written notice is given to Executive. In the event that on or after
the Closing Date and prior to the Expiration Date Executive's employment
with the Company is terminated by the Company other than for Cause, the
Term of
<PAGE>
- 5 -
Covered Employment shall end upon such specified date of termination and
the Company shall pay Executive, within 15 days after such date of
termination, an additional lump sum amount equal to 150% of one year's Base
Salary. Executive shall not be eligible to participate in any of the
Company's employee benefit plans following such date of termination of
employment, except as may be required by applicable law.
5.4 Termination Due to Death or Disability. The Company may
--------------------------------------
terminate Executive's employment with the Company due to "Disability", as
hereinafter defined, by giving Executive written notice of such
termination, which notice shall specify the date of such termination, which
shall not be earlier than 30 days after such written notice is given to
Executive. If on or after the Closing Date and prior to the Expiration
Date Executive's employment with the Company is terminated due to
Disability, or if during such period Executive dies, the Term of Covered
Employment shall end upon such specified date of termination or date of
death, as applicable, and the Company shall pay Executive, or his
beneficiary or estate, as the case may be, within 15 days after such date
of termination or death, an additional lump sum amount equal to 150% of one
year's Base Salary.
For purposes of this Agreement, "Disability" means Executive's
inability to perform his duties under this Agreement for a period of at
least six consecutive months because of medically determinable physical or
mental impairment, as determined by a physician mutually agreeable to
Executive and the Company. If Executive and the Company are unable to
agree on such a physician, each shall appoint one physician and those two
physicians shall appoint a third physician who shall make such a
determination.
6. NON-COMPETITION; NON-SOLICITATION. While Executive is employed
---------------------------------
by the Company (including any period of such employment following the expiration
of the Term of Covered Employment), and during the period in which Executive is
receiving payments of Base Salary from the Company (regardless of whether or not
Executive is then employed by the Company), Executive shall not directly or
indirectly (i) own, manage, operate, represent, promote, consult for, control or
participate in the ownership, operation, acquisition or management of any
business which manufactures and/or distributes ethnic hair care products or
cosmetics within a 500-mile radius of the Company's headquarters, (ii) solicit
(other than on behalf of the Company or any of its affiliates), divert or take
away the business of any customers of the Company or any of its affiliates, or
any prospective customers of the Company or any of its affiliates whose business
the Company or any of its affiliates is actively soliciting, or has actively
solicited, during Executive's employment with the Company with whom Executive
had any material
<PAGE>
- 6 -
personal contact, or (iii) solicit or induce any employee of the Company or any
of its affiliates to terminate such employee's employment with the Company or
such affiliate. It is expressly acknowledged that a breach of this covenant may
result in irreparable harm to the Company for which there is no adequate remedy
at law and that, therefore, in the event of such a breach, the Company shall be
entitled to obtain injunctive relief restraining Executive from engaging in
activities prohibited by this Section 6 or any other relief as may be required
to specifically enforce this covenant.
7. CONFIDENTIALITY. While employed by the Company and at all times
---------------
thereafter, Executive shall maintain the confidentiality of all information of
and relating to, and all material of, the Company and its affiliates that have
not been made available to the public (other than by reason of a breach by
Executive of his obligations under this Section 7) and shall not, without the
Company's prior written permission, disclose to any person outside of the
Company and its affiliates any such information or material. Without limiting
the foregoing sentence, such information and material shall include pricing
plans and price policies, business plans, sales forecasts, research and
development, formulas, procedures and the identity of customers and suppliers
and the terms upon which the Company or any of its affiliates deals with them.
Upon termination of employment with the Company, Executive shall return to the
Company all property in his possession, whether or not containing confidential
information, including but not limited to originals and copies of any written
documents, drawings and reports, diskettes and other storage media, belonging to
the Company or any of its affiliates or received from the Company or any of its
affiliates. It is expressly acknowledged that a breach of this covenant may
result in irreparable harm to the Company for which there is no adequate remedy
at law and that, therefore, in the event of such a breach, the Company shall be
entitled to obtain injunctive relief restraining Executive from engaging in
activities prohibited by this Section 7 or any other relief as may be required
to specifically enforce this covenant.
8. TAXES. The Company shall be entitled to deduct and withhold from
-----
all amounts payable under this Agreement all applicable Federal, state and local
taxes which the Company determines are required by law to be deducted and
withheld.
<PAGE>
- 7 -
9. NOTICES. All notices and other communications under this
-------
Agreement shall be in writing and shall be given by hand delivery to the party
receiving such notice or by certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to Executive: John P. Brown, Jr.
If to the Company: Carson Products Company
71 A Ross Road
Savannah, Georgia 31405
Attention: Chief Executive
Officer
or to such other address as either party shall have furnished to the other party
in writing as the address to send future notices and communications in
accordance herewith. Any notice or communication shall be deemed given when
actually received by the party who is its intended recipient.
10. SEVERABILITY. If any provision of this Agreement is held to be
------------
invalid under applicable law, such provision shall be ineffective only to the
extent of such invalidity, and the remaining provisions of this Agreement shall
be unimpaired.
11. WAIVERS. The waiver by either party of a breach of any provision
-------
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision, or as a waiver of any other provision of
this Agreement.
12. ASSIGNABILITY. The Company may assign its rights and obligations
-------------
hereunder to any of its affiliates, or to any successor of the Company.
Executive may not assign any of his rights, duties, obligations or interests
hereunder to any other person without the prior express written consent of the
Board of Directors of the Company.
13. ENTIRE AGREEMENT. This instrument contains the entire agreement
----------------
of the parties with respect to, and supersedes all prior agreements relating to,
Executive's employment with the Company.
14. GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed and enforced under, the laws of the State of Georgia.
15. EFFECTIVENESS OF AGREEMENT . This Agreement shall be and become
---------------------------
effective as of the Closing Date; provided, that if
--------
<PAGE>
- 8 -
the Stock Purchase Agreement is terminated, this Agreement shall be canceled and
be of no force or effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CARSON PRODUCTS COMPANY
By:_______________________
__________________________
John P. Brown, Jr.
<PAGE>
CARSON PRODUCTS COMPANY
P.O. Box 22309
Savannah, Georgia 31403-2309
July 31, 1996
PERSONAL AND CONFIDENTIAL
- -------------------------
Mr. John P. Brown, Jr.
c/o Carson Products Company
71A Ross Road
Savannah, Georgia 31405
Re: Employment Agreement Modification
---------------------------------
Dear John:
I am pleased to advise you that the Board of Directors of Carson Products
Company (the "Company") has agreed to modify your employment agreement, dated as
of June 7, 1995, with the Company (the "Employment Agreement") to (i) extend
your term of employment thereunder, (ii) convert your stock-based long-term
incentive opportunity into the right to purchase Class A Common Stock of the
Company, and (iii) effect certain other changes thereto.
Accordingly, the Employment Agreement is hereby modified, effective as of
the dates set forth below, as follows:
1. Effective as of the closing of the Offerings (as that term is defined
in the Form S-1 Registration Statement filed by Carson, Inc. under the
Securities Act of 1933), Section 1 of the Employment Agreement is hereby amended
by deleting it in its entirety and replacing it with a new Section 1 to read in
its entirety as follows:
"1. Term of Covered Employment. The term of Executive's
--------------------------
employment covered under this Agreement (the "Term of Covered Employment")
shall commence on the Closing Date and shall end on the third anniversary
of the closing of the Offerings, as that term is defined in the Form
<PAGE>
- 2 -
S-1 Registration Statement filed by Carson, Inc. under the Securities Act
of 1933, (the "Expiration Date"), unless earlier terminated under Section 5
of this Agreement."
2. Effective as of [the date hereof], Section 3.1 of the Employment
Agreement is hereby amended by deleting it in its entirety and replacing it with
a new Section 3.1 to read as follows:
"3.1 Compensation. For all services to be rendered during the
------------
Term of Covered Employment, the Company shall pay Executive a salary
("Base Salary") of $135,000 per annum, payable bi-weekly in arrears.
In addition, for each fiscal year of the Company ending within the
Term of Covered Employment, Executive shall receive a bonus (the
"Bonus") in an amount equal to (i) thirty percent (30%) of Base Salary
if the "base case" objectives (but not the "anticipated case"
objectives) for that fiscal year, as specified by the Board (as
defined in Section 5.1 of this Agreement), or a committee thereof, are
achieved, or (ii) fifty percent (50%) of Base Salary if the
"anticipated case" objectives for that fiscal year, as specified by
the Board (or a committee thereof) are met. The objectives utilized
in determining the Bonus shall be net revenue growth, net income,
earnings per share and/or stock price growth, each as defined by the
Board (or a committee thereof) in its sole discretion. A lesser
percentage of Base Salary may be paid hereunder if one or more, but
not all, of the targeted objectives for a fiscal year are achieved.
If the "base case" objectives are met, the value of the Bonus, if any,
shall be paid seventy-five percent (75%) in a single lump sum cash
payment and twenty-five percent (25%) in shares of restricted stock of
Carson, Inc. If the "anticipated case" objectives are met, the value
of the Bonus, if any, shall be paid fifty percent (50%) in a single
lump sum cash payment and fifty percent (50%) in shares of restricted
stock of Carson, Inc. Such restricted stock shall vest as to one-
third (1/3) of the aggregate number of shares delivered to Executive
on each of the first three anniversaries of the date of payment of the
Bonus (if Executive is employed by the Company on such dates). The
Bonus shall be paid no later than 120 days after the end of the fiscal
year for which the applicable objectives have been met."
<PAGE>
- 3 -
3. Effective as of the date hereof, Section 3.2 of the Employment
Agreement is hereby amended by adding at the end thereof the following proviso:
", provided, however, that, unless otherwise determined by the Company
-------- -------
and Carson, Inc., Executive shall not be eligible to participate in
any profit-sharing plan maintained, sponsored or contributed to by the
Company or Carson, Inc. that is intended to qualify under Section
401(a) of the Internal Revenue Code of 1986, as amended."
4. Effective as of the date hereof, Section 4 of the Employment
Agreement is hereby amended by deleting it in its entirety and replacing it with
a new Section 4 to read as follows:
"4. Stock Purchase Right. Executive shall have the right to
--------------------
acquire 5.2205 shares of Carson, Inc.'s Class A Common Stock at a per share
purchase price equal to the fair market value per hare of the Class A
Common Stock on the date of purchase, as determined by the Board (as
defined in Section 5.1 of this Agreement). Executive may satisfy the
aggregate purchase price for the shares of the Class A Common Stock by
tendering cash or a promissory note (in the form attached hereto as Exhibit
1). If Executive elects to tender such a promissory note, Executive shall
execute and deliver a pledge agreement, in the form attached hereto as
Exhibit 2, pursuant to which Executive shall pledge the purchased shares of
the Class A Common Stock acquired to Carson, Inc. to secure payment of such
promissory note. As a condition of any such purchase, Executive shall also
execute and deliver a shareholders agreement, if required by the Company or
Carson, Inc., and a registration rights agreement (in the form attached
hereto as Exhibit 3)."
5. Effective as of the date hereof, Appendix A to the Employment
Agreement is hereby deleted in its entirety.
6. Except as expressly modified herein, the Employment Agreement
shall remain in full force and effect in accordance with its terms and
provisions as the same are set forth on the date hereof.
<PAGE>
- 4 -
Please indicate your acceptance of and agreement to the above
modifications by signing this modification agreement in the space provided
below.
CARSON PRODUCTS COMPANY
By:___________________________
Name:
Title:
AGREED TO AND ACCEPTED:
____________________________
John P. Brown, Jr.
<PAGE>
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of June 22, 1995, by and between Carson Products
Company, a Georgia Corporation (the "Company"), and Donald Cowsar ("Executive").
WITNESSETH:
----------
WHEREAS, Executive currently serves as Technical Director of the Company;
and
WHEREAS, the current owners of all of the outstanding capital stock of
Aminco, Inc., the parent of the Company, have entered into a Stock Purchase
Agreement dated as of May 11, 1995 (the "Stock Purchase Agreement") with DNL
Savannah Acquisition Corp., a Delaware Corporation ("DNL"), under which such
shareholders shall sell, and DNL shall purchase, all of the outstanding capital
stock of Aminco, Inc.; and
WHEREAS, the Company wishes to retain the services of Executive from and
after the date of the closing of the sale of Aminco, Inc.'s capital stock to DNL
as contemplated under the Stock Purchase Agreement (the "Closing Date"), and
Executive wishes to continue in the service of the Company from and after the
Closing Date, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. TERM OF COVERED EMPLOYMENT. The term of Executive's employment covered
--------------------------
under this Agreement (the "Term of Covered Employment") shall commence on the
Closing Date and shall end on the third anniversary of the Closing Date (the
"Expiration Date"), unless terminated earlier under Section 5.
2. EMPLOYMENT AND DUTIES. Subject to the terms and conditions hereinafter
---------------------
set forth, during the Term of Covered Employment, the Company shall employ
Executive, and Executive shall serve, as Vice President, Technical Services of
the Company. In such capacity, Executive shall perform the duties and
responsibilities assigned by the Company, and such performance shall be
Executive's principal activity to which he shall devote substantially all his
working hours. Executive shall report to the Chief Executive Officer of the
Company.
<PAGE>
- 2 -
3. COMPENSATION AND BENEFITS.
-------------------------
3.1 Compensation. For all services to be rendered during the Term of
------------
Covered Employment, the Company shall pay Executive a salary ("Base
Salary") of $95,000 per annum, payable bi-weekly in arrears. In addition,
for each fiscal year of the Company ending within the Term of Covered
Employment, Executive shall receive a bonus (the "Bonus) in an amount equal
to (i) thirty percent (30%) of his Base Salary if the "base case"
objectives (but not the "anticipated case" objectives) for such fiscal year
as specified in the business plan attached as Appendix A hereto are met,
and (ii) fifty percent (50%) of his Base Salary if the "anticipated case"
objectives for such fiscal year as specified in the business plan attached
as Appendix A hereto are met. The Bonus shall be paid in a single lump sum
no later than 120 days after the end of the fiscal year for which the
applicable objectives have been met.
3.2 Pension and Welfare Plans. During the Term of Covered
-------------------------
Employment, Executive shall also be eligible to participate in any pension
and welfare plans maintained by the Company for its employees, subject to
the requirements of applicable law.
3.3 Fringe Benefits. During the Term of Covered
---------------
Employment, Executive shall receive any fringe benefits generally provided
by the Company to its employees.
4. LONG-TERM INCENTIVE AWARD. In the event a "Triggering Event", as
-------------------------
hereinafter defined, occurs while Executive is employed by the Company
(including any such employment following the expiration of the Term of Covered
Employment), the Company shall pay Executive, within 90 days after such
Triggering Event, a lump sum amount in cash equal to one-half of one percent
(0.5%) of the value of Aminco, Inc. (or any successor thereto) at the time of
such Triggering Event, minus $250,000. A "Triggering Event" means the earliest
-----
to occur of (i) an initial public offering of the common stock of Aminco, Inc.
(or any successor thereto), (ii) a sale of substantially all of the stock or
assets of Aminco, Inc. (or any successor thereto), or (iii) the fifth
anniversary of the Closing Date. For purposes of this Section 4, the value of
Aminco, Inc. (or any successor thereto) at the time of the Triggering Event
means (x) if the Triggering Event is the initial public offering of the common
stock of Aminco, Inc. (or any successor thereto), the value determined on the
basis of the price set for the sale of such common stock to the public in such
initial public offering, as established by the managing underwriters to such
public offering, (y) if the Triggering Event is the sale of substantially all of
the stock or assets of Aminco, Inc. (or any successor thereto), the price being
paid by the acquiror of such
<PAGE>
- 3 -
stock or assets, and (z) if the Triggering Event is the fifth anniversary of the
Closing Date, the value established as of such date under a valuation of Aminco,
Inc. (or any successor thereto) conducted by an independent appraiser.
5. TERMINATION OF EMPLOYMENT. Notwithstanding any other provision
-------------------------
of this Agreement, but subject to the notice provisions contained in this
Section 5, the Company retains the right to terminate Executive's employment,
and Executive retains the right to resign from employment with the Company, at
any time and for any reason.
5.1 Termination for Cause. The Company may terminate Executive's
---------------------
employment with the Company for "Cause" (as hereinafter defined) in the
manner specified in this Section 5.1. In the event that on or after the
Closing Date and prior to the Expiration Date, the Company terminates
Executive's employment with the Company for Cause, the Term of Covered
Employment shall end on the date of such termination (which shall be the
date specified in the notice described in this Section 5.1) and Executive
shall be entitled only to any unpaid amount of Base Salary for his
employment with the Company through and including the date of such
termination. In any event, Executive shall not be entitled to receive any
amount of Base Salary with respect to any period following the date of such
termination, or any portion of the Bonus for the fiscal year of the Company
in which such date of termination occurs.
For purposes of this Agreement, termination for "Cause" means termination
by the Company due to Executive's gross dereliction of his duties under
this Agreement, including, without limitation, his refusal to follow or
gross neglect of the directions of the Chief Executive Officer of the
Company or any other executive of the Company senior to Executive, or any
willful misconduct by Executive that is materially injurious to the
Company, or the indictment of Executive for a felony involving moral
turpitude.
To terminate Executive for Cause, the Company shall give a written notice
of such termination to Executive ("Notice of Termination"), which notice
shall have been authorized by a vote of the majority of the Company's Board
of Directors (the "Board") and shall specify the date of such termination,
which shall not be earlier than the date on which such notice is given to
Executive. Such notice shall be given to Executive no later than 10 days
after a member of the Board (other than Executive) has actual knowledge of
the events or circumstances which purportedly constitute Cause for such
termination, and shall specify the particular act or acts, or failure to
act, or other events or circumstances constituting Cause for such
termination.
<PAGE>
- 4 -
Executive shall be given the opportunity within 30 days after receiving
such notice to meet with the Board to explain why Cause for such
termination does not exist. Within 15 days after any such meeting, the
Board shall give Executive its final decision regarding whether Cause
exists. If the Board's final decision is that Cause exists, Executive's
employment with the Company shall be terminated under this Section 5.1
pursuant to the Notice of Termination as of the date of termination
specified in such Notice. If the Board's final decision is that Cause does
not exist, Executive's employment with the Company shall not be terminated
under this Section 5.1.
5.2 Resignation. Executive may resign from employment with the
-----------
Company by giving the Company written notice of such resignation, which
notice shall specify the date of resignation, which shall not be earlier
than 30 days after the date such written notice is given to the Company.
In the event of Executive's resignation on or after the Closing Date and
prior to the Expiration Date, the Term of Covered Employment shall end on
the date of resignation (which shall be the date specified in Executive's
notice of resignation), and Executive shall be entitled only to any unpaid
amount of Base Salary for his employment with the Company through and
including such date of resignation. Executive shall not be entitled to
receive any amount of Base Salary with respect to any period following such
date of resignation, or any portion of the Bonus for the fiscal year of the
Company in which such date of resignation occurs.
5.3 Termination Other Than For Cause. The Company may terminate
--------------------------------
Executive's employment with the Company other than for Cause by giving
Executive written notice of such termination, which notice shall specify
the date of such termination, which shall not be earlier than 30 days after
such written notice is given to Executive. In the event that on or after
the Closing Date and prior to the Expiration Date Executive's employment
with the Company is terminated by the Company other than for Cause, the
Term of Covered Employment shall end upon such specified date of
termination and the Company shall pay Executive, within 15 days after such
date of termination, an additional lump sum amount equal to 150% of one
year's Base Salary. Executive shall not be eligible to participate in any
of the Company's employee benefit plans following such date of termination
of employment, except as may be required by applicable law.
5.4 Termination Due to Death or Disability. The Company may
--------------------------------------
terminate Executive's employment with the Company due to "Disability", as
hereinafter defined, by giving Executive written notice of such
termination, which notice shall specify the date of such termination, which
shall not be earlier than 30 days after such written notice
<PAGE>
- 5 -
is given to Executive. If on or after the Closing Date and prior to the
Expiration Date Executive's employment with the Company is terminated due
to Disability, or if during such period Executive dies, the Term of Covered
Employment shall end upon such specified date of termination or date of
death, as applicable, and the Company shall pay Executive, or his
beneficiary or estate, as the case may be, within 15 days after such date
of termination or death, an additional lump sum amount equal to 150% of one
year's Base Salary.
For purposes of this Agreement, "Disability" means Executive's
inability to perform his duties under this Agreement for a period of at
least six consecutive months because of medically determinable physical or
mental impairment, as determined by a physician mutually agreeable to
Executive and the Company. If Executive and the Company are unable to
agree on such a physician, each shall appoint one physician and those two
physicians shall appoint a third physician who shall make such a
determination.
6. NON-COMPETITION; NON-SOLICITATION. While Executive is employed
---------------------------------
by the Company (including any period of such employment following the expiration
of the Term of Covered Employment), and during the period in which Executive is
receiving payments of Base Salary from the Company (regardless of whether or not
Executive is then employed by the Company), Executive shall not directly or
indirectly (i) own, manage, operate, represent, promote, consult for, control or
participate in the ownership, operation, acquisition or management of any
business which manufactures and/or distributes ethnic hair care products or
cosmetics within a 500-mile radius of the Company's headquarters, (ii) solicit
(other than on behalf of the Company or any of its affiliates), divert or take
away the business of any customers of the Company or any of its affiliates, or
any prospective customers of the Company or any of its affiliates whose business
the Company or any of its affiliates is actively soliciting, or has actively
solicited, during Executive's employment with the Company with whom Executive
had any material personal contact, or (iii) solicit or induce any employee of
the Company or any of its affiliates to terminate such employee's employment
with the Company or such affiliate. It is expressly acknowledged that a breach
of this covenant may result in irreparable harm to the Company for which there
is no adequate remedy at law and that, therefore, in the event of such a breach,
the Company shall be entitled to obtain injunctive relief restraining Executive
from engaging in activities prohibited by this Section 6 or any other relief as
may be required to specifically enforce this covenant.
7. CONFIDENTIALITY. While employed by the Company and at all times
---------------
thereafter, Executive shall maintain the confidentiality of all information of
and relating to, and all
<PAGE>
- 6 -
material of, the Company and its affiliates that have not been made available to
the public (other than by reason of a breach by Executive of his obligations
under this Section 7) and shall not, without the Company's prior written
permission, disclose to any person outside of the Company and its affiliates any
such information or material. Without limiting the foregoing sentence, such
information and material shall include pricing plans and price policies,
business plans, sales forecasts, research and development, formulas, procedures
and the identity of customers and suppliers and the terms upon which the Company
or any of its affiliates deals with them. Upon termination of employment with
the Company, Executive shall return to the Company all property in his
possession, whether or not containing confidential information, including but
not limited to originals and copies of any written documents, drawings and
reports, diskettes and other storage media, belonging to the Company or any of
its affiliates or received from the Company or any of its affiliates. It is
expressly acknowledged that a breach of this covenant may result in irreparable
harm to the Company for which there is no adequate remedy at law and that,
therefore, in the event of such a breach, the Company shall be entitled to
obtain injunctive relief restraining Executive from engaging in activities
prohibited by this Section 7 or any other relief as may be required to
specifically enforce this covenant.
8. TAXES. The Company shall be entitled to deduct and withhold from
-----
all amounts payable under this Agreement all applicable Federal, state and local
taxes which the Company determines are required by law to be deducted and
withheld.
9. NOTICES. All notices and other communications under this
-------
Agreement shall be in writing and shall be given by hand delivery to the party
receiving such notice or by certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to Executive: Donald Cowsar
If to the Company: Carson Products Company
71 A Ross Road
Savannah, Georgia 31405
Attention: Chief Executive
Officer
or to such other address as either party shall have furnished to the other party
in writing as the address to send future notices and communications in
accordance herewith. Any notice or
<PAGE>
- 7 -
communication shall be deemed given when actually received by the party who is
its intended recipient.
10. SEVERABILITY. If any provision of this Agreement is held to be
------------
invalid under applicable law, such provision shall be ineffective only to the
extent of such invalidity, and the remaining provisions of this Agreement shall
be unimpaired.
11. WAIVERS. The waiver by either party of a breach of any provision
-------
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision, or as a waiver of any other provision of
this Agreement.
12. ASSIGNABILITY. The Company may assign its rights and obligations
-------------
hereunder to any of its affiliates, or to any successor of the Company;
provided, that this Agreement shall, without further action of the Company,
- --------
automatically be assumed by the surviving entity in any merger transaction or
transactions to which the Company is a party. Executive may not assign any of
his rights, duties, obligations or interests hereunder to any other person
without the prior express written consent of the Board of Directors of the
Company.
13. ENTIRE AGREEMENT. This instrument contains the entire agreement
----------------
of the parties with respect to, and supersedes all prior agreements relating to,
Executive's employment with the Company.
14. GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed and enforced under, the laws of the State of Georgia.
15. EFFECTIVENESS OF AGREEMENT. This Agreement shall be and become
--------------------------
effective as of the Closing Date; provided, that if the Stock Purchase Agreement
--------
is terminated, this Agreement shall be canceled and be of no force or effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CARSON PRODUCTS COMPANY
By:_______________________
__________________________
Donald Cowsar
<PAGE>
CARSON PRODUCTS COMPANY
P.O. Box 22309
Savannah, Georgia 31403-2309
July 31, 1996
PERSONAL AND CONFIDENTIAL
- -------------------------
Mr. Donald Cowsar
24 Twelve Oaks Drive
Savannah, Georgia 31410
Re: Employment Agreement Modification
---------------------------------
Dear Don:
I am pleased to advise you that the Board of Directors of Carson Products
Company (the "Company") has agreed to modify your employment agreement, dated as
of June 22, 1995, with the Company (the "Employment Agreement") to (i) extend
your term of employment thereunder, (ii) convert one-half of your stock-based
long-term incentive opportunity into the right to purchase Class A Common Stock
of the Company, and (iii) effect certain other changes thereto.
Accordingly, the Employment Agreement is hereby modified, effective as of
the dates set forth below, as follows:
1. Effective as of the closing of the Offerings (as that term is defined
in the Form S-1 Registration Statement filed by Carson, Inc. under the
Securities Act of 1933), Section 1 of the Employment Agreement is hereby amended
by deleting it in its entirety and replacing it with a new Section 1 to read in
its entirety as follows:
"1. Term of Covered Employment. The term of Executive's
--------------------------
employment covered under this Agreement (the "Term of Covered
<PAGE>
- 2 -
Employment") shall commence on the Closing Date and shall end on the third
anniversary of the closing of the Offerings, as that term is defined in the
Form S-1 Registration Statement filed by Carson, Inc. under the Securities
Act of 1933, (the "Expiration Date"), unless earlier terminated under
Section 5 of this Agreement."
2. Effective as of [the date hereof], Section 3.1 of the Employment
Agreement is hereby amended by deleting it in its entirety and replacing it with
a new Section 3.1 to read as follows:
"3.1 Compensation. For all services to be rendered during the
------------
Term of Covered Employment, the Company shall pay Executive a salary
("Base Salary") of $95,000 per annum, payable bi-weekly in arrears.
In addition, for each fiscal year of the Company ending within the
Term of Covered Employment, Executive shall receive a bonus (the
"Bonus") in an amount equal to (i) thirty percent (30%) of Base Salary
if the "base case" objectives (but not the "anticipated case"
objectives) for that fiscal year, as specified by the Board (as
defined in Section 5.1 of this Agreement), or a committee thereof, are
achieved, or (ii) fifty percent (50%) of Base Salary if the
"anticipated case" objectives for that fiscal year, as specified by
the Board (or a committee thereof) are met. The objectives utilized
in determining the Bonus shall be net revenue growth, net income,
earnings per share and/or stock price growth, each as defined by the
Board (or a committee thereof) in its sole discretion. A lesser
percentage of Base Salary may be paid hereunder if one or more, but
not all, of the targeted objectives for a fiscal year are achieved.
If the "base case" objectives are met, the value of the Bonus, if any,
shall be paid seventy-five percent (75%) in a single lump sum cash
payment and twenty-five percent (25%) in shares of restricted stock of
Carson, Inc. If the "anticipated case" objectives are met, the value
of the Bonus, if any, shall be paid fifty percent (50%) in a single
lump sum cash payment and fifty percent (50%) in shares of restricted
stock of Carson, Inc. Such restricted stock shall vest as to one-
third (1/3) of the aggregate number of shares delivered to Executive
on each of the first three anniversaries of the date of payment of the
Bonus (if Executive is employed by the Company on such dates). The
Bonus shall be paid no later than 120 days after the end of the fiscal
year for which the applicable objectives have been met."
<PAGE>
- 3 -
3. Effective as of the date hereof, Section 4 of the Employment
Agreement is hereby amended by deleting it in its entirety and replacing it with
a new Section 4 to read as follows:
"4. STOCK PURCHASE RIGHT AND LONG-TERM INCENTIVE AWARD.
--------------------------------------------------
"4.1 Stock Purchase Right. Executive shall have the right to
--------------------
acquire 2.6102 shares of Carson, Inc.'s Class A Common Stock at a per
share purchase price equal to the fair market value per hare of the
Class A Common Stock on the date of purchase, as determined by the
Board (as defined in Section 5.1 of this Agreement). Executive may
satisfy the aggregate purchase price for the shares of the Class A
Common Stock by tendering cash or a promissory note (in the form
attached hereto as Exhibit 1). If Executive elects to tender such a
promissory note, Executive shall execute and deliver a pledge
agreement, in the form attached hereto as Exhibit 2, pursuant to which
Executive shall pledge the purchased shares of the Class A Common
Stock acquired to Carson, Inc. to secure payment of such promissory
note. As a condition of any such purchase, Executive shall also
execute and deliver a shareholders agreement, if required by the
Company or Carson, Inc., and a registration rights agreement (in the
form attached hereto as Exhibit 3).
"4.2 Long-Term Incentive Award. In the event a "Triggering
-------------------------
Event", as hereinafter defined, occurs while Executive is employed by
the Company (including any such employment following the expiration of
the Term of Covered Employment), the Company shall pay Executive,
within 90 days after such Triggering Event, a lump sum amount in cash
equal to (A) the product of (i) one-quarter of one percent of the
value of Aminco, Inc. (or any successor thereto) at the time of such
Triggering Event (as that value is reduced by the aggregate
underwriting discount in connection with the Offerings) and (ii) the
Dilution Percentage (as defined below), minus (B) $125,000. A
-----
"Triggering Event" means the earliest to occur of (i) an initial
public offering of the common stock of Aminco, Inc. (or any successor
thereto), (ii) sale of substantially all (90%) of the stock or assets
of Aminco, Inc. (or any successor thereto), or (iii) the fifth
anniversary of the Closing Date. For purposes of this Section 4, the
value of Aminco, Inc. (or any successor thereto) at the time of the
Triggering Event means (x) if the Triggering Event is the initial
public offering of the common stock of Aminco, Inc. (or any successor
thereto), the value determined on the basis of the price set for the
sale of such common stock to the public in such initial public
offering, as established by the managing underwriters to such public
offering, (y) if the Triggering
<PAGE>
- 4 -
Event is the sale of substantially all of the stock or assets of
Aminco, Inc. (or any successor thereto), the price being paid by the
acquiror of such stock or assets, and (z) if the Triggering Event is
the fifth anniversary of the Closing Date, the value established as of
such date under a valuation of Aminco, Inc. (or any successor thereto)
conducted by an independent appraiser to be selected by Executive and
the Company by mutual consent. However, if Executive and the Company
cannot mutually consent to said appraiser, then Executive shall select
an independent appraiser and the Company shall an independent
appraiser who will then jointly select an independent appraiser to
establish the valuation of Aminco, Inc. and independent appraiser.
For purposes of this Agreement, the Dilution Percentage is equal to
the quotient resulting when (i) the number of shares of all classes of
the Company's Common Stock outstanding on July 31, 1996 is divided by
(ii) the number of shares of all classes of the Company's Common Stock
outstanding immediately after the closing of the Offerings, as defined
in Section 1 above."
4. Effective as of the date hereof, Appendix A to the Employment
Agreement is hereby deleted in its entirety.
5. Except as expressly modified herein, the Employment Agreement
shall remain in full force and effect in accordance with its terms and
provisions as the same are set forth on the date hereof.
Please indicate your acceptance of and agreement to the above
modifications by signing this modification agreement in the space provided
below.
CARSON PRODUCTS COMPANY
By:___________________________
Name:
Title:
AGREED TO AND ACCEPTED:
____________________________
Donald Cowsar
<PAGE>
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of September 1, 1995, by and between Carson Products
Company, a Delaware Corporation (the "Company"), and Arthur P. Gnann III
("Executive").
WITNESSETH:
----------
WHEREAS, Executive currently serves as Controller of the Company; and
WHEREAS, the Company wishes to retain the services of Executive from and
after the date hereof (the "Effective Date"), and Executive wishes to continue
in the service of the Company from and after the Effective Date, on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. TERM OF COVERED EMPLOYMENT. The term of Executive's employment covered
--------------------------
under this Agreement (the "Term of Covered Employment") shall commence on the
Effective Date and shall end on the third anniversary of the Effective Date (the
"Expiration Date"), unless terminated earlier under Section 5.
2. EMPLOYMENT AND DUTIES. Subject to the terms and conditions hereinafter
---------------------
set forth, during the Term of Covered Employment, the Company shall employ
Executive, and Executive shall serve, as Vice President and Controller of the
Company. In such capacity, Executive shall perform the duties and
responsibilities assigned by the Company, and such performance shall be
Executive's principal activity to which he shall devote substantially all his
working hours. Executive shall report to the Chief Executive Officer of the
Company.
3. COMPENSATION AND BENEFITS.
-------------------------
3.1 Compensation. For all services to be rendered during the Term of
------------
Covered Employment, the Company shall pay Executive a salary ("Base
Salary") of $75,000 per annum, payable bi-weekly in arrears. In addition,
for each fiscal year of the Company ending within the Term of Covered
Employment, Executive shall receive a bonus (the "Bonus) in an amount equal
to (i) thirty percent (30%) of his Base Salary if the "base case"
objectives (but not the
<PAGE>
- 2 -
"anticipated case" objectives) for such fiscal year as specified in the
business plan attached as Appendix A hereto (as the same may be
supplemented from time to time) are met, and (ii) fifty percent (50%) of
his Base Salary if the "anticipated case" objectives for such fiscal year
as specified in said business plan are met. The Bonus shall be paid in a
single lump sum no later than 120 days after the end of the fiscal year for
which the applicable objectives have been met.
3.2 Pension and Welfare Plans. During the Term of Covered
-------------------------
Employment, Executive shall also be eligible to participate in any pension
and welfare plans maintained by the Company for its employees, subject to
the requirements of applicable law.
3.3 Fringe Benefits. During the Term of Covered
---------------
Employment, Executive shall receive any fringe benefits generally provided
by the Company to its employees.
4. LONG-TERM INCENTIVE AWARD. In the event a "Triggering Event", as
-------------------------
hereinafter defined, occurs while Executive is employed by the Company
(including any such employment following the expiration of the Term of Covered
Employment), the Company shall pay Executive, within 90 days after such
Triggering Event, a lump sum amount in cash equal to one-quarter of one percent
(0.25%) of the value of DNL Savannah Holding Corp., a Delaware corporation ("DNL
Holding"), the parent corporation of the Company, or any successor thereto, at
the time of such Triggering Event, minus $125,000. A "Triggering Event" means
-----
the earliest to occur of (i) an initial public offering of the common stock of
DNL Holding (or any successor thereto), (ii) a sale of substantially all of the
stock or assets of DNL Holding or the Company (or any successor thereto), or
(iii) the fifth anniversary of the Effective Date. For purposes of this Section
4, the value of DNL Holding (or any successor thereto) at the time of the
Triggering Event means (x) if the Triggering Event is the initial public
offering of the common stock of DNL Holding (or any successor thereto), the
value determined on the basis of the price set for the sale of such common stock
to the public in such initial public offering, as established by the managing
underwriters to such public offering, (y) if the Triggering Event is the sale of
substantially all of the stock or assets of DNL Holding or the Company (or any
successor thereto), the price being paid by the acquiror of such stock or
assets, and (z) if the Triggering Event is the fifth anniversary of the
Effective Date, the value established as of such date under a valuation of DNL
Holding (or any successor thereto) conducted by an independent appraiser.
<PAGE>
- 3 -
5. TERMINATION OF EMPLOYMENT. Notwithstanding any other provision of
-------------------------
this Agreement, but subject to the notice provisions contained in this Section
5, the Company retains the right to terminate Executive's employment, and
Executive retains the right to resign from employment with the Company, at any
time and for any reason.
5.1 Termination for Cause. The Company may terminate Executive's
---------------------
employment with the Company for "Cause" (as hereinafter defined) in the
manner specified in this Section 5.1. In the event that on or after the
Effective Date and prior to the Expiration Date, the Company terminates
Executive's employment with the Company for Cause, the Term of Covered
Employment shall end on the date of such termination (which shall be the
date specified in the notice described in this Section 5.1) and Executive
shall be entitled only to any unpaid amount of Base Salary for his
employment with the Company through and including the date of such
termination. In any event, Executive shall not be entitled to receive any
amount of Base Salary with respect to any period following the date of such
termination, or any portion of the Bonus for the fiscal year of the Company
in which such date of termination occurs.
For purposes of this Agreement, termination for "Cause" means termination
by the Company due to Executive's gross dereliction of his duties under
this Agreement, including, without limitation, his refusal to follow or
gross neglect of the directions of the Chief Executive Officer of the
Company or any other executive of the Company senior to Executive, or any
willful misconduct by Executive that is materially injurious to the
Company, or the indictment of Executive for a felony involving moral
turpitude.
To terminate Executive for Cause, the Company shall give a written notice
of such termination to Executive ("Notice of Termination"), which notice
shall have been authorized by a vote of the majority of the Company's Board
of Directors (the "Board") and shall specify the date of such termination,
which shall not be earlier than the date on which such notice is given to
Executive. Such notice shall be given to Executive no later than 10 days
after a member of the Board (other than Executive) has actual knowledge of
the events or circumstances which purportedly constitute Cause for such
termination, and shall specify the particular act or acts, or failure to
act, or other events or circumstances constituting Cause for such
termination. Executive shall be given the opportunity within 30 days after
receiving such notice to meet with the Board to explain why Cause for such
termination does not exist. Within 15 days after any such meeting, the
Board shall give Executive its final decision regarding whether Cause
exists. If the Board's final decision is that Cause exists,
<PAGE>
- 4 -
Executive's employment with the Company shall be terminated under this
Section 5.1 pursuant to the Notice of Termination as of the date of
termination specified in such Notice. If the Board's final decision is
that Cause does not exist, Executive's employment with the Company shall
not be terminated under this Section 5.1.
5.2 Resignation. Executive may resign from employment with the
-----------
Company by giving the Company written notice of such resignation, which
notice shall specify the date of resignation, which shall not be earlier
than 30 days after the date such written notice is given to the Company.
In the event of Executive's resignation on or after the Effective Date and
prior to the Expiration Date, the Term of Covered Employment shall end on
the date of resignation (which shall be the date specified in Executive's
notice of resignation), and Executive shall be entitled only to any unpaid
amount of Base Salary for his employment with the Company through and
including such date of resignation. Executive shall not be entitled to
receive any amount of Base Salary with respect to any period following such
date of resignation, or any portion of the Bonus for the fiscal year of the
Company in which such date of resignation occurs.
5.3 Termination Other Than For Cause. The Company may terminate
--------------------------------
Executive's employment with the Company other than for Cause by giving
Executive written notice of such termination, which notice shall specify
the date of such termination, which shall not be earlier than 30 days after
such written notice is given to Executive. In the event that on or after
the Effective Date and prior to the Expiration Date Executive's employment
with the Company is terminated by the Company other than for Cause, the
Term of Covered Employment shall end upon such specified date of
termination and the Company shall pay Executive, within 15 days after such
date of termination, an additional lump sum amount equal to 150% of one
year's Base Salary. Executive shall not be eligible to participate in any
of the Company's employee benefit plans following such date of termination
of employment, except as may be required by applicable law.
5.4 Termination Due to Death or Disability. The Company may
--------------------------------------
terminate Executive's employment with the Company due to "Disability", as
hereinafter defined, by giving Executive written notice of such
termination, which notice shall specify the date of such termination, which
shall not be earlier than 30 days after such written notice is given to
Executive. If on or after the Effective Date and prior to the Expiration
Date Executive's employment with the Company is terminated due to
Disability, or if during such period Executive dies, the Term of Covered
Employment shall end upon such specified date of termination or date of
<PAGE>
- 5 -
death, as applicable, and the Company shall pay Executive, or his
beneficiary or estate, as the case may be, within 15 days after such date
of termination or death, an additional lump sum amount equal to 150% of one
year's Base Salary.
For purposes of this Agreement, "Disability" means Executive's
inability to perform his duties under this Agreement for a period of at
least six consecutive months because of medically determinable physical or
mental impairment, as determined by a physician mutually agreeable to
Executive and the Company. If Executive and the Company are unable to
agree on such a physician, each shall appoint one physician and those two
physicians shall appoint a third physician who shall make such a
determination.
6. NON-COMPETITION; NON-SOLICITATION. While Executive is employed
---------------------------------
by the Company (including any period of such employment following the expiration
of the Term of Covered Employment), and during the period in which Executive is
receiving payments of Base Salary from the Company (regardless of whether or not
Executive is then employed by the Company), Executive shall not directly or
indirectly (i) own, manage, operate, represent, promote, consult for, control or
participate in the ownership, operation, acquisition or management of any
business which manufactures and/or distributes ethnic hair care products or
cosmetics within a 500-mile radius of the Company's headquarters, (ii) solicit
(other than on behalf of the Company or any of its affiliates), divert or take
away the business of any customers of the Company or any of its affiliates, or
any prospective customers of the Company or any of its affiliates whose business
the Company or any of its affiliates is actively soliciting, or has actively
solicited, during Executive's employment with the Company with whom Executive
had any material personal contact, or (iii) solicit or induce any employee of
the Company or any of its affiliates to terminate such employee's employment
with the Company or such affiliate. It is expressly acknowledged that a breach
of this covenant may result in irreparable harm to the Company for which there
is no adequate remedy at law and that, therefore, in the event of such a breach,
the Company shall be entitled to obtain injunctive relief restraining Executive
from engaging in activities prohibited by this Section 6 or any other relief as
may be required to specifically enforce this covenant.
7. CONFIDENTIALITY. While employed by the Company and at all times
---------------
thereafter, Executive shall maintain the confidentiality of all information of
and relating to, and all material of, the Company and its affiliates that have
not been made available to the public (other than by reason of a breach by
Executive of his obligations under this Section 7) and shall not, without the
Company's prior written permission, disclose to any person outside of the
Company and its affiliates any such
<PAGE>
- 6 -
information or material. Without limiting the foregoing sentence, such
information and material shall include pricing plans and price policies,
business plans, sales forecasts, research and development, formulas, procedures
and the identity of customers and suppliers and the terms upon which the Company
or any of its affiliates deals with them. Upon termination of employment with
the Company, Executive shall return to the Company all property in his
possession, whether or not containing confidential information, including but
not limited to originals and copies of any written documents, drawings and
reports, diskettes and other storage media, belonging to the Company or any of
its affiliates or received from the Company or any of its affiliates. It is
expressly acknowledged that a breach of this covenant may result in irreparable
harm to the Company for which there is no adequate remedy at law and that,
therefore, in the event of such a breach, the Company shall be entitled to
obtain injunctive relief restraining Executive from engaging in activities
prohibited by this Section 7 or any other relief as may be required to
specifically enforce this covenant.
8. TAXES. The Company shall be entitled to deduct and withhold from
-----
all amounts payable under this Agreement all applicable Federal, state and local
taxes which the Company determines are required by law to be deducted and
withheld.
9. NOTICES. All notices and other communications under this
-------
Agreement shall be in writing and shall be given by hand delivery to the party
receiving such notice or by certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to Executive: Arthur P. Gnann III
c/o Carson Products Company
71 A Ross Road
Savannah, Georgia 31405
If to the Company: Carson Products Company
71 A Ross Road
Savannah, Georgia 31405
Attention: Chief Executive
Officer
or to such other address as either party shall have furnished to the other party
in writing as the address to send future notices and communications in
accordance herewith. Any notice or communication shall be deemed given when
actually received by the party who is its intended recipient.
<PAGE>
- 7 -
10. SEVERABILITY. If any provision of this Agreement is held to be
------------
invalid under applicable law, such provision shall be ineffective only to the
extent of such invalidity, and the remaining provisions of this Agreement shall
be unimpaired.
11. WAIVERS. The waiver by either party of a breach of any provision
-------
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision, or as a waiver of any other provision of
this Agreement.
12. ASSIGNABILITY. The Company may assign its rights and obligations
-------------
hereunder to any of its affiliates, or to any successor of the Company;
provided, that this Agreement shall, without further action of the Company,
- --------
automatically be assumed by the surviving entity in any merger transaction or
transactions to which the Company is a party. Executive may not assign any of
his rights, duties, obligations or interests hereunder to any other person
without the prior express written consent of the Board of Directors of the
Company.
13. ENTIRE AGREEMENT. This instrument contains the entire agreement
----------------
of the parties with respect to, and supersedes all prior agreements relating to,
Executive's employment with the Company.
14. GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed and enforced under, the laws of the State of Georgia.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CARSON PRODUCTS COMPANY
By:_______________________
__________________________
Arthur P. Gnann III
<PAGE>
APPENDIX A
BUSINESS PLAN
Executive Level Bonus Targets for FY 1996
-----------------------------------------
Anticipated Case Base Case
---------------- ---------
Sales $68.8 million $66.3 million
EBIDTA $15.9 million $13.1 million
<PAGE>
CARSON PRODUCTS COMPANY
P.O. Box 22309
Savannah, Georgia 31403-2309
July 31, 1996
PERSONAL AND CONFIDENTIAL
- -------------------------
Arthur P. Gnann III
c/o Carson Products Company
71A Ross Road
Savannah, Georgia 31405
Re: Employment Agreement Modification
---------------------------------
Dear Arthur:
I am pleased to advise you that the Board of Directors of Carson Products
Company (the "Company") has agreed to modify your employment agreement, dated as
of September 1, 1995, with the Company (the "Employment Agreement") to (i)
extend your term of employment thereunder, (ii) convert your stock-based long-
term incentive opportunity into the right to purchase Class A Common Stock of
the Company, and (iii) effect certain other changes thereto.
Accordingly, the Employment Agreement is hereby modified, effective as of
the dates set forth below, as follows:
1. Effective as of the closing of the Offerings (as that term is defined
in the Form S-1 Registration Statement filed by Carson, Inc. under the
Securities Act of 1933), Section 1 of the Employment Agreement is hereby amended
by deleting it in its entirety and replacing it with a new Section 1 to read in
its entirety as follows:
<PAGE>
- 2 -
"1. Term of Covered Employment. The term of Executive's
--------------------------
employment covered under this Agreement (the "Term of Covered Employment")
shall commence on the Closing Date and shall end on the third anniversary
of the closing of the Offerings, as that term is defined in the Form S-1
Registration Statement filed by Carson, Inc. under the Securities Act of
1933, (the "Expiration Date"), unless earlier terminated under Section 5 of
this Agreement."
2. Effective as of [the date hereof], Section 3.1 of the Employment
Agreement is hereby amended by deleting it in its entirety and replacing it with
a new Section 3.1 to read as follows:
"3.1 Compensation. For all services to be rendered during the
------------
Term of Covered Employment, the Company shall pay Executive a salary
("Base Salary") of $90,000 per annum, payable bi-weekly in arrears.
In addition, for each fiscal year of the Company ending within the
Term of Covered Employment, Executive shall receive a bonus (the
"Bonus") in an amount equal to (i) thirty percent (30%) of Base Salary
if the "base case" objectives (but not the "anticipated case"
objectives) for that fiscal year, as specified by the Board (as
defined in Section 5.1 of this Agreement), or a committee thereof, are
achieved, or (ii) fifty percent (50%) of Base Salary if the
"anticipated case" objectives for that fiscal year, as specified by
the Board (or a committee thereof) are met. The objectives utilized
in determining the Bonus shall be net revenue growth, net income,
earnings per share and/or stock price growth, each as defined by the
Board (or a committee thereof) in its sole discretion. A lesser
percentage of Base Salary may be paid hereunder if one or more, but
not all, of the targeted objectives for a fiscal year are achieved.
If the "base case" objectives are met, the value of the Bonus, if any,
shall be paid seventy-five percent (75%) in a single lump sum cash
payment and twenty-five percent (25%) in shares of restricted stock of
Carson, Inc. If the "anticipated case" objectives are met, the value
of the Bonus, if any, shall be paid fifty percent (50%) in a single
lump sum cash payment and fifty percent (50%) in shares of restricted
stock of Carson, Inc. Such restricted stock shall vest as to one-
third (1/3) of the aggregate number of shares delivered to Executive
on each of the first three anniversaries of the date of payment of the
Bonus (if Executive is employed by the Company on such dates). The
Bonus shall be paid no later than 120 days after the end of the fiscal
year for which the applicable objectives have been met."
<PAGE>
- 3 -
3. Effective as of the date hereof, Section 4 of the Employment
Agreement is hereby amended by deleting it in its entirety and replacing it with
a new Section 4 to read as follows:
"4. Stock Purchase Right. Executive shall have the right to
--------------------
acquire 2.6102 shares of Carson, Inc.'s Class A Common Stock at a per share
purchase price equal to the fair market value per hare of the Class A
Common Stock on the date of purchase, as determined by the Board (as
defined in Section 5.1 of this Agreement). Executive may satisfy the
aggregate purchase price for the shares of the Class A Common Stock by
tendering cash or a promissory note (in the form attached hereto as Exhibit
1). If Executive elects to tender such a promissory note, Executive shall
execute and deliver a pledge agreement, in the form attached hereto as
Exhibit 2, pursuant to which Executive shall pledge the purchased shares of
the Class A Common Stock acquired to Carson, Inc. to secure payment of such
promissory note. As a condition of any such purchase, Executive shall also
execute and deliver a shareholders agreement, if required by the Company or
Carson, Inc., and a registration rights agreement (in the form attached
hereto as Exhibit 3)."
4. Effective as of the date hereof, Appendix A to the Employment
Agreement is hereby deleted in its entirety.
5. Except as expressly modified herein, the Employment Agreement
shall remain in full force and effect in accordance with its terms and
provisions as the same are set forth on the date hereof.
Please indicate your acceptance of and agreement to the above
modifications by signing this modification agreement in the space provided
below.
CARSON PRODUCTS COMPANY
By:___________________________
Name:
Title:
AGREED TO AND ACCEPTED:
____________________________
Arthur P. Gnann III
<PAGE>
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of September 1, 1995, by and between Carson Products
Company, a Delaware Corporation (the "Company"), and Allena Lee-Brown
("Executive").
WITNESSETH:
----------
WHEREAS, Executive currently serves as Human Resources Director of the
Company; and
WHEREAS, the Company wishes to retain the services of Executive from and
after the date hereof (the "Effective Date"), and Executive wishes to continue
in the service of the Company from and after the Effective Date, on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. TERM OF COVERED EMPLOYMENT. The term of Executive's employment covered
--------------------------
under this Agreement (the "Term of Covered Employment") shall commence on the
Effective Date and shall end on the third anniversary of the Effective Date (the
"Expiration Date"), unless terminated earlier under Section 5.
2. EMPLOYMENT AND DUTIES. Subject to the terms and conditions hereinafter
---------------------
set forth, during the Term of Covered Employment, the Company shall employ
Executive, and Executive shall serve, as Vice President, Human Resources of the
Company. In such capacity, Executive shall perform the duties and
responsibilities assigned by the Company, and such performance shall be
Executive's principal activity to which she shall devote substantially all her
working hours. Executive shall report to the Chief Executive Officer of the
Company.
3. COMPENSATION AND BENEFITS.
-------------------------
3.1 Compensation. For all services to be rendered during the Term of
------------
Covered Employment, the Company shall pay Executive a salary ("Base
Salary") of $75,000 per annum, payable bi-weekly in arrears. In addition,
for each fiscal year of the Company ending within the Term of Covered
Employment, Executive shall receive a bonus (the "Bonus) in an amount equal
to (i) thirty percent (30%) of her Base Salary if the "base case"
objectives (but not the
<PAGE>
- 2 -
"anticipated case" objectives) for such fiscal year as specified in the
business plan attached as Appendix A hereto (as the same may be
supplemented from time to time) are met, and (ii) fifty percent (50%) of
her Base Salary if the "anticipated case" objectives for such fiscal year
as specified in said business plan are met. The Bonus shall be paid in a
single lump sum no later than 120 days after the end of the fiscal year for
which the applicable objectives have been met.
3.2 Pension and Welfare Plans. During the Term of Covered
-------------------------
Employment, Executive shall also be eligible to participate in any pension
and welfare plans maintained by the Company for its employees, subject to
the requirements of applicable law.
3.3 Fringe Benefits. During the Term of Covered
---------------
Employment, Executive shall receive any fringe benefits generally provided
by the Company to its employees.
4. LONG-TERM INCENTIVE AWARD. In the event a "Triggering Event", as
-------------------------
hereinafter defined, occurs while Executive is employed by the Company
(including any such employment following the expiration of the Term of Covered
Employment), the Company shall pay Executive, within 90 days after such
Triggering Event, a lump sum amount in cash equal to one-quarter of one percent
(0.25%) of the value of DNL Savannah Holding Corp., a Delaware corporation ("DNL
Holding"), the parent corporation of the Company, or any successor thereto, at
the time of such Triggering Event, minus $125,000. A "Triggering Event" means
-----
the earliest to occur of (i) an initial public offering of the common stock of
DNL Holding (or any successor thereto), (ii) a sale of substantially all of the
stock or assets of DNL Holding or the Company (or any successor thereto), or
(iii) the fifth anniversary of the Effective Date. For purposes of this Section
4, the value of DNL Holding (or any successor thereto) at the time of the
Triggering Event means (x) if the Triggering Event is the initial public
offering of the common stock of DNL Holding (or any successor thereto), the
value determined on the basis of the price set for the sale of such common stock
to the public in such initial public offering, as established by the managing
underwriters to such public offering, (y) if the Triggering Event is the sale of
substantially all of the stock or assets of DNL Holding or the Company (or any
successor thereto), the price being paid by the acquiror of such stock or
assets, and (z) if the Triggering Event is the fifth anniversary of the
Effective Date, the value established as of such date under a valuation of DNL
Holding (or any successor thereto) conducted by an independent appraiser.
<PAGE>
- 3 -
5. TERMINATION OF EMPLOYMENT. Notwithstanding any other provision of
-------------------------
this Agreement, but subject to the notice provisions contained in this Section
5, the Company retains the right to terminate Executive's employment, and
Executive retains the right to resign from employment with the Company, at any
time and for any reason.
5.1 Termination for Cause. The Company may terminate Executive's
---------------------
employment with the Company for "Cause" (as hereinafter defined) in the
manner specified in this Section 5.1. In the event that on or after the
Effective Date and prior to the Expiration Date, the Company terminates
Executive's employment with the Company for Cause, the Term of Covered
Employment shall end on the date of such termination (which shall be the
date specified in the notice described in this Section 5.1) and Executive
shall be entitled only to any unpaid amount of Base Salary for her
employment with the Company through and including the date of such
termination. In any event, Executive shall not be entitled to receive any
amount of Base Salary with respect to any period following the date of such
termination, or any portion of the Bonus for the fiscal year of the Company
in which such date of termination occurs.
For purposes of this Agreement, termination for "Cause" means termination
by the Company due to Executive's gross dereliction of her duties under
this Agreement, including, without limitation, her refusal to follow or
gross neglect of the directions of the Chief Executive Officer of the
Company or any other executive of the Company senior to Executive, or any
willful misconduct by Executive that is materially injurious to the
Company, or the indictment of Executive for a felony involving moral
turpitude.
To terminate Executive for Cause, the Company shall give a written notice
of such termination to Executive ("Notice of Termination"), which notice
shall have been authorized by a vote of the majority of the Company's Board
of Directors (the "Board") and shall specify the date of such termination,
which shall not be earlier than the date on which such notice is given to
Executive. Such notice shall be given to Executive no later than 10 days
after a member of the Board (other than Executive) has actual knowledge of
the events or circumstances which purportedly constitute Cause for such
termination, and shall specify the particular act or acts, or failure to
act, or other events or circumstances constituting Cause for such
termination. Executive shall be given the opportunity within 30 days after
receiving such notice to meet with the Board to explain why Cause for such
termination does not exist. Within 15 days after any such meeting, the
Board shall give Executive its final decision regarding whether Cause
exists. If the Board's final decision is that Cause exists,
<PAGE>
- 4 -
Executive's employment with the Company shall be terminated under this
Section 5.1 pursuant to the Notice of Termination as of the date of
termination specified in such Notice. If the Board's final decision is
that Cause does not exist, Executive's employment with the Company shall
not be terminated under this Section 5.1.
5.2 Resignation. Executive may resign from employment with the
-----------
Company by giving the Company written notice of such resignation, which
notice shall specify the date of resignation, which shall not be earlier
than 30 days after the date such written notice is given to the Company.
In the event of Executive's resignation on or after the Effective Date and
prior to the Expiration Date, the Term of Covered Employment shall end on
the date of resignation (which shall be the date specified in Executive's
notice of resignation), and Executive shall be entitled only to any unpaid
amount of Base Salary for her employment with the Company through and
including such date of resignation. Executive shall not be entitled to
receive any amount of Base Salary with respect to any period following such
date of resignation, or any portion of the Bonus for the fiscal year of the
Company in which such date of resignation occurs.
5.3 Termination Other Than For Cause. The Company may terminate
--------------------------------
Executive's employment with the Company other than for Cause by giving
Executive written notice of such termination, which notice shall specify
the date of such termination, which shall not be earlier than 30 days after
such written notice is given to Executive. In the event that on or after
the Effective Date and prior to the Expiration Date Executive's employment
with the Company is terminated by the Company other than for Cause, the
Term of Covered Employment shall end upon such specified date of
termination and the Company shall pay Executive, within 15 days after such
date of termination, an additional lump sum amount equal to 150% of one
year's Base Salary. Executive shall not be eligible to participate in any
of the Company's employee benefit plans following such date of termination
of employment, except as may be required by applicable law.
5.4 Termination Due to Death or Disability. The Company may
--------------------------------------
terminate Executive's employment with the Company due to "Disability", as
hereinafter defined, by giving Executive written notice of such
termination, which notice shall specify the date of such termination, which
shall not be earlier than 30 days after such written notice is given to
Executive. If on or after the Effective Date and prior to the Expiration
Date Executive's employment with the Company is terminated due to
Disability, or if during such period Executive dies, the Term of Covered
Employment shall end upon such specified date of termination or date of
<PAGE>
- 5 -
death, as applicable, and the Company shall pay Executive, or her
beneficiary or estate, as the case may be, within 15 days after such date
of termination or death, an additional lump sum amount equal to 150% of one
year's Base Salary.
For purposes of this Agreement, "Disability" means Executive's
inability to perform her duties under this Agreement for a period of at
least six consecutive months because of medically determinable physical or
mental impairment, as determined by a physician mutually agreeable to
Executive and the Company. If Executive and the Company are unable to
agree on such a physician, each shall appoint one physician and those two
physicians shall appoint a third physician who shall make such a
determination.
6. NON-COMPETITION; NON-SOLICITATION. While Executive is employed
---------------------------------
by the Company (including any period of such employment following the expiration
of the Term of Covered Employment), and during the period in which Executive is
receiving payments of Base Salary from the Company (regardless of whether or not
Executive is then employed by the Company), Executive shall not directly or
indirectly (i) own, manage, operate, represent, promote, consult for, control or
participate in the ownership, operation, acquisition or management of any
business which manufactures and/or distributes ethnic hair care products or
cosmetics within a 500-mile radius of the Company's headquarters, (ii) solicit
(other than on behalf of the Company or any of its affiliates), divert or take
away the business of any customers of the Company or any of its affiliates, or
any prospective customers of the Company or any of its affiliates whose business
the Company or any of its affiliates is actively soliciting, or has actively
solicited, during Executive's employment with the Company with whom Executive
had any material personal contact, or (iii) solicit or induce any employee of
the Company or any of its affiliates to terminate such employee's employment
with the Company or such affiliate. It is expressly acknowledged that a breach
of this covenant may result in irreparable harm to the Company for which there
is no adequate remedy at law and that, therefore, in the event of such a breach,
the Company shall be entitled to obtain injunctive relief restraining Executive
from engaging in activities prohibited by this Section 6 or any other relief as
may be required to specifically enforce this covenant.
7. CONFIDENTIALITY. While employed by the Company and at all times
---------------
thereafter, Executive shall maintain the confidentiality of all information of
and relating to, and all material of, the Company and its affiliates that have
not been made available to the public (other than by reason of a breach by
Executive of her obligations under this Section 7) and shall not, without the
Company's prior written permission, disclose to any person outside of the
Company and its affiliates any such
<PAGE>
- 6 -
information or material. Without limiting the foregoing sentence, such
information and material shall include pricing plans and price policies,
business plans, sales forecasts, research and development, formulas, procedures
and the identity of customers and suppliers and the terms upon which the Company
or any of its affiliates deals with them. Upon termination of employment with
the Company, Executive shall return to the Company all property in her
possession, whether or not containing confidential information, including but
not limited to originals and copies of any written documents, drawings and
reports, diskettes and other storage media, belonging to the Company or any of
its affiliates or received from the Company or any of its affiliates. It is
expressly acknowledged that a breach of this covenant may result in irreparable
harm to the Company for which there is no adequate remedy at law and that,
therefore, in the event of such a breach, the Company shall be entitled to
obtain injunctive relief restraining Executive from engaging in activities
prohibited by this Section 7 or any other relief as may be required to
specifically enforce this covenant.
8. TAXES. The Company shall be entitled to deduct and withhold from
-----
all amounts payable under this Agreement all applicable Federal, state and local
taxes which the Company determines are required by law to be deducted and
withheld.
9. NOTICES. All notices and other communications under this
-------
Agreement shall be in writing and shall be given by hand delivery to the party
receiving such notice or by certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to Executive: Allena Lee-Brown
c/o Carson Products Company
71 A Ross Road
Savannah, Georgia 31405
If to the Company: Carson Products Company
71 A Ross Road
Savannah, Georgia 31405
Attention: Chief Executive
Officer
or to such other address as either party shall have furnished to the other party
in writing as the address to send future notices and communications in
accordance herewith. Any notice or communication shall be deemed given when
actually received by the party who is its intended recipient.
<PAGE>
- 7 -
10. SEVERABILITY. If any provision of this Agreement is held to be
------------
invalid under applicable law, such provision shall be ineffective only to the
extent of such invalidity, and the remaining provisions of this Agreement shall
be unimpaired.
11. WAIVERS. The waiver by either party of a breach of any provision
-------
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision, or as a waiver of any other provision of
this Agreement.
12. ASSIGNABILITY. The Company may assign its rights and obligations
-------------
hereunder to any of its affiliates, or to any successor of the Company;
provided, that this Agreement shall, without further action of the Company,
- --------
automatically be assumed by the surviving entity in any merger transaction or
transactions to which the Company is a party. Executive may not assign any of
her rights, duties, obligations or interests hereunder to any other person
without the prior express written consent of the Board of Directors of the
Company.
13. ENTIRE AGREEMENT. This instrument contains the entire agreement
----------------
of the parties with respect to, and supersedes all prior agreements relating to,
Executive's employment with the Company.
14. GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed and enforced under, the laws of the State of Georgia.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CARSON PRODUCTS COMPANY
By:_______________________
__________________________
Allena Lee-Brown
<PAGE>
APPENDIX A
BUSINESS PLAN
Executive Level Bonus Targets for FY 1996
-----------------------------------------
Anticipated Case Base Case
---------------- ---------
Sales $68.8 million $66.3 million
- ----- --------------- -------------
EBIDTA $15.9 million $13.1 million
<PAGE>
CARSON PRODUCTS COMPANY
P.O. Box 22309
Savannah, Georgia 31403-2309
July 31, 1996
PERSONAL AND CONFIDENTIAL
- -------------------------
Ms. Allena Lee-Brown
c/o Carson Products Company
71A Ross Road
Savannah, Georgia 31405
Re: Employment Agreement Modification
---------------------------------
Dear Allena:
I am pleased to advise you that the Board of Directors of Carson Products
Company (the "Company") has agreed to modify your employment agreement, dated as
of September 1, 1995, with the Company (the "Employment Agreement") to (i)
extend your term of employment thereunder, and (ii) effect certain other changes
thereto.
Accordingly, the Employment Agreement is hereby modified, effective as of
the dates set forth below, as follows:
1. Effective as of the closing of the Offerings (as that term is defined
in the Form S-1 Registration Statement filed by Carson, Inc. under the
Securities Act of 1933), Section 1 of the Employment Agreement is hereby amended
by deleting it in its entirety and replacing it with a new Section 1 to read in
its entirety as follows:
"1. Term of Covered Employment. The term of Executive's
--------------------------
employment covered under this Agreement (the "Term of Covered Employment")
shall commence on the Closing Date and shall end on the third anniversary
of the closing of the Offerings, as that term is defined in the Form S-1
Registration Statement filed by Carson, Inc. under the Securities Act of
1933, (the "Expiration Date"), unless earlier terminated under Section 5 of
this Agreement."
<PAGE>
- 2 -
2. Effective as of [the date hereof], Section 3.1 of the Employment
Agreement is hereby amended by deleting it in its entirety and replacing it with
a new Section 3.1 to read as follows:
"3.1 Compensation. For all services to be rendered during the
------------
Term of Covered Employment, the Company shall pay Executive a salary
("Base Salary") of $90,000 per annum, payable bi-weekly in arrears.
In addition, for each fiscal year of the Company ending within the
Term of Covered Employment, Executive shall receive a bonus (the
"Bonus") in an amount equal to (i) thirty percent (30%) of Base Salary
if the "base case" objectives (but not the "anticipated case"
objectives) for that fiscal year, as specified by the Board (as
defined in Section 5.1 of this Agreement), or a committee thereof, are
achieved, or (ii) fifty percent (50%) of Base Salary if the
"anticipated case" objectives for that fiscal year, as specified by
the Board (or a committee thereof) are met. The objectives utilized
in determining the Bonus shall be net revenue growth, net income,
earnings per share and/or stock price growth, each as defined by the
Board (or a committee thereof) in its sole discretion. A lesser
percentage of Base Salary may be paid hereunder if one or more, but
not all, of the targeted objectives for a fiscal year are achieved.
If the "base case" objectives are met, the value of the Bonus, if any,
shall be paid seventy-five percent (75%) in a single lump sum cash
payment and twenty-five percent (25%) in shares of restricted stock of
Carson, Inc. If the "anticipated case" objectives are met, the value
of the Bonus, if any, shall be paid fifty percent (50%) in a single
lump sum cash payment and fifty percent (50%) in shares of restricted
stock of Carson, Inc. Such restricted stock shall vest as to one-
third (1/3) of the aggregate number of shares delivered to Executive
on each of the first three anniversaries of the date of payment of the
Bonus (if Executive is employed by the Company on such dates). The
Bonus shall be paid no later than 120 days after the end of the fiscal
year for which the applicable objectives have been met."
3. Effective as of the date hereof, Section 4 of the Employment
Agreement is hereby amended by deleting it in its entirety and replacing it with
a new Section 4 to read as follows:
"4. Long-Term Incentive Award. In the event a "Triggering
-------------------------
Event", as hereinafter defined, occurs while Executive is employed by the
Company (including any such employment following the expiration of the Term
of Covered Employment), the Company shall pay Executive, within 90 days
after such Triggering Event, a lump sum amount in cash equal to (A) the
product of (i) one-quarter of one percent (0.25%) of the value of DNL
<PAGE>
- 3 -
Savannah Holding Corp., a Delaware corporation ("DNL Holding"), the parent
corporation of the Company, or any successor thereto, at the time of such
Triggering Event (as that value is reduced by the aggregate underwriting
discount in connection with the Offerings) and (ii) the Dilution Percentage
(as defined below), minus (B) $125,000. A "Triggering Event" means the
-----
earliest to occur of (i) an initial public offering of the common stock of
Aminco, Inc. (or any successor thereto), (ii) sale of substantially all
(90%) of the stock or assets of Aminco, Inc. (or any successor thereto), or
(iii) the fifth anniversary of the Closing Date. For purposes of this
Section 4, the value of Aminco, Inc. (or any successor thereto) at the time
of the Triggering Event means (x) if the Triggering Event is the initial
public offering of the common stock of Aminco, Inc. (or any successor
thereto), the value determined on the basis of the price set for the sale
of such common stock to the public in such initial public offering, as
established by the managing underwriters to such public offering, (y) if
the Triggering Event is the sale of substantially all of the stock or
assets of Aminco, Inc. (or any successor thereto), the price being paid by
the acquiror of such stock or assets, and (z) if the Triggering Event is
the fifth anniversary of the Closing Date, the value established as of such
date under a valuation of Aminco, Inc. (or any successor thereto) conducted
by an independent appraiser to be selected by Executive and the Company by
mutual consent. However, if Executive and the Company cannot mutually
consent to said appraiser, then Executive shall select an independent
appraiser and the Company shall an independent appraiser who will then
jointly select an independent appraiser to establish the valuation of
Aminco, Inc. and independent appraiser. For purposes of this Agreement,
the Dilution Percentage is equal to the quotient resulting when (i) the
number of shares of all classes of the Company's Common Stock outstanding
on July 31, 1996 is divided by (ii) the number of shares of all classes of
the Company's Common Stock outstanding immediately after the closing of the
Offerings, as defined in Section 1 above."
4. Effective as of the date hereof, Appendix A to the Employment
Agreement is hereby deleted in its entirety.
5. Except as expressly modified herein, the Employment Agreement
shall remain in full force and effect in accordance with its terms and
provisions as the same are set forth on the date hereof.
<PAGE>
- 4 -
Please indicate your acceptance of and agreement to the above
modifications by signing this modification agreement in the space provided
below.
CARSON PRODUCTS COMPANY
By:___________________________
Name:
Title:
AGREED TO AND ACCEPTED:
____________________________
Allena Lee-Brown
<PAGE>
Exhibit 10.9
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of March 11, 1996, by and between Carson Products
Company, a Georgia corporation (the "Company"), and Miriam Muley ("Executive").
WITNESSETH:
----------
WHEREAS, the current owners of all of the outstanding capital stock of
Aminco, Inc., the parent of the Company, have entered into a Stock Purchase
Agreement dated as of May 11, 1995 (the "Stock Purchase Agreement") with DNL
Savannah Acquisition Corp., a Delaware Corporation ("DNL"), under which such
shareholders shall sell, and DNL shall purchase, all of the outstanding capital
stock of Aminco, Inc.; and
WHEREAS, the Company wishes to retain the services of Executive from April
8, 1996, and Executive wishes to be employed in the service of the Company from
April 8, 1996, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. TERM OF COVERED EMPLOYMENT. The term of Executive's employment covered
--------------------------
under this Agreement (the "Term of Covered Employment") shall commence on April
8, 1996 and shall end on the third anniversary of that date (the "Expiration
Date"), unless terminated earlier under Section 5.
2. EMPLOYMENT AND DUTIES. Subject to the terms and conditions hereinafter
---------------------
set forth, during the Term of Covered Employment, the Company shall employ
Executive, and Executive shall serve, as Vice President, Marketing.
In such capacity, Executive shall perform the duties and responsibilities
assigned by the Company, and such performance shall be Executive's principal
activity to which she shall devote substantially all her working hours.
Executive shall report to the Executive Vice President, Global Marketing.
3. COMPENSATION AND BENEFITS.
-------------------------
3.1 Compensation. For all services to be rendered during the Term of
------------
Covered Employment, the Company shall pay Executive a salary ("Base Salary") of
$140,000 per annum, payable bi-weekly in arrears. In addition, for each fiscal
year of the Company ending within the Term of Covered Employment, Executive
shall receive a bonus (the "Bonus") in an amount equal to (i) thirty percent
(30%) of her Base Salary if the "base case" objectives (but not the "anticipated
case" objectives) for such fiscal year as specified in the business plan
attached as Appendix A hereto are met, and (ii) fifty percent (50%) of her Base
Salary if the "anticipated case" objectives for such fiscal year as specified in
the business plan attached as Appendix A hereto are met. The Bonus shall be
paid
<PAGE>
in a single lump sum no later than 120 days after the end of the fiscal year for
which the applicable objectives have been met.
3.2 Pension and Welfare Plans. During the Term of Covered Employment,
-------------------------
Executive shall also be eligible to participate in any pension and welfare plans
maintained by the Company for its employees, subject to the requirements of
applicable law.
3.3 Fringe Benefits.
---------------
(a) Relocation Expenses/Allowance. The Company shall reimburse
-----------------------------
Executive for all expenses incurred by her in relocating to Savannah,
Georgia or its vicinity. The Company shall reimburse Executive for
all travel and temporary lodging expenses incurred by her prior to her
commencement of employment with the Company including two spouse
accompanied trips to Savannah, Georgia to secure her new permanent
residence in Savannah, Georgia or its vicinity. In addition the
Company shall pay Executive $10,000 as a general relocation allowance,
$12,000 per annum education allowance and weekly travel between
Warwick, New York and Georgia from April 8 through June 30, 1996 and
temporary housing expenses up to June 30, 1996.
(b) Other Fringe Benefits. During the Term of Covered Employment,
---------------------
Executive shall receive any fringe benefits generally provided by the
Company to its employees.
4. LONG-TERM INCENTIVE AWARD. In the event a "Triggering Event", as
-------------------------
hereinafter defined, occurs while Executive is employed by the Company
(including any such employment following the expiration of the Term of Covered
Employment), the Company shall pay Executive, within 90 days after such
Triggering Event, a lump sum amount in cash equal to one-half of one percent
(0.5%) of the value of Aminco, Inc. (or any successor thereto) at the time of
such Triggering Event, minus $250,000. A "Triggering Event" means the earliest
to occur of (i) an initial public offering of the common stock of Aminco, Inc.
(or any successor thereto), (ii) a sale of substantially all of the stock of the
assets of Aminco, Inc. (or any successor thereto), or (iii) the fifth
anniversary of the Closing Date. For purposes of this Section 4, the value of
Aminco, Inc. (or any successor thereto) at the time of the Triggering Event
means (x) if the Triggering Event is the initial public offering of the common
stock of Aminco, Inc. (or any successor thereto), the value determined on the
basis of the price set for the sale of such common stock to the public in such
initial public offering, as established by the managing underwriters to such
public offering, (y) if the Triggering Event is the sale of substantially all of
the stock or assets of Aminco, Inc. (or any successor thereto), the price being
paid by the acquiror of such stock or assets, and (z) if the Triggering Event is
the fifth anniversary of the Closing Date, the value established as of such date
under a valuation of Aminco, Inc. (or any successor thereto) conducted by an
independent appraiser.
5. TERMINATION OF EMPLOYMENT. Notwithstanding any other provision
-------------------------
of this Agreement, but subject to the notice provisions contained in this
Section 5, the Company retains the right to terminate Executive's employment,
and Executive retains the right to resign from employment with the Company, at
any time and for any reason.
5.1 Termination for Cause. The Company may terminate Executive's
---------------------
employment with the Company for "Cause" (as hereinafter defined) in the
manner specified in this Section 5.1. In the event that after the Start
Date and prior to the Expiration Date, the Company terminates Executive's
employment with the Company for Cause, the Term of Covered
2
<PAGE>
Employment shall end on the date of such termination (which shall be the
date specified in the notice described in this Section 5.1) and Executive
shall be entitled only to any unpaid amount of Base Salary for her
employment with the Company through and including the date of such
termination. In any event, Executive shall not be entitled to receive any
amount of Base Salary with respect to any period following the date of such
termination, or any portion of the Bonus for the fiscal year of the Company
in which such date of termination occurs.
For purposes of this Agreement, termination for "Cause" means
termination by the Company due to Executive's gross dereliction of her
duties under this Agreement, including, without limitation, her refusal to
follow or gross neglect of the directions of the Chief Executive Officer of
the Company or the Executive Vice President, Global Marketing or any other
executive of the Company senior to Executive, or any willful misconduct by
Executive that is materially injurious to the Company, or the indictment of
Executive for a felony involving moral turpitude.
To terminate Executive for Cause, the Company shall give a written notice
of such termination to Executive ("Notice of Termination"), which notice
shall have been authorized by a vote of the majority of the Company's Board
of Directors (the "Board") and shall specify the date of such termination,
which shall not be earlier than the date on which notice is given to the
Executive. Such notice shall be given to Executive no later than 10 days
after a member of the Board (other than Executive) has actual knowledge of
the events or circumstances which purportedly constitute Cause for such
termination, and shall specify the particular act or acts, or failure to
act, or other events or circumstances constituting Cause for such
termination. Executive shall be given the opportunity within 30 days after
receiving such notice to meet with the Board to explain why Cause for such
termination does not exist. Within 15 days after any such meeting, the
Board shall give Executive its final decision regarding whether Cause
exists. If the Board's final decision is that Cause exists, Executive's
employment with the Company shall be terminated under this Section 5.1
pursuant to the Notice of Termination as of the date of termination
specified in such Notice. If the Board's final decision is that Cause does
not exist, Executive's employment with the Company shall not be terminated
under this Section 5.1.
5.2 Resignation. Executive may resign from employment with the
-----------
Company by giving the Company written notice of such resignation, which
notice shall specify the date of resignation, which shall not be earlier
than 30 days after the date such written notice is given to the Company.
In the event of Executive's resignation after the Start Date and prior to
the Expiration Date, the Term of Covered Employment shall end on the date
of resignation (which shall be the date specified in Executive's notice of
resignation), and Executive shall be entitled only to any unpaid amount of
Base Salary for her employment with the Company through and including such
date of resignation. Executive shall not be entitled to receive any amount
of Base Salary with respect to any period following such date of
resignation, or any portion of the Bonus for the fiscal year of the Company
in which such date of resignation occurs.
5.3 Termination Other Than For Cause. The Company may terminate
--------------------------------
Executive's employment with the Company other than for Cause by giving
Executive written notice of such termination, which notice shall specify
the date of such termination, which shall not be earlier than 30 days after
such written notice is given to Executive. In the event that on or after
the Closing Date and prior to the Expiration Date, Executive's employment
with the Company is terminated by the Company other than for Cause, the
Term of Covered Employment shall end upon such specified date of
termination and the Company shall pay
3
<PAGE>
executive, within 15 days after such date of termination, an additional
lump sum amount equal to 150% of one year's Base Salary. Executive shall
not be eligible to participate in any of the Company's employee benefit
plans following such date of termination of employment, except as may be
required by applicable law.
5.4 Termination Due to Death or Disability. The Company may
--------------------------------------
terminate Executive's employment with the Company due to "Disability", as
hereinafter defined, by giving Executive written notice of such
termination, which notice shall specify the date of such termination, which
shall not be earlier than 30 days after such written notice is given to
Executive. If on or after the Start Date and prior to the Expiration Date
Executive's employment with the Company is terminated due to Disability, or
if during such period Executive dies, the Term of Covered Employment shall
end upon such specified date of termination or date of death, as
applicable, and the Company shall pay Executive, or her beneficiary or
estate, as the case may be, within 15 days after such date of termination
or death, an additional lump sum amount equal to 150% of one year's Base
Salary.
For purposes of this Agreement, "Disability" means Executive's
inability to perform her duties under this Agreement for a period of at
least six consecutive months because of medically determinable physical or
mental impairment, as determined by a physician mutually agreeable to
Executive and the Company. If Executive and the Company are unable to
agree on such a physician, each shall appoint one physician and those two
physicians shall appoint a third physician who shall make such a
determination.
6. NON-COMPETITION; NON-SOLICITATION. While Executive is employed
---------------------------------
by the Company (including any period of such employment following the expiration
of the Term of Covered Employment), and during the period in which Executive is
receiving is receiving payments of Base Salary from the Company (regardless of
whether or not Executive is then employed by the Company), Executive shall not
directly or indirectly (i) own, manage, operate, represent, promote, consult
for, control or participate in the ownership, operation, acquisition or
management of any business which manufactures and/or distributes ethnic hair
care products or cosmetics within a 500-mile radius of the Company's
headquarters, (ii) solicit (other than on behalf of the Company or any of its
affiliates), divert or take away the business of any customers of the Company or
any of its affiliates, or any prospective customers of the Company or any of its
affiliates whose business the Company is actively soliciting, or has actively
solicited, during Executive's employment with the Company with whom Executive
had any material personal contact, or (iii) solicit or induce any employee of
the Company or any of its affiliates to terminate such employee's employment
with the Company or such affiliate. It is expressly acknowledged that a breach
of this covenant may result in irreparable harm to the Company for which there
is no adequate remedy at law and that, therefore, in the event of such a breach,
the Company shall be entitled to obtain injunctive relief restraining Executive
from engaging in activities prohibited by this Section 6 or any other relief as
may be required to specifically enforce this covenant.
7. CONFIDENTIALITY. While employed by the Company and at all times
---------------
thereafter, Executive shall maintain the confidentiality of all information of
and relating to, and all material of, the Company and its affiliates that have
not been made available to the public (other than by reason of a breach by
Executive of her obligations under this Section 7) and shall not, without the
Company's prior written permission, disclose to any person outside of the
Company and its affiliates any such information or material. Without limiting
the foregoing sentence, such information and material shall include pricing
plans and price policies, business plans, sales forecasts, research and
development, formulas, procedures and the identity of customers and suppliers
and the terms upon which the
4
<PAGE>
Company or any of its affiliates deals with them. Upon termination of
employment with the Company, Executive shall return to the Company all property
in her possession, whether or not containing confidential information, including
but not limited to originals and copies of any written documents, drawings and
reports, diskettes and other storage media, belonging to the Company or any of
its affiliates or received from the Company or any of its affiliates. It is
expressly acknowledged that a breach of this covenant may result in irreparable
harm to the Company for which there is no adequate remedy at law and that,
therefore, in the event of such a breach, the Company shall be entitled to
obtain injunctive relief restraining Executive from engaging in activities
prohibited by this Section 7 or any other relief as may be required to
specifically enforce this covenant.
8. TAXES. The Company shall be entitled to deduct and withhold from
-----
all amounts payable under this Agreement all applicable Federal, state and local
taxes which the Company determines are required by law to be deducted and
withheld.
9. NOTICES. All notices and other communications under this
-------
Agreement shall be in writing and shall be given by hand delivery to the party
receiving such notice or by certified mail, return requested, postage prepaid,
addressed as follows:
If to Executive: Ms. Miriam Muley
6 Arthur's Court
Warwick, New York 10990
If to the Company: Carson Products Company
71 A Ross Road
Savannah, Georgia 31405
Attention: Chief Executive Officer
or to such other address as either party shall have furnished to the other party
in writing as the address to send future notices and communications in
accordance herewith. Any notice or communication shall be deemed given when
actually received by the party who is its intended recipient.
10. SEVERABILITY. If any provision of this Agreement is held to be
------------
invalid under applicable law, such provision shall be ineffective only to the
extent of such invalidity, and the remaining provisions of this Agreement shall
be unimpaired.
11. WAIVERS. The waiver by either party of a breach of any provision
-------
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision, or as a waiver of any other provision of
this Agreement.
12. ASSIGNABILITY. The Company may assign its rights and obligations
-------------
hereunder to any of its affiliates, or to any successor of the Company.
Executive may not assign any of her rights, duties, obligations or interests
hereunder to any other person without the prior express written consent of the
Board of Directors of the Company.
13. ENTIRE AGREEMENT. This instrument contains the entire agreement
----------------
of the parties with respect to, and supersedes all prior agreements relating to,
Executive's employment with the Company.
14. GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed and enforced under, the laws of the State of Georgia.
5
<PAGE>
15. EFFECTIVENESS OF AGREEMENT. This Agreement shall be and become
--------------------------
effective as of the Closing Date, provided, that if the Stock Purchase Agreement
--------
is terminated, this Agreement shall be cancelled and be of no force or effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Carson Products Company
By:____________________________
Roy Keith
Chairman & CEO
_________________________
Mariam Muley
6
<PAGE>
CARSON PRODUCTS COMPANY
P.O. Box 22309
Savannah, Georgia 31403-2309
July 31, 1996
PERSONAL AND CONFIDENTIAL
- -------------------------
Ms. Sharon A. Davis
c/o Carson Products Company
71A Ross Road
Savannah, Georgia 31405
Re: Employment Agreement Modification
---------------------------------
Dear Sharon:
I am pleased to advise you that the Board of Directors of Carson Products
Company (the "Company") has agreed to modify your employment agreement, dated as
of April 1, 1996, with the Company (the "Employment Agreement") to (i) extend
your term of employment thereunder, (ii) convert your stock-based long-term
incentive opportunity into the right to purchase Class A Common Stock of the
Company, and (iii) effect certain other changes thereto.
Accordingly, the Employment Agreement is hereby modified, effective as of
the dates set forth below, as follows:
1. Effective as of the closing of the Offerings (as that term is defined
in the Form S-1 Registration Statement filed by Carson, Inc. under the
Securities Act of 1933), Section 1 of the Employment Agreement is hereby amended
by deleting it in its entirety and replacing it with a new Section 1 to read in
its entirety as follows:
"1. Term of Covered Employment. The term of Executive's
--------------------------
employment covered under this Agreement (the "Term of Covered Employment")
shall commence on the Closing Date end shall end on the third anniversary
of the closing of the Offerings, as that term is defined in the Form
<PAGE>
- 2 -
S-1 Registration Statement filed by Carson, Inc. under the Securities Act
of 1933, (the "Expiration Date"), unless earlier terminated under Section 5
of this Agreement."
2. Effective as of [the date hereof], Section 3.1 of the Employment
Agreement is hereby amended by deleting it in its entirety and replacing it with
a new Section 3.1 to read as follows:
"3.1 Compensation. For all services to be rendered during the
------------
Term of Covered Employment, the Company shall pay Executive a salary
("Base Salary") of $90,000 per annum, payable bi-weekly in arrears.
In addition, for each fiscal year of the Company ending within the
Term of Covered Employment, Executive shall receive a bonus (the
"Bonus") in an amount equal to (i) thirty percent (30%) of Base Salary
if the "base case" objectives (but not the "anticipated case"
objectives) for that fiscal year, as specified by the Board (as
defined in Section 5.1 of this Agreement), or a committee thereof, are
achieved, or (ii) fifty percent (50%) of Base Salary if the
"anticipated case" objectives for that fiscal year, as specified by
the Board (or a committee thereof) are met. The objectives utilized
in determining the Bonus shall be net revenue growth, net income,
earnings per share and/or stock price growth, each as defined by the
Board (or a committee thereof) in its sole discretion. A lesser
percentage of Base Salary may be paid hereunder if one or more, but
not all, of the targeted objectives for a fiscal year are achieved.
If the "base case" objectives are met, the value of the Bonus, if any,
shall be paid seventy-five percent (75%) in a single lump sum cash
payment and twenty-five percent (25%) in shares of restricted stock of
Carson, Inc. If the "anticipated case" objectives are met, the value
of the Bonus, if any, shall be paid fifty percent (50%) in a single
lump sum cash payment and fifty percent (50%) in shares of restricted
stock of Carson, Inc. Such restricted stock shall vest as to one-
third (1/3) of the aggregate number of shares delivered to Executive
on each of the first three anniversaries of the date of payment of the
Bonus (if Executive is employed by the Company on such dates). The
Bonus shall be paid no later than 120 days after the end of the fiscal
year for which the applicable objectives have been met."
3. Effective as of the date hereof, Section 4 of the Employment
Agreement is hereby amended by deleting it in its entirety and replacing it with
a new Section 4 to read as follows:
<PAGE>
- 3 -
"4. Stock Purchase Right. Executive shall have the right to
--------------------
acquire 2.6102 shares of Carson, Inc.'s Class A Common Stock at a per share
purchase price equal to the fair market value per hare of the Class A
Common Stock on the date of purchase, as determined by the Board (as
defined in Section 5.1 of this Agreement). Executive may satisfy the
aggregate purchase price for the shares of the Class A Common Stock by
tendering cash or a promissory note (in the form attached hereto as Exhibit
1). If Executive elects to tender such a promissory note, Executive shall
execute and deliver a pledge agreement, in the form attached hereto as
Exhibit 2, pursuant to which Executive shall pledge the purchased shares of
the Class A Common Stock acquired to Carson, Inc. to secure payment of such
promissory note. As a condition of any such purchase, Executive shall also
execute and deliver a shareholders agreement, if required by the Company or
Carson, Inc., and a registration rights agreement (in the form attached
hereto as Exhibit 3)."
4. Effective as of the date hereof, Appendix A to the Employment
Agreement is hereby deleted in its entirety.
5. Except as expressly modified herein, the Employment Agreement
shall remain in full force and effect in accordance with its terms and
provisions as the same are set forth on the date hereof.
Please indicate your acceptance of and agreement to the above
modifications by signing this modification agreement in the space provided
below.
CARSON PRODUCTS COMPANY
By:___________________________
Name:
Title:
AGREED TO AND ACCEPTED:
____________________________
Sharon A. Davis
<PAGE>
EXHIBIT 10.10
MANAGEMENT ASSISTANCE AGREEMENT
MANAGEMENT ASSISTANCE AGREEMENT, dated August 23, 1995 between Carson
Products Company, a Delaware corporation (the "Company"), and Morningside
-------
Capital Group, LLC, a Connecticut limited liability company ("Morningside").
-----------
WITNESSETH:
----------
WHEREAS, DNL Savannah Acquisition Corp., a Delaware corporation (the
"Purchaser"), has on the date hereof acquired all of the outstanding capital
- ----------
stock of the Company from the holders thereof and is on the date hereof merging
itself into the Company;
WHEREAS, to finance such acquisition, the Purchaser has incurred
significant amounts of indebtedness and, upon such merger, the Company will by
operation of law assume the Purchaser's obligations with respect to such
indebtedness;
WHEREAS, the Company has also on the date hereof merged into itself
Carson Products Company, a Georgia corporation ("Carson Georgia") that has
--------------
heretofore been the Company's principal operating subsidiary, and one other
subsidiary and the Company will hereafter continue to conduct the business
heretofore conducted by the Company and such subsidiaries;
WHEREAS, Vincent A. Wasik ("Wasik"), who is the principal member of
-----
Morningside, has, as an officer and director of the Purchaser and its parent,
been instrumental in arranging for the foregoing transactions and the Company
desires to retain the services of Morningside, and thereby of Wasik, in
connection with its ongoing business on the terms herein provided.
NOW, THEREFORE, the Company and Morningside agree as follows:
(S)1. MANAGEMENT ASSISTANCE SERVICES. Morningside shall, during the
Term (as hereinafter defined), from time to time as reasonably requested by the
Company make available to the Company the services of Wasik to provide advice
and assistance to the Company with respect to the following:
(a) the formulation of the strategic direction of the Company;
(b) the formulation of business plans, capital budgets and financial
strategies;
<PAGE>
(c) the formulation of the marketing, sales and operational plans of
the Company;
(d) evaluating business investment and acquisition opportunities; and
(e) dealing with banks and other lending institutions;
the services so to be provided being herein called the "Management Assistance
---------------------
Services"; provided, however, the Management Assistance Services shall not
- -------- -------- -------
include any services in connection with arranging for or attempting to arrange
for or consummating or attempting to consummate any business investment or
acquisition opportunity.
(S)2. FEE. In consideration of Morningside's agreement to provide
Management Assistance Services upon the terms and conditions of this Agreement,
the Company shall pay Morningside a fee at the rate, during the Term, of
$350,000 per year, to be payable on a monthly basis in advance.
(S)3. REIMBURSEMENT FOR EXPENSES. The fee to be paid to Morningside
as provided in (S)2 does not include, and the Company will promptly reimburse
-
Morningside for, all out-of-pocket expenses reasonably incurred by Morningside
or Wasik in performing the Management Assistance Services, but not including
office and other overhead expenses of Morningside, provided, however,
-------- -------
Morningside shall not be entitled to be reimbursed pursuant to this (S)3 for
-
more than $25,000 in the aggregate with respect to such expenses so incurred in
any fiscal year of the Company.
(S)4. INDEMNIFICATION. (a) The Company agrees to indemnify and hold
Morningside and its members, employees and agents, including Wasik
(collectively, the "Indemnified Parties"), harmless from and against any and all
-------------------
actions, claims, damages, and liabilities (and all actions in respect thereof
and any legal or other expenses in giving testimony or furnishing documents in
response to a subpoena or otherwise), whether or not arising out of third party
claims, including reasonable legal fees and expenses in connection with, and
other costs of, investigating, preparing or defending any such action or claim,
whether or not in connection with litigation in which an Indemnified Party is a
party, and as and when incurred, caused by, relating to, based upon or arising
out of (directly or indirectly) such Indemnified Party's acceptance of or the
performance of the obligations of Morningside under this Agreement; provided,
--------
however, that such indemnity shall not apply to any such action, claim, damage,
- -------
liability or cost to the extent it resulted from the gross negligence or willful
misconduct of the Indemnified Parties or a material breach of this Agreement by
Morningside or Wasik.
(b) If any action, proceeding or investigation is commenced for which
an Indemnified Party proposes to demand such
2
<PAGE>
indemnification, it will notify the Company with reasonable promptness;
provided, however, that any failure by an Indemnified Party to notify the
- -------- -------
Company will not relieve the Company from its obligations hereunder, except to
the extent that such failure shall have prejudiced the defense of such action.
The Company shall promptly pay expenses reasonably and actually incurred by an
Indemnified Party (including the reasonable fees and expenses of counsel) in
defending or settling any action, proceeding or investigation in which an
Indemnified Party is a party or is threatened to be made a party by reason of
its relationship with the Company hereunder, in advance of the final disposition
of such action, proceeding, or investigation upon submission of invoices
therefor. Morningside, on behalf of each Indemnified Party, hereby undertakes,
and the Company hereby accepts its undertaking, to repay any and all such
amounts so advanced if it shall ultimately be determined that such Indemnified
Party is not entitled to be indemnified therefor. If any such action,
proceeding, or investigation in which an Indemnified Party is a party is also
against the Company or any of its subsidiaries, the Company may, in lieu of
advancing the expenses of separate counsel for such Indemnified Party, provide
such Indemnified Party with legal representation by the same counsel who
represents the Company or its subsidiaries, as applicable, at no cost to such
Indemnified Party; provided, however, that if such counsel or counsel to such
-------- -------
Indemnified Party shall determine that due to the existence of actual or
potential conflicts of interest between such Indemnified Party and any one or
more of the Company or its subsidiaries, such counsel is unable to represent
both the Indemnified Party and one or more of the Company or its subsidiaries,
then the Indemnified Party shall be entitled to use separate counsel of its own
choice, and the Company shall promptly pay the Indemnified Party's reasonable
expenses of such separate counsel upon submission of invoices therefor. Nothing
herein shall prevent any Indemnified Party from using separate counsel of its
own choice at its own expense. The Company shall only be liable for settlements
of claims against any Indemnified Party made with the Company's written consent,
which consent shall not be unreasonably withheld. The Indemnifying Party shall
not, in defense of any such claim involving an Indemnified Party, except with
the prior written consent of such Indemnified Party, consent to the entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff in question to such
Indemnified Party and any affiliates of such Indemnified Party named in such
claim of a release of all liabilities in respect of such claims, or that does
not result only in the payment of money damages by such Indemnifying Party.
(S)5. LIMITATION ON MORNINGSIDE AND WASIK'S LIABILITY.
Notwithstanding any provision to the contrary in this Agreement, neither
Morningside nor Wasik shall have any liability to the Company hereunder for the
failure of Morningside to perform its obligations under this Agreement except to
the extent that any such failure involves the gross negligence or wilful
misconduct
3
<PAGE>
of, or a material breach of its obligations under this Agreement by,
Morningside.
(S)6. TERM OF AGREEMENT. The term of this Agreement (the "Term")
----
shall commence on the date hereof (the "Commencement Date") and, subject to the
-----------------
early termination provisions of (S)7, shall continue until August 23, 1998 (the
----
"Specified Termination Date"); provided, however, that unless either party, at
-------------------------- -------- -------
least 30 days prior to the Specified Termination Date, gives the other party
written notice of an election to terminate this Agreement on the Specified
Termination Date, the Term shall continue after the Specified Termination Date
until terminated by not less than 30 days' advance notice by one party to the
other.
(S)7. EARLY TERMINATION.
(a) The Company may terminate the Term on any date if (i) Morningside
(x) shall have been grossly negligent in performing its obligations hereunder,
or (y) shall have engaged in willful misconduct in the performance of such
duties or shall have perpetrated any fraud, or (z) shall have materially
breached this Agreement, or (ii) Wasik shall cease to be actively involved in
the ownership or management and affairs of Morningside or shall otherwise be
unable, for a period of in excess of 60 consecutive days, to perform Management
Assistance Services hereunder, which date of termination is specified in a
written notice of termination to Morningside given by the Board of Directors of
the Company not later than 30 days prior to such date of termination, which
notice specifies in reasonable detail the basis, pursuant to this (S)7(a), for
----
such termination.
(b) The Term shall terminate forthwith upon notice from the Company
to Morningside if
(i) Morningside or Wasik shall (A) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or himself or of all or a substantial
part of its or his property, (B) make a general assignment for the
benefit of its or his creditors, (C) commence a voluntary case under
the Bankruptcy Code (as now or hereafter in effect), (D) file a
petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
readjustment of debts, (E) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed
against it or him in an involuntary case under the Bankruptcy Code, or
(F) take any corporate action for the purpose of effecting any of the
foregoing; or
(ii) a proceeding or case shall be commenced, without the
application or consent of Morningside or Wasik, as the case may be, in
any court of competent
4
<PAGE>
jurisdiction, seeking (A) its or his liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of its
or his debts, (B) the appointment of a trustee, receiver, custodian,
liquidator or the like of Morningside or Wasik or of all or any
substantial part of its or his assets, or (C) similar relief in
respect of Morningside or Wasik under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment
of debts, and such proceeding or case shall continue undismissed, or
an order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect, for a
period of 60 or more days; or an order for relief against Morningside
or Wasik shall be entered in an involuntary case under the Bankruptcy
Code.
(S)8. SURVIVAL. The provisions of (S)(S)3, 4 and 5, and any other
- - -
provisions of this Agreement insofar as they set forth or relate to obligations
of the parties performable during the Term and rights of the parties in respect
thereof, shall survive the ending of the Term pursuant to (S)6 or (S)7.
- -
(S)9. NON-COMPETITION; NON-SOLICITATION. For the duration of the
Term, Morningside agrees that neither it nor Wasik shall directly or indirectly
(i) own (other than through the ownership of five percent (5%) or less of any
class of securities registered under the Securities Exchange Act of 1934, as
amended), manage, operate, represent, promote, consult for, control or
participate in the ownership, operation, acquisition or management of any
business manufacturing and/or distributing ethnic hair care products or
cosmetics within a 500-mile radius of the Company's headquarters, or (ii)
solicit (other than on behalf of the Company or any of its affiliates), divert
or take away the business of any customers of the Company or any of its
affiliates, or any prospective customers of the Company or any of its
affiliates. It is expressly acknowledged that a breach of this covenant may
result in irreparable harm to the Company for which there is no adequate remedy
at law and that, therefore, in the event of such a breach, the Company shall be
entitled to obtain injunctive relief restraining Morningside or Wasik, as the
case may be, from engaging in activities prohibited by this (S)9 or any other
----
relief as may be required to specifically enforce this covenant.
(S)10. CONFIDENTIALITY. During the Term and at all times thereafter,
Morningside shall and shall cause Wasik to, maintain the confidentiality of all
information of and relating to, and all material of, the Company and its
affiliates that have not been made available to the public (other than by reason
of a breach by Morningside of its obligations under this (S)10). It is
-----
expressly acknowledged that a breach of this covenant may result in irreparable
harm to the Company for which there is no adequate remedy at law and that,
therefore, in the event of such a breach, the Company shall be entitled to
obtain injunctive relief
5
<PAGE>
restraining Morningside or Wasik, as the case may be, from engaging in
activities prohibited by this (S)10 or any other relief as may be required
-----
to specifically enforce this covenant.
(S)11. NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be given by hand delivery to the party
receiving such notice or by certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to Morningside: Morningside Capital Group, LLC
1 Morningside Drive, North
Suite 200
Westport, CT 06880
If to the Company: Carson Products Company
71 A Ross Road
Savannah, Georgia 31405
Attention: Chief Executive
Officer
or to such other address as either party shall have furnished to the other party
in writing as the address to send future notices and communications in
accordance herewith. Any notice or communication shall be deemed given when
actually received by the party who is its intended recipient.
(S)12. SEVERABILITY. If any provision of this Agreement is held to
be invalid under applicable law, such provision shall be ineffective only to the
extent of such invalidity, and the remaining provisions of this Agreement shall
be unimpaired.
(S)13. WAIVER. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by law or otherwise afforded, will be cumulative and not
alternative.
(S)14. AMENDMENT. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
(S)15. NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereof and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other person.
6
<PAGE>
(S)16. NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void, except for assignments and transfers by operation of law.
Subject to the preceding sentence, this Agreement is binding upon, inures to the
benefit of and is enforceable by, the parties and their respective successors
and assigns.
(S)17. ENTIRE AGREEMENT. This instrument contains the entire
agreement of the parties with respect to, and supersedes all prior agreements
relating to, Morningside's providing management assistance or similar services
to the Company.
(S)18. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced under, the laws of the State of New York.
(S)19. SUBORDINATION. Morningside agrees that the payment of all
amounts to which it is entitled pursuant to this Agreement shall be subordinate
and junior in right of payment to both (i) the Company's obligations under the
Credit Agreement, dated as of August 23, 1995, between the Company and Banque
Indosuez, New York Branch, as Agent, and the lending institutions listed
therein, (ii) the Company's obligations under the 12.50% Senior Subordinated
Notes due 2002 (the "Senior Subordinated Notes") of the Company and (iii) the
-------------------------
Company's obligations under the 15% Subordinated Notes (the "Subordinated
Notes") to the same extent that the Subordinated Notes are made subordinate to
all Senior Indebtedness, as such term is used in Section 12 of the Note Purchase
Agreement dated as of August 23, 1995 between the Company and the Purchasers
named therein relating to the Subordinated Notes (the "Note Purchase
-------------
Agreement"). In order to effect such subordination, Morningside agrees to
incorporate herein by reference and be bound by the provisions of Section 12 of
the Note Purchase Agreement and further agrees that for purposes of this Section
19, all references in such Section 12, as incorporated herein, to the Purchasers
shall be deemed references to Morningside and all references to Senior
Indebtedness in such Section 12, as incorporated herein, shall be deemed to
include as Senior Indebtedness the Subordinated Notes.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first written above.
CARSON PRODUCTS COMPANY MORNINGSIDE CAPITAL GROUP, LLC
By:________________________ By:_______________________
Name: Bradford Creswell Name: Vincent A. Wasik
Title: Executive Vice Title:
President
8
<PAGE>
MANAGEMENT AGREEMENT
--------------------
THIS MANAGEMENT AGREEMENT (the "Agreement") is made and entered into this
____ day of _____________, 1996, by and between CARSON PRODUCTS COMPANY
("CPC"),. a Delaware corporation, and AM COSMETICS, INC. ("AMC") a Delaware
corporation.
EXPLANATORY STATEMENT
---------------------
A. AMC is engaged in the business of manufacturing and distributing
cosmetics.
B. CPC has expertise in the areas of marketing, sales and finance as well
in managing and administering the operations of, and providing other services
with regard to the personal care industry.
C. AMC desires to engage CPC to provide management and certain further
services to AMC and CPC desires to be engaged by AMC to provide management and
certain further services to AMC upon the terms and subject to the conditions set
forth in this Agreement.
Now, therefore, in consideration of the Explanatory Statement that shall be
deemed to be a substantive part of this Agreement, and the mutual covenants,
promises, agreements, representations and warranties hereinafter contained, the
parties hereto do hereby covenant, promise, agree, represent and warrant as
follows:
1. ENGAGEMENT OF MANAGER; TERM.
----------------------------
1.1. Engagement. AMC hereby engages CPC as AMC's manager to manage the
-----------
business operations ("Operations") of AMC and to render such further services
to, or for the benefit of, AMC as shall be hereinafter described in this
Agreement. CPC hereby accepts such engagement and the fiduciary relationship of
trust and confidence established between CPC and AMC by this Agreement, and
agrees to exert and furnish the highest degree of skill, judgment, effort and
care in furthering the interests of AMC in the management of the operations of
AMC including, but not limited to, maximizing profitability and shareholder
value of AMC, and in rendering such further services to, or for the benefit of,
AMC as shall be hereinafter described
1
<PAGE>
in this Agreement, all in accordance with the terms and subject to the
conditions of this Agreement.
1.2. Term. The term of this Agreement shall be for that period of time
-----
commencing upon the date of execution of this Agreement and ending on the eighth
anniversary of the date of this Agreement ("Term"), unless terminated earlier or
renewed in accordance with the provisions hereinafter set forth.
1.3. Renewal Term. AMC shall have the option to renew this Agreement for
-------------
an additional 3 year period pursuant to the same terms and conditions of this
Agreement ("Renewal Term"). Such option shall be exercised by AMC giving CPC
written notice thereof at least 180 days prior to the expiration of the Term, or
else this Agreement shall be deemed to expire at the end of the Term (the Term
and Renewal Term are collectively referred to as "Terms").
1.4. Termination. Either party may terminate this Agreement with or
------------
without cause by providing the other party with written notice thereof at least
(a) 360 days with regard to termination by CPC and (b) 60 days with regard to
termination by AMC prior to the date termination is to be effective. In the
event of termination of this Agreement, CPC shall be entitled to its fees
calculated up to the date of termination, as set forth in Section 8 below.
2. REPRESENTATIONS AND WARRANTIES.
-------------------------------
2.1. REPRESENTATIONS AND WARRANTIES OF AMC. AMC represents and warrants
--------------------------------------
to CPC that:
2.1.1. Due Organization; Good Standing; Power. AMC is a corporation
---------------------------------------
duly organized, validly existing, and in good standing under the laws of the
State of Delaware. AMC has all requisite corporate power to enter into this
Agreement and to perform its obligations hereunder.
2.1.2. Authorization and Validity of Document. The execution,
---------------------------------------
acknowledgement, sealing, delivery and performance of this Agreement by AMC has
been duly and validly authorized by AMC. This Agreement has been duly executed,
acknowledged, sealed and delivered by AMC and is a legal, valid and binding
obligation of AMC, fully enforceable against AMC in accordance with its terms,
except as such enforceability may be limited by
2
<PAGE>
general principles of equity, bankruptcy, insolvency, moratorium and similar
laws relating to creditors' rights generally.
2.2 REPRESENTATIONS AND WARRANTIES OF CPC. CPC represents and warrants to
-------------------------------------
AMC that:
2.2.1. Due Organization; Good Standing; Power. CPC is a corporation duly
---------------------------------------
organized, validly existing, and in good standing under the laws of the State of
Delaware. CPC has all requisite corporate power to enter into this Agreement
and to perform its obligations hereunder.
2.2.2. Authorization and Validity of Document. The execution,
---------------------------------------
acknowledgement, sealing, delivery and performance of this Agreement by CPC has
been duly and validly authorized by CPC. This Agreement has been duly executed,
acknowledged, sealed and delivered by CPC and is a legal, valid and binding
obligation of CPC, fully enforceable against CPC in accordance with its terms,
except as such enforceability may be limited by general principles of equity,
bankruptcy, insolvency, moratorium and similar laws relating to creditors'
rights generally.
3. POWERS AND DUTIES OF CPC. Upon the terms and subject to the conditions
-------------------------
of this Agreement and such further material management directives and decisions
as may be issued and made by the AMC Board of Directors from time to time,
during the Terms of this Agreement CPC shall have authority and the obligation
and duty to supervise the management and administration of the Operations of AMC
by AMC and its officers and employees, all of whom shall fully cooperate with
CPC in this regard. CPC and AMC's authority, obligations and duties shall
include, but shall not be limited to, those described below, which authority,
obligations and duties ("Powers and Duties") may be further assumed by CPC,
expanded, reduced and/or supplemented by amendments to this Agreement and/or by
the execution of other separate agreements with terms, conditions and
compensation as may be mutually determined by the parties hereto, at a future
date. With regard to such other separate agreements, by way of example, but not
limitation, the parties may enter into sales agreements and manufacturing
agreements substantially similar to the forms attached hereto as Exhibits A and
B, respectively. Such form of sales agreement provides for a five percent sales
commission on net sales. Such
3
<PAGE>
form of manufacturing agreement provides that AMC will be entitled to a twenty
five percent profit margin above all costs, including general administrative
costs. The Sales Agreement will provide for a Termination clause and
Arbitration clause substantially similar to Sections 1.4 and 15 of the
Agreement. The Manufacturing Agreement will not be subject to early termination
as provided by paragraph 1.4, but will be subject to arbitration as provided by
paragraph 15 (both as set forth in the within Agreement). All duties shall be
performed by CPC in accordance with the fiduciary standards described in Section
1.1.
3.1. Types of Powers and Duties. Topic examples of types of Powers and
---------------------------
Duties to be addressed in the future are as follows: Collection of Accounts;
Financial Records; Monthly Receipts and Disbursements' Reports; Annual Reports;
Operational and Regulatory Reports; Budget; Purchases and Leases; Insurance;
Government Regulations and Licenses; Marketing and Sales.
3.2. Payment of Expenses. CPC shall pay from its own funds, all salary,
--------------------
bonus and benefit costs of AMC's Chief Executive Officer, head of marketing,
head of Sales and Chief Financial Officer. To the extent that such persons
incur general and administrative expenses in the fulfillment of their duties at
AMC, AMC shall pay such expenses, provided they are in accord with the then
current budget.
3.3 Planning and Budgeting. CPC will, within 90 days from the date
-----------------------
hereof, supervise the production of a detailed business plan and budget ("Plan")
for the balance of the calendar year and the following calendar year (and within
30 days of the end of each calendar year thereafter) for submission to and
approval by the Board of AMC. Such Plan will be in the same detail as CPC uses
for its own purposes (see draft attached hereto as Exhibit C) and will include
proposals for establishing internal financial controls within AMC. Once the
Plan is approved by the Board of AMC, CPC shall supervise and administer AMC
within the confines of the approved Plan and will seek the approval of the Board
of AMC with regard to any material deviations from such Plan.
CPC shall cooperate with AMC's accountants in connection with the
preparation of all tax returns and in connection with all audits of AMC and its
business. All expenses incurred by AMC to AMC's independent certified public
accountants in connection with the preparation
4
<PAGE>
or auditing of annual financial statements and tax returns of AMC shall be paid
by AMC.
3.4. Confidentiality of Records. CPC and AMC shall adopt
---------------------------
procedures that shall assure maximum confidentiality to the records of CPC and
AMC.
3.5. Location of Operations. AMC shall provide adequate office space,
-----------------------
support staff and equipment ("Office Facilities") at AMC's facility, to enable
CPC to perform its management and administrative services for AMC.
3.6. Access; Financial Reports. AMC shall at all times during normal
--------------------------
business hours provide CPC with access to all AMC facilities applicable to AMC
and to the books and records of AMC. AMC shall respond promptly to all
reasonable requests by CPC for information, documents or data.
3.7. Return of Records. Upon the termination or expiration of the Terms
------------------
of this Agreement, CPC and AMC shall deliver to each other, respectively, all
books, records, insurance policies, contracts, funds, invoices, receipts and all
other records, information, data, instruments and documents in their respective
possession relating to the other. Within 20 days after such expiration or
termination they shall each render a final accounting and statement to the
other.
4. EMPLOYEES AND INDEPENDENT CONTRACTORS; BONDING REQUIREMENTS. All
------------------------------------------------------------
management persons employed or retained as agents, employees, servants or
independent contractors by CPC in connection with the management of AMC
(collectively, the "CPC Employees") shall be employees or independent
contractors of CPC and not of AMC. CPC shall obtain, at AMC's expense, in a
form or forms and from a company or companies satisfactory to AMC, a bond or
bonds indemnifying AMC from pecuniary loss sustained by AMC as a result of any
act or acts of fraud, dishonesty, forgery, theft, embezzlement or misapplication
on the part of any of the CPC Employees. The minimum indemnification provided
by such bond or bonds for all loss or losses caused by any one of the CPC
Employees shall be not less than ____________ Dollars ($_____).
5. COMPENSATION OF CPC. As compensation for services rendered by CPC to
--------------------
AMC under and pursuant to this Agreement, CPC shall be paid fees equal to 1% of
AMC's annual Net Sales subject to a minimum of $500,000 per annum. Such
payments will be made on a
5
<PAGE>
monthly basis at the rate of $41,667 per month. On a quarterly basis, AMC will
pay CPC a payment equal to 1% of all Net Sales in excess of $12,500,000 for the
quarter. At the end of any fiscal year, if AMC's annual Net Sales are less than
$50,000,000 and the total payments made to CPC pursuant to this Agreement exceed
$500,000, CPC will refund AMC the excess payments over $500,000. In addition,
at the end of any fiscal year, if the annual Net Sales are greater than
$50,000,000 and the total payments made to CPC are greater than 1% of the annual
---
Net Sales, CPC will refund to AMC the excess payments over 1% of the annual Net
Sales. Net Sales shall be defined as the gross sales of AMC minus selling
discounts, returns, allowances and cooperative advertising costs.
6. CONFIDENTIALITY. AMC and CPC covenant and agree that they will not,
----------------
during or after the Terms of this Agreement, disclose to anyone (except (a) to
the extent reasonably necessary for them to perform their duties hereunder; (b)
as required by subpoena or court order; or (c) as consented to by CPC or AMC,
respectively) any "Confidential Information" as such term is hereinafter defined
and qualified concerning the business or affairs of the other or any of their
respective predecessors, affiliates or subsidiaries which they may have acquired
in the course of or as incident to the performance of the terms and conditions
of this Agreement. Confidential Information shall include, without limitation,
customer lists, business or trade secrets, research and development programs,
operating procedures and systems, tooling, designs, specifications, "know how",
methods and techniques used by either of them and any information that would be
considered unique to CPC or AMC respectively and which has significant business
purpose. For purposes of this Section 6, Confidential Information shall not
include information which was known to the public prior to the date of
communication thereof by either of them to the other or which becomes known to
the public subsequently thereafter other than through communications by either
of them which are prohibited by this Section.
7. INDEMNIFICATION. CPC and AMC shall indemnify, defend and hold each
----------------
other harmless from and against any and all damages, liabilities, actions,
suits, proceedings, claims, threats, demands, losses, costs and expenses
(including attorneys' and experts' fees) arising out of or in connection with:
(a) their respective acts or omissions and the acts and omissions of their
respective agents, servants, employees and independent contractors under this
Agreement
6
<PAGE>
which constitute gross negligence or wilful misconduct; and (b) their respective
breach of or default under any covenant, promise, agreement, representation or
warranty set forth in this Agreement.
8. RELATIONSHIP OF THE PARTIES. The parties hereto agree that in
----------------------------
performing its duties hereunder, CPC shall be acting as an independent
contractor. Nothing contained in this Agreement shall constitute AMC and CPC as
partners, joint venturers, or agents, servants or employees of one another, any
such intent being hereby expressly disclaimed.
9. NOTICES. All notices, requests, demands, consents and other
--------
communications which are required or may be given under this Agreement
(collectively, the "Notices") shall be in writing and shall be given either by
(a) personal delivery against a receipted copy; or (b) by certified or
registered United States mail, return receipt requested, postage prepaid, or (c)
by a recognized overnight express mail delivery company, to the following
addresses:
If to CPC:
With a Copy to:
If to AMC:
With a copy to:
or to such other address of which Notice in accordance with this Section shall
have been provided by such party. Notices may only be given in the manner
hereinabove described in this Section and shall be deemed received when given in
such manner.
10. SPECIFIC PERFORMANCE. The parties hereto recognize that the parties'
---------------------
remedies at law for damages in the event of breach of this Agreement may be
inadequate. Accordingly, it is the intention of the parties that the
obligations and duties of the parties hereunder shall be enforceable in equity
by specific performance.
7
<PAGE>
11. ENTIRE AGREEMENT; MODIFICATION. This Agreement represents the full,
-------------------------------
entire and integrated agreement of the parties with respect to the subject
matter hereof and supersedes any and all prior agreements or understandings.
This Agreement may not be modified, amended, waived, discharges or terminated
orally, but only by an instrument in writing signed by the parties hereto.
12. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All of the
-------------------------------------------------------
representations, warranties, covenants, promises and agreements of the parties
contained in this Agreement shall survive the execution, acknowledgement,
sealing and delivery of this Agreement.
13. ASSIGNABILITY. This Agreement shall not be assignable by either party
--------------
hereto without the prior written consent of the other party hereto.
14. BINDING EFFECT; BENEFIT. This Agreement shall inure to the benefit of
------------------------
and be binding upon the parties hereto and their respective successors and its
permitted assigns. Nothing in this Agreement, express or implied, is intended
to confer upon any other person or entity any rights, remedies, obligations or
liabilities.
15. ARBITRATION. Any disputes arising out of or relating to this
------------
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association,
and judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof.
16. GENERAL.
--------
16.1. Headings. The section headings contained in this Agreement are for
---------
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
16.2. Governing Law. This Agreement shall be construed and performed in
--------------
accordance with, and governed by, the laws of the State of New York.
16.3. Invalidity of Sections. If any provision of this Agreement is held
-----------------------
to be invalid or unenforceable, the remaining provisions shall not be affected,
but shall continue in full force and effect.
8
<PAGE>
16.4. Use of Genders. Whenever used in this Agreement, the singular shall
---------------
include the plural and vice versa, and the use of any gender shall include all
genders and the neuter.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed,
sealed and delivered in their respective names on the date first above written.
ATTEST: AM COSMETICS, INC.
______________________ By: ________________________________
Secretary President
ATTEST: CARSON PRODUCTS COMPANY
______________________ By: ________________________________
Secretary President
9
<PAGE>
This SUBSCRIPTION AGREEMENT, as of June 26, 1996, is made and entered into
by and among Morningside AM Acquisition Corp., a Delaware corporation
("Holding") and Carson Products Company, a Delaware corporation ("Investor").
Capitalized terms not otherwise defined herein have the meanings set forth in
Section 7.01.
WHEREAS, Holding desires to issue and sell 300 newly issued shares of
Payment in Kind Preferred Shares (the "PIK Preferred" or the "Shares") for a
purchase price of $10,000.00 per share to Investor; and
WHEREAS, the Investor desires to purchase 300 of the PIK Preferred Shares
which will, after giving effect to the issuance of other shares of the Preferred
Stock of Holding to be issued on the Closing Date, constitute 100% of the
outstanding Preferred Stock of Holding, on the terms and subject to the
conditions set forth in this Agreement and;
WHEREAS, the PIK Preferred Shares are to be issued to Investor for an
investment in the amount of $3,000,000 by Investor. In partial consideration
for said investment, Holding agrees, on its behalf, and on behalf of it wholly
owned Subsidiary, A.M. Cosmetics, Inc., ("AM") that for a period of five (5)
years commencing on July 1, 1996, that: 1) AM will not "contract manufacture"
for any other ethnic cosmetics line; 2) AM will agree to produce a cosmetics
line for Investor, as designed and directed by Investor, at AM's cost plus a
maximum 25% markup; and 3) AM will agree to provide the necessary research and
development for formulations for the ethnic cosmetic product line(s) as
determined by Investor, at no additional cost to Investor.
NOW, THEREFORE, in consideration of the mutual covenants and agreement set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE
1.01 Purchase and Sale. Holding agrees to issue and sell to Investor, and
-----------------
Investor agrees to purchase from Holding 300 Shares of PIK Preferred Shares
which have the rights and privileges described in the "Restated Certificate of
Incorporation of Morningside AM Acqusition Corp.", Exhibit "A", attached hereto
and incorporated herein.
1.02 Purchase Price. The purchase price for the Shares (the "Purchase
---------------
Price") shall be ten thousand dollars ($10,000.00) per share, payable in
immediately available United States funds at the Closing in the manner provided
in Section 1.03.
1.03 Closing. The closing (the "Closing") of the transactions contemplated
-------
by this Article I will take place at the offices of Cahill Gordon & Reindel,
Eighty Pine Street, New
1
<PAGE>
York, New York 10005-1702, or at such other place as Holding and Investor agree,
simultaneously with the Closing as that term is defined in the Purchase
Agreement dated June 6, 1996. At the Closing, (a) Investor will pay its portion
of the Purchase Price to Holding by wire transfer of immediately available funds
to such account as Holding may reasonably direct by written notice delivered to
Investor by Holding at least two (2) Business Days before the Closing Date and
(b) Holding shall issue and sell to Investor such Investor's Shares, free and
clear of all liens, by delivery to Investor of a certificate representing such
Investor's Shares registered in the name of such Investor, with requisite stock
transfer tax stamps, if any, attached. Such certificates representing the
Shares shall bear the endorsements provided for in Section 4.01. At the
Closing, there shall also be delivered to the parties the opinion and
certificates to be delivered under Articles V and VI.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF HOLDING
A. Holding hereby represents and warrants to Investor that:
2.01 Corporate Existence. Holding is a corporation duly incorporated,
-------------------
validly existing and in good standing under the laws of the State of Delaware.
Holding has full power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby.
2.02 Authority. The execution and delivery by Holding of this Agreement,
---------
and the performance by Holding of its obligations hereunder, have been duly and
validly authorized by the Board of Directors of Holding, no other corporate
action on the part of Holding or its stockholders being necessary. This
Agreement has been duly and validly executed and delivered by Holding and
constitutes a legal, valid and binding obligation of Holding enforceable against
Holding in accordance with its terms. Holding has, prior to the execution of
this Agreement, furnished to Investors copies of the Restated Certificate of
Incorporation of Holding, and no changes to such Restated Certificate of
Incorporation have been made.
2.03 Capital Stock; the Shares. The authorized capital stock of Holding
-------------------------
consists exclusively of 1,000 shares of Class A Voting Common Stock, par value
$.01 per share, 1,000 shares of Class B Non-Voting Common Stock and 500 Shares
of PIK Preferred Stock. As of the Closing Date, giving effect to the issuance
of all shares of the Preferred Stock of Holding (including the Shares) to be
issued on the Closing Date, the PIK Preferred Shares will constitute 100% of the
outstanding Preferred Stock of Holding. The delivery to Investor of a
certificate at the Closing representing Investor's Shares in the manner provided
in Section 1.03 will transfer to such Investor good and valid title to such
Investor's Shares, free and clear of all Liens. Upon such delivery and upon
payment for the Shares as contemplated by Section 1.03, the Shares will be
validly issued, fully paid and nonassessable.
2.04 Regarding the Purchase Agreement.
--------------------------------
2
<PAGE>
(a) The Purchase Agreement dated June 6, 1996 between Arthur Matney
Co., Inc., Seller, (the "Company") and AM Cosmetics, Inc., Purchaser
(hereinafter the "Purchase Agreement") constitutes a legal, valid and binding
obligation of AM, enforceable against AM in accordance with its terms.
(b) The representations and warranties made by AM in the Purchase
Agreement are true and correct, in all material respects, on and as of the dates
made and as of the date hereof and will be true and correct in all material
respects as of the Closing Date.
(c) To the best knowledge of Holding, the Purchase Agreement
constitutes a legal, valid and binding obligation the Company, enforceable
against the Company in accordance with its terms.
(d) To the best knowledge of Holding, the representations and
warranties made by the Company in the Purchase Agreement are true and correct,
in all material respects, on and as of the dates made and as of the date hereof
and will be true and correct in all material respects as of the Closing Date.
Prior to entering into the Purchase Agreement, AM conducted, including by the
use of outside counsel and accountants, what it believed to be reasonable due
diligence with respect to the Company and its subsidiaries.
(e) True and complete copies of the Purchase Agreement, including
Schedules and Exhibits, and the financial statements referred to in Section
3.04, of the Purchase Agreement, have been-furnished to the Investor prior to
the execution of this Agreement.
2.05 Regarding the Credit Agreement and the Senior Subordinated Loan
---------------------------------------------------------------
Agreement and The Subordinated Loan Agreement. The Credit Agreement, the Senior
- ----------------------------------------------
Subordinated Loan Agreement and the Subordinated Loan Agreement constitute
legal, valid, binding and enforceable obligations of AM, enforceable against AM
in accordance with their respective terms.
2.06 Ownership of Stock of Acquisition Corp. Holding owns all of the
--------------------------------------
issued and outstanding capital stock of AM, beneficially and of record, free and
clear of all Liens.
2.07 Ownership of Stock of the Capital Stock of AM. After the Closing,
---------------------------------------------
Holding will own all of the operating assets of the Company, beneficially and of
record, free and clear of all Liens except for a pledge thereof pursuant to the
Credit Agreement.
2.08 Conduct of Business. Holding has, since its incorporation, conducted
-------------------
no business except (a) the acquisition of all of the issued and outstanding
capital stock of AM, (b) the transactions contemplated by the Purchase
Agreement, the Credit Agreement as of June 26, 1996 between AM, Banque Indosuez,
as Agent and the Lending Institutions listed therein (the "Credit Agreement),
and the Senior Subordinated Loan Agreement as of June 26, 1996 (the "Senior
Subordinated Loan Agreement") among Holding, AM and the Lenders named therein,
and the Subordinated Loan Agreement between AM and the Lenders named therein,
and (c) the offering and sale of Holding's stock in transactions not involving a
public offering.
3
<PAGE>
2.09 No Conflicts. The execution, delivery and performance by Holding of
------------
this Agreement and the consummation of the transactions contemplated hereby do
not and will not: (a) require any consent or approval that has not been
obtained and each such consent and approval that has been obtained is in full
force and effect, (b) conflict with, result in a breach of, or constitute a
default under, any law or any regulation, rule or order of any governmental body
to which Holding is subject, the certificate of incorporation or bylaws of
Holding or any indenture or loan or credit agreement or any other agreement or
lease or instrument to which Holding is a party or by which its property may be
bound or affected or (e) result in, or creating any Lien upon or with respect to
any of the property now owned or hereafter acquired by Holding.
B. Holding covenants and agrees with Investor as follows (except, as to a
particular Investor, as otherwise agree or consented to or waived in writing by
such Investor):
2.10 Financial Statements. (a) Holding will, until the occurrence of an
--------------------
IPO or the time when Holding otherwise becomes subject to the periodic reporting
requirements of the Exchange Act, furnish to Investor as soon as available and
in any event within 90 days after the close of each fiscal year of Holding, the
consolidated balance sheets of Holding and its Subsidiaries as at-the end of
such fiscal year and the related consolidated statements of income, of
shareholders' equity and of cash flows for such fiscal year, setting forth
comparative consolidated figures for the preceding fiscal year (other than in
the case of the first fiscal year of Holding when no such comparative figures
shall be required), and a report on such consolidated balance sheets and
financial statements by independent certified public accountants of recognized
national standing, which report shall not be qualified as to the scope of audit
and shall state that such consolidated financial statement present fairly, in
all material respects, the consolidated financial position of Holding and its
Subsidiaries as at the dates indicated and the results of their operations and
their cash flows for the periods indicated in conformity with GAAP applied on a
basis consistent with prior years (except for such changes with which the
independent certified public accountants concur) and that the examination by
such accountants was conducted in accordance with generally accepted auditing
standards.
(b) Holding will, until the occurrence of an IPO or the time when Holding
otherwise becomes subject to the periodic reporting requirements of the Exchange
Act, furnish to Investor as soon as practicable and in any event within 45 days
after the end of the first full fiscal quarter ending after the Closing Date and
each fiscal quarter thereafter, (i) the consolidated balance sheet of Holding
and its Subsidiaries as at the end of such period and (ii) the related
consolidated statements of income and cash flows of Holding in the form
customarily prepared by management, in each case for such fiscal quarter and for
the period from the beginning of the then current fiscal year to the end of such
fiscal quarter, setting forth in comparative form the same information for the
corresponding periods of the prior fiscal year together with a brief narrative
discussion and analysis prepared by management describing the Company's results
of operations for such fiscal quarter.
4
<PAGE>
2.11 Investment Company Act. Holding shall not register as, or conduct
----------------------
its business or take any action that would cause it to become or be deemed to
be, an investment company as defined in the Investment Company Act of 1940, as
amended.
2.12 Further Assurances. Holding shall promptly execute and deliver all
------------------
further instruments and documents, and take all further action, that the
Investors, individually or collectively, may reasonably request in order more
fully to give effect to the provisions of this Agreement.
2.13 Dividend Payment by Wire Transfer. Holding shall pay dividends
---------------------------------
payable in cash with respect to the Shares, if any, by wire transfer of
immediately available funds to the account of the applicable Investor reasonably
specified by such Investor to Holding.
2.14 Sales of Stock by Holding. Holding and any Person acting on
-------------------------
Holding's behalf shall not sell, offer, attempt to offer or solicit an offer to
buy stock of Holding (a) except in a transaction registered or exempt from
registration under the Securities Act and (b) in any manner that would cause the
sale of the stock to the Investors pursuant to this Agreement to fail to qualify
as an exempted transaction under the Securities Act. Holding will provide to
the Investors a copy of any agreement or other evidence of the terms on which it
is selling its Common Stock to others and shall not sell stock to any Person
other than as contemplated in this Agreement, the Other Subscription Agreement
or such other terms as are disclosed to the Investors.
2.15 Transactions with Affiliates. Holding will not and will not permit
----------------------------
any subsidiary of Holding to, enter into an transaction or series of
transactions, whether or not in the ordinary course of business, with any holder
(excluding Indosuez and other participating Lenders) of 5% or more of any class
of equity securities of Holding or with any Affiliate of Holding other than on
terms and conditions substantially as favorable to Holding of such subsidiary as
would be obtainable by Holding or such subsidiary at the time in a comparable
arm's-length transaction with a Person other than a holder of 5% or more of any
class of equity securities of Holding or an Affiliate of Holding; provided that
the foregoing restrictions shall not apply to (i) transactions between Holding
and any of its Wholly Owned Subsidiaries (as defined in Section 9 of the Senior
Subordinated Loan Agreement) and between Wholly Owned Subsidiaries (as so
defined); (ii) the payment of reasonable fees to Banque Indosuez and its
Affiliates for financial services, such fees not to exceed the usual and
customary fees for similar services, (iii) transactions, including the issuance
of capital stock of Holding or any of its subsidiaries, pursuant to any pension,
stock option, profit sharing or-other employee benefit plan or agreement of
Holding or any of its subsidiaries in the ordinary course of business, (iv) the
Management Assistance Agreement between Morningside Capital Group LLC and AM
dated as of the Closing Date, (v) the Manufacturing Agreement and Sales and
Marketing Agreement between AM and Investor, and (vi) this Agreement, the Other
Subscription Agreement, and the Purchase Agreement and the transactions
contemplated thereby.
ARTICLE III
5
<PAGE>
REPRESENTATIONS, WARRANTIES AND COVENANTS OF INVESTOR
Investor hereby represents and warrants,, as of the date hereof and as of
the Closing Date, and (as to Section 3.03) covenants to Holding that as to
itself:
3.01 Corporate Power. Investor has full power and authority to execute
---------------
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby.
3.02 Authority. The execution and delivery by Investor of this Agreement,
---------
and the performance by Investor of its obligations hereunder, have been duly and
validly authorized by all necessary corporate action, no other action on the
part of Investor being necessary. This Agreement has been duly and validly
executed and delivered by Investor and constitutes a legal, valid and binding
obligation of Investor enforceable against Investor in accordance with its
terms.
3.03 Investment Representations and Agreement. Investor understands that
----------------------------------------
the Shares have not been registered under the Securities Act. Investor is
acquiring the Shares for Investor's own account, for investment and not with a
view to the distribution thereof; provided, that the disposition of Investor's
property and the property of any accounts for which Investor is acting as
fiduciary or agent shall at all times be and remain within the control of
Investor and Investor may at any time and from time to time sell some or all of
its Shares in its sole discretion, subject to applicable law. Investor agrees
that Investor will not, and understands that under the Securities Act Investor
may not, sell or otherwise dispose of any of the Shares except pursuant to an
effective registration-statement under the Securities Act or in a transaction
exempt from the registration requirements of the Securities Act.
3.04 No Conflicts. The execution, delivery and performance by Investor of
------------
this Agreement and the consummation of the transactions contemplated hereby do
not and will not: (a) require any consent or approval that has not been obtained
and each such consent and approval that has been obtained is in full force and
effect, (b) conflict with, result in a breach of, or constitute a default under,
any law or any regulation, rule or order of any governmental body to which
Investor is subject, the certificate of incorporation or bylaws, or equivalent
documents, of Investor or any indenture or loan or credit agreement or any other
agreement, lease or instrument to which Investor is a party or by which it or
its property may be bound or affected or (d) result in, or create any Lien upon
or with respect to any of the property now owned or hereafter acquired by
Investor.
ARTICLE IV
LEGENDS
6
<PAGE>
4.01 Legends. Each outstanding certificate representing Shares shall,
-------
until such Shares are sold in a Public offering or pursuant to Rule 144, bear
endorsements reading substantially as follows:
The sale, assignment, pledge, encumbrance or other transfer of the
shares represented by this certificate is subject to the provisions of
a Subscription Agreement, as of June 26, 1996, by and among Morningside
AM Acquisition Corp. and the Investor referred to therein, a copy of
which is on file at the principal executive office of Morningside AM
Acquisition Corp. The shares represented by this certificate have not
been registered under the Securities Act of 1933, as amended, and may
not be sold or otherwise disposed of except pursuant to an effective
registration statement under such Act or in a transaction exempt from
the registration requirements of such Act.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF HOLDING
The obligations of Holding hereunder to issue and sell the Shares are
subject to the fulfillment of each of the following conditions (all or any of
which may be waived in whole or in part by Holding in its sole discretion):
5.01 Representations and Warranties. The representations and warranties
------------------------------
made by Investor in this Agreement shall be true and correct, in all material
respects, and as of the Closing Date as though made on and as of the Closing
Date.
5.02 Closing. The Closing (as defined in the Purchase Agreement) shall
-------
have occurred, the Initial Loans (as defined in the Credit Agreement) shall have
been made and the closing of the initial purchase of the Loans (as defined in
the Senior Subordinated Loan Agreement and the Subordinated Loan Agreement)
shall have occurred, all simultaneously with the Closing hereunder.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF INVESTOR
The obligations of Investor hereunder to purchase the Shares are subject to
the fulfillment of each of the following conditions (all or any of which may be
waived in.whole or in part by Investor in its sole discretion):
6.01 Representations and Warranties. The representations and warranties
------------------------------
made by Holding in this Agreement shall be true and correct, in all material
respects, on and as of the Closing Date as though made on and as of the Closing
Date.
7
<PAGE>
6.02 Officer's Certificate. Holding shall have delivered to Investor a
---------------------
certificate of Holding, dated the Closing Date, executed on its behalf by the
Chairman of the Board, the President or any Vice President of Holding,
substantially in the form of Exhibit B hereto, and a certificate of Holding,
dated the Closing Date, executed on its behalf by the Secretary of Holding,
substantially in the form of Exhibit C hereto.
6.03 Closing. The Closing (as defined in the Purchase Agreement) shall
-------
have occurred, the Initial Loans (as defined in the Credit Agreement) shall have
been made and the closing of the initial purchase of the Loans (as defined in
the Senior Subordinated Loan Agreement and the Subordinated Loan Agreement)
shall have occurred, all simultaneously with the Closing hereunder.
6.04 Opinion of-Counsel. Investor shall have received the opinion of
------------------
Bathgate, Wegener & Wolf, counsel to Holding, as of the Closing Date,
substantially in the form and to the effect of Exhibit (B) to the Senior
Subordinated Loan Agreement.
ARTICLE VII
DEFINITIONS
7.01 Definitions. Except as otherwise specifically indicated, the
-----------
following terms will have the following meanings for all purposes of this
Agreement:
"Affiliate" means with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with such Person.
"Agreement" means this Subscription Agreement, as the same shall be amended
from time to time.
"AM" means AM Cosmetics, Inc., a Delaware corporation.
"Business Day" means a day other than Saturday, Sunday or any other day on
which banks located in New York City are authorized or obligated to close.
"Closing" has the meaning ascribed to it in Section 1.03.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended from time to-
time and the regulations promulgated thereunder.
"Commission" means the United States Securities and Exchange Commission, or
any successor governmental agency or authority.
8
<PAGE>
"Common Stock" means shares of Class A Common Stock or Class B Common
Stock, as constituted on the date hereof, and any stock into which such Class A
Common Stock or Class B Common Stock shall have been changed or any stock
resulting from any reclassification of such Class A Common Stock or Class B
Common Stock.
"Company" means Arthur Matney Co., Inc., a New York corporation.
"Contract" means any agreement, lease, license, evidence of indebtedness,
mortgage, indenture, security agreement or other contract.
"Credit Agreement" has the meaning ascribed to it in Section 2.08.
"GAAP" means generally accepted accounting principles in the United.States
of America as in effect from time to time.
"Holding" has the meaning ascribed to it in the preamble.
"Investor" has the meaning ascribed to it in the preamble.
"Liens" means any mortgage, pledge, assessment security interest, lease,
lien, adverse claim, levy, charge or other encumbrance of any kind, or any
conditional sale Contract to give any of the foregoing, but excluding, in the
case of securities, restrictions under the Securities Act on the sale of such
securities.
"Other Subscription Agreement" means the Subscription Agreements as of the
date hereof by and between Holding, and AM Partners, LP. and between Holding,
Indosuez Matney Partners and Indosuez CM II, Inc.
"Person" means any natural person, corporation, general partnership,
limited partnership, proprietorship, other business organization, trust, union
or association.
"PIK Preferred Stock" has the meaning ascribed to it in the preamble and
more particularly described in Exhibit A of the Agreement.
"Purchase Agreement" means the Purchase Agreement dated June 6, 1996, by
and between AM and Arthur Matney Co., Inc.
"Purchase Price" has the meaning ascribed to it in Section 1.02.
"Rule 144" means Rule 144 promulgated by the Commission under the
Securities Act, and any successor provision thereto.
9
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Senior Subordinated Loan Agreement" has the meaning ascribed to it in
Section 2.08.
7.02 Unless the context of this Agreement otherwise requires, (i) words of
any gender include each other gender; (ii) words using the singular or plural
number also include the plural or singular number, respectively; (iii) the terms
"hereof," "herein," "hereby" and derivative or similar words refer to this
entire Agreement; and (iv) the term "Section" refers to the specified Section of
this Agreement. Whenever this Agreement refers to a number of days, such number
shall refer to calendar days unless Business Days are specified. Any
representation or warranty contained herein as to the enforceability of a
Contract shall be subject to the effect of any bankruptcy, insolvency,
reorganization, moratorium or other similar law affecting the enforcement of
creditors' rights generally and to general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
ARTICLE VIII
MISCELLANEOUS
8.01 Notices. All notices, requests and other communications hereunder
-------
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to Holding, to: Morningside AM Acquisition Corp.
1 Morningside Drive, North
Suite 200
Westport, CT 06880
Facsimile No. (203) 226-8011
Attn: Vincent A. Wasik
with a copy to: Bathgate, Wegener & Wolf, P.C.
One Airport Road
PO Box 2043
Lakewood, NJ 08701
Facsimile No. (908) 363-9864
Attn: Lawrence E. Bathgate, II, Esq.
If to Investor, to: Carson Products Company
64 Ross Street
PO Box 22309
Savannah, GA 31405
Facsimile No.: (912) 651-3424
Attn: Dr. Leroy Keith, President
10
<PAGE>
with a copy to: Carson Products Company
64 Ross Street
PO Box 22309
Savannah, GA 31405
Facsimile No. (908) 363-9864
Attn: Corporate Secretary
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 8.01, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided this Section 8.01, be deemed given upon receipt, and (iii) delivered by
mail in the manner described above to the address provided in this Section 8.01,
be deemed given upon receipt (in each case regardless of whether such notice,
request or other communication is received by any other Person to whom a copy of
such notice is to be delivered pursuant to this Section 8.01). Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other parties hereto.
8.02 Entire Agreement. This Agreement supersedes all prior discussions
----------------
and agreements between the parties with respect to the subject matter hereof,
and contains the sole and entire agreement between the parties hereto with
respect to the subject matter hereof.
8.03 Amendment. This Agreement may be amended, supplemented or modified
---------
only by a written instrument (which may be executed in any number of
counterparts) duly executed by or on behalf of each of Holding and the Investor.
8.04 Waiver. Any term or condition of this Agreement may be waived at any
------
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf the party waiving such term or condition. No waiver by any part of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same term or condition of this
Agreement on any future occasion.
8.05 No Third Party Beneficiary. The terms and provisions of this
--------------------------
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third party beneficiary rights upon any other Person.
8.06 Successors and Assigns. This Agreement is binding upon, inures to
----------------------
the benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
8.07 Headings. The headings used in this Agreement have been inserted for
--------
convenience of reference only and do not define or limit the provisions hereof.
11
<PAGE>
8.08 Invalid Provisions. If any provision of this Agreement is held to be
------------------
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
8.09 Remedies. Except as otherwise expressly provided for herein, no
--------
remedy conferred by any of the specific provisions of this Agreement is intended
to be exclusive of any other remedy, and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise. The
election of any one or more remedies by any party hereto shall not constitute a
waiver by any such party of the right to pursue any other available remedies.
Damages in the event of breach of this Agreement by a party hereto would be
difficult, if not impossible, to ascertain, and it is therefore agreed that-each
such Person, in addition to and without limiting any other remedy or right it
may have, will have the right to an injunction or other equitable relief in any
court of competent jurisdiction, enjoining any such breach, and enforcing
specifically the terms and provisions hereof, and Holding and Investor, by
Investor's acquisition of its Registrable Securities, hereby waive any and all
defenses they may have on the grounds of lack of jurisdiction or competence of
the court to grant such an injunction or other equitable relief. The existence
of this right will not preclude any such Person from pursuing any other rights
and remedies at law or in equity which such Person may have.
8.10 Governing Law. This Agreement shall be govern by and construed in
-------------
accordance with the laws of the State of New York applicable to a contract
executed and performed in such State, without giving effect to the conflicts of
laws principles thereof.
8.11 Counterparts. This Agreement may be executed any number of
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
12
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officer of each party hereto as of the date first above
written.
MORNINGSIDE AM ACQUISITION CORP.
By:_____________________________________
Vincent A. Wasik, CEO and President
CARSON PRODUCTS COMPANY
By:______________________________________
Name: Dr. Leroy Keith
Title: Chairman/CEO
13
<PAGE>
EXHIBIT 10.13
CARSON, INC.
1996 LONG-TERM INCENTIVE PLAN
* * * * *
1. PURPOSE. The purpose of the 1996 Long-Term Incentive Plan (the
-------
"Plan") is to further and promote the interests of Carson, Inc. (the "Company"),
its Subsidiaries and its shareholders by enabling the Company and its
Subsidiaries to attract, retain and motivate employees and consultants or those
who will become employees or consultants, and to align the interests of those
individuals and the Company's shareholders. To do this, the Plan offers
performance-based incentive awards and equity-based opportunities providing such
employees and consultants with a proprietary interest in maximizing the growth,
profitability and overall success of the Company and its Subsidiaries.
2. DEFINITIONS. For purposes of the Plan, the following terms shall
-----------
have the meanings set forth below:
2.1 "AWARD" means an award or grant made to a Participant under
Sections 6, 7, 8 and/or 9 of the Plan.
2.2 "AWARD AGREEMENT" means the agreement executed by a Participant
pursuant to Sections 3.2 and 17.7 of the Plan in connection with the granting of
an Award.
2.2 "BOARD" means the Board of Directors of the Company, as
constituted from time to time.
2.3 "CLOSING" means the occurrence of the closing of the initial
public offerings by the Company of the Common Stock.
2.4 "CODE" means the Internal Revenue Code of 1986, as in effect
and as amended from time to time, or any successor statute thereto, together
with any rules, regulations and interpretations promulgated thereunder or with
respect thereto.
2.5 "COMMITTEE" means the committee of the Board established to
administer the Plan, as described in Section 3 of the Plan.
2.6 "COMMON STOCK" means the Class A Common Stock, par value $.01
per share, of the Company or any security of the Company issued by the Company
in substitution or exchange therefor.
2.7 "COMPANY" means Carson, Inc., a Delaware corporation, or any
successor corporation to Carson, Inc.
<PAGE>
- 2 -
2.8 "DISABILITY" means disability as defined in the Participant's
then effective employment agreement, or if the participant is not then a party
to an effective employment agreement with the Company which defines disability,
"Disability" means disability as determined by the Committee in accordance with
standards and procedures similar to those under the Company's long-term
disability plan, if any. Subject to the first sentence of this Section 2.8, at
any time that the Company does not maintain a long-term disability plan,
"Disability" shall mean any physical or mental disability which is determined to
be total and permanent by a physician selected in good faith by the Company.
2.9 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as in
effect and as amended from time to time, or any successor statute thereto,
together with any rules, regulations and interpretations promulgated thereunder
or with respect thereto.
2.10 "FAIR MARKET VALUE" means on, or with respect to, any given
date(s), the average of the highest and lowest market prices of the Common
Stock, as reported on the consolidated transaction reporting system for the New
York Stock Exchange for such date(s) or, if the Common Stock was not traded on
such date(s), on the next preceding day or days on which the Common Stock was
traded. If at any time the Common Stock is not traded on such exchange, the
Fair Market Value of a share of the Common Stock shall be determined in good
faith by the Board.
2.11 "INCENTIVE STOCK OPTION" means any stock option granted
pursuant to the provisions of Section 6 of the Plan (and the relevant Award
Agreement) that is intended to be (and is specifically designated as) an
"incentive stock option" within the meaning of Section 422 of the Code.
2.12 "NON-QUALIFIED STOCK OPTION" means any stock option granted
pursuant to the provisions of Section 6 of the Plan (and the relevant Award
Agreement) that is not (and is specifically designated as not being) an
Incentive Stock Option.
2.13 "PARTICIPANT" means any individual who is selected from time to
time under Section 5 to receive an Award under the Plan.
2.14 "PERFORMANCE UNITS" means the monetary units granted under
Section 9 of the Plan and the relevant Award Agreement.
2.15 "PLAN" means the Carson, Inc. 1996 Long-Term Incentive Plan, as
set forth herein and as in effect and as amended from time to time (together
with any rules and regulations promulgated by the Committee with respect
thereto).
2.16 "RELOAD STOCK OPTION" means any Non-Qualified Stock Option
automatically granted pursuant to the provisions of Section 6.7 of the Plan and
the relevant Award Agreement.
<PAGE>
- 3 -
2.17 "RESTRICTED SHARES" means the restricted shares of Common Stock
granted pursuant to the provisions of Section 8 of the Plan and the relevant
Award Agreement.
2.18 "RETIREMENT" means the voluntary retirement by the Participant
from active employment with the Company and its Subsidiaries on or after the
attainment of (i) age 65, or (ii) 60, with the consent of the Board.
2.19 "STOCK APPRECIATION RIGHT" means an Award described in Section
7.2 of the Plan and granted pursuant to the provisions of Section 7 of the Plan.
2.20 "SUBSIDIARY(IES)" means any corporation (other than the
Company) in an unbroken chain of corporations, including and beginning with the
Company, if each of such corporations, other than the last corporation in the
unbroken chain, owns, directly or indirectly, more than fifty percent (50%) of
the voting stock in one of the other corporations in such chain.
3. ADMINISTRATION.
--------------
3.1 THE COMMITTEE. The Plan shall be administered by the
-------------
Committee. The Committee shall be appointed from time to time by the Board and
shall be comprised of not less than three (3) of the then members of the Board
who are Non-Employee Directors (within the meaning of SEC Rule 16b-3(b)(3)) of
the Company. No member of the Committee shall be eligible to receive awards
under the Plan. Consistent with the Bylaws of the Company, members of the
Committee shall serve at the pleasure of the Board and the Board, subject to the
immediately preceding sentence, may at any time and from time to time remove
members from, or add members to, the Committee.
3.2 PLAN ADMINISTRATION AND PLAN RULES. The Committee is
----------------------------------
authorized to construe and interpret the Plan and to promulgate, amend and
rescind rules and regulations relating to the implementation, administration and
maintenance of the Plan. Subject to the terms and conditions of the Plan, the
Committee shall make all determinations necessary or advisable for the
implementation, administration and maintenance of the Plan including, without
limitation, (a) selecting the Plan's Participants, (b) making Awards in such
amounts and form as the Committee shall determine, (c) imposing such
restrictions, terms and conditions upon such Awards as the Committee shall deem
appropriate, and (d) correcting any technical defect(s) or technical
omission(s), or reconciling any technical inconsistency(ies), in the Plan and/or
any Award Agreement. The Committee may designate persons other than members of
the Committee to carry out the day-to-day ministerial administration of the Plan
under such conditions and limitations as it may prescribe, except that the
Committee shall not delegate its authority with regard to the selection for
participation in the Plan and/or the granting of any Awards to Participants.
The Committee's determinations under the Plan need not be uniform and may be
made selectively among Participants, whether or not such
<PAGE>
- 4 -
Participants are similarly situated. Any determination, decision or action of
the Committee in connection with the construction, interpretation,
administration, implementation or maintenance of the Plan shall be final,
conclusive and binding upon all Participants and any person(s) claiming under or
through any Participants. The Company shall effect the granting of Awards under
the Plan, in accordance with the determinations made by the Committee, by
execution of written agreements and/or other instruments in such form as is
approved by the Committee.
3.3 LIABILITY LIMITATION. Neither the Board nor the Committee, nor
--------------------
any member of either, shall be liable for any act, omission, interpretation,
construction or determination made in good faith in connection with the Plan (or
any Award Agreement), and the members of the Board and the Committee shall be
entitled to indemnification and reimbursement by the Company in respect of any
claim, loss, damage or expense (including, without limitation, attorneys' fees)
arising or resulting therefrom to the fullest extent permitted by law and/or
under any directors and officers liability insurance coverage which may be in
effect from time to time.
3.4 PRE-IPO ADMINISTRATION. Notwithstanding anything in the Plan
----------------------
to the contrary and prior to the Closing (the "Pre-IPO Period"), the Plan may
also be administered by the Board. During the Pre-IPO Period (but not beyond),
the Board shall have all the authority, rights and powers set forth in Sections
3.1, 3.2 and 3.3 of the Plan and may make any and all determinations, and take
any and all other actions, which may or could be made, or taken, by the
Committee under the Plan.
4. TERM OF PLAN/COMMON STOCK SUBJECT TO PLAN.
-----------------------------------------
4.1 TERM. The Plan shall terminate on December 31, 2006, except
----
with respect to Awards then outstanding. After such date no further Awards
shall be granted under the Plan.
4.2 COMMON STOCK. The maximum number of shares of Common Stock in
------------
respect of which Awards may be granted or paid out under the Plan, subject to
adjustment as provided in Section 14.2 of the Plan, shall not exceed 600,000
shares. In the event of a change in the Common Stock of the Company that is
limited to a change in the designation thereof to "Capital Stock" or other
similar designation, or to a change in the par value thereof, or from par value
to no par value, without increase or decrease in the number of issued shares,
the shares resulting from any such change shall be deemed to be the Common Stock
for purposes of the Plan. Common Stock which may be issued under the Plan may
be either authorized and unissued shares or issued shares which have been
reacquired by the Company (in the open-market or in private transactions) and
which are being held as treasury shares. No fractional shares of Common Stock
shall be issued under the Plan.
<PAGE>
- 5 -
4.3 COMPUTATION OF AVAILABLE SHARES. For the purpose of computing
-------------------------------
the total number of shares of Common Stock available for Awards under the Plan,
there shall be counted against the limitations set forth in Section 4.2 of the
Plan the maximum number of shares of Common Stock potentially subject to
issuance upon exercise or settlement of Awards granted under Sections 6 and 7 of
the Plan, the number of shares of Common Stock issued under grants of Restricted
Shares pursuant to Section 8 of the Plan and the maximum number of shares of
Common Stock potentially issuable under grants or payments of Performance Units
pursuant to Section 9 of the Plan, in each case determined as of the date on
which such Awards are granted. If any Awards expire unexercised or are
forfeited, surrendered, cancelled, terminated or settled in cash in lieu of
Common Stock, the shares of Common Stock which were theretofore subject (or
potentially subject) to such Awards shall again be available for Awards under
the Plan to the extent of such expiration, forfeiture, surrender, cancellation,
termination or settlement of such Awards.
5. ELIGIBILITY. Individuals eligible for Awards under the Plan shall
-----------
consist of all salaried employees and consultants, or those who will become such
employees or consultants, of the Company and/or its Subsidiaries who are
responsible for the management, growth and protection of the business of the
Company and/or its Subsidiaries or whose performance or contribution, in the
sole discretion of the Committee, benefits or will benefit the Company.
6. STOCK OPTIONS.
-------------
6.1 TERMS AND CONDITIONS. Stock options granted under the Plan
--------------------
shall be in respect of Common Stock and may be in the form of Incentive Stock
Options, Non-Qualified Stock Options or Reload Stock Options (sometimes referred
to collectively herein as the "Stock Option(s))". Such Stock Options shall be
subject to the terms and conditions set forth in this Section 6 and any
additional terms and conditions, not inconsistent with the express terms and
provisions of the Plan, as the Committee shall set forth in the relevant Award
Agreement.
6.2 GRANT. Stock Options may be granted under the Plan in such
-----
form as the Committee may from time to time approve. Stock Options may be
granted alone or in addition to other Awards under the Plan or in tandem with
Stock Appreciation Rights. Special provisions shall apply to Incentive Stock
Options granted to any employee who owns (within the meaning of Section
422(b)(6) of the Code) more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or its parent corporation or any
subsidiary of the Company, within the meaning of Sections 424(e) and (f) of the
Code (a "10% Shareholder").
6.3 EXERCISE PRICE. The exercise price per share of Common Stock
--------------
subject to a Stock Option shall be determined by the Committee, including,
without limitation, a determination based on a formula determined by the
Committee; provided, however, that the exercise price of an Incentive Stock
-------- -------
Option or a Reload Stock Option shall not be less than
<PAGE>
- 6 -
one hundred percent (100%) of the Fair Market Value of the Common Stock on the
date of the grant of such Incentive Stock Option or Reload Stock Option;
provided, further, however, that, in the case of a 10% Shareholder, the exercise
- -------- ------- -------
price of an Incentive Stock Option shall not be less than one hundred ten
percent (110%) of the Fair Market Value of the Common Stock on the date of
grant.
6.4 TERM. The term of each Stock Option shall be such period of
----
time as is fixed by the Committee; provided, however, that the term of any
-------- -------
Incentive Stock Option shall not exceed ten (10) years (five (5) years, in the
case of a 10% Shareholder) after the date immediately preceding the date on
which the Incentive Stock Option is granted.
6.5 METHOD OF EXERCISE. A Stock Option may be exercised, in whole
------------------
or in part, by giving written notice of exercise to the Secretary of the
Company, or the Secretary's designee, specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full of the exercise
price in cash, by certified check, bank draft or money order payable to the
order of the Company or, if permitted by the Committee (in its sole discretion)
and applicable law, by delivery of, alone or in conjunction with a partial cash
or instrument payment, (a) a fully-secured promissory note or notes, (b) shares
of Common Stock already owned by the Participant for at least six (6) months, or
(c) some other form of payment acceptable to the Committee. The Committee may
also permit Participants (either on a selective or group basis) to
simultaneously exercise Stock Options and sell the shares of Common Stock
thereby acquired, pursuant to a "cashless exercise" arrangement or program,
selected by and approved of in all respects in advance by the Committee.
Payment instruments shall be received by the Company subject to collection. The
proceeds received by the Company upon exercise of any Stock Option may be used
by the Company for general corporate purposes. Any portion of a Stock Option
that is exercised may not be exercised again.
6.6 EXERCISABILITY. In respect of any Stock Option granted under the
--------------
Plan, unless otherwise (a) determined by the Committee (in its sole discretion)
at any time and from time to time in respect of any such Stock Option, or (b)
provided in the Award Agreement or in the Participant's employment agreement in
respect of any such Stock Option, such Stock Option shall become exercisable as
to the aggregate number of shares of Common Stock underlying such Stock Option,
as determined on the date of grant, as follows:
. 33 1/3%, on the first anniversary of the date of grant of the Stock
Option, provided the Participant is then employed by the Company
and/or one of its Subsidiaries;
. 66 2/3%, on the second anniversary of the date of grant of the
Stock Option, provided the Participant is then employed by the
Company and/or one of its Subsidiaries;
<PAGE>
- 7 -
. 100%, on the third anniversary of the date of grant of the Stock
Option, provided the Participant is then employed by the Company
and/or one of its Subsidiaries; and
Notwithstanding anything to the contrary contained in this Section 6.6, such
Stock Option shall become one hundred percent (100%) exercisable as to the
aggregate number of shares of Common Stock underlying such Stock Option upon the
death, Disability or Retirement of the Participant.
6.7 RELOAD STOCK OPTIONS. The Committee may, in its sole
--------------------
discretion, provide in any Award Agreement in respect of any Non-Qualified Stock
Option that if the Participant delivers shares of the Company's Common Stock
already owned by such Participant for at least six (6) months in full or partial
payment of the exercise price of such Non-Qualified Stock Option, the
Participant shall automatically (subject to the limitations contained in Section
4.2) and immediately thereupon be granted a Reload Stock Option to purchase that
number of shares of Common Stock delivered by the Participant to the Company (on
such terms as the Committee may prescribe under and in accordance with the
Plan).
6.8 TANDEM GRANTS. If Non-Qualified Stock Options and Stock
-------------
Appreciation Rights are granted in tandem, as designated in the relevant Award
Agreements, the right of a Participant to exercise any such tandem Stock Option
shall terminate to the extent that the shares of Common Stock subject to such
Stock Option are used to calculate amounts or shares receivable upon the
exercise of the related tandem Stock Appreciation Right.
7. STOCK APPRECIATION RIGHTS.
-------------------------
7.1 TERMS AND CONDITIONS. The grant of Stock Appreciation Rights
--------------------
under the Plan shall be subject to the terms and conditions set forth in this
Section 7 and any additional terms and conditions, not inconsistent with the
express terms and provisions of the Plan, as the Committee shall set forth in
the relevant Award Agreement.
7.2 STOCK APPRECIATION RIGHTS. A Stock Appreciation Right is an
-------------------------
Award granted with respect to a specified number of shares of Common Stock
entitling a Participant to receive an amount equal to the excess of the Fair
Market Value of a share of Common Stock on the date of exercise over the Fair
Market Value of a share of Common Stock on the date of grant of the Stock
Appreciation Right, multiplied by the number of shares of Common Stock with
respect to which the Stock Appreciation Right shall have been exercised.
7.3 GRANT. A Stock Appreciation Right may be granted in addition
-----
to any other Award under the Plan or in tandem with or independent of a Non-
Qualified Stock Option.
<PAGE>
- 8 -
7.4 DATE OF EXERCISABILITY. Unless otherwise provided in the
----------------------
Participant's employment agreement or the Award Agreement in respect of any
Stock Appreciation Right, a Stock Appreciation Right may be exercised by a
Participant, in accordance with and subject to all of the procedures established
by the Committee, in whole or in part at any time and from time to time during
its specified term. Notwithstanding the preceding sentence, in no event shall a
Stock Appreciation Right be exercisable prior to the date which is six (6)
months after the date on which the Stock Appreciation Right was granted or prior
to the exercisability of any Non-Qualified Stock Option with which it is granted
in tandem. The Committee may also provide, as set forth in the relevant Award
Agreement and without limitation, that some Stock Appreciation Rights shall be
automatically exercised and settled on one or more fixed dates specified therein
by the Committee.
7.5 FORM OF PAYMENT. Upon exercise of a Stock Appreciation Right,
---------------
payment may be made in cash, in Restricted Shares or in shares of unrestricted
Common Stock, or in any combination thereof, as the Committee, in its sole
discretion, shall determine and provide in the relevant Award Agreement.
7.6 TANDEM GRANT. The right of a Participant to exercise a tandem
------------
Stock Appreciation Right shall terminate to the extent such Participant
exercises the Non-Qualified Stock Option to which such Stock Appreciation Right
is related.
8. RESTRICTED SHARES.
-----------------
8.1 TERMS AND CONDITIONS. Grants of Restricted Shares shall be
--------------------
subject to the terms and conditions set forth in this Section 8 and any
additional terms and conditions, not inconsistent with the express terms and
provisions of the Plan, as the Committee shall set forth in the relevant Award
Agreement. Restricted Shares may be granted alone or in addition to any other
Awards under the Plan. Subject to the terms of the Plan, the Committee shall
determine the number of Restricted Shares to be granted to a Participant and the
Committee may provide or impose different terms and conditions on any particular
Restricted Share grant made to any Participant. With respect to each
Participant receiving an Award of Restricted Shares, there shall be issued a
stock certificate (or certificates) in respect of such Restricted Shares. Such
stock certificate(s) shall be registered in the name of such Participant, shall
be accompanied by a stock power duly executed by such Participant, and shall
bear, among other required legends, the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including,
without limitation, forfeiture events) contained in the Carson, Inc.
1996 Long-Term Incentive Plan and an Award Agreement entered into
between the registered owner hereof and Carson, Inc. Copies of such
Plan and Award Agreement are on file in the office of the Secretary of
Carson, Inc., Savannah,
<PAGE>
- 9 -
Georgia. Carson, Inc. will furnish to the recordholder of the
certificate, without charge and upon written request at its principal
place of business, a copy of such Plan and Award Agreement. Carson,
Inc. reserves the right to refuse to record the transfer of this
certificate until all such restrictions are satisfied, all such terms
are complied with and all such conditions are satisfied."
Such stock certificate evidencing such shares shall, in the sole discretion of
the Committee, be deposited with and held in custody by the Company until the
restrictions thereon shall have lapsed and all of the terms and conditions
applicable to such grant shall have been satisfied.
8.2 RESTRICTED SHARE GRANTS. A grant of Restricted Shares is an
-----------------------
Award of shares of Common Stock granted to a Participant, subject to such
restrictions, terms and conditions as the Committee deems appropriate,
including, without limitation, (a) restrictions on the sale, assignment,
transfer, hypothecation or other disposition of such shares, (b) the requirement
that the Participant deposit such shares with the Company while such shares are
subject to such restrictions, and (c) the requirement that such shares be
forfeited upon termination of employment for specified reasons within a
specified period of time or for other reasons (including, without limitation,
the failure to achieve designated performance goals).
8.3 RESTRICTION PERIOD. In accordance with Sections 8.1 and 8.2 of
------------------
the Plan and unless otherwise determined by the Committee (in its sole
discretion) at any time and from time to time, Restricted Shares shall only
become unrestricted and vested in the Participant in accordance with such
vesting schedule relating to such Restricted Shares, if any, as the Committee
may establish in the relevant Award Agreement (the "Restriction Period").
Notwithstanding the preceding sentence, in no event shall the Restriction Period
be less than six (6) months after the date of grant. During the Restriction
Period, such stock shall be and remain unvested and a Participant may not sell,
assign, transfer, pledge, encumber or otherwise dispose of or hypothecate such
Award. Upon satisfaction of the vesting schedule and any other applicable
restrictions, terms and conditions, the Participant shall be entitled to receive
payment of the Restricted Shares or a portion thereof, as the case may be, as
provided in Section 8.4 of the Plan.
8.4 PAYMENT OF RESTRICTED SHARE GRANTS. After the satisfaction
----------------------------------
and/or lapse of the restrictions, terms and conditions established by the
Committee in respect of a grant of Restricted Shares, a new certificate, without
the legend set forth in Section 8.1 of the Plan, for the number of shares of
Common Stock which are no longer subject to such restrictions, terms and
conditions shall, as soon as practicable thereafter, be delivered to the
Participant.
8.5 SHAREHOLDER RIGHTS. A Participant shall have, with respect to
------------------
the shares of Common Stock underlying a grant of Restricted Shares, all of the
rights of a
<PAGE>
- 10 -
shareholder of such stock (except as such rights are limited or restricted under
the Plan or in the relevant Award Agreement). Any stock dividends paid in
respect of unvested Restricted Shares shall be treated as additional Restricted
Shares and shall be subject to the same restrictions and other terms and
conditions that apply to the unvested Restricted Shares in respect of which such
stock dividends are issued.
9. PERFORMANCE UNITS.
-----------------
9.1 TERMS AND CONDITIONS. Performance Units shall be subject to
--------------------
the terms and conditions set forth in this Section 9 and any additional terms
and conditions, not inconsistent with the express provisions of the Plan, as the
Committee shall set forth in the relevant Award Agreement.
9.2 PERFORMANCE UNIT GRANTS. A Performance Unit is an Award of
-----------------------
units (with each unit representing such monetary amount as is designated by the
Committee in the Award Agreement) granted to a Participant, subject to such
terms and conditions as the Committee deems appropriate, including, without
limitation, the requirement that the Participant forfeit such units (or a
portion thereof) in the event certain performance criteria or other conditions
are not met within a designated period of time.
9.3 GRANTS. Performance Units may be granted alone or in addition
------
to any other Awards under the Plan. Subject to the terms of the Plan, the
Committee shall determine the number of Performance Units to be granted to a
Participant and the Committee may impose different terms and conditions on any
particular Performance Units granted to any Participant.
9.4 PERFORMANCE GOALS AND PERFORMANCE PERIODS. Participants
-----------------------------------------
receiving a grant of Performance Units shall only earn into and be entitled to
payment in respect of such Awards if the Company and/or the Participant achieves
certain performance goals (the "Performance Goals") during and in respect of a
designated performance period (the "Performance Period"). The Performance Goals
and the Performance Period shall be established by the Committee, in its sole
discretion. The Committee shall establish Performance Goals for each
Performance Period prior to, or as soon as practicable after, the commencement
of such Performance Period. The Committee shall also establish a schedule or
schedules for Performance Units setting forth the portion of the Award which
will be earned or forfeited based on the degree of achievement, or lack thereof,
of the Performance Goals at the end of the relevant Performance Period. In
setting Performance Goals, the Committee may use, but shall not be limited to,
such measures as total shareholder return, return on equity, net earnings
growth, sales or revenue growth, cash flow, comparisons to peer companies,
individual or aggregate Participant performance or such other measure or
measures of performance as the Committee, in its sole discretion, may deem
appropriate. Such performance measures shall be defined as to their respective
components and meaning by the Committee (in its sole discretion). During any
Performance Period, the Committee shall have
<PAGE>
- 11 -
the authority to adjust the Performance Goals and/or the Performance Period in
such manner as the Committee, in its sole discretion, deems appropriate at any
time and from time to time.
9.5 PAYMENT OF UNITS. With respect to each Performance Unit, the
----------------
Participant shall, if the applicable Performance Goals have been achieved, or
partially achieved, as determined by the Committee in its sole discretion, by
the Company and/or the Participant during the relevant Performance Period, be
entitled to receive payment in an amount equal to the designated value of each
Performance Unit times the number of such units so earned. Payment in
settlement of earned Performance Units shall be made as soon as practicable
following the conclusion of the respective Performance Period in cash, in
unrestricted Common Stock, or in Restricted Shares, or in any combination
thereof, as the Committee in its sole discretion, shall determine and provide in
the relevant Award Agreement.
10. DEFERRAL ELECTIONS/TAX REIMBURSEMENTS/OTHER PROVISIONS.
------------------------------------------------------
10.1 DEFERRALS. The Committee may permit a Participant to elect to
---------
defer receipt of any payment of cash or any delivery of shares of Common Stock
that would otherwise be due to such Participant by virtue of the exercise, earn
out or settlement of any Award made under the Plan. If any such election is
permitted, the Committee shall establish rules and procedures for such
deferrals, including, without limitation, the payment or crediting of reasonable
interest on such deferred amounts credited in cash, and the payment or crediting
of dividend equivalents in respect of deferrals credited in units of Common
Stock. The Committee may also provide in the relevant Award Agreement for a tax
reimbursement cash payment to be made by the Company in favor of any Participant
in connection with the tax consequences resulting from the grant, exercise,
settlement, or earn out of any Award made under the Plan.
10.2 PERFORMANCE-BASED AWARDS. Performance Units, performance-based
------------------------
Restricted Shares, and other Awards subject to performance criteria are intended
to be "qualified performance-based compensation" within the meaning of section
162(m) of the Code and shall be paid solely on account of the attainment of one
or more preestablished, objective performance goals within the meaning of
section 162(m) and the regulations thereunder. Until otherwise determined by
the Committee, the performance goals shall be the attainment of preestablished
levels of any of net income, market price per share, earnings per share, return
on equity, return on capital employed and/or cash flow. The payout of any such
Award to a Covered Employee may be reduced, but not increased, based on the
degree of attainment of other performance criteria or otherwise at the
discretion of the Committee. For purposes of the Plan, "Covered Employee" has
the same meaning as set forth in Section 162(m) of the Code.
<PAGE>
- 12 -
10.3 MAXIMUM YEARLY AWARDS. The maximum annual Common Stock amounts
---------------------
in this Section 10.3 are subject to adjustment under Section 14.2 and are
subject to the Plan maximum under Section 4.2.
10.3.1 PERFORMANCE-BASED AWARDS. All Participants in the
------------------------
aggregate may not receive in any calendar year Performance Units,
performance-based Restricted Shares and other Awards subject to
performance criteria exceeding, in the aggregate, 300,000 underlying
shares of Common Stock. The maximum amount payable in respect of such
Awards in any calendar year may not exceed 500,000 shares of Common Stock
(or the then equivalent Fair Market Value thereof) in the aggregate to all
Participants and 100,000 shares of Common Stock (or the then equivalent
Fair Market Value thereof) in the case of any individual Participant.
10.3.2 STOCK OPTIONS AND SARS. All Participants in the
----------------------
aggregate
may not receive in any calendar year Awards of Options and Stock
Appreciation Rights, in the aggregate, exceeding 500,000 underlying shares
of Common Stock. Each individual Participant may not receive in any
calendar year Awards of Options or Stock Appreciation Rights exceeding
200,000 underlying shares of Common Stock.
11. DIVIDEND EQUIVALENTS. In addition to the provisions of Section 8.5
--------------------
of the Plan, Awards of Stock Options, and/or Stock Appreciation Rights, may, in
the sole discretion of the Committee and if provided for in the relevant Award
Agreement, earn dividend equivalents. In respect of any such Award which is
outstanding on a dividend record date for Common Stock, the Participant shall be
credited with an amount equal to the amount of cash or stock dividends that
would have been paid on the shares of Common Stock covered by such Award had
such covered shares been issued and outstanding on such dividend record date.
The Committee shall establish such rules and procedures governing the crediting
of such dividend equivalents, including, without limitation, the amount, the
timing, form of payment and payment contingencies and/or restrictions of such
dividend equivalents, as it deems appropriate or necessary.
12. TERMINATION OF EMPLOYMENT.
-------------------------
12.1 GENERAL. Except as is otherwise provided (a) in the relevant
-------
Award Agreement as determined by the Committee (in its sole discretion), or (b)
in the Participant's then effective employment agreement, if any, the following
terms and conditions shall apply as appropriate and as not inconsistent with the
terms and conditions, if any, contained in such Award Agreement and/or such
employment agreement:
12.1.1 OPTIONS/SARS. Subject to any determination of the Committee
------------
pursuant to Section 6.6 of the Plan, if a Participant's employment with the
Company terminates for any reason any then unexercisable Stock Options
and/or Stock Appreciation Rights shall be forfeited and cancelled by the
Company. Except as
<PAGE>
- 13 -
otherwise provided in this Section 12.1.1, if a Participant's employment
with the Company and its Subsidiaries terminates for any reason, such
Participant's rights, if any, to exercise any then exercisable Stock
Options and/or Stock Appreciation Rights, if any, shall terminate ninety
(90) days after the date of such termination (but not beyond the stated
term of any such Stock Option and/or Stock Appreciation Right as determined
under Sections 6.4 and 7.4) and thereafter such Stock Options or Stock
Appreciation Rights shall be forfeited and cancelled by the Company. The
Committee, in its sole discretion, may determine that any such
Participant's Stock Options and/or Stock Appreciation Rights, if any, to
the extent exercisable immediately prior to any termination of employment
(other than a termination due to death, Retirement or Disability), may
remain exercisable for an additional specified time period after such
ninety (90) day period expires (subject to any other applicable terms and
provisions of the Plan and the relevant Award Agreement), but not beyond
the stated term of any such Stock Option and/or Stock Appreciation Right.
If any termination of employment is due to death, Retirement or Disability,
a Participant (and such Participant's estate, designated beneficiary or
other legal representative, as the case may be and as determined by the
Committee) shall have the right, to the extent exercisable immediately
prior to any such termination, to exercise such Stock Options and/or Stock
Appreciation Rights, if any, at any time within the one (1) year period
following such termination due to death, Retirement or Disability (but not
beyond the term of any such Stock Option and/or Stock Appreciation Right as
determined under Sections 6.4 and 7.4).
12.1.2 RESTRICTED SHARES. If a Participant's employment with the
-----------------
Company and its Subsidiaries terminates for any reason (other than due to
Disability, Retirement or death) prior to the satisfaction and/or lapse of
the restrictions, terms and conditions applicable to a grant of Restricted
Shares, such Restricted Shares shall immediately be cancelled and the
Participant (and such Participant's estate, designated beneficiary or other
legal representative) shall forfeit any rights or interests in and with
respect to any such Restricted Shares. Notwithstanding anything to the
contrary in this Section 12, the Committee, in its sole discretion, may
determine, prior to or within ninety (90) days after the date of such
termination, that all or a portion of any such Participant's Restricted
Shares shall not be so cancelled and forfeited. If the Participant's
employment terminates due to death, Disability or Retirement, the
Participant shall become 100% vested in any such Participant's restricted
Shares as of the date of any such termination.
12.1.3 PERFORMANCE UNITS. If a Participant's employment with the
-----------------
Company and its Subsidiaries terminates for any reason (other than due to
Disability, Retirement or death) prior to the completion of any Performance
Period, any Performance Units granted in respect of such Performance Period
shall immediately be cancelled by the Company and the Participant (and such
Participant's estate, designated beneficiary or other legal representative)
shall forfeit any rights or interests in and with
<PAGE>
- 14 -
respect to any such Performance Units. Notwithstanding anything to the
contrary in this Section 12, the Committee, in its sole discretion may
determine, prior to or within ninety (90) days after the date of any such
termination, that all or a portion of any such Participant's Performance
Units shall not be so cancelled and forfeited upon termination of
employment for any reason or for a particular reason. If the Participant's
employment terminates due to death, Disability or Retirement, the
Participant shall be entitled to earn into such Participant's Performance
Units in accordance with Section 9 of the Plan; provided, however, that any
-------- -------
such earn out (determined in good faith by the Committee) shall be
proportionately reduced based on the number of days transpired in the
relevant Performance Periods prior to such death, Disability or Retirement
over the total number of calendar days in any such relevant Performance
Period.
13. NON-TRANSFERABILITY OF AWARDS. Unless otherwise provided in the
-----------------------------
Award Agreement, no Award under the Plan or any Award Agreement, and no rights
or interests herein or therein, shall or may be assigned, transferred, sold,
exchanged, encumbered, pledged, or otherwise hypothecated or disposed of by a
Participant or any beneficiary(ies) of any Participant, except by testamentary
disposition by the Participant or the laws of intestate succession. No such
interest shall be subject to execution, attachment or similar legal process,
including, without limitation, seizure for the payment of the Participant's
debts, judgements, alimony, or separate maintenance. Unless otherwise provided
in the Award Agreement, during the lifetime of a Participant, Stock Options and
Stock Appreciation Rights are exercisable only by the Participant.
14. CHANGES IN CAPITALIZATION AND OTHER MATTERS.
-------------------------------------------
14.1 NO CORPORATE ACTION RESTRICTION. The existence of the Plan,
-------------------------------
any Award Agreement and/or the Awards granted hereunder shall not limit, affect
or restrict in any way the right or power of the Board or the shareholders of
the Company to make or authorize (a) any adjustment, recapitalization,
reorganization or other change in the Company's or any Subsidiary's capital
structure or its business, (b) any merger, consolidation or change in the
ownership of the Company or any Subsidiary, (c) any issue of bonds, debentures,
capital, preferred or prior preference stocks ahead of or affecting the
Company's or any Subsidiary's capital stock or the rights thereof, (d) any
dissolution or liquidation of the Company or any Subsidiary, (e) any sale or
transfer of all or any part of the Company's or any Subsidiary's assets or
business, or (f) any other corporate act or proceeding by the Company or any
Subsidiary. No Participant, beneficiary or any other person shall have any claim
against any member of the Board or the Committee, the Company or any Subsidiary,
or any employees, officers or agents of the Company or any subsidiary, as a
result of any such action.
14.2 RECAPITALIZATION ADJUSTMENTS. In the event of any change in
----------------------------
capitalization affecting the Common Stock of the Company, including, without
limitation, a
<PAGE>
- 15 -
stock dividend or other distribution, stock split, reverse stock split,
recapitalization, consolidation, subdivision, split-up, spin-off, split-off,
combination or exchange of shares or other form of reorganization or
recapitalization, or any other change affecting the Common Stock, the Board
shall authorize and make such proportionate adjustments, if any, as the Board
deems appropriate to reflect such change, including, without limitation, with
respect to the aggregate number of shares of the Common Stock for which Awards
in respect thereof may be granted under the Plan, the maximum number of shares
of the Common Stock which may be granted or awarded to any Participant, the
number of shares of the Common Stock covered by each outstanding Award, and the
exercise price or other price per share of Common Stock in respect of
outstanding Awards.
14.3 CERTAIN MERGERS.
---------------
14.3.1 If the Company enters into or is involved in any
merger, reorganization or other business combination with any person or
entity (such merger, reorganization or other business combination to be
referred to herein as a "Merger Event") and as a result of any such Merger
Event the Company will be or is the surviving corporation, a Participant
shall be entitled, as of the date of the execution of the agreement
evidencing the Merger Event (the "Execution Date") and with respect to both
exercisable and unexercisable Stock Options and/or Stock Appreciation
Rights (but only to the extent not previously exercised), to receive
substitute stock options and/or stock appreciation rights in respect of the
shares of the surviving corporation on such terms and conditions, as to the
number of shares, pricing and otherwise, which shall substantially preserve
the value, rights and benefits of any affected Stock Options or Stock
Appreciation Rights granted hereunder as of the date of the consummation of
the Merger Event. Notwithstanding anything to the contrary in this Section
14.3, if any Merger Event occurs, the Company shall have the right, but not
the obligation, to pay to each affected Participant an amount in cash or
certified check equal to the excess of the Fair Market Value of the Common
Stock underlying any affected unexercised Stock Options or Stock
Appreciation Rights as of the Execution Date (whether then exercisable or
not) over the aggregate exercise price of such unexercised Stock Options
and/or Stock Appreciation Rights, as the case may be.
14.3.2 If, in the case of a Merger Event in which the Company
will not be, or is not, the surviving corporation, and the Company
determines not to make the cash or certified check payment described in
Section 14.3.1 of the Plan, the Company shall compel and obligate, as a
condition of the consummation of the Merger Event, the surviving or
resulting corporation and/or the other party to the Merger Event, as
necessary, or any parent, subsidiary or acquiring corporation thereof, to
grant, with respect to both exercisable and unexercisable Stock Options
and/or Stock Appreciation Rights (but only to the extent not previously
exercised), substitute stock options or stock appreciation rights in
respect of the shares of common or other capital stock of such surviving or
resulting corporation on such terms and conditions, as to the number
<PAGE>
- 16 -
of shares, pricing and otherwise, which shall substantially preserve the
value, rights and benefits of any affected Stock Options and/or Stock
Appreciation Rights previously granted hereunder as of the date of the
consummation of the Merger Event.
14.3.3 Upon receipt by any affected Participant of any such cash,
certified check, or substitute stock options or stock appreciation rights
as a result of any such Merger Event, such Participant's affected Stock
Options and/or Stock Appreciation Rights for which such cash, certified
check or substitute awards was received shall be thereupon cancelled
without the need for obtaining the consent of any such affected
Participant.
14.3.4 The foregoing adjustments and the manner of application of
the foregoing provisions, including, without limitation, the issuance of
any substitute stock options and/or stock appreciation rights, shall be
determined in good faith by the Committee in its sole discretion. Any such
adjustment may provide for the elimination of fractional shares.
15. CHANGE OF CONTROL.
-----------------
15.1 ACCELERATION OF AWARDS VESTING. Anything in the Plan
------------------------------
to the contrary notwithstanding, if a Change of Control of the Company occurs
(a) all Stock Options and/or Stock Appreciation Rights then unexercised and
outstanding shall become fully vested and exercisable as of the date of the
Change of Control, (b) all restrictions, terms and conditions applicable to all
Restricted Shares then outstanding shall be deemed lapsed and satisfied as of
the date of the Change of Control, and (c) the Performance Period shall be
deemed completed, all Performance Goals shall be deemed attained at the highest
levels and all Performance Units shall be deemed to have been fully earned as of
the date of the Change of Control. The immediately preceding sentence shall
apply to only those Participants (i) who are employed by the Company and/or one
of its Subsidiaries as of the date of the Change of Control, or (ii) to whom
Section 15.3 below is applicable.
15.2 PAYMENT AFTER CHANGE OF CONTROL. Notwithstanding
-------------------------------
anything to the contrary in the Plan, within thirty (30) days after a Change of
Control occurs, (a) the holder of an Award of Restricted Shares vested under
Section 15.1(b) above shall receive a new certificate for such shares without
the legend set forth in Section 8 of the Plan (and, in the case only of a Change
of Control under Section 15.4.1 of the Plan, such holder shall have the right,
but not the obligation, to elect, within ten (10) business days after the
Participant has actual or constructive knowledge of the occurrence of such
Change of Control, to require the Company to purchase such shares from the
Participant at their then Fair Market Value, (b) the holder of Performance Units
shall receive payment of the value of such grants in cash at the highest levels,
and (c) in the case only of a Change of Control under Section 15.4.1 of the
Plan, the holders of any Stock Options and/or Stock Appreciation Rights shall
have the right, but not the obligation, to elect, within ten (10) business days
after the Participant has actual or
<PAGE>
- 17 -
constructive knowledge of the occurrence of such Change of Control, to require
the Company to purchase such Stock Options and/or Stock Appreciation Rights from
the Participant for an aggregate amount equal to the then aggregate Fair Market
Value of the Common Stock underlying such Awards tendered, less the aggregate
exercise price of such tendered Awards.
15.3 TERMINATION AS A RESULT OF A CHANGE OF CONTROL. Anything in
----------------------------------------------
the Plan to the contrary notwithstanding, if a Change of Control occurs and if
the Participant's employment is terminated before such Change of Control and it
is reasonably demonstrated by the Participant that such employment termination
(a) was at the request, directly or indirectly, of a third party who has taken
steps reasonably calculated to effect the Change of Control, or (b) otherwise
arose in connection with or in anticipation of the Change of Control, then for
purposes of this Section 15, the Change of Control shall be deemed to have
occurred immediately prior to such Participant's employment termination (for all
purposes other than those set forth in Section 15.2(c) of the Plan).
15.4 CHANGE OF CONTROL. For the purpose of this Agreement, "Change
-----------------
of Control" shall mean:
15.4.1 The acquisition, after and not pursuant to the Closing, by
an individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either
(a) the shares of the Common Stock, or (b) the combined voting power of the
voting securities of the Company entitled to vote generally in the election
of directors (the "Voting Securities"); provided, however, that the
-------- -------
following acquisitions shall not constitute a Change of Control: (x) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Subsidiary, (y) any acquisition by any
underwriter in connection with any firm commitment underwriting of
securities to be issued by the Company, or (z) any acquisition by any
corporation if, immediately following such acquisition, more than 80% of
the then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation (entitled to vote generally in the election of directors), is
beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who, immediately prior to such acquisition,
were the beneficial owners of the Common Stock and the Voting Securities in
substantially the same proportions, respectively, as their ownership,
immediately prior to such acquisition, of the Common Stock and Voting
Securities; or
15.4.2 Individuals who, as of the effective date of the Plan,
constitute the Board (the "Incumbent Board") cease thereafter for any
reason to constitute at least a majority of the Board; provided, however,
-------- -------
that any individual becoming a director subsequent to the effective date of
the Plan whose election, or nomination for election by the Company's
shareholders, was approved by at least a majority of the directors
<PAGE>
- 18 -
then serving and comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents; or
15.4.3 Approval by the shareholders of the Company of a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all of
the individuals and entities who were the beneficial owners, immediately
prior to such reorganization, merger or consolidation, of the Common Stock
and Voting Securities beneficially own, directly or indirectly, immediately
after such reorganization, merger or consolidation more than 80% of the
then outstanding common stock and voting securities (entitled to vote
generally in the election of directors) of the corporation resulting from
such reorganization, merger or consolidation in substantially the same
proportions as their respective ownership, immediately prior to such
reorganization, merger or consolidation, of the Common Stock and the Voting
Securities; or
15.4.4 Approval by the shareholders of the Company of (a) a
complete liquidation or substantial dissolution of the Company, or (b) the
sale or other disposition of all or substantially all of the assets of the
Company, other than to a Subsidiary, wholly-owned, directly or indirectly,
by the Company.
16. AMENDMENT, SUSPENSION AND TERMINATION.
-------------------------------------
16.1 IN GENERAL. The Board may suspend or terminate the Plan (or
----------
any portion thereof) at any time and may amend the Plan at any time and from
time to time in such respects as the Board may deem advisable to insure that any
and all Awards conform to or otherwise reflect any change in applicable laws or
regulations, or to permit the Company or the Participants to benefit from any
change in applicable laws or regulations, or in any other respect the Board may
deem to be in the best interests of the Company or any Subsidiary. No such
amendment, suspension or termination shall (x) materially adversely effect the
rights of any Participant under any outstanding Stock Options, Stock
Appreciation Rights, Performance Units, or Restricted Share grants, without the
consent of such Participant, or (y) make any change that would disqualify the
Plan, or any other plan of the Company or any Subsidiary intended to be so
qualified, from the benefits provided under Section 422 of the Code, or any
successor provisions thereto.
16.2 AWARD AGREEMENT MODIFICATIONS. The Committee may (in its
------------------------------
sole discretion) amend or modify at any time and from time to time the terms and
provisions of any outstanding Stock Options, Stock Appreciation Rights,
Performance Units, or Restricted Share grants, in any manner to the extent that
the Committee under the Plan or any Award
<PAGE>
- 19 -
Agreement could have initially determined the restrictions, terms and provisions
of such Stock Options, Stock Appreciation Rights, Performance Units, and/or
Restricted Share grants, including, without limitation, changing or accelerating
(a) the date or dates as of which such Stock Options or Stock Appreciation
Rights shall become exercisable, (b) the date or dates as of which such
Restricted Share grants shall become vested, or (c) the performance period or
goals in respect of any Performance Units. No such amendment or modification
shall, however, materially adversely affect the rights of any Participant under
any such Award without the consent of such Participant.
17. MISCELLANEOUS.
-------------
17.1 TAX WITHHOLDING. The Company shall have the right to deduct
---------------
from any payment or settlement under the Plan, including, without limitation,
the exercise of any Stock Option or Stock Appreciation Right, or the delivery,
transfer or vesting of any Common Stock or Restricted Shares, any federal,
state, local or other taxes of any kind which the Committee, in its sole
discretion, deems necessary to be withheld to comply with the Code and/or any
other applicable law, rule or regulation. If the Committee, in its sole
discretion, permits shares of Common Stock to be used to satisfy any such tax
withholding, such Common Stock shall be valued based on the Fair Market Value of
such stock as of the date the tax withholding is required to be made, such date
to be determined by the Committee. The Committee may establish rules limiting
the use of Common Stock to meet withholding requirements by Participants who are
subject to Section 16 of the Exchange Act.
17.2 NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan, the
----------------------
granting of any Award, nor the execution of any Award Agreement, shall confer
upon any employee of the Company or any Subsidiary any right to continued
employment with the Company or any Subsidiary, as the case may be, nor shall it
interfere in any way with the right, if any, of the Company or any Subsidiary to
terminate the employment of any employee at any time for any reason.
17.3 UNFUNDED PLAN. The Plan shall be unfunded and the Company
-------------
shall not be required to segregate any assets in connection with any Awards
under the Plan. Any liability of the Company to any person with respect to any
Award under the Plan or any Award Agreement shall be based solely upon the
contractual obligations that may be created as a result of the Plan or any such
award or agreement. No such obligation of the Company shall be deemed to be
secured by any pledge of, encumbrance on, or other interest in, any property or
asset of the Company or any Subsidiary. Nothing contained in the Plan or any
Award Agreement shall be construed as creating in respect of any Participant (or
beneficiary thereof or any other person) any equity or other interest of any
kind in any assets of the Company or any Subsidiary or creating a trust of any
kind or a fiduciary relationship of any kind between the Company, any Subsidiary
and/or any such Participant, any beneficiary thereof or any other person.
<PAGE>
- 20 -
17.4 PAYMENTS TO A TRUST. The Committee is authorized to cause to be
-------------------
established a trust agreement or several trust agreements or similar
arrangements from which the Committee may make payments of amounts due or to
become due to any Participants under the Plan.
17.5 OTHER COMPANY BENEFIT AND COMPENSATION PROGRAMS. Payments and
-----------------------------------------------
other benefits received by a Participant under an Award made pursuant to the
Plan shall not be deemed a part of a Participant's compensation for purposes of
the determination of benefits under any other employee welfare or benefit plans
or arrangements, if any, provided by the Company or any Subsidiary unless
expressly provided in such other plans or arrangements, or except where the
Board expressly determines in writing that inclusion of an Award or portion of
an Award should be included to accurately reflect competitive compensation
practices or to recognize that an Award has been made in lieu of a portion of
competitive annual base salary or other cash compensation. Awards under the
Plan may be made in addition to, in combination with, or as alternatives to,
grants, awards or payments under any other plans or arrangements of the Company
or its Subsidiaries. The existence of the Plan notwithstanding, the Company or
any Subsidiary may adopt such other compensation plans or programs and
additional compensation arrangements as it deems necessary to attract, retain
and motivate employees.
17.6 LISTING, REGISTRATION AND OTHER LEGAL COMPLIANCE. No Awards or
------------------------------------------------
shares of the Common Stock shall be required to be issued or granted under the
Plan unless legal counsel for the Company shall be satisfied that such issuance
or grant will be in compliance with all applicable federal and state securities
laws and regulations and any other applicable laws or regulations. The
Committee may require, as a condition of any payment or share issuance, that
certain agreements, undertakings, representations, certificates, and/or
information, as the Committee may deem necessary or advisable, be executed or
provided to the Company to assure compliance with all such applicable laws or
regulations. Certificates for shares of the Restricted Shares and/or Common
Stock delivered under the Plan may be subject to such stock-transfer orders and
such other restrictions as the Committee may deem advisable under the rules,
regulations, or other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Common Stock is then listed, and any
applicable federal or state securities law. In addition, if, at any time
specified herein (or in any Award Agreement or otherwise) for (a) the making of
any Award, or the making of any determination, (b) the issuance or other
distribution of Restricted Shares and/or Common Stock, or (c) the payment of
amounts to or through a Participant with respect to any Award, any law, rule,
regulation or other requirement of any governmental authority or agency shall
require either the Company, any Subsidiary or any Participant (or any estate,
designated beneficiary or other legal representative thereof) to take any action
in connection with any such determination, any such shares to be issued or
distributed, any such payment, or the making of any such determination, as the
case may be, shall be deferred until such required action is taken. With
respect to persons subject to Section 16 of the Exchange Act, transactions under
the Plan are intended to comply with all applicable conditions of SEC Rule
<PAGE>
- 21 -
16b-3. To the extent any provision of the Plan or any action by the
administrators of the Plan fails to so comply with such rule, it shall be deemed
null and void, to the extent permitted by law and deemed advisable by the
Committee.
17.7 AWARD AGREEMENTS. Each Participant receiving an Award under
----------------
the Plan shall enter into an Award Agreement with the Company in a form
specified by the Committee. Each such Participant shall agree to the
restrictions, terms and conditions of the Award set forth therein and in the
Plan.
17.8 DESIGNATION OF BENEFICIARY. Each Participant to whom an Award
--------------------------
has been made under the Plan may designate a beneficiary or beneficiaries to
exercise any option or to receive any payment which under the terms of the Plan
and the relevant Award Agreement may become exercisable or payable on or after
the Participant's death. At any time, and from time to time, any such
designation may be changed or cancelled by the Participant without the consent
of any such beneficiary. Any such designation, change or cancellation must be
on a form provided for that purpose by the Committee and shall not be effective
until received by the Committee. If no beneficiary has been designated by a
deceased Participant, or if the designated beneficiaries have predeceased the
Participant, the beneficiary shall be the Participant's estate. If the
Participant designates more than one beneficiary, any payments under the Plan to
such beneficiaries shall be made in equal shares unless the Participant has
expressly designated otherwise, in which case the payments shall be made in the
shares designated by the Participant.
17.9 LEAVES OF ABSENCE/TRANSFERS. The Committee shall have the
---------------------------
power to promulgate rules and regulations and to make determinations, as it
deems appropriate, under the Plan in respect of any leave of absence from the
Company or any Subsidiary granted to a Participant. Without limiting the
generality of the foregoing, the Committee may determine whether any such leave
of absence shall be treated as if the Participant has terminated employment with
the Company or any such Subsidiary. If a Participant transfers within the
Company, or to or from any Subsidiary, such Participant shall not be deemed to
have terminated employment as a result of such transfers.
17.10 LOANS. Subject to applicable law, the Committee may provide,
-----
pursuant to Plan rules, for the Company or any Subsidiary to make loans to
Participants to finance the exercise price of any Stock Options, as well as the
withholding obligation under Section 17.1 of the Plan and/or the estimated or
actual taxes payable by the Participant as a result of the exercise of such
Stock Option and the Committee may prescribe the terms and conditions of any
such loan.
17.11 GOVERNING LAW. The Plan and all actions taken thereunder shall
-------------
be governed by and construed in accordance with the laws of the State of
Delaware, without reference to the principles of conflict of laws thereof. Any
titles and headings herein are for
<PAGE>
- 22 -
reference purposes only, and shall in no way limit, define or otherwise affect
the meaning, construction or interpretation of any provisions of the Plan.
17.12 EFFECTIVE DATE. The Plan shall be effective upon its approval
--------------
by the Board and adoption by the Company, subject to (a) the occurrence of the
Closing, and (b) the approval of the Plan by the Company's shareholders in
accordance with Sections 162(m) and 422 of the Code.
IN WITNESS WHEREOF, this Plan is adopted by the Company on this
_____ day of August, 1996.
CARSON, INC.
By: ________________________
Name:
Title:
<PAGE>
EXHIBIT 10.14
CARSON, INC.
1996 NON-EMPLOYEE DIRECTORS EQUITY INCENTIVE PROGRAM
* * * *
1. PURPOSE. The purpose of the Carson, Inc. 1996 Non-Employee
-------
Directors Equity Incentive Program (the "Program") is to promote the interests
of Carson, Inc. ("the Company") and its stockholders by strengthening the
Company's ability to attract and retain the services of experienced and
knowledgeable non-employee directors through formula and other grants of non-
qualified stock options to acquire the Company's Common Stock, par value $.01
per share. In addition, such grants will encourage the closer alignment of the
interests of such directors with those of the Company's stockholders.
2. DEFINITIONS. For purposes of the Program, the following terms shall
-----------
have the meanings set forth below:
2.1 "ANNUAL MEETING" means the annual meeting of the Company's
stockholders for any fiscal year as determined by the Company's By-Laws.
2.2 "APPLICABLE TRADING PERIOD" means the five trading days
preceding each Annual Meeting.
2.3 "AWARD AGREEMENT" means the option or restricted share
agreement executed by each of the Eligible Directors pursuant to Section 10.3 of
the Program in connection with the granting of Options or Restricted Shares
hereunder.
2.4 "BOARD" means the Board of Directors of the Company, as
constituted from time to time.
2.5 "CLOSING" means the occurrence of the closing of the initial
public offerings by the Company of the Common Stock.
2.6 "CODE" means the Internal Revenue Code of 1986, as in effect
and as amended from time to time, or any successor statute thereto, together
with any rules, regulations and interpretations promulgated thereunder or with
respect thereto.
2.7 "COMMON STOCK" means the Class A Common Stock, par value $.01
per share, of the Company or any security of the Company issued by the Company
in substitution or exchange therefor.
<PAGE>
-2-
2.8 "COMPANY" means Carson, Inc., a Delaware corporation, or any
successor corporation to Carson, Inc.
2.9 "DISABILITY" means any physical or mental disability of an
Eligible Director which is determined to be total and permanent by a physician
selected by the Company and reasonably satisfactory to such Eligible Director
(or such Eligible Director's legal representative).
2.10 "ELIGIBLE DIRECTOR" means any Non-Employee Director of the
Company who becomes a member of the Board.
2.11 "FAIR MARKET VALUE" means on, or with respect to, any given
date(s), the average of the highest and lowest per share market trading prices
for the Common Stock as reported on the consolidated transaction reporting
system for the New York Stock Exchange for such date(s), or, if the Common Stock
was not traded on such date, on the next preceding day on which the Common Stock
is traded.
2.12 "GRANT DATE" means the date of any Annual Meeting in respect of
which an Annual Grant under Section 4.3 or a Restricted Share grant is made to
an Eligible Director, and, in the case of an Initial Grant under Section 4.2,
the date on which the Closing occurs.
2.13 "INVOLUNTARY TERMINATION" means any termination of an Eligible
Director's membership on the Board other than a Voluntary Termination and a
removal from the Board for cause.
2.14 "NON-EMPLOYEE DIRECTOR" means any director of the Company who
is not, and who has not been for at least one year preceding the commencement of
his or her membership on the Board, an employee of the Company, or any parent or
subsidiary companies of the Company.
2.15 "PROGRAM" means the Carson, Inc. 1996 Non-Employee Directors
Equity Incentive Program, as set forth herein.
2.16 "OPTION(S)" means the stock option(s) to acquire shares of
Common Stock granted pursuant to the provisions of Section 4 of the Program and
the relevant Award Agreement.
2.17 "RESTRICTED SHARE(S)" means the restricted share grants
effected pursuant to Section 5 of the Program and the relevant Award Agreement.
2.18 "SEC" means the Securities and Exchange Commission, or any
successor governmental agency.
<PAGE>
-3-
2.19 "VOLUNTARY TERMINATION" means a termination of an Eligible
Director's membership on the Board due to or as a result of any such Eligible
Director's resignation from the Board (other than due to death, Disability or
Retirement) or refusal (other than due to death, Disability or Retirement) to
stand for election to the Board after having been nominated by the Board.
3. TERM OF THE PROGRAM/COMMON STOCK SUBJECT TO THE
-----------------------------------------------
PROGRAM/ADMINISTRATION.
----------------------
3.1 The Program shall continue in effect until it is terminated by
action of the Board or the Company's stockholders, but any such termination
shall not affect the terms of any then outstanding Options or Restricted Shares.
The maximum number of shares of Common Stock in respect of which Option and
Restricted Share grants may be made under the Program, subject to adjustment as
provided in Section 8.2 of the Program, shall be 400,000 shares. Such shares
shall be shares currently authorized but unissued or currently held or
subsequently acquired by the Company as treasury shares, including without
limitation, shares purchased by the Company in the open market or in private
transactions. If any Option or Restricted Share granted under the Program
expires, is forfeited or terminates for any reason, the shares of Common Stock
subject to, but not delivered under, any such Option or Restricted Share may
again become available for the grant of other Options or Restricted Shares under
the Program.
3.2 The Program shall be administered by the Board. The Board
shall have the power to interpret and construe the terms and provisions of the
Program, to determine questions that arise thereunder, to designate persons to
carry out the day-to-day ministerial administration of the Program and to adopt
and amend such rules and regulations for administering the Program as the Board
deems necessary or desirable.
4. NON-QUALIFIED STOCK OPTION GRANTS.
---------------------------------
4.1 All Options granted under the Program shall be nonstatutory
options and are not intended to qualify under Section 422 of the Code as
"incentive stock options".
4.2 An initial Option to acquire 1,500 shares of Common Stock (as
adjusted pursuant to Section 8.2 of the Program) shall be granted (an "Initial
Grant") to each Eligible Director immediately following the Closing. Each
Initial Grant Option shall be exercisable upon grant and shall expire on the
first anniversary of the Closing.
4.3 An annual Option to acquire 5,000 shares of Common Stock (as
adjusted pursuant to Section 8.2 of the Program) shall be granted (an "Annual
Grant") automatically each year, immediately following the Annual Meeting, to
each Eligible Director at such time.
<PAGE>
-4-
4.4 The per share option exercise price for an Annual Grant shall be
the average of the Fair Market Values for the Applicable Trading Period. The
per share option exercise price for an Initial Grant shall be equal to the
initial public offering price paid by the public for the Common Stock.
4.5 Upon becoming exercisable in accordance with Section 4.7 of the
Program, the exercisable portion of an Option may be exercised in whole or in
part at any time and from time to time during the Option Period (as defined in
Section 4.7 of the Program) by giving written notice, signed by the person
exercising the Option, to the Secretary of the Company stating the number of
shares of Common Stock in respect of which the Option is being exercised,
accompanied by payment in full of the aggregate option exercise price for the
shares of Common Stock to be acquired. The date both such notice and payment
are received by the office of the Secretary of the Company shall be the date of
exercise of the Option as to such number of shares of Common Stock. No Option
may be exercised at any time in respect of a fractional share.
4.6 Payment of the aggregate option exercise price may be made in
cash or by certified, cashier's or personal check. Payment may also be made in
whole or in part by the transfer to the Company of shares of Common Stock
already owned by an Eligible Director for at least six months and having a fair
market value equal to all or a portion of the option exercise price at the time
of such exercise. All payment instruments are accepted subject to collection.
4.7 Each Annual Grant Option shall become exercisable on the first
anniversary of the Closing and shall expire ten years after its Grant Date (the
"Option Period"), but shall be subject to earlier termination as follows:
4.7.1 In the event of a Voluntary Termination or a removal
from the Board for cause, the then outstanding unexercisable Annual
Grant Options of such Eligible Director shall automatically expire on
the effective date of any such termination and the then outstanding
exercisable Annual Grant Options of such Eligible Director shall
automatically expire ninety (90) days after the effective date of any
such termination.
4.7.2 In the event of an Involuntary Termination, the then
outstanding Annual Grant Options of such Eligible Director shall
become exercisable, to the full extent of the number of Option Shares
remaining covered by such Annual Grant Options, regardless of whether
such Annual Grant Options were previously exercisable, and each such
Option shall expire two (2) years after the date of any such
termination or on the expiration of the Option Period, whichever is
earlier.
4.7.3 Exercise of a deceased Eligible Director's Options that
are still exercisable shall be effected, as determined by the
Committee in its sole
<PAGE>
-5-
discretion, by (a) the estate of such Eligible Director, (b) the
person or persons whom the Eligible Director has designated in a
writing filed with the Company under Section 10.4, or (c) if no such
designation has been made, by the person or persons to whom the
Eligible Director's rights have passed by testamentary disposition or
intestate succession.
4.8 Unless otherwise provided in the Award Agreement, the right of
any Eligible Director to exercise an Option granted under the Program shall,
during the lifetime of such Eligible Director, be exercisable only by such
Eligible Director and shall not be assignable or transferable by such Eligible
Director other than by testamentary disposition or intestate succession.
4.9 Neither the Eligible Director, nor an Eligible Director's
successor or successors in interest, shall have any rights as a stockholder of
the Company with respect to any shares of Common Stock subject to an Option
granted to any such Eligible Director until the date of issuance of a stock
certificate in respect of such shares of Common Stock. Neither the Program, nor
the granting of an Option, nor any other action taken pursuant to the Program
shall constitute or be evidence of any agreement or understanding, express or
implied, that an Eligible Director has a right to continue as a director of the
Company for any period of time or at any particular rate of remuneration.
5. RESTRICTED SHARES.
-----------------
5.1 Immediately following each Annual Meeting, and subject to the
terms and conditions of this Section 5, each Eligible Director at such time
shall be granted automatically each year a number of Restricted Shares of Common
Stock equal to the quotient resulting when $25,000 is divided by the average
Fair Market Value of the Common Stock during the Applicable Trading Period.
5.2 During any restricted period, such stock shall be and remain
unvested and an Eligible Director may not sell, assign, transfer, pledge,
encumber or otherwise dispose of or hypothecate such Award. Upon satisfaction
of the vesting schedule and any other applicable restrictions, terms and
conditions, an Eligible Director shall be entitled to receive payment of the
Restricted Shares or a portion thereof, as the case may be, as provided below.
After the satisfaction and/or lapse of the applicable restrictions, terms and
conditions in respect of a grant of Restricted Shares, a new certificate,
without the legend set forth below, for the number of shares of Common Stock
which are no longer subject to such restrictions, terms and conditions shall, as
soon as practicable thereafter, be delivered to the Participant.
5.3 An Eligible Director shall have, with respect to the shares of
Common Stock underlying a grant of Restricted Shares, all of the rights of a
shareholder of such stock (except as such rights are limited or restricted under
the Program or in the relevant Award Agreement). Any stock dividends paid in
respect of unvested Restricted Shares shall be treated as additional Restricted
Shares and shall be subject to the same restrictions and other
<PAGE>
-6-
terms and conditions that apply to the unvested Restricted Shares in respect of
which such stock dividends are issued.
5.4 With respect to each Eligible Director receiving an award of
Restricted Shares, there shall be issued a stock certificate (or certificates)
in respect of such Restricted Shares. Such stock certificate(s) shall be
registered in the name of such Eligible Director, shall be accompanied by a
stock power duly executed by such Eligible Director, and shall bear, among other
required legends, the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including,
without limitation, forfeiture events) contained in the Carson, Inc.
1996 Non-Employee Directors Equity Incentive Program and an Award
Agreement entered into between the registered owner hereof and Carson,
Inc. Copies of such Program and Award Agreement are on file in the
office of the Secretary of Carson, Inc., Savannah, Georgia. Carson,
Inc. will furnish to the recordholder of the certificate, without
charge and upon written request at its principal place of business, a
copy of such Program and Award Agreement. Carson, Inc. reserves the
right to refuse to record the transfer of this certificate until all
such restrictions are satisfied, all such terms are complied with and
all such conditions are satisfied."
Such stock certificate evidencing such shares shall, in the sole discretion of
the Board, be deposited with and held in custody by the Company until the
restrictions thereon shall have lapsed and all of the terms and conditions
applicable to such grant shall have been satisfied.
5.5 Restricted Shares shall become vested in respect of the
aggregate number of underlying shares of Common Stock, determined as of the
Grant Date, according to the following schedule:
(a) one-third as of the first anniversary of the Grant Date;
(b) an additional one-third on the second anniversary of the Grant
Date; and
(c) the remaining one-third on the third anniversary of the Grant
Date.
5.6 In the event of a Voluntary Termination, the then outstanding
unvested Restricted Shares of such Eligible Director shall automatically be
forfeited on the effective date of such termination. In the event of an
Involuntary Termination, the then outstanding unvested Restricted Shares of such
Eligible Director shall become 100% vested and non-forfeitable as of the date of
any such termination.
<PAGE>
-7-
6. WITHHOLDING. The Eligible Director shall pay to the Company in
-----------
cash an amount equal to any applicable withholding taxes determined by the
Company to be required to be withheld or collected under applicable federal,
state or local laws or regulations.
7. INCOME TAX LIABILITY. All taxes, if any, in respect of any
--------------------
Option(s) and/or Restricted Shares granted hereunder to the Eligible Director
hereunder shall be the sole responsibility of and shall be paid by the Eligible
Director.
8. CHANGES IN CAPITALIZATION AND OTHER MATTERS.
-------------------------------------------
8.1 The existence of the Program, any Award Agreement and/or the
grants made hereunder shall not limit, affect or restrict in any way the right
or power of the Board or the shareholders of the Company to make or authorize
(a) any adjustment, recapitalization, reorganization or other change in the
Company's or any subsidiary's capital structure or its business, (b) any merger,
consolidation or change in the ownership of the Company or any subsidiary, (c)
any issue of bonds, debentures, capital, preferred or prior preference stocks
ahead of or affecting the Company's or any subsidiary's capital stock or the
rights thereof, (d) any dissolution or liquidation of the Company or any
subsidiary, (e) any sale or transfer of all or any part of the Company's or any
subsidiary's assets or business, or (f) any other corporate act or proceeding by
the Company or any subsidiary. An Eligible Director, any beneficiary(ies) of
any such Eligible Director and/or any other person shall not have any claim
against any member of the Board or any committee thereof, the Company or any
subsidiary, or any employees, officers or agents of the Company or any
subsidiary, as a result of any such action.
8.2 In the event of any change in capitalization affecting the
Common Stock of the Company, including, without limitation, a stock dividend or
other distribution, stock split, reverse stock split, recapitalization,
consolidation, subdivision, split-up, spin-off, split-off, combination or
exchange of shares or other form of reorganization or recapitalization, or any
other change affecting the Common Stock, proportionate adjustments shall be made
to reflect such change, including, without limitation, with respect to the
aggregate number and class of shares of the Common Stock subject to and
authorized by the Program, the number and class of shares of Common Stock in
respect of which an Option or Restricted Share may be granted to an Eligible
Director under the Program as provided in Section 4, the number and class of
shares subject to each outstanding Option or Restricted Share, and the per share
exercise price specified for each outstanding Option.
9. AMENDMENT; TERMINATION. The Board may suspend or terminate the
----------------------
Program (or any portion thereof) at any time and may amend the Program at any
time and from time to time in such respects as the Board may deem advisable. In
addition, no such amendment, suspension or termination shall be effective if it
would materially adversely effect the rights of any Eligible Director in respect
of any outstanding Option or Restricted Share, without the consent of such
Eligible Director.
<PAGE>
EXHIBIT 10.15
SUBSCRIPTION AGREEMENT
dated as of August 23, 1995
by and among
DNL SAVANNAH HOLDING CORP.
and
THE INVESTORS SET FORTH IN SCHEDULE I
with respect to shares of the
capital stock of
DNL SAVANNAH HOLDING CORP.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
<TABLE>
<CAPTION>
ARTICLE I
PURCHASE AND SALE
<S> <C>
1.01 Purchase and Sale.................................. 1
1.02 Purchase Price..................................... 1
1.03 Closing............................................ 1
<CAPTION>
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF HOLDING
<S> <C>
2.01 Corporate Existence................................ 2
2.02 Authority.......................................... 2
2.03 Capital Stock; the Shares.......................... 2
2.04 Regarding the Stock Purchase Agreement............. 3
2.05 Regarding the Credit Agreement and the Senior
Subordinated Note Agreement................... 3
2.06 Ownership of Stock of Acquisition Corp............. 3
2.07 Ownership of Stock of the Company.................. 4
2.08 Conduct of Business................................ 4
2.09 No Conflicts....................................... 4
2.10 Financial Statements............................... 4
2.11 Investment Company Act............................. 5
2.12 Further Assurances................................. 5
2.13 Dividend Payment by Wire Transfer.................. 5
2.14 Sales of Stock by Holding.......................... 5
2.15 Transactions with Affiliates....................... 6
<CAPTION>
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH INVESTOR
<S> <C>
3.01 Corporate Power.................................... 6
3.02 Authority.......................................... 6
3.03 Investment Representations and Agreement........... 7
3.04 No Conflicts....................................... 7
3.05 Source of Funds.................................... 7
<CAPTION>
ARTICLE IV
LEGENDS
<S> <C>
4.01 Legends............................................ 7
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
ARTICLE V
CONDITIONS TO OBLIGATIONS OF HOLDING
<S> <C>
5.01 Representations and Warranties..................... 8
5.02 Closing............................................ 8
<CAPTION>
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF INVESTORS
<S> <C>
6.01 Representations and Warranties..................... 8
6.02 Officers' Certificate.............................. 8
6.03 Closing............................................ 9
6.04 Opinion of Counsel................................. 9
<CAPTION>
ARTICLE VII
REGISTRATION RIGHTS
<S> <C>
7.01 Requested Registrations............................ 9
(a) Registration Requests.......................... 9
(b) Limitations on Requested Registrations......... 10
(c) Additional Conditions and Limitations
Relating to Requested Registrations............ 11
(d) Rights if Registration Request Withdrawn....... 12
(e) Registration Expenses.......................... 12
(f) Priority in Cutback Registrations.............. 12
(g) Registration Statement Form.................... 13
7.02 Piggyback Registrations............................ 13
(a) Right to Include Registrable Securities........ 13
(b) Registration Expenses.......................... 13
(c) Priority in Cutback Registrations.............. 14
7.03 Registration Procedures............................ 15
7.04 Underwritten Offerings............................. 19
(a) Underwritten Requested Offerings............... 19
(b) Underwritten Piggyback Offerings............... 20
7.05 Holdback Agreements................................ 21
(a) By the Holders of Registrable Securities....... 21
(b) By Holding and Other Securityholders........... 21
(c) Exception...................................... 22
7.06 Registration Rights Transferable................... 22
7.07 Indemnification.................................... 22
(a) Indemnification by Holding..................... 22
(b) Indemnification by the Sellers of Registrable
Securities..................................... 23
(c) Notices of Claims, etc......................... 24
(d) Contribution................................... 25
(e) Other Indemnification.......................... 26
(f) Indemnification Payments....................... 26
7.08 Covenants Relating to Rule 144..................... 26
7.09 Other Registration Rights.......................... 26
(a) No Existing Agreements......................... 26
(b) Future Agreements.............................. 27
(c) Best Registration Rights....................... 27
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VIII
ANTI-DILUTION PROTECTION/PREEMPTIVE RIGHTS
<S> <C>
8.01 Anti-Dilution Rights with respect to Common Stock
Distributions................................. 27
8.03 Article VIII Definitions........................... 31
<CAPTION>
ARTICLE IX
DEFINITIONS
<S> <C>
9.01 Definitions........................................ 32
<CAPTION>
ARTICLE X
<S> <C>
MISCELLANEOUS....................... 37
10.01 Notices........................................... 38
10.02 Entire Agreement.................................. 39
10.03 Amendment......................................... 39
10.04 Waiver............................................ 39
10.05 No Third Party Beneficiary........................ 39
10.06 Successors and Assigns............................ 39
10.07 Headings.......................................... 39
10.08 Invalid Provisions................................ 39
10.09 Remedies.......................................... 40
10.10 Governing Law..................................... 40
10.11 Counterparts...................................... 40
</TABLE>
SCHEDULES AND EXHIBITS
SCHEDULE I Investors
SCHEDULE II Certain Agreements
EXHIBIT A Officer's Certificate
EXHIBIT B Secretary's Certificate
(iii)
<PAGE>
This SUBSCRIPTION AGREEMENT, dated as of August 23, 1995, is made and
entered into by and among DNL Savannah Holding Corp., a Delaware corporation
("Holding"), and each of the purchasers set forth in Schedule I hereto (each
- ---------
such purchaser being herein referred to as an "Investor" and together the
--------
"Investors"). Capitalized terms not otherwise defined herein have the meanings
- ----------
set forth in Section 8.01.
------------
WHEREAS, Holding desires to issue and sell 104.44 newly issued shares
of the Class A Common Stock ("Class A Shares") and 73.06 newly issued shares of
--------------
the Class B Common Stock ("Class B Shares" and together with the Class A Shares,
--------------
the "Shares"), each with a par value of $.01 per share, of Holding; and
------
WHEREAS, each Investor desires to purchase the number of Class A
Shares or Class B Shares, as the case may be, set forth opposite its name in
Schedule I hereto which together will, after giving effect to the issuance of
other shares of the Common Stock of Holding to be issued on the Closing Date,
constitute 17.75% of the outstanding Common Stock of Holding, on the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, the payment of the Purchase Price to Holding in exchange for
the Shares, as contemplated by Article I, is made pursuant to one overall plan,
---------
together with other transfers to Holding by other Persons in exchange for shares
of capital stock of Holding to occur on the Closing Date, and such transfers are
intended to constitute a transaction in which, pursuant to Section 351 of the
Code, no gain or loss is recognized.
NOW, THEREFORE, in consideration of the mutual covenants and agreement
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE
1.01 Purchase and Sale. Holding agrees to issue and sell to each
-----------------
Investor, and each Investor, severally and not jointly, agrees to purchase from
Holding the number of Class A Shares or Class B Shares, as the case may be, set
forth opposite its name in Schedule I hereto.
1.02 Purchase Price. The purchase price for the Shares (the
--------------
"Purchase Price") shall be one cent ($.01) per share, payable in immediately
- ---------------
available United States funds at the Closing in the manner provided in Section
-------
1.03.
- ----
1.03 Closing. The closing (the "Closing") of the transactions
------- -------
contemplated by this Article I will take place at the offices of Milbank, Tweed,
---------
Hadley & McCloy, 1 Chase Manhattan
<PAGE>
Plaza, New York, New York 10005, or at such other place as Holding and each
Investor agree, simultaneously with the Closing, as that term is defined in the
Stock Purchase Agreement. At the Closing, (a) each Investor will pay its
portion of the Purchase Price to Holding by wire transfer of immediately
available funds to such account as Holding may reasonably direct by written
notice delivered to each Investor by Holding at least two (2) Business Days
before the Closing Date and (b) Holding shall issue and sell to Investor such
Investor's Shares, free and clear of all liens, by delivery to each Investor of
a certificate representing such Investor's Shares registered in the name of such
Investor, with requisite stock transfer tax stamps, if any, attached. The
obligations of each Investor under this Agreement shall be several and not joint
and no Investor shall be liable or responsible for the acts of any other
Investor. Such certificates representing the Shares shall bear the endorsements
provided for in Section 4.01. At the Closing, there shall also be delivered to
------------
the parties the opinion and certificates to be delivered under Articles V and
VI.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF HOLDING
A. Holding hereby represents and warrants to each Investor that:
2.01 Corporate Existence. Holding is a corporation duly
-------------------
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Holding has full power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby.
2.02 Authority. The execution and delivery by Holding of this
---------
Agreement, and the performance by Holding of its obligations hereunder, have
been duly and validly authorized by the Board of Directors of Holding, no other
corporate action on the part of Holding or its stockholders being necessary.
This Agreement has been duly and validly executed and delivered by Holding and
constitutes a legal, valid and binding obligation of Holding enforceable against
Holding in accordance with its terms. Holding has, prior to the execution of
this Agreement, furnished to Investors copies of the Restated Certificate of
Incorporation of Holding, and no changes to such Restated Certificate of
Incorporation have been made.
2.03 Capital Stock; the Shares. The authorized capital stock of
-------------------------
Holding consists exclusively of 20,000 shares of Class A Common Stock, par value
$.01 per share ("Class A Common Stock"), and 10,000 shares of Class B Common
--------------------
Stock. As of the Closing Date, giving effect to the issuance of all shares of
the Common Stock of Holding (including the Shares) to be issued on the Closing
Date, the Shares will constitute 17.75% of the outstanding Common Stock of
Holding. The delivery to each
- 2 -
<PAGE>
Investor of a certificate at the Closing representing such Investor's Shares in
the manner provided in Section 1.03 will transfer to such Investor good and
------------
valid title to such Investor's Shares, free and clear of all Liens. Upon such
delivery and upon payment for the Shares as contemplated by Section 1.03, the
------------
Shares will be validly issued, fully paid and nonassessable.
2.04 Regarding the Stock Purchase Agreement.
--------------------------------------
(a) The Stock Purchase Agreement constitutes a legal, valid and
binding obligation of Acquisition Corp., enforceable against Acquisition Corp.
in accordance with its terms.
(b) The representations and warranties made by Acquisition Corp. in
the Stock Purchase Agreement are true and correct, in all material respects, on
and as of the dates made and as of the date hereof and will be true and correct
in all material respects as of the Closing Date.
(c) To the best knowledge of Holding, the Stock Purchase Agreement
constitutes a legal, valid and binding obligation of the Sellers and the
Company, enforceable against the Sellers and the Company in accordance with its
terms.
(d) To the best knowledge of Holding, the representations and
warranties made by the Sellers and the Company in the Stock Purchase Agreement
are true and correct, in all material respects, on and as of the dates made and
as of the date hereof and will be true and correct in all material respects as
of the Closing Date. Prior to entering into the Stock Purchase Agreement,
Acquisition Corp. conducted, including by the use of outside counsel and
accountants, what it believed to be reasonable due diligence with respect to the
Company and its subsidiaries.
(e) True and complete copies of the Stock Purchase Agreement, the
Disclosure Schedule, the Purchaser Disclosure Schedule (as those terms are
defined in the Stock Purchase Agreement), and the financial statements referred
to in Section 2.14(a) of the Stock Purchase Agreement, have been furnished to
Investors prior to the execution of this Agreement.
2.05 Regarding the Credit Agreement and the Senior Subordinated Note
---------------------------------------------------------------
Agreement. The Credit Agreement and the Senior Subordinated Note Agreement
- ---------
constitute legal, valid, binding and enforceable obligations of Acquisition
Corp., enforceable against Acquisition Corp. in accordance with their respective
terms.
2.06 Ownership of Stock of Acquisition Corp. Holding owns all of the
--------------------------------------
issued and outstanding capital stock of Acquisition Corp., beneficially and of
record, free and clear of all Liens.
2.07 Ownership of Stock of the Company. After the post-closing
---------------------------------
merger referred to in Section 1.06 of the Stock
- 3 -
<PAGE>
Purchase Agreement, whereby Acquisition Corp. shall merge itself into the
Company, Holding will own all of the issued and outstanding capital stock of the
Company, beneficially and of record, free and clear of all Liens except for a
pledge thereof pursuant to the Credit Agreement.
2.08 Conduct of Business. Holding has, since its incorporation,
-------------------
conducted no business except (a) the acquisition of all of the issued and
outstanding capital stock of Acquisition Corp., (b) the transactions
contemplated by the Stock Purchase Agreement, the Credit Agreement (the "Credit
------
Agreement") dated as of August 23, 1995 between Acquisition Corp., Indosuez, as
- ---------
Agent, and the Lending Institutions listed therein, and the Note Purchase
Agreement dated as of August 23, 1995 (the "Senior Subordinated Note Agreement")
----------------------------------
between Acquisition Corp. and the Purchasers named therein, and (c) the offering
and sale of Holding's stock in transactions not involving a public offering.
2.09 No Conflicts. The execution, delivery and performance by
------------
Holding of this Agreement and the consummation of the transactions contemplated
hereby do not and will not: (a) require any consent or approval that has not
been obtained and each such consent and approval that has been obtained is in
full force and effect, (b) conflict with, result in a breach of, or constitute a
default under, any law or any regulation, rule or order of any governmental body
to which Holding is subject, the certificate of incorporation or bylaws of
Holding or any indenture or loan or credit agreement or any other agreement,
lease or instrument to which Holding is a party or by which it or its property
may be bound or affected or (e) result in, or create any Lien upon or with
respect to any of the property now owned or hereafter acquired by Holding.
B. Holding covenants and agrees with each Investor as follows
(except, as to a particular Investor, as otherwise agreed or consented to or
waived in writing by such Investor):
2.10 Financial Statements. (a) Holding will, until the occurrence
--------------------
of an IPO or the time when Holding otherwise becomes subject to the periodic
reporting requirements of the Exchange Act, furnish to each Investor as soon as
available and in any event within 90 days after the close of each fiscal year of
Holding, the consolidated balance sheets of Holding and its Subsidiaries as at
the end of such fiscal year and the related consolidated statements of income,
of shareholders' equity and of cash flows for such fiscal year, setting forth
comparative consolidated figures for the preceding fiscal year (other than in
the case of the first fiscal year of Holding when no such comparative figures
shall be required), and a report on such consolidated balance sheets and
financial statements by independent certified public accountants of recognized
national standing, which report shall not be qualified as to the scope of audit
and shall state that such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Holding and its
Subsidiaries as at the
- 4 -
<PAGE>
dates indicated and the results of their operations and their cash flows for the
periods indicated in conformity with GAAP applied on a basis consistent with
prior years (except for such changes with which the independent certified public
accountants concur) and that the examination by such accountants was conducted
in accordance with generally accepted auditing standards.
(b) Holding will, until the occurrence of an IPO or the time when
Holding otherwise becomes subject to the periodic reporting requirements of the
Exchange Act, furnish to each Investor as soon as practicable and in any event
within 45 days after the end of the first full fiscal quarter ending after the
Closing Date and each fiscal quarter thereafter, (i) the consolidated balance
sheet of Holding and its Subsidiaries as at the end of such period and (ii) the
related consolidated statements of income and cash flows of Holding in the form
customarily prepared by management, in each case for such fiscal quarter and for
the period from the beginning of the then current fiscal year to the end of such
fiscal quarter, setting forth in comparative form the same information for the
corresponding periods of the prior fiscal year together with a brief narrative
discussion and analysis prepared by management describing the Company's results
of operations for such fiscal quarter.
2.11 Investment Company Act. Holding shall not register as, or
----------------------
conduct its business or take any action that would cause it to become or be
deemed to be, an investment company as defined in the Investment Company Act of
1940, as amended.
2.12 Further Assurances. Holding shall promptly execute and deliver
------------------
all further instruments and documents, and take all further action, that the
Investors, individually or collectively, may reasonably request in order more
fully to give effect to the provisions of this Agreement.
2.13 Dividend Payment by Wire Transfer. Holding shall pay dividends
---------------------------------
payable with respect to the Shares, if any, by wire transfer of immediately
available funds to the account of the applicable Investor reasonably specified
by such Investor to Holding.
2.14 Sales of Stock by Holding. Holding and any Person acting on
-------------------------
Holding's behalf shall not sell, offer, attempt to offer or solicit an offer to
buy stock of Holding (a) except in a transaction registered or exempt from
registration under the Securities Act and (b) in any manner that would cause the
sale of the stock to the Investors pursuant to this Agreement to fail to qualify
as an exempted transaction under the Securities Act. Holding will provide to
the Investors a copy of any agreement or other evidence of the terms on which it
is selling its Common Stock to others and shall not sell stock to any Person
other than as contemplated in this Agreement, the Other Subscription Agreement
or such other terms as are disclosed to the Investors.
- 5 -
<PAGE>
2.15 Transactions with Affiliates. Holding will not, and will not
----------------------------
permit any subsidiary of Holding to, enter into any transaction or series of
transactions, whether or not in the ordinary course of business, with any holder
(excluding J.P. Morgan and Indosuez) of 5% or more of any class of equity
securities of Holding or with any Affiliate of Holding other than on terms and
conditions substantially as favorable to Holding or such subsidiary as would be
obtainable by Holding or such subsidiary at the time in a comparable arm's-
length transaction with a Person other than a holder of 5% or more of any class
of equity securities of Holding or an Affiliate of Holding; provided that the
--------
foregoing restrictions shall not apply to (i) transactions between Holding and
any of its Wholly Owned Subsidiaries (as defined in the Senior Subordinated Note
Purchase Agreement) and between Wholly Owned Subsidiaries (as so defined), (ii)
the payment of reasonable fees to Indosuez and its Affiliates for financial
services, such fees not to exceed the usual and customary fees for similar
services, (iii) transactions, including the issuance of capital stock of Holding
or any of its subsidiaries, pursuant to any pension, stock option, profit
sharing or other employee benefit plan or agreement of Holding or any of its
subsidiaries in the ordinary course of business, (iv) the Management Assistance
Agreement between Morningside Capital Group LLC and the Company (as renamed
Carson Products Company) dated as of the Closing Date, and (v) this Agreement,
the Other Subscription Agreement, the Partnership Subscription Agreement and the
Stock Purchase Agreement and the transactions contemplated thereby.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH INVESTOR
Each Investor, severally and not jointly, hereby represents and
warrants, as of the date hereof and as of the Closing Date, and (as to Section
-------
3.03) covenants to Holding that, as to itself:
- ----
3.01 Corporate Power.
---------------
(a) Each Investor has full power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby.
3.02 Authority. The execution and delivery by Investor of this
---------
Agreement, and the performance by each Investor of its obligations hereunder,
have been duly and validly authorized by all necessary corporate action, no
other action on the part of any Investor being necessary. This Agreement has
been duly and validly executed and delivered by Investor and constitutes a
legal, valid and binding obligation of Investor enforceable against Investor in
accordance with its terms.
3.03 Investment Representations and Agreement. Investor understands
----------------------------------------
that the Shares have not been registered
- 6 -
<PAGE>
under the Securities Act. Investor is acquiring the Shares for Investor's own
account, for investment and not with a view to the distribution thereof;
provided, that the disposition of each Investor's property and the property of
- --------
any accounts for which such investor is acting as fiduciary or agent shall at
all times be and remain within the control of that Investor and each Investor
may at any time and from time to time sell some or all of its Shares in its sole
discretion, subject to applicable law. Investor agrees that Investor will not,
and understands that under the Securities Act Investor may not, sell or
otherwise dispose of any of the Shares except pursuant to an effective
registration statement under the Securities Act or in a transaction exempt from
the registration requirements of the Securities Act.
3.04 No Conflicts. The execution, delivery and performance by
------------
Investor of this Agreement and the consummation of the transactions contemplated
hereby do not and will not: (a) require any consent or approval that has not
been obtained and each such consent and approval that has been obtained is in
full force and effect, (b) conflict with, result in a breach of, or constitute a
default under, any law or any regulation, rule or order of any governmental body
to which Investor is subject, the certificate of incorporation or bylaws, or
equivalent documents, of Investor or any indenture or loan or credit agreement
or any other agreement, lease or instrument to which Investor is a party or by
which it or its property may be bound or affected or (d) result in, or create
any Lien upon or with respect to any of the property now owned or hereafter
acquired by Investor.
3.05 Source of Funds. With respect to each source of funds to be
---------------
used by Investor to purchase Shares hereunder (each being referred to as "Equity
------
Source"), at least one of the statements contained in clauses (i) through (iv)
- -------
of Section 2(f) of the Senior Subordinated Note Agreement (with reference in
such clauses to "Source" being deemed to be references to Equity Source) is
accurate as of the date hereof.
ARTICLE IV
LEGENDS
4.01 Legends. Each outstanding certificate representing Shares
-------
shall, until such Shares are sold in a Public Offering or pursuant to Rule 144,
bear endorsements reading substantially as follows:
The sale, assignment, pledge, encumbrance or other transfer of the
shares represented by this certificate is subject to the provisions of
a Subscription Agreement, dated as of August 23, 1995, by and among
DNL Savannah Holding Corp., Indosuez CM II, Inc. and the other
Investors referred to therein, a copy of which is on file at the
principal executive office of DNL Savannah Holding Corp.
- 7 -
<PAGE>
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
otherwise disposed of except pursuant to an effective registration
statement under such Act or in a transaction exempt from the
registration requirements of such Act.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF HOLDING
The obligations of Holding hereunder to issue and sell the Shares are
subject to the fulfillment of each of the following conditions (all or any of
which may be waived in whole or in part by Holding in its sole discretion):
5.01 Representations and Warranties. The representations and
------------------------------
warranties made by each Investor in this Agreement shall be true and correct, in
all material respects, on and as of the Closing Date as though made on and as of
the Closing Date.
5.02 Closing. The Closing (as defined in the Stock Purchase
-------
Agreement) shall have occurred, the Initial Loans (as defined in the Credit
Agreement) shall have been made and the closing of the initial purchase of the
Notes (as defined in the Senior Subordinated Note Agreement) shall have
occurred, all simultaneously with the Closing hereunder.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF INVESTORS
The obligations of Investors hereunder to purchase the Shares are
subject to the fulfillment of each of the following conditions (all or any of
which may be waived in whole or in part by Investors in their sole discretion):
6.01 Representations and Warranties. The representations and
------------------------------
warranties made by Holding in this Agreement shall be true and correct, in all
material respects, on and as of the Closing Date as though made on and as of the
Closing Date.
6.02 Officers' Certificate. Holding shall have delivered to each
---------------------
Investor a certificate of Holding, dated the Closing Date, executed on its
behalf by the Chairman of the Board, the President or any Vice President of
Holding, substantially in the form of Exhibit A hereto, and a certificate of
---------
Holding, dated the Closing Date, executed on its behalf by the Secretary of
Holding, substantially in the form of Exhibit B hereto.
---------
6.03 Closing. The Closing (as defined in the Stock Purchase
-------
Agreement) shall have occurred, the Initial Loans (as defined in the Credit
Agreement) shall have been made and the
- 8 -
<PAGE>
closing of the initial purchase of the Notes (as defined in the Senior
Subordinated Note Agreement) shall have occurred, all simultaneously with the
Closing hereunder.
6.04 Opinion of Counsel. Each Investor shall have received the
------------------
opinion of Milbank, Tweed, Hadley & McCloy, counsel to Holding, dated the
Closing Date, substantially in the form and to the effect of Exhibit 5(j) to the
Senior Subordinated Note Agreement.
ARTICLE VII
REGISTRATION RIGHTS
7.01 Requested Registrations.
-----------------------
(a) Registration Requests. At any time (subject to Sections 7.01(b)
--------------------- ----------------
and (c)) after the earlier of (1) the time when Holding shall have effected a
- -------
Public Offering representing, together with any other Public Offerings effected
after the date hereof (with the number of shares sold in any such prior Public
Offering being appropriately adjusted for this purpose to reflect any
intervening recapitalization, stock dividend, stock split or reverse stock split
or the like as to Holding), a number of shares which, in the aggregate, is equal
to at least the lesser of five percent (5%) of the issued and outstanding shares
of Common Stock as of the time of the written request hereinafter referred to,
other than shares of Common Stock held in the treasury of Holding, and twenty
percent (20%) of the total shares of Common Stock originally issued and sold
under this Agreement and the Other Subscription Agreement (an "IPO"), and (2)
---
the fifth anniversary of the date of this Agreement, upon the written request of
one or more Initiating Holders requesting that Holding effect the registration
under the Securities Act of all or part of such Initiating Holders' Registrable
Securities and specifying the number of Registrable Securities to be registered
and the intended method of disposition thereof, Holding will promptly, and in no
event more than ten (10) Business Days after receipt of such request, give
written notice (a "Notice of Requested Registration") of such request to all
--------------------------------
other holders of Registrable Securities, and thereupon will use its best efforts
to effect the registration under the Securities Act of
(i) the Registrable Securities which Holding has been so requested to
register by such Initiating Holder or Holders, and
(ii) all other Registrable Securities the holders of which have made
written requests to Holding for registration thereof within 10 days after
the giving of the Notice of Requested Registration (which requests shall
specify the intended method of disposition thereof),
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof) of the Registrable
- 9 -
<PAGE>
Securities so to be registered. If requested by the holders of a majority of
the Registrable Securities requested to be included in any Requested
Registration, the method of disposition of all Registrable Securities included
in such registration shall be an underwritten offering effected in accordance
with Section 7.04(a). Subject to Section 7.01(f), Holding may include in such
--------------- ---------------
registration other securities of the same class as the Registrable Securities
for sale for its own account or for the account of any other Person. Neither
Holding nor any of its securityholders shall have the right to include any
securities of Holding (other than Registrable Securities) in a registration
statement to be filed as part of a Requested Registration unless (i) such
securities are of the same class as the Registrable Securities, and (ii) if such
Requested Registration is an underwritten offering, Holding or such
securityholders, as applicable, agree in writing to sell, subject to Section
-------
7.01(f), their securities on the same terms and conditions as apply to the
- -------
Registrable Securities being sold. If any securityholders of Holding (other
than the holders of Registrable Securities in such capacity) register securities
of Holding in a Requested Registration in accordance with this Section 7.01,
------------
such holders shall pay the fees and expenses of their counsel and their pro rata
--- ----
share, on the basis of the respective amounts of the securities included in such
registration on behalf of each such holder, of the Registration Expenses if the
Registration Expenses for such registration are not payable by Holding pursuant
hereto.
(b) Limitations on Requested Registrations. Notwithstanding anything
--------------------------------------
herein to the contrary, Holding shall not be required to honor a request for a
Requested Registration if:
(i) the Registrable Securities requested by Initiating Holders
to be so registered do not constitute at least twenty
percent (20%) of the aggregate number of shares of Common
Stock originally issued and sold under this Agreement and
the Other Subscription Agreement (adjusted proportionately
to reflect any recapitalization, stock dividend,
subdivision, stock split or reverse stock split or the like
effected with respect to the Common Stock);
(ii) such request is received from any Requesting Holder with
respect to Registrable Securities that may immediately be
sold under Rule 144 in full during any ninety (90) day
period; or
(iii) the intended method of distribution requested is an
initial underwritten Public Offering, and Holding is unable
to enter into a firm commitment underwriting agreement with
respect to such Public Offering unless the Initiating
Holders consent to such
- 10 -
<PAGE>
registration being other than pursuant to an underwritten
Public Offering.
For purposes of determining whether holders have joined in a request pursuant to
this Section 7.01, each holder of Registrable Securities shall be entitled to
------------
one vote for each share of Common Stock constituting Registrable Securities then
outstanding.
(c) Additional Conditions and Limitations Relating to Requested
-----------------------------------------------------------
Registrations. The registration rights granted by Section 7.01(a) are subject
- ------------- ---------------
to the following additional conditions and limitations:
(i) Notwithstanding the receipt of a request for a registration
under Section 7.01(a), Holding shall always have the right
---------------
to initiate a primary offering of its securities at any
time. If Holding elects to do so, it may either (A)
postpone the filing of a Registration Statement in response
to such request for up to ninety (90) calendar days after
receipt of such request for registration, or (B) include the
securities subject to the request in such Registration
Statement as a registration pursuant to Section 7.02, while
------------
providing each holder of Registrable Securities the
opportunity to withdraw such Registrable Securities from the
offering;
(ii) Notwithstanding anything to the contrary contained herein,
no request may be made under Section 7.01(a) within ninety
---------------
(90) days after the effective date of a registration
statement filed by Holding covering an underwritten public
offering or within one hundred eighty (180) days after the
effective date of any previous registration statement filed
in connection with a Requested Registration; and
(iii) Notwithstanding the provisions of this Section 7.01,
------------
Holding's obligation to file a Registration Statement, or
cause such Registration Statement to become and remain
effective, shall be suspended for a period not to exceed
ninety (90) calendar days in any 12-month period if, in the
good faith opinion of Holding's Board of Directors, filing
such Registration Statement or causing it to become or
remain effective would adversely affect a material
financing, acquisition, disposition of assets or stock,
merger or other comparable transaction or would require
Holding to make public
- 11 -
<PAGE>
disclosure of information the public disclosure of which
would have a material adverse effect upon Holding.
(d) Rights if Registration Request Withdrawn. In the event the
----------------------------------------
request for a registration made pursuant to Section 7.01(a) is withdrawn in
---------------
accordance with this Agreement, Requesting Holders shall be entitled to make a
subsequent request under Section 7.01(a).
---------------
(e) Registration Expenses. All Registration Expenses incurred in
---------------------
connection with Requested Registrations pursuant to this Section 7.01 shall be
------------
paid by Holding.
(f) Priority in Cutback Registrations. If a Requested Registration
---------------------------------
becomes a Cutback Registration, Holding will include in any such registration to
the extent of the number which the Managing Underwriter advises Holding can be
sold in such offering (the "Underwriters Maximum Number"), first, the
--------------------------- -----
Registrable Securities requested to be included in such registration by the
Initiating Holders, or if all such Registrable Securities exceed the
Underwriters Maximum Number, allocated pro rata among the Initiating Holders on
--- ----
the basis of the number of Registrable Securities requested to be included
therein by each such holder, and, to the extent the Underwriters Maximum Number
is not fully allotted to the Initiating Holders, second, any Registrable
------
Securities requested to be included by holders thereof other than the Initiating
Holders, and third, any equity securities requested to be included in such
-----
registration by Holding and any other holders of such securities, allocated as
determined by Holding subject to any agreements between Holding and any such
holders. If the Initiating Holders are unable to register at least the lesser
of (A) 50% of the number of Registrable Securities then held by them, or (B) 80%
of the Registrable Securities which they have requested to be registered, then
such registration shall not count as a Requested Registration for the purposes
of this Section 7.01, and the Requesting Holders will be entitled to request the
------------
registration of their Registrable Securities on an additional occasion.
(g) Registration Statement Form. Requested Registrations shall be on
---------------------------
such appropriate registration form promulgated by the Commission as shall be
selected by Holding, and shall be reasonably acceptable to the holders of a
majority of the Registrable Securities to which such registration relates, and
shall permit the disposition of such Registrable Securities in accordance with
the intended method or methods specified in their request for such registration.
7.02 Piggyback Registrations.
-----------------------
(a) Right to Include Registrable Securities. Notwithstanding any
---------------------------------------
limitation contained in Section 7.01, if Holding at any time proposes after the
------------
date hereof to effect a Piggyback Registration, including in accordance with
- 12 -
<PAGE>
Section 7.01(c)(i), it will each such time give written notice (a "Notice of
- ------------------ ---------
Piggyback Registration") at least 20 days prior to the anticipated filing date,
- ----------------------
to all holders of Registrable Securities of its intention to do so and of such
holders' rights under this Section 7.02, which Notice of Piggyback Registration
------------
shall include a description of the intended method of disposition of such
securities. Upon the written request of any such holder made within 10 days
after receipt of a Notice of Piggyback Registration (which request shall specify
the Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), Holding will use its best efforts to
include in the registration statement relating to such Piggyback Registration
all Registrable Securities which Holding has been so requested to register.
Notwithstanding the foregoing, if, at any time after giving a Notice of
Piggyback Registration and prior to the effective date of the registration
statement filed in connection with such registration, Holding shall determine
for any reason not to register or to delay registration of such securities,
Holding may, at its election, give written notice of such determination to each
holder of Registrable Securities and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not from
its obligation to pay the Registration Expenses in connection therewith) without
prejudice, however, to the rights of any Requesting Holder entitled to do so to
request that such registration be effected as a Requested Registration under
Section 7.01, and (ii) in the case of a determination to delay registering,
- ------------
shall be permitted to delay registering any Registrable Securities for the same
period as the delay in registering such other securities. No registration
effected under this Section 7.02 shall relieve Holding of its obligations to
------------
effect a Requested Registration under Section 7.01.
------------
(b) Registration Expenses. All Registration Expenses incurred in
---------------------
connection with Piggyback Registrations pursuant to this Section 7.02 shall be
------------
paid by Holding.
(c) Priority in Cutback Registrations. If a Piggyback Registration
---------------------------------
becomes a Cutback Registration, Holding will include in such registration to the
extent of the amount of the securities which the Managing Underwriter advises
Holding can be sold in such offering:
(i) if such registration as initially proposed by Holding was solely a
primary registration of its securities, (x) first, the securities proposed
-----
by Holding to be sold for its own account, and (y) second, any Registrable
------
Securities requested to be included in such registration by Requesting
Holders, any DNL Requested Securities (together with such Registrable
Securities, the "DNL/Investor Securities")and any other securities of
-----------------------
Holding proposed to be included in such registration (1) as between the
DNL/Investor Securities and such other securities, pro rata on the basis of
--- ----
the
- 13 -
<PAGE>
numbers of the DNL/Investor Securities and such other securities,
respectively, (2) as between such Registrable Securities and any DNL
Requested Securities, pro rata on the basis of (A) in the case of
--- ----
Registrable Securities, the sum of the number of Registrable Securities
requested to be included by such holders and 49.02% of the DNL Requested
Securities and (B) in the case of DNL Requested Securities, 50.98% of the
DNL Requested Securities, (3) as among such Registrable Securities, pro
---
rata on the basis of the number of Registrable Securities requested to be
----
included by such holders and (4) as among such other securities, allocated
among the holders thereof in accordance with the priorities then existing
among Holding and such holders; and
(ii) if such registration as initially proposed by Holding was in
whole or in part requested by holders of securities of Holding, other than
holders of Registrable Securities in their capacities as such, pursuant to
demand registration rights, (x) first, such securities held by the holders
-----
initiating such registration and, if applicable, any securities proposed by
Holding to be sold for its own account, allocated in accordance with the
priorities then existing among Holding and such holders, and (y) second,
------
any Registrable Securities requested to be included in such registration by
Requesting Holders and any other securities of Holding proposed to be
included in such registration (1) as between such Registrable Securities
and such other securities, pro rata on the basis of the numbers of such
--- ----
Registrable Securities and such other securities, respectively, (2) as
among such Registrable Securities, pro rata on the basis of the number of
--- ----
Registrable Securities requested to be included by such holders and (3) as
among such other securities, allocated among the holders thereof in
accordance with the priorities then existing among Holding and the holders
of such other securities;
and any securities so excluded shall be withdrawn from and shall not be included
in such Piggyback Registration.
7.03 Registration Procedures. If and whenever Holding is required to
-----------------------
use its best efforts to effect the registration of any Registrable Securities
under the Securities Act pursuant to Section 7.01 or Section 7.02, Holding will
------------ ------------
use its best efforts to effect the registration and sale of such Registrable
Securities in accordance with the intended methods of disposition thereof
specified by the Requesting Holders. Without limiting the foregoing, Holding in
each such case will, as expeditiously as possible:
(a) prepare and file with the Commission (as promptly as practicable
after Holding's receipt of the request therefor from the Requesting
Holders) the requisite registration statement to effect such registration
and use its best efforts to cause such registration statement to become
effective, provided that as far in advance as
--------
- 14 -
<PAGE>
practical before filing such registration statement or any amendment
thereto, Holding will furnish to the Requesting Holders copies of
reasonably complete drafts of all such documents proposed to be filed
(including exhibits), and any such holder shall have the opportunity to
object to any information pertaining solely to such holder that is
contained therein and Holding will make the corrections reasonably
requested by such holder with respect to such information prior to filing
any such registration statement or amendment;
(b) prepare and file with the Commission such amendments and supplements
to such registration statement and any prospectus used in connection
therewith as may be necessary to maintain the effectiveness of such
registration statement and to comply with the provisions of the Securities
Act with respect to the disposition of all Registrable Securities covered
by such registration statement, in accordance with the intended methods of
disposition thereof, until the earlier of (i) such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement and (ii) 180 days after such registration statement becomes
effective; provided, however, that such 180 day period shall be extended
-------- -------
for a period of time equal to the period the holder during such 180 day
period refrains from selling any securities included in such registration
in accordance with the provisions of Section 7.05;
------------
(c) promptly notify each Requesting Holder and the underwriter or
underwriters, if any:
(i) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has been
filed and, with respect to such registration statement or any post-
effective amendment thereto, when the same has become effective;
(ii) of any written comments from the Commission with respect to
any filing referred to in clause (i) and of any written request by the
Commission for amendments or supplements to such registration
statement or prospectus;
(iii) of the notification to Holding by the Commission of its
initiation of any proceeding with respect to the issuance by the
Commission of, or of the issuance by the Commission of, any stop order
suspending the effectiveness of such registration statement; and
(iv) of the receipt by Holding of any notification with respect
to the suspension of the qualification of
- 15 -
<PAGE>
any Registrable Securities for sale under the applicable securities or
blue sky laws of any jurisdiction;
(d) furnish to each seller of Registrable Securities covered by such
registration statement such number of conformed copies of such registration
statement and of each amendment and supplement thereto (in each case
including all exhibits and documents incorporated by reference), such
number of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any
other prospectus filed under Rule 424 promulgated under the Securities Act
relating to such holder's Registrable Securities, and such other documents,
as such seller may reasonably request to facilitate the disposition of its
Registrable Securities;
(e) use its best efforts to register or qualify all Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each holder thereof
shall reasonably request, to keep such registration or qualification in
effect for so long as such registration statement remains in effect, and
take any other action which may be reasonably necessary or advisable to
enable such holder to consummate the disposition in such jurisdictions of
the Registrable Securities owned by such holder, except that Holding shall
not for any such purpose be required (i) to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not
but for the requirements of this paragraph (e) be obligated to be so
-------------
qualified, (ii) to subject itself to taxation in any such jurisdiction or
(iii) to consent to general service of process in any jurisdiction;
(f) use its best efforts to cause all Registrable Securities covered by
such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable each
holder thereof to consummate the disposition of such Registrable
Securities;
(g) furnish to each Requesting Holder a signed counterpart, addressed to
such holder (and the underwriters, if any), of
(i) an opinion of counsel for Holding, dated the effective date of
such registration statement (or, if such registration includes an
underwritten Public Offering, dated the date of any closing under the
underwriting agreement), reasonably satisfactory in form and substance
to such holder, and
- 16 -
<PAGE>
(ii) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten Public Offering, dated the date of any closing under the
underwriting agreement), signed by the independent public accountants
who have certified Holding's financial statements included in such
registration statement,
in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the
case of the accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten Public Offerings of securities and, in the
case of the accountants' letter, such other financial matters, as such
holder (or the underwriters, if any) may reasonably request;
(h) notify each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event as a result of which any prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and at the request of any such
holder promptly prepare and furnish to such holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(i) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, but not more than
eighteen (18) months, beginning with the first full calendar month after
the effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 promulgated thereunder;
(j) make available for inspection by any Requesting Holder, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or any such underwriter (collectively, the "Inspectors"), all
----------
- 17 -
<PAGE>
financial and other records, pertinent corporate documents and properties
of Holding (collectively, the "Records") as shall be reasonably necessary
-------
to enable them to exercise their due diligence responsibility, and cause
Holding's officers, directors and employees to supply all information
reasonably requested by any such Inspector in connection with such
registration statement, and permit the Inspectors to participate in the
preparation of such registration statement and any prospectus contained
therein and any amendment or supplement thereto to the extent they
reasonably request. Records which Holding determines, in good faith, to be
confidential and which it notifies the Inspectors are confidential shall
not be disclosed by the Inspectors unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in the
registration statement, (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction or (iii) the information in such Records has been made
generally available to the public. The seller of Registrable Securities
agrees by acquisition of such Registrable Securities that it will, upon
learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to Holding and allow Holding, at Holding's
expense, to undertake appropriate action to prevent disclosure of the
Records deemed confidential;
(k) provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement; and
(l) use its best efforts to cause all Registrable Securities covered by
such registration statement to be listed, upon official notice of issuance,
on any securities exchange or system on which any of the securities of the
same class as the Registrable Securities are then listed or traded, or if
the same class of securities is not then listed, to use its best efforts to
effect a listing on a national securities exchange or system.
Holding may require each holder of Registrable Securities as to which
any registration is being effected to, and each such holder, as a condition to
including Registrable Securities in such registration, shall, furnish Holding
with such information and affidavits regarding such holder and the distribution
of such securities as Holding may from time to time reasonably request in
writing in connection with such registration.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from Holding of the
happening of any event of the kind described in paragraph (h), such holder will
-------------
forthwith discontinue such holder's disposition of Registrable Securities
- 18 -
<PAGE>
pursuant to the registration statement relating to such Registrable Securities
until such holder's receipt of the copies of the supplemented or amended
prospectus contemplated by paragraph (h) and, if so directed by Holding, will
-------------
deliver to Holding (at Holding's expense) all copies, other than permanent file
copies, then in such holder's possession of the prospectus relating to such
Registrable Securities current at the time of receipt of such notice. In the
event Holding shall give any such notice, the period referred to in paragraph
---------
(b) shall be extended by a number of days equal to the number of days during the
- ---
period from and including the giving of notice pursuant to paragraph (h) and to
-------------
and including the date when each holder of any Registrable Securities shall
receive the copies of the supplemented or amended prospectus contemplated by
paragraph (h).
- -------------
7.04 Underwritten Offerings.
----------------------
(a) Underwritten Requested Offerings. In the case of any
--------------------------------
underwritten Public Offering being effected pursuant to a Requested
Registration, the Managing Underwriter and any other underwriter or underwriters
with respect to such offering shall be selected, after consultation with
Holding, by the holders of a majority of the Registrable Securities to be
included in such underwritten offering with the consent of Holding, which
consent shall not be unreasonably withheld. Holding shall enter into an
underwriting agreement in customary form with such underwriter or underwriters,
which shall include, among other provisions, indemnities to the effect and to
the extent provided in Section 7.07. Subject to the following sentence, holders
------------
of Registrable Securities to be distributed by such underwriters shall be
parties to such underwriting agreement and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, Holding to and for the benefit of such underwriters also be made to
and for their benefit and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement also be
conditions precedent to their obligations. No holder of Registrable Securities
shall be required to make any representations or warranties to or agreements
with Holding or the underwriters other than representations, warranties or
agreements regarding such holder and its ownership of the securities being
registered on its behalf and such holder's intended method of distribution and
any other representation required by law. Subject to the preceding sentence, no
Requesting Holder may participate in such underwritten offering unless such
holder agrees to sell its Registrable Securities on the basis provided in such
underwriting agreement and completes and executes all questionnaires, powers of
attorney, indemnities and other documents reasonably required under the terms of
such underwriting agreement. If any Requesting Holder disapproves of the terms
of an underwriting, such holder may elect to withdraw therefrom and from such
registration by notice to Holding and the Managing Underwriter, and each of the
remaining Requesting Holders shall be entitled to increase the number of
Registrable Securities being registered to the extent of the Registrable
- 19 -
<PAGE>
Securities so withdrawn in the proportion which the number of Registrable
Securities being registered by such remaining Requesting Holder bears to the
total number of Registrable Securities being registered by all such remaining
Requesting Holders.
(b) Underwritten Piggyback Offerings. If Holding at any time
--------------------------------
proposes to register any of its securities in a Piggyback Registration and such
securities are to be distributed by or through one or more underwriters, Holding
will, subject to the provisions of Section 7.02(c), use its best efforts, if
---------------
requested by any holder of Registrable Securities, to arrange for such
underwriters to include the Registrable Securities to be offered and sold by
Requesting Holders among the securities to be distributed by such underwriters,
and such holders shall be obligated to sell their Registrable Securities in such
Piggyback Registration through such underwriters on the same terms and
conditions as apply to the other securities of Holding to be sold by such
underwriters in connection with such Piggyback Registration. Subject to the
following sentence, the holders of Registrable Securities to be distributed by
such underwriters shall be parties to the underwriting agreement between Holding
and such underwriter or underwriters and may, at their option, require that any
or all of the representations and warranties by, and the other agreements on the
part of, Holding to and for the benefit of such underwriters also be made to and
for their benefit and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement also be
conditions precedent to their obligations. No holder of Registrable Securities
shall be required to make any representations or warranties to or agreements
with Holding or the underwriters other than representations, warranties or
agreements regarding such holder and its ownership of the securities being
registered on its behalf and such holder's intended method of distribution and
any other representation required by law. Subject to the preceding sentence, no
Requesting Holders may participate in such underwritten offering unless such
holder agrees to sell its Registrable Securities on the basis provided in such
underwriting agreement and completes and executes all questionnaires, powers of
attorney, indemnities and other documents reasonably required under the terms of
such underwriting agreement. If any Requesting Holder disapproves of the terms
of an underwriting, such holder may elect to withdraw therefrom and from such
registration by notice to Holding and the Managing Underwriter, and each of the
remaining Requesting Holders shall be entitled to increase the number of
Registrable Securities being registered to the extent of the Registrable
Securities so withdrawn in the proportion which the number of Registrable
Securities being registered by such remaining Requesting Holder bears to the
total number of Registrable Securities being registered by all such remaining
Requesting Holders.
7.05 Holdback Agreements.
-------------------
- 20 -
<PAGE>
(a) By the Holders of Registrable Securities. Unless the Managing
----------------------------------------
Underwriter (or, in the case of a non-underwritten Public Offering, Holding)
otherwise agrees, each holder of Registrable Securities, by acquisition of such
Registrable Securities, agrees not to effect any public sale or distribution
(including a sale under Rule 144, Rule 144A or Regulation S) of such securities
during the 10 days prior to and the 90 days after the effective date of any
registration statement filed by Holding in connection with a primary offering
of Common Stock on behalf of Holding (or for such shorter period of time as is
sufficient and appropriate, in the opinion of the Managing Underwriter (or, in
the case of a non-underwritten Public Offering, Holding), in order to complete
the sale and distribution of the securities included in such registration),
except as part of such registration statement, whether or not such holder
participates in such registration, provided, however, that all holders of Common
-------- -------
Stock of Holding enter into agreements with Holding having terms substantially
similar to this Section 7.05(a).
---------------
(b) By Holding and Other Securityholders. Unless the Managing
------------------------------------
Underwriter otherwise agrees, Holding agrees (x) not to effect any public sale
or distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the 10 days prior to and
the 90 days after the effective date of the registration statement filed in
connection with an underwritten offering made pursuant to a Requested
Registration (or for such shorter period of time as is sufficient and
appropriate, in the opinion of the Managing Underwriter, in order to complete
the sale and distribution of the securities included in such registration),
except as part of such underwritten registration and except pursuant to
registrations on Form S-4 or Form S-8 promulgated by the Commission or any
successor or similar forms thereto, and (y) to cause each holder of its equity
securities, or of any securities convertible into or exchangeable or exercisable
for such securities, in each case purchased from Holding at any time after the
date of this Agreement (other than in a Public Offering), to agree, to the
extent permitted by law, not to effect any such public sale or distribution of
such securities (including a sale under Rule 144, Rule 144A or Regulation S),
during such period, except as part of such underwritten registration.
(c) Exception. The foregoing provisions of this Section 7.05 shall
--------- ------------
not apply to any holder of securities of Holding to the extent such holder is
prohibited by applicable law from agreeing to withhold from sale.
7.06 Registration Rights Transferable. The rights granted by this
--------------------------------
Agreement are transferable and shall inure to the benefit of the Investors (or
the investor or investors for which the Investors are acting as fiduciary or
agent, as the case may be) and all subsequent holders of the Shares from time to
time, subject in all events to the last sentence of the definition of
"Registrable Securities" in Section 8.01.
------------
- 21 -
<PAGE>
7.07 Indemnification.
---------------
(a) Indemnification by Holding. Holding shall, to the full extent
--------------------------
permitted by law, indemnify and hold harmless each seller of Registrable
Securities included in any registration statement filed in connection with a
Requested Registration or a Piggyback Registration, its directors and officers,
and each other Person, if any, who controls any such seller within the meaning
of the Securities Act, against any Losses, claims, damages, expenses or
liabilities, joint or several (together, "Losses"), to which such seller or any
------
such director or officer or controlling Person may become subject under the
Securities Act or otherwise, insofar as such Losses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of a prospectus, in the light of the circumstances under
which they were made) not misleading, or any violation (or alleged violation) by
Holding of any provision of the Securities Act, or any rule or regulation
promulgated under the Securities Act, applicable to Holding in connection with
any such registration, qualification or compliance, and Holding will reimburse
such seller and each such director, officer and controlling Person for any legal
or any other expenses reasonably incurred by them in connection with
investigating or defending any such Loss (or action or proceeding in respect
thereof); provided that Holding shall not be liable in any such case to the
--------
extent that any such Loss (or action or proceeding in respect thereof) arises
out of or is based upon (x) an untrue statement or alleged untrue statement or
omission or alleged omission made in any such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information as to the
matters referred to in the fourth sentence of Section 7.04(a) or the third
---------------
sentence of Section 7.04(b), furnished to Holding through an instrument duly
---------------
executed by such seller specifically stating that it is for use in the
preparation thereof or (y) such seller's failure to send or give a copy of the
final prospectus to the Persons asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such seller or any such director, officer or controlling Person,
and shall survive the transfer of such securities by such seller. Holding shall
also indemnify each other Person who participates (including as an underwriter)
in the offering or sale of Registrable Securities, their officers and directors
and each other Person, if any, who controls any such participating Person
- 22 -
<PAGE>
within the meaning of the Securities Act to the same extent as provided above
with respect to sellers of Registrable Securities.
(b) Indemnification by the Sellers of Registrable Securities. Each
--------------------------------------------------------
holder of Registrable Securities which are included or are to be included in any
registration statement filed in connection with a Requested Registration or a
Piggyback Registration, as a condition to including Registrable Securities in
such registration statement, shall, to the full extent permitted by law,
indemnify and hold harmless Holding, its directors and officers, and each other
Person, if any, who controls Holding within the meaning of the Securities Act,
against any Losses to which Holding or any such director or officer or
controlling Person may become subject under the Securities Act or otherwise,
insofar as such Losses (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made) not
misleading, if such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information as to the matters referred to in the fourth sentence of Section
-------
7.04(a) or the third sentence of Section 7.04(b), furnished to Holding through
- ------- ---------------
an instrument duly executed by such seller specifically stating that it is for
use in the preparation of such registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement; provided, that
--------
the liability of a holder for indemnity under this Section 7.07(b) shall not
---------------
exceed the gross proceeds from the offering received by such holder. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of Holding or any such director, officer or controlling
Person and shall survive the transfer of such securities by such seller. Such
holders shall also indemnify each other Person who participates (including as an
underwriter) in the offering or sale of Registrable Securities, their officers
and directors and each other Person, if any, who controls any such participating
Person within the meaning of the Securities Act to the same extent as provided
above with respect to Holding.
(c) Notices of Claims, etc. Promptly after receipt by an Indemnified
-----------------------
Party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding paragraph (a) or (b) of this Section 7.07,
-------------------- ------------
such Indemnified Party will, if a claim in respect thereof is to be made against
an Indemnifying Party pursuant to such paragraphs, give written notice to the
latter of the commencement of such action, provided that the failure of any
--------
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its
- 23 -
<PAGE>
obligations under the preceding paragraphs of this Section 7.07, except to the
------------
extent that the Indemnifying Party is actually prejudiced by such failure to
give notice. In case any such action is brought against an Indemnified Party,
the Indemnifying Party shall be entitled to participate in and to assume the
defense thereof, jointly with any other Indemnifying Party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
Indemnified Party, and after notice from the Indemnifying Party to such
Indemnified Party of its election so to assume the defense thereof, the
Indemnifying Party shall not be liable to such Indemnified Party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation; provided that the
--------
Indemnified Party may participate in such defense at the Indemnified Party's
expense; and provided further that the Indemnified Party or Indemnified Parties
-------- -------
shall have the right to employ one counsel to represent it or them if, in the
reasonable judgment of the Indemnified Party or Indemnified Parties, it is
advisable for it or them to be represented by separate counsel by reason of
having legal defenses which are different from or in addition to those available
to the Indemnifying Party, and in that event the reasonable fees and expenses of
such one counsel shall be paid by the Indemnifying Party. If the Indemnifying
Party is not entitled to, or elects not to, assume the defense of a claim, it
will not be obligated to pay the fees and expenses of more than one counsel for
the Indemnified Parties with respect to such claim, unless in the reasonable
judgment of any Indemnified Party a conflict of interest may exist between such
Indemnified Party and any other Indemnified Parties with respect to such claim,
in which event the Indemnifying Party shall be obligated to pay the fees and
expenses of such additional counsel for the Indemnified Parties or counsels. No
Indemnifying Party shall consent to entry of any judgment or enter into any
settlement without the consent of the Indemnified Party which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. No Indemnifying Party shall be subject to any liability for any
settlement made without its consent, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing sentence, if at any time an Indemnified
Party or any person who controls an Indemnified Party shall have requested an
Indemnifying Party to reimburse an Indemnified Party or such control person for
reasonable fees and expenses actually incurred by counsel for which such
Indemnified Party or person is entitled to be so reimbursed pursuant to this
Agreement, the Indemnifying Party agrees that it shall be liable for any
settlement of any proceeding affected without its consent if (i) such settlement
is entered into more than 60 days after receipt by such Indemnifying Party of
the aforesaid request and (ii) such Indemnifying Party shall not have reimbursed
the Indemnified Party or such control person in accordance with such request
prior to the date of such settlement; provided, however, that the Indemnifying
-------- -------
Party shall not be liable for any settlement effected without its consent
pursuant to this sentence if the Indemnifying Party is
- 24 -
<PAGE>
contesting, in good faith, the request for reimbursement and shall have
reimbursed all amounts not so contested.
(d) Contribution. If the indemnity and reimbursement obligation
------------
provided for in any paragraph of this Section 7.07 is unavailable or
------------
insufficient to hold harmless an Indemnified Party in respect of any Losses (or
actions or proceedings in respect thereof) referred to therein, then the
Indemnifying Party shall contribute to the amount paid or payable by the
Indemnified Party as a result of such Losses (or actions or proceedings in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party on the one hand and the Indemnified Party on the
other hand in connection with statements or omissions which resulted in such
Losses, as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Indemnifying Party or the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The parties hereto agree that it would not be
just and equitable if contributions pursuant to this paragraph were to be
determined by pro rata allocation or by any other method of allocation which
--- ----
does not take account of the equitable considerations referred to in the first
sentence of this paragraph. The amount paid by an Indemnified Party as a result
of the Losses referred to in the first sentence of this paragraph shall be
deemed to include any legal and other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any Loss which
is the subject of this paragraph.
No Indemnified Party guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from the Indemnifying Party if the Indemnifying Party was not
guilty of such fraudulent misrepresentation.
(e) Other Indemnification. Indemnification similar to that specified
---------------------
in the preceding paragraphs of this Section 7.07 (with appropriate
------------
modifications) shall be given by Holding and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation of any governmental
authority other than the Securities Act. The provisions of this Section 7.07
------------
shall be in addition to any other rights to indemnification or contribution
which an Indemnified Party may have pursuant to law, equity, contract or
otherwise.
(f) Indemnification Payments. The indemnification required by this
------------------------
Section 7.07 shall be made by periodic payments of the amount thereof during the
- ------------
course of the investigation or defense, as and when bills are received or Losses
are incurred.
- 25 -
<PAGE>
7.08 Covenants Relating to Rule 144. If at any time Holding is
------------------------------
required to file reports in compliance with either Section 13 or Section 15(d)
of the Exchange Act, Holding will file reports in compliance with the Exchange
Act, and will, at its expense, forthwith upon the request of any holder of
Registrable Securities, deliver to such holder a certificate, signed by
Holding's principal financial officer, stating (a) Holding's name, address and
telephone number (including area code), (b) Holding's Internal Revenue Service
identification number, (c) Holding's Commission file number, (d) the number of
shares of each class of capital stock outstanding as shown by the most recent
report or statement published by Holding, and (e) whether Holding has filed the
reports required to be filed under the Exchange Act for a period of at least
ninety (90) days prior to the date of such certificate and in addition has filed
the most recent annual report required to be filed thereunder.
7.09 Other Registration Rights.
-------------------------
(a) No Existing Agreements. Holding represents and warrants to the
----------------------
holders of Registrable Securities that there is not in effect on the date hereof
any agreement by Holding pursuant to which any holders of securities of Holding
have a right to cause Holding to register or qualify such securities under the
Securities Act or any securities or blue sky laws of any jurisdiction other than
as set forth in Schedule II hereto. None of such agreements conflicts or is
inconsistent with any provision of this Agreement.
(b) Future Agreements. Holding shall not hereafter agree with the
-----------------
holders of any securities issued or to be issued by Holding to register or
qualify such securities under the Securities Act or any securities or blue sky
laws of any jurisdiction unless such agreement specifically provides that (i)
such holder of such securities may not participate in any Requested Registration
except as provided in Section 7.01; and (ii) the holder of such securities may
------------
not participate in any Piggyback Registration except as provided in Section
-------
7.02, and (iii) the Investors may participate in any registration initiated by
such holders on terms consistent with Section 7.02(c)(ii).
-------------------
(c) Best Registration Rights. If Holding grants to any Person other
------------------------
than a holder of Registrable Securities (an "Other Holder") with respect to any
------------
security issued by Holding registration rights that provide for terms that,
taken as a whole, are materially more favorable to the Other Holder than the
terms granted to the holders of the Registrable Securities (or if Holding amends
or waives any provision of any agreement providing registration rights to an
Other Holder or takes any other action whatsoever to provide for terms with
respect to registration rights that in either case results in the terms with
respect to registration rights of an Other Holder, taken as a whole, being
materially more favorable to such Other Holder than the terms provided to the
holders of Registrable Securities), then Holding shall promptly so notify the
holders of Registrable Securities in
- 26 -
<PAGE>
writing and, if the holders of a majority of the Registrable Securities shall
notify Holding not later than 30 days after their receipt of such notice from
Holding that such holders elect to amend this Agreement as hereinafter provided,
this Agreement shall as promptly as practicable thereafter be amended to conform
the provisions of this Article VII as closely as practicable to the registration
rights of such Other Holder.
ARTICLE VIII
ANTI-DILUTION PROTECTION/PREEMPTIVE RIGHTS
8.01 Anti-Dilution Rights with respect to Common Stock Distributions.
---------------------------------------------------------------
(a) If Holding shall after the date hereof issue or otherwise sell or
distribute any shares of Common Stock, whether for cash or other consideration,
or pursuant to the issuance of options, warrants, any other security convertible
into, or exercisable for, or exchangeable into, shares of Common Stock, or
pursuant to any other agreement other than (i) pursuant to the exercise of
options, warrants or any other securities convertible into, or exercisable for,
or exchangeable into, shares of Common Stock the original issuance, sale,
distribution or grant of which was for a consideration not less than the Fair
Market Value thereof, (ii) to employees and directors, or to a fiduciary acting
on behalf of employees and directors, of Holding and its direct and indirect
subsidiaries in circumstances determined in good faith by the Board of Directors
of Holding to be in the best interests of Holding and its subsidiaries, all of
which issuances, sales, distributions and grants pursuant to this subclause (ii)
will not result in the issuance, sale, distribution or grant after the date
hereof to such employees and directors pursuant to this subclause (ii) of in
excess of 10% of the outstanding Common Stock in the aggregate, (iii) in
connection with any recapitalization, stock dividend, stock split or the like in
which all holders of Common Stock are treated on an equal basis, (iv) the
issuance of Common Stock pursuant to this Section 8.01 or (v) the issuance of
------------
Common Stock pursuant to Section 8.01 of the Other Subscription Agreement, (any
------------
such event, other than those described in subclauses (i) through (v) above,
being referred to herein as a "Common Stock Distribution") for a consideration
-------------------------
per share less than the Fair Market Value per share of outstanding Common Stock
of Holding on the date immediately prior to such Common Stock Distribution,
then, effective as of the Common Stock Distribution, each Holder of Common
Shares immediately prior to such Common Stock Distribution shall be entitled to
receive, for a consideration of $.01 per share, the number of additional shares
of Common Stock equal to the difference between (x) the number of Common Shares
held by such Holder immediately prior to such Common Stock Distribution and (y)
the number of shares determined by multiplying the number of Common Shares held
by such Holder immediately prior to such Common Stock Distribution by a
fraction, the numerator of which shall be the total number of shares of Common
Stock outstanding (and issuable upon exercise or conversion of outstanding
options, warrants and convertible securities or pursuant to any other agreement)
immediately prior to such Common Stock Distribution
- 27 -
<PAGE>
plus the number of shares of Common Stock issued in such Common Stock
Distribution and the denominator of which shall be an amount equal to the sum of
(A) the number of shares of Common Stock outstanding (and issuable upon exercise
or conversion of outstanding options, warrants and convertible securities or
pursuant to any other agreement) immediately prior to such Common Stock
Distribution, plus (B) the number of shares of Common Stock which the aggregate
consideration received by Holding (determined as provided below) for such Common
Stock Distribution would buy at the Fair Market Value thereof, as of the date
immediately prior to such Common Stock Distribution.
(b) If any shares of Common Stock, Options or Convertible Securities
shall be issued, sold or distributed for cash, the consideration received
therefor shall be deemed to be the amount received by Holding therefor, before
deduction therefrom of any expenses incurred and any underwriting commissions or
concessions paid or allowed by Holding in connection therewith. If any shares
of Common Stock, Options or Convertible Securities shall be issued, sold or
distributed for a consideration other than cash, the amount of the consideration
other than cash received by Holding shall be deemed to be the Fair Market Value
of such consideration, before deduction of any expenses incurred and any
underwriting commissions or concessions paid or allowed by Holding in connection
therewith. If any shares of Common Stock, Options or Convertible Securities
shall be issued in connection with any merger in which Holding is the surviving
corporation, the amount of consideration therefor shall be deemed to be the Fair
Market Value of such portion of the assets and business of the nonsurviving
corporation as shall be attributable to such Common Stock, Options or
Convertible Securities, as the case may be.
Upon each determination of Fair Market Value hereunder (other than a
determination relating solely to setting the value of fractional shares),
Holding shall promptly give notice thereof to all Holders, setting forth in
reasonable detail the calculation of such Fair Market Value and the method and
basis of determination thereof, as the case may be. If a majority in interest
of Holders (the "Disputing Holders") shall in good faith disagree with such
determination and shall, by notice to the Company given within 15 days after the
Company's notice of such determination, elect to dispute such determination,
such dispute shall be submitted to a New York Stock Exchange member firm
selected by the Company and reasonably acceptable to a majority in interest of
the Disputing Holders, whose determination of Fair Market Value shall be binding
on the Company and the Holders. If such determination is disparate by less than
10% from the Company's initial determination, the fees and expenses of such
determination shall be borne by the Disputing Holders and if such determination
is disparate by 10% or more from the Company's initial determination, the fees
and expenses of such determination shall be borne by the Company. In the event
that a determination of Market Price is disputed, such dispute shall also be
resolved as set forth in this Section 8.01(b). If any
---------------
- 28 -
<PAGE>
Options shall be issued in connection with the issue and sale of other
securities of Holding, together comprising one integral transaction in which no
specific consideration is allocated to such Options by the parties thereto, such
Options shall be deemed to have been issued for consideration to be determined
as set forth in this Section 8.01(b). Notwithstanding the foregoing, in the
---------------
event that the initial determination of Fair Market Value by the Company was
made by a New York Stock Exchange member firm selected by the Company, and
reasonably acceptable to a majority in interest of the Holders or made by the
Board of Directors of Holding and verified by such a New York Stock Exchange
member firm, such determination shall be definitive and the Holders shall not
have any rights to disagree with such determination.
(c) All shares of Common Stock issued upon the application of this
Section shall be validly issued, fully paid and nonassessable and free from all
preemptive rights of any stockholder, and from all taxes, liens and charges with
respect to the issue thereof (other than transfer taxes) and, if Voting Common
Stock is to be issued upon application hereunder and such Common Stock is then
listed on any national securities exchange (as defined in the Securities
Exchange Act of 1934, as amended) or quoted on NASDAQ, shall be duly listed or
quoted thereon, as the case may be.
(d) Holding shall not be required to issue fractions of shares of
Common Stock pursuant to this Section. If any fraction of a share would, but
for this paragraph (d), be issuable upon any application of this Section, in
lieu of such fractional share Holding shall pay to the Holder, in cash, an
amount equal to such fraction of the Fair Market Value per share of outstanding
Common Stock of Holding on the Business Day immediately prior to the date of
such issuance.
(e) Each certificate for shares of Common Stock issued pursuant to
this Section, unless at the time of exercise such shares are registered under
the Securities Act of 1933, as amended, shall bear the legend as provided in
Section 4.01 until such time as the shares are registered under the Securities
- ------------
Act or sold pursuant to Rule 144 thereunder.
8.02 Preemptive Rights upon Common Stock Distribution. (a) In the
------------------------------------------------
event that Holding proposes to effect a Common Stock Distribution after the date
hereof for a cash consideration that the Board of Directors of Holding in good
faith determines is at or above the Fair Market Value for the Common Stock to be
issued, sold or distributed pursuant to such Common Stock Distribution, then the
Holders shall have the right to participate in such Common Stock Distribution in
the manner set forth below.
(b) Not less than 20 Business Days prior to any Common Stock
Distribution referred to in Section 8.02(a), Holding will give written notice
thereof (a "Distribution Notice") to each Holder. Such Distribution Notice
-------------------
shall name the Person or Persons to whom such Common Stock Distribution is
proposed to be
- 29 -
<PAGE>
made (the "Purchasers") and specify the price and other terms and conditions of
----------
such Common Stock Distribution. Each Holder electing to participate in such
Common Stock Distribution ("Electing Holders") shall give written notice of its
----------------
election to participate in such Common Stock Distribution to Holding not later
than 10 Business Days after its receipt of a Distribution Notice.
(c) In the event of such a Common Stock Distribution, Holding may, at
its option (i) reduce the number of shares of Common Stock to be sold to the
Purchasers pursuant to such Common Stock Distribution by, and sell to each
Electing Holder (as defined below) upon the same terms and conditions applicable
to the Purchasers, that number of shares of Common Stock derived by multiplying
the total number of shares of Common Stock to be sold in such Common Stock
Distribution, by the Electing Holder's Ownership Interest, rounded to the
nearest whole number or (ii) in addition to the Common Stock to be sold to the
Purchasers pursuant to such Common Stock Distribution, sell to each Electing
Holder, upon the same terms and conditions applicable to the Purchasers, that
number of shares of Common Stock equal to the excess of (A) the number of shares
of Common Stock derived by multiplying the number of shares of Common Stock
outstanding after giving effect to such Common Stock Distribution to the
Purchasers, by the Electing Holder's Ownership Interest, rounded to the nearest
whole number over (B) the number of shares of Common Stock held by such Holder
immediately prior to the Common Stock Distribution to the Purchasers. For
purposes of this Section, "Ownership Interest" means (x) the sum of the total
------------------
number of shares of Common Stock owned by the Electing Holder, divided by (y)
the sum of the total number of shares of Common Stock outstanding, in both
instances, immediately prior to the proposed Common Stock Distribution.
8.03 Article VIII Definitions. For purpose of this Section
------------------------ -------
8.01, the following terms have the following respective meanings:
"Business Day" shall mean (a) if any class of Common Stock is listed
------------
or admitted to trading on a national securities exchange, a day on which the
principal national securities exchange on which such class of Common Stock is
listed or admitted to trading is open for business or (b) if no class of Common
Stock is so listed or admitted to trading, a day on which any New York Stock
Exchange member firm is open for business.
"Closing Price" with respect to any security on any day means (a) if
-------------
such security is listed or admitted for trading on a national securities
exchange, the reported last sales price regular way or, if no such reported sale
occurs on such day, the average of the closing bid and asked prices regular way
on such day, in each case as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which such class of security is listed or admitted to
trading, or (b) if such
- 30 -
<PAGE>
security is not listed or admitted to trading on any national securities
exchange, the last quoted sales price, or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market on such day as
reported by NASDAQ or any comparable system then in use or, if not so reported,
as reported by any New York Stock Exchange member firm reasonably selected by
Holding for such purpose.
"Common Shares" means shares of Common Stock issued pursuant to this
-------------
Agreement.
"Common Stock Distribution" has the meaning ascribed to it in
-------------------------
Section 8.01(a).
- ---------------
"Convertible Securities" means any stock or other securities
----------------------
convertible into, exercisable for or exchangeable into shares of Common Stock of
Holding.
"DNL/Investor Securities" has the meaning ascribed to it in Section
----------------------- -------
7.02(c)(i).
- ----------
"Fair Market Value" means the fair market value of the business or
-----------------
property in question, as determined in good faith by the Board of Directors of
Holding, provided, however, that the Fair Market Value of any security for which
a Closing Price is available shall be the Market Price of such security. The
Fair Market Value of Holding shall be the Fair Market Value of Holding and its
subsidiaries. Notwithstanding the foregoing, if, at any date of determination
of the Fair Market Value of Holding, the Common Stock of any class shall then be
publicly traded, the Fair Market Value of Holding on such date shall be the
Market Price on such date multiplied by the number of shares of Common Stock
then outstanding on a fully diluted basis.
"Holder" means a holder of Common Shares.
------
"Market Price" with respect to any security on any day means the
------------
average of the daily Closing Prices of a share or unit of such security for the
20 consecutive Business Days ending on the most recent Business Day for which a
Closing Price is available; provided, however, that in the event that, in the
case of Common Stock, the Market Price is determined during a period following
the announcement by Holding of (A) a dividend or distribution of Common Stock,
or (B) any subdivision, combination or reclassification of Common Stock and
prior to the expiration of 20 Business Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, then, and in each such case, the Market Price shall be
appropriately adjusted to reflect the current market price per share equivalent
of Common Stock.
"NASDAQ" means The National Association of Securities Dealers, Inc.
------
Automated Quotation System.
- 31 -
<PAGE>
"Options" means any rights to subscribe for or to purchase, or any
-------
warrants or options for the purchase of, shares of Common Stock, or any rights,
warrants or options to purchase Convertible Securities, pursuant to any
agreement which relates in whole or in part to the Common Stock.
ARTICLE IX
DEFINITIONS
9.01 Definitions. Except as otherwise specifically indicated, the
-----------
following terms will have the following meanings for all purposes of this
Agreement:
"Acquisition Corp." means DNL Savannah Acquisition Corp., a Delaware
-----------------
corporation.
"Affiliate" means with respect to any Person, any other Person
---------
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such Person.
"Agreement" means this Subscription Agreement, as the same shall be
---------
amended from time to time.
"Business Day" means a day other than Saturday, Sunday or any other
------------
day on which banks located in New York City are authorized or obligated to
close.
"Class A Common Stock" has the meaning ascribed to it in Section
-------------------- -------
2.03.
- ----
"Class A Shares" has the meaning ascribed to it in the preamble.
--------------
"Class B Common Stock" has the meaning ascribed to it in the
--------------------
preamble.
"Class B Shares" has the meaning ascribed to it in the preamble.
--------------
"Closing" has the meaning ascribed to it in Section 1.03.
------- ------------
"Closing Date" means the date of the Closing.
------------
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time and the regulations promulgated thereunder.
"Commission" means the United States Securities and Exchange
----------
Commission, or any successor governmental agency or authority.
- 32 -
<PAGE>
"Common Stock" means shares of Class A Common Stock or Class B Common
------------
Stock, as constituted on the date hereof, and any stock into which such Class A
Common Stock or Class B Common Stock shall have been changed or any stock
resulting from any reclassification of such Class A Common Stock or Class B
Common Stock.
"Company" means Aminco, Inc., a Delaware corporation.
-------
"Contract" means any agreement, lease, license, evidence of
--------
Indebtedness, mortgage, indenture, security agreement or other contract.
"Credit Agreement" has the meaning ascribed to it in Section 2.08.
---------------- ------------
"Cutback Registration" means any Requested Registration or Piggyback
--------------------
Registration to be effected as an underwritten Public Offering in which the
Managing Underwriter with respect thereto advises Holding and the Requesting
Holders in writing that, in its opinion, the number of securities requested to
be included in such registration (including securities of Holding which are not
Registrable Securities) exceed the number which can be sold in such offering
without a material reduction in the selling price anticipated to be received for
the securities to be sold in such Public Offering.
"DNL Requested Securities" means, with respect to any Piggyback
------------------------
Registration, any securities of Holding requested to be included in such
registration by DNL Partners, Limited Partnership, a Delaware limited
partnership ("DNL"), pursuant to the agreement or agreements between DNL and
---
Holding providing for registration rights.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated thereunder.
"GAAP" means generally accepted accounting principles in the United
----
States of America as in effect from time to time.
"Holding" has the meaning ascribed to it in the preamble.
-------
"Indebtedness" of any Person means all obligations of such Person (i)
------------
for borrowed money, (ii) evidenced by noted, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any Person.
"Indemnified Party" means a party entitled to indemnity in
-----------------
accordance with Section 7.07.
------------
- 33 -
<PAGE>
"Indemnifying Party" means a party obligated to provide indemnity in
------------------
accordance with Section 7.07.
------------
"Indosuez" means the New York Branch of Banque Indosuez, a French
--------
banking corporation.
"Initiating Holders" means any holder or holders of Registrable
------------------
Securities making a written request pursuant to Section 7.01, or Section 7.01 of
------------
the Other Subscription Agreement, for the registration of Registrable
Securities.
"Inspectors" has the meaning ascribed to it in Section 7.03(j).
---------- ---------------
"Investor" has the meaning ascribed to it in the preamble.
--------
"IPO" has the meaning ascribed to it in Section 7.01(a).
--- ---------------
"Liens" means any mortgage, pledge, assessment, security interest,
-----
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract to give any of the foregoing, but excluding, in
the case of securities, restrictions under the Securities Act on the sale of
such securities.
"Losses" has the meaning ascribed to it in Section 7.07(a).
------ ---------------
"Managing Underwriter" means, with respect to any Public Offering, the
--------------------
underwriter or underwriters managing such Public Offering.
"Morgan" means the Investors that are parties to this Agreement
------
other than Indosuez CM II, Inc.
"NASD" means the National Association of Securities Dealers, Inc.
----
"Notice of Piggyback Registration" has the meaning ascribed to it in
--------------------------------
Section 7.02(a).
- ---------------
"Notice of Requested Registration" has the meaning ascribed to it in
--------------------------------
Section 7.01(a).
- ---------------
"Other Subscription Agreement" means the Subscription Agreement dated
----------------------------
as of the date hereof by and between Holding and Indosuez.
"Other Subscription Agreement Shares" means the Shares, as defined
-----------------------------------
in the Other Subscription Agreement.
"Partnership Subscription Agreement" means the Subscription Agreement
----------------------------------
dated as of the date hereof by and between
- 34 -
<PAGE>
Holding and DNL Partners, Limited Partnership, a Delaware limited partnership.
"Person" means any natural person, corporation, general partnership,
------
limited partnership, proprietorship, other business organization, trust, union
or association.
"Piggyback Registration" means any registration of equity securities
----------------------
of Holding of the same class as the Registrable Securities under the Securities
Act (other than a registration in respect of a dividend reinvestment or similar
plan for stockholders of Holding or on Form S-4 or Form S-8 promulgated by the
Commission, or any successor or similar forms thereto), whether for sale for the
account of Holding or for the account of any holder of securities of Holding
(other than Registrable Securities), including a registration by Holding under
the circumstances described in Section 7.01(c)(i) or Section 7.01(c)(i) of the
------------------
Other Subscription Agreement.
"Public Offering" means any offering of Common Stock to the public,
---------------
either on behalf of Holding or any of its securityholders, pursuant to an
effective registration statement under the Securities Act.
"Purchase Price" has the meaning ascribed to it in Section 1.02.
-------------- ------------
"Records" has the meaning ascribed to it in Section 7.03(j).
------- ---------------
"Registrable Securities" means (i) the Class A Shares, (ii) the Class
----------------------
A Shares (as defined in the Other Subscription Agreement), (iii) any shares of
Class A Common Stock into which the Shares or the Other Subscription Agreement
Shares have been converted, and (ii) any additional shares of Class A Common
Stock or (to the extent they have been converted into shares of Class A Common
Stock) Class B Common Stock issued or distributed by way of a dividend, stock
split or other distribution in respect of the Shares or the Other Subscription
Agreement Shares or the shares referred to in clause (i) of this sentence, or
acquired by way of any rights offering or similar offering made in respect of
the Shares, the Other Subscription Agreement Shares or the shares referred to in
clause (i) of this sentence. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities (i) when a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (ii) when they shall have
been distributed to the public pursuant to Rule 144, or (iii) when they shall
have ceased to be outstanding.
"Registration Expenses" means all expenses incident to Holding's
---------------------
performance of or compliance with its obligations under this Agreement to effect
the registration of Registrable
- 35 -
<PAGE>
Securities in a Requested Registration or a Piggyback Registration, including,
without limitation, all registration, filing, securities exchange listing and
NASD fees, all registration, filing, qualification and other fees and expenses
of complying with securities or blue sky laws, all word processing, duplicating
and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for Holding and of its independent public accountants,
including the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, the reasonable fees and
disbursements of a single counsel retained by the holders of a majority of
Registrable Securities being registered, premiums and other costs of policies of
insurance against liabilities arising out of the Public Offering of the
Registrable Securities being registered and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities, but excluding
underwriting discounts and commissions and transfer taxes, if any, in respect of
Registrable Securities, which shall be payable by each holder thereof.
"Regulation S" means Regulation S promulgated by the Commission under
------------
the Securities Act, and any successor provision thereto.
"Requested Registration" means any registration of Registrable
----------------------
Securities under the Securities Act effected in accordance with Section 7.01 or
------------
Section 7.01 of the Other Subscription Agreement.
"Requesting Holders" means, with respect to any Requested Registration
------------------
or Piggyback Registration, the holders of Registrable Securities requesting to
have Registrable Securities included in such registration in accordance with
this Agreement or the Other Subscription Agreement.
"Rule 144" means Rule 144 promulgated by the Commission under the
--------
Securities Act, and any successor provision thereto.
"Rule 144A" means Rule 144A promulgated by the Commission under the
---------
Securities Act, and any successor provision thereto.
"Securities Act" means the Securities Act of 1933, as amended, and
--------------
the rules and regulations promulgated thereunder.
"Sellers" has the meaning ascribed thereto in the Stock Purchase
-------
Agreement.
"Senior Subordinated Note Agreement" has the meaning ascribed to it
----------------------------------
in Section 2.08.
------------
"Shares" has the meaning ascribed to it in the preamble.
------
- 36 -
<PAGE>
"Stock Purchase Agreement" means the Stock Purchase Agreement dated as
------------------------
of May 11, 1995, as amended, by and between Acquisition Corp., the Sellers named
therein, and the Company.
9.02 Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; and (iv) the term "Section" refers to the specified
Section of this Agreement. Whenever this Agreement refers to a number of days,
such number shall refer to calendar days unless Business Days are specified.
Any representation or warranty contained herein as to the enforceability of a
Contract shall be subject to the effect of any bankruptcy, insolvency,
reorganization, moratorium or other similar law affecting the enforcement of
creditors' rights generally and to general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
ARTICLE X
MISCELLANEOUS
10.01 Notices. All notices, requests and other communications
-------
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
If to Holding, to:
DNL Savannah Holding Corp.
1 Morningside Drive, North
Suite 200
Westport, Connecticut 06880
Facsimile No.: (203) 226-8011
Attn: Vincent A. Wasik
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Facsimile No.: (212) 530-5219
Attn: G. Malcolm Holderness, Esq.
and Robert E. Rice, Esq.
If to Indosuez, to:
Bank Indosuez, New York Branch
1211 Avenue of the Americas
7th Floor
New York, New York 10036
- 37 -
<PAGE>
Facsimile No.:
Attn:
with a copy to:
Cahill Gordon & Reindel
Eighty Pine Street
New York, New York 10005-1702
Facsimile No.: (212) 269-5420
Attn: Jonathan I. Mark, Esq.
If to Morgan, to:
J.P. Morgan
[to come]
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
1752 N Street, N.W.
Washington, D.C. 20036
Facsimile No.: (202) 429-0946
Attn: Steven N. Robinson, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 10.01, be deemed given
-------------
upon delivery, (ii) if delivered by facsimile transmission to the facsimile
number as provided in this Section 10.01, be deemed given upon receipt, and
-------------
(iii) if delivered by mail in the manner described above to the address as
provided in this Section 10.01, be deemed given upon receipt (in each case
-------------
regardless of whether such notice, request or other communication is received by
any other Person to whom a copy of such notice is to be delivered pursuant to
this Section 10.01). Any party from time to time may change its address,
-------------
facsimile number or other information for the purpose of notices to that party
by giving notice specifying such change to the other parties hereto.
10.02 Entire Agreement. This Agreement supersedes all prior
----------------
discussions and agreements between the parties with respect to the subject
matter hereof, and contains the sole and entire agreement between the parties
hereto with respect to the subject matter hereof.
10.03 Amendment. This Agreement may be amended, supplemented or
---------
modified only by a written instrument (which may be executed in any number of
counterparts) duly executed by or on behalf of each of Holding, Indosuez and
Morgan.
10.04 Waiver. Any term or condition of this Agreement may be waived
------
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party
- 38 -
<PAGE>
of any term or condition of this Agreement, in any one or more instances, shall
be deemed to be or construed as a waiver of the same term or condition of this
Agreement on any future occasion.
10.05 No Third Party Beneficiary. The terms and provisions of this
--------------------------
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under Section 7.07.
------------
10.06 Successors and Assigns. This Agreement is binding upon, inures
----------------------
to the benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
10.07 Headings. The headings used in this Agreement have been
--------
inserted for convenience of reference only and do not define or limit the
provisions hereof.
10.08 Invalid Provisions. If any provision of this Agreement is held
------------------
to be illegal, invalid or unenforceable under any present or future law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
10.09 Remedies. Except as otherwise expressly provided for herein,
--------
no remedy conferred by any of the specific provisions of this Agreement is
intended to be exclusive of any other remedy, and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise. The
election of any one or more remedies by any party hereto shall not constitute a
waiver by any such party of the right to pursue any other available remedies.
Damages in the event of breach of this Agreement by a party hereto
would be difficult, if not impossible, to ascertain, and it is therefore agreed
that each such Person, in addition to and without limiting any other remedy or
right it may have, will have the right to an injunction or other equitable
relief in any court of competent jurisdiction, enjoining any such breach, and
enforcing specifically the terms and provisions hereof, and Holding and each
Investor, by each Investor's acquisition of its Registrable Securities, hereby
waive any and all defenses they may have on the ground of lack of jurisdiction
or competence of
- 39 -
<PAGE>
the court to grant such an injunction or other equitable relief. The existence
of this right will not preclude any such Person from pursuing any other rights
and remedies at law or in equity which such Person may have.
10.10 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
10.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
- 40 -
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first above written.
DNL SAVANNAH HOLDING CORP.
By: _________________________
Vincent A. Wasik
Chairman of the Board and
President
INDOSUEZ CM II, INC.
By: _________________________
Name:
Title:
By: _________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK as
Trustee of a Commingled Pension Fund - Multi-
Market Special Investment Fund II
By: ___________________________
Name: Ronald G. Hodge II
Title: Vice President
MULTI-MARKET SPECIAL INVESTMENT TRUST FUND OF
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: ___________________________
Name: Ronald G. Hodge II
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Investment Manager and Agent for the Alfred P.
Sloan Foundation - Multi-Market Account
By: ___________________________
Name: Ronald G. Hodge II
Title: Vice President
- 41 -
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Investor Securities to be Purchased
-------- --------------------------
<S> <C>
Indosuez CM II, Inc. 73.06 Shares of Class B Common Stock
Wire Instructions:
Designated Bank: Banque Indosuez
Address: Grand Cayman Island Branch
1211 Avenue of the Americas
New York, NY 10036-8701
Bank ABA Number: 0260 0266 8
Attention: Loan Administration
Ref: Carson Products Corp.
Contact Person: Michael Walsh, Esq.
Nominee (name in which the Shares are
to be registered, if different from
the name of the Purchaser:
n/a
------------------------------------
Tax Identification Number of
Nominee, if applicable:
------------------------------------
Morgan Guaranty Trust Company of 83.552 Shares of Class A
New York as Trustee of a Commingled Common Stock
Pension Fund - Multi-Market Special
Investment Fund II
Wire Instructions: Kelly & Co.
Designated Bank: c/o Morgan Guaranty
Trust Co. of New York
Address: 23 Wall Street
New York, NY 10015
Bank ABA Number: 021 000 238
Account No.: 999 97 847
Attention: Re: Carson Products
Contact Person:
Nominee (name in which the Shares are
to be registered, if different from
the name of the Purchaser:
Kelly & Co.
---------------------------------
Tax Identification Number of
Nominee, if applicable:
---------------------------------
Multi-Market Special Investment Trust 10.444 Shares of Class A
Fund of Morgan Guaranty Trust Company Common Stock
of New York
Wire Instructions: Kelly & Co.
Designated Bank: c/o Morgan Guaranty
Trust Co. of New York
Address: 23 Wall Street
New York, NY 10015
Bank ABA Number: 021 000 238
Account No.: 999 97 847
Attention: Re: Carson Products
Contact Person:
Nominee (name in which the Shares are
</TABLE>
<PAGE>
<TABLE>
<S> <C>
to be registered, if different from
the name of the Purchaser:
Kelly & Co.
---------------------------------
Tax Identification Number of
Nominee, if applicable:
---------------------------------
Morgan Guaranty Trust Company of New 10.444 Shares of Class A
York, as Investment Manager and Agent Common Stock
for the Alfred P. Sloane Foundation -
Multi-Market Account
Wire Instructions: Kelly & Co.
Designated Bank: c/o Morgan Guaranty
Trust Co. of New York
Address: 23 Wall Street
New York, NY 10015
Bank ABA Number: 021 000 238
Account No.: 999 97 847
Attention: Re: Carson Products
Contact Person:
Nominee (name in which the Shares are
to be registered, if different from
the name of the Purchaser:
Kelly & Co.
---------------------------------
Tax Identification Number of
Nominee, if applicable:
---------------------------------
</TABLE>
<PAGE>
SCHEDULE II
Certain Agreements Referred to in Section 7.09(a)
-------------------------------------------------
1. This Agreement.
2. The Other Subscription Agreement.
3. The Partnership Subscription Agreement.
4. The Registration Rights Agreement (as
defined in the Stock Purchase Agreement).
5. The Registration Rights Agreement dated as of the date hereof
between Holding and Dr. Leroy Keith.
<PAGE>
EXHIBIT 10.16
SUBSCRIPTION AGREEMENT
dated as of August 23, 1995
by and among
DNL SAVANNAH HOLDING CORP.
and
DNL PARTNERS, LIMITED PARTNERSHIP
with respect to shares of the
capital stock of
DNL SAVANNAH HOLDING CORP.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
PURCHASE AND SALE
1.01 Purchase and Sale.............................. 1
1.02 Purchase Price................................. 1
1.03 Closing........................................ 1
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF HOLDING
2.01 Corporate Existence............................ 2
2.02 Authority...................................... 2
2.03 Capital Stock; the Shares...................... 2
2.04 Regarding the Stock Purchase Agreement......... 2
2.05 Regarding the Credit Agreement and the Senior
Subordinated Note Agreement.................... 3
2.06 Ownership of Stock of Acquisition Corp......... 3
2.07 Ownership of Stock of the Company.............. 3
2.08 Conduct of Business............................ 3
2.09 No Conflicts................................... 4
2.10 Financial Statements........................... 4
2.11 Investment Company Act......................... 5
2.12 Further Assurances............................. 5
2.13 Dividend Payment by Wire Transfer.............. 5
2.14 Sales of Stock by Holding...................... 5
2.15 Transactions with Affiliates................... 5
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF INVESTOR
3.01 Corporate Existence............................ 6
3.02 Authority...................................... 6
3.03 Investment Representations and Agreement....... 6
3.04 No Conflicts................................... 7
ARTICLE IV
LEGENDS
4.01 Legends........................................ 7
(i)
<PAGE>
ARTICLE V
CONDITIONS TO OBLIGATIONS OF HOLDING
5.01 Representations and Warranties................ 8
5.02 Closing....................................... 8
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF INVESTOR
6.01 Representations and Warranties................. 8
6.02 Officers' Certificate.......................... 8
6.03 Closing........................................ 8
6.04 Opinion of Counsel............................. 9
ARTICLE VII
REGISTRATION RIGHTS
7.01 Requested Registrations....................... 9
(a) Registration Requests..................... 9
(b) Limitations on Requested Registrations.... 10
(c) Additional Conditions and Limitations
Relating to Requested Registrations....... 11
(d) Rights if Registration Request Withdrawn.. 12
(e) Registration Expenses..................... 12
(f) Priority in Cutback Registrations......... 12
(g) Registration Statement Form............... 12
7.02 Piggyback Registrations....................... 12
(a) Right to Include Registrable Securities... 12
(b) Registration Expenses..................... 13
(c) Priority in Cutback Registrations......... 13
7.03 Registration Procedures....................... 14
7.04 Underwritten Offerings........................ 19
(a) Underwritten Requested Offerings.......... 19
(b) Underwritten Piggyback Offerings.......... 20
7.05 Holdback Agreements........................... 21
(a) By the Holders of Registrable Securities.. 21
(b) By Holding and Other Securityholders...... 21
(c) Exception ................................ 21
7.06 Registration Rights Transferable.............. 22
7.07 Indemnification............................... 22
(a) Indemnification by Holding................ 22
(b) Indemnification by the Sellers of
Registrable Securities.................... 23
(c) Notices of Claims, etc.................... 24
(d) Contribution.............................. 25
(e) Other Indemnification..................... 25
(f) Indemnification Payments.................. 26
7.08 Covenants Relating to Rule 144................ 26
7.09 Other Registration Rights..................... 26
(a) No Existing Agreements.................... 26
(b) Future Agreements......................... 26
(ii)
<PAGE>
(c) Best Registration Rights................... 26
ARTICLE VIII
DEFINITIONS
8.01 Definitions............................. 27
ARTICLE IX
MISCELLANEOUS
9.01 Notices........................................ 32
9.02 Entire Agreement............................... 33
9.03 Amendment...................................... 33
9.04 Waiver......................................... 33
9.05 No Third Party Beneficiary..................... 33
9.06 Successors and Assigns......................... 33
9.07 Headings....................................... 33
9.08 Invalid Provisions............................. 33
9.09 Remedies....................................... 34
9.10 Governing Law.................................. 34
9.11 Counterparts................................... 34
SCHEDULES AND EXHIBITS
SCHEDULE I Certain Agreements
(iii)
<PAGE>
This SUBSCRIPTION AGREEMENT, dated as of August 23, 1995, is made and
entered into by and between DNL Savannah Holding Corp., a Delaware corporation
("Holding"), and DNL Partners, Limited Partnership, a Delaware limited
-------
partnership ("Investor"). Capitalized terms not otherwise defined herein have
--------
the meanings set forth in Section 8.01.
------------
WHEREAS, Holding desires to issue and sell, and Investor desires to
purchase, five hundred ten (510) newly issued shares (the "Shares") of the Class
------
A Common Stock, par value $.01 per share, of Holding ("Class A Common Stock")
--------------------
that will, after giving effect to the issuance of other shares of the Common
Stock of Holding to be issued on the Closing Date, constitute fifty-one (51%) of
the outstanding Common Stock of Holding, on the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, the payment of the Purchase Price to Holding in exchange for
the Shares, as contemplated by Article I, is made pursuant to one overall plan,
---------
together with other transfers to Holding by other Persons in exchange for shares
of capital stock of Holding to occur on the Closing Date, and such transfers are
intended to constitute a transaction in which, pursuant to Section 351 of the
Code, no gain or loss is recognized.
NOW, THEREFORE, in consideration of the mutual covenants and agreement
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE
1.01 Purchase and Sale. Holding agrees to issue and sell to
-----------------
Investor, and Investor agrees to purchase from Holding, the Shares.
1.02 Purchase Price. The aggregate purchase price for the Shares
--------------
(the "Purchase Price") shall be eleven million dollars ($11,000,000), payable in
--------------
immediately available United States funds at the Closing in the manner provided
in Section 1.03.
------------
1.03 Closing. The closing (the "Closing") of the transactions
------- -------
contemplated by this Article I will take place at the offices of Milbank, Tweed,
---------
Hadley & McCloy, 1 Chase Manhattan Plaza, New York, New York 10005, or at such
other place as Holding and Investor agree, simultaneously with the Closing, as
that term is defined in the Stock Purchase Agreement. At the Closing, (a)
Investor will pay the Purchase Price to Holding by wire transfer of immediately
available funds to such account as Holding may reasonably direct by written
notice delivered to Investor by Holding at least two (2) Business Days before
the
<PAGE>
Closing Date and (b) Holding shall issue and sell to Investor the Shares, free
and clear of all liens, by delivery to Investor a certificate representing the
Shares registered in the name of Investor, with requisite stock transfer tax
stamps, if any, attached. Such certificate representing the Shares shall bear
the endorsements provided for in Section 4.01. At the Closing, there shall also
------------
be delivered to the parties the opinion and certificates to be delivered under
Articles V and VI.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF HOLDING
A. Holding hereby represents and warrants to Investor that:
2.01 Corporate Existence. Holding is a corporation duly
-------------------
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Holding has full power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby.
2.02 Authority. The execution and delivery by Holding of this
---------
Agreement, and the performance by Holding of its obligations hereunder, have
been duly and validly authorized by the Board of Directors of Holding, no other
corporate action on the part of Holding or its stockholders being necessary.
This Agreement has been duly and validly executed and delivered by Holding and
constitutes a legal, valid and binding obligation of Holding enforceable against
Holding in accordance with its terms. Holding has, prior to the execution of
this Agreement, furnished to Investor a copy of the Restated Certificate of
Incorporation of Holding, and no changes to such Restated Certificate of
Incorporation have been made.
2.03 Capital Stock; the Shares. The authorized capital stock of
-------------------------
Holding consists exclusively of 20,000 shares of Class A Common Stock, and
10,000 shares of Class B Common Stock, par value $.01 per share ("Class B Common
--------------
Stock"). As of the Closing Date, giving effect to the issuance of all shares of
- -----
the Common Stock of Holding (including the Shares) to be issued on the Closing
Date, the Shares will constitute fifty-one (51%) of the outstanding Common Stock
of Holding. The delivery to Investor of a certificate at the Closing
representing the Shares in the manner provided in Section 1.03 will transfer to
------------
Investor good and valid title to Shares, free and clear of all Liens. Upon such
delivery and upon payment for the Shares as contemplated by Section 1.03, the
-------------
Shares will be validly issued, fully paid and nonassessable.
- 2 -
<PAGE>
2.04 Regarding the Stock Purchase Agreement.
--------------------------------------
(a) The Stock Purchase Agreement constitutes a legal, valid and
binding obligation of Acquisition Corp., enforceable against Acquisition Corp.
in accordance with its terms.
(b) The representations and warranties made by Acquisition Corp. in
the Stock Purchase Agreement are true and correct, in all material respects, on
and as of the dates made and as of the date hereof and will be true and correct
in all material respects as of the Closing Date.
(c) To the best knowledge of Holding, the Stock Purchase Agreement
constitutes a legal, valid and binding obligation of the Sellers and the
Company, enforceable against the Sellers and the Company in accordance with its
terms.
(d) To the best knowledge of Holding, the representations and
warranties made by the Sellers and the Company in the Stock Purchase Agreement
are true and correct, in all material respects, on and as of the dates made and
as of the date hereof and will be true and correct in all material respects as
of the Closing Date. Prior to entering into the Stock Purchase Agreement,
Acquisition Corp. conducted, including by the use of outside counsel and
accountants, what it believed to be reasonable due diligence with respect to the
Company and its subsidiaries.
(e) True and complete copies of the Stock Purchase Agreement, the
Disclosure Schedule, the Purchaser Disclosure Schedule (as those terms are
defined in the Stock Purchase Agreement), and the financial statements referred
to in Section 2.14(a) of the Stock Purchase Agreement, have been furnished to
Investor prior to the execution of this Agreement.
2.05 Regarding the Credit Agreement and the Senior Subordinated Note
---------------------------------------------------------------
Agreement. The Credit Agreement and the Senior Subordinated Note Agreement
- ---------
constitute legal, valid, binding and enforceable obligations of Acquisition
Corp., enforceable against Acquisition Corp. in accordance with their respective
terms.
2.06 Ownership of Stock of Acquisition Corp. Holding owns all of the
--------------------------------------
issued and outstanding capital stock of Acquisition Corp., beneficially and of
record, free and clear of all Liens except, as of the Closing Date, for a pledge
thereof pursuant to the Credit Agreement.
2.07 Ownership of Stock of the Company. After the post-closing
---------------------------------
merger referred to in Section 1.06 of the Stock Purchase Agreement, whereby
Acquisition Corp. shall merge itself into the Company, Holding will own all of
the issued and outstanding capital stock of the Company, beneficially and of
record, free and clear of all Liens.
- 3 -
<PAGE>
2.08 Conduct of Business. Holding has, since its incorporation,
-------------------
conducted no business except (a) the acquisition of all of the issued and
outstanding capital stock of Acquisition Corp., (b) the transactions
contemplated by the Stock Purchase Agreement, the Credit Agreement (the "Credit
------
Agreement") dated as of August 23, 1995 between Acquisition Corp., Banque
- ---------
Indosuez, New York branch ("Indosuez"), as Agent, and the Lending Institutions
--------
listed therein, and the Note Purchase Agreement dated as of August 23, 1995 (the
"Senior Subordinated Note Agreement") between Acquisition Corp. and the
----------------------------------
Purchasers named therein, and (c) the offering and sale of Holding's stock in
transactions not involving a public offering.
2.09 No Conflicts. The execution, delivery and performance by
------------
Holding of this Agreement and the consummation of the transactions contemplated
hereby do not and will not: (a) require any consent or approval that has not
been obtained and each such consent and approval that has been obtained is in
full force and effect, (b) conflict with, result in a breach of, or constitute a
default under, any law or any regulation, rule or order of any governmental body
to which Holding is subject, the certificate of incorporation or bylaws of
Holding or any indenture or loan or credit agreement or any other agreement,
lease or instrument to which Holding is a party or by which it or its property
may be bound or affected or (c) result in, or create any Lien upon or with
respect to any of the property now owned or hereafter acquired by Holding.
B. Holding covenants and agrees with Investor as follows (except as
otherwise agreed or consented to or waived in writing by Investor):
2.10 Financial Statements. (a) Holding will, until the occurrence
--------------------
of an IPO or the time when Holding otherwise becomes subject to the periodic
reporting requirements of the Exchange Act, furnish to Investor as soon as
available and in any event within 90 days after the close of each fiscal year of
Holding, the consolidated balance sheets of Holding and its Subsidiaries as at
the end of such fiscal year and the related consolidated statements of income,
of shareholders' equity and of cash flows for such fiscal year, setting forth
comparative consolidated figures for the preceding fiscal year (other than in
the case of the first fiscal year of Holding when no such comparative figures
shall be required), and a report on such consolidated balance sheets and
financial statements by independent certified public accountants of recognized
national standing, which report shall not be qualified as to the scope of audit
and shall state that such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Holding and its
Subsidiaries as at the dates indicated and the results of their operations and
their cash flows for the periods indicated in conformity with GAAP applied on a
basis consistent with prior years (except for such changes with which the
independent certified public accountants
- 4 -
<PAGE>
concur) and that the examination by such accountants was conducted in accordance
with generally accepted auditing standards.
(b) Holding will, until the occurrence of an IPO or the time when
Holding otherwise becomes subject to the periodic reporting requirements of the
Exchange Act, furnish to Investor as soon as practicable and in any event within
45 days after the end of the first full fiscal quarter ending after the Closing
Date and each fiscal quarter thereafter, (i) the consolidated balance sheet of
Holding and its Subsidiaries as at the end of such period and (ii) the related
consolidated statements of income and cash flows of Holding in the form
customarily prepared by management, in each case for such fiscal quarter and for
the period from the beginning of the then current fiscal year to the end of such
fiscal quarter, setting forth in comparative form the same information for the
corresponding periods of the prior fiscal year together with a brief narrative
discussion and analysis prepared by management describing the Company's results
of operations for such fiscal quarter.
2.11 Investment Company Act. Holding shall not register as, or
----------------------
conduct its business or take any action that would cause it to become or be
deemed to be, an investment company as defined in the Investment Company Act of
1940, as amended.
2.12 Further Assurances. Holding shall promptly execute and deliver
------------------
all further instruments and documents, and take all further action, that
Investor may reasonably request in order more fully to give effect to the
provisions of this Agreement.
2.13 Dividend Payment by Wire Transfer. Holding shall pay dividends
---------------------------------
payable with respect to the Shares, if any, by wire transfer of immediately
available funds to the account of Investor reasonably specified by Investor to
Holding.
2.14 Sales of Stock by Holding. Holding and any Person acting on
-------------------------
Holding's behalf shall not sell, offer, attempt to offer or solicit an offer to
buy stock of Holding (a) except in a transaction registered or exempt from
registration under the Securities Act and (b) in any manner that would cause the
sale of the stock to Investor, pursuant to this Agreement to fail to qualify as
an exempted transaction under the Securities Act. Holding will provide to
Investor a copy of any agreement or other evidence of the terms on which it is
selling its Common Stock to others and shall not sell stock to any Person other
than as contemplated in this Agreement or such other terms as are disclosed to
Investor.
2.15 Transactions with Affiliates. Holding will not, and will not
----------------------------
permit any subsidiary of Holding to, enter into any transaction or series of
transactions, whether or not in the
- 5 -
<PAGE>
ordinary course of business, with any holder of 5% or more of any class of
equity securities of Holding or with any Affiliate of Holding other than on
terms and conditions substantially as favorable to Holding or such subsidiary as
would be obtainable by Holding or such subsidiary at the time in a comparable
arm's-length transaction with a Person other than a holder of 5% or more of any
class of equity securities of Holding or an Affiliate of Holding; provided that
--------
the foregoing restrictions shall not apply to (i) transactions between Holding
and any of its Wholly Owned Subsidiaries (as defined in the Senior Subordinated
Note Purchase Agreement) and between Wholly Owned Subsidiaries (as so defined),
(ii) the payment of reasonable fees to Investor and its Affiliates for financial
services, such fees not to exceed the usual and customary fees for similar
services, (iii) transactions, including the issuance of capital stock of Holding
or any of its subsidiaries, pursuant to any pension, stock option, profit
sharing or other employee benefit plan or agreement of Holding or any of its
subsidiaries in the ordinary course of business, (iv) the Management Assistance
Agreement between Morningside Capital Group LLC and the Company (as renamed
Carson Products Company) dated as of the Closing Date, and (v) this Agreement,
the Lender Subscription Agreements, and the Stock Purchase Agreement and the
transactions contemplated thereby.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF INVESTOR
Investor hereby represents and warrants, and (as to Section 3.03)
------------
covenants to Holding that:
3.01 Corporate Existence. Investor is a limited partnership duly
-------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Investor has full power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby.
3.02 Authority. The execution and delivery by Investor of this
---------
Agreement, and the performance by Investor of its obligations hereunder, have
been duly and validly authorized by all necessary partnership action, no other
action on the part of Investor being necessary. This Agreement has been duly
and validly executed and delivered by Investor and constitutes a legal, valid
and binding obligation of Investor enforceable against Investor in accordance
with its terms.
3.03 Investment Representations and Agreement. Investor understands
----------------------------------------
that the Shares have not been registered under the Securities Act. Investor is
acquiring the Shares for Investor's own account, for investment and not with a
view to the distribution thereof; provided, that the disposition of Investor's
--------
property and the property of any accounts for which Investor is acting as
fiduciary or agent shall at all times be
- 6 -
<PAGE>
and remain within the control of Investor and Investor may at any time and from
time to time sell some or all of the Shares in its sole discretion, subject to
applicable law. Investor agrees that Investor will not, and understands that
under the Securities Act Investor may not, sell or otherwise dispose of any of
the Shares except pursuant to an effective registration statement under the
Securities Act or in a transaction exempt from the registration requirements of
the Securities Act.
3.04 No Conflicts. The execution, delivery and performance by
------------
Investor of this Agreement and the consummation of the transactions contemplated
hereby do not and will not: (a) require any consent or approval that has not
been obtained and each such consent and approval that has been obtained is in
full force and effect, (b) conflict with, result in a breach of, or constitute a
default under, any law or any regulation, rule or order of any governmental body
to which Investor is subject, the limited partnership agreement of Investor or
any indenture or loan or credit agreement or any other agreement, lease or
instrument to which Investor is a party or by which it or its property may be
bound or affected or (d) result in, or create any Lien upon or with respect to
any of the property now owned or hereafter acquired by Investor.
ARTICLE IV
LEGENDS
4.01 Legends. Each outstanding certificate representing Shares
-------
shall, until such Shares are sold in a Public Offering or pursuant to Rule 144,
bear endorsements reading substantially as follows:
The sale, assignment, pledge, encumbrance or other transfer of the
shares represented by this certificate is subject to the provisions of
a Subscription Agreement, dated as of August 23, 1995, among DNL
Savannah Holding Corp. and DNL Partners, Limited Partnership, a copy
of which is on file at the principal executive office of DNL Savannah
Holding Corp.
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
otherwise disposed of except pursuant to an effective registration
statement under such Act or in a transaction exempt from the
registration requirements of such Act.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF HOLDING
- 7 -
<PAGE>
The obligations of Holding hereunder to issue and sell the Shares are
subject to the fulfillment of each of the following conditions (all or any of
which may be waived in whole or in part by Holding in its sole discretion):
5.01 Representations and Warranties. The representations and
------------------------------
warranties made by Investor in this Agreement shall be true and correct, in all
material respects, on and as of the Closing Date as though made on and as of the
Closing Date.
5.02 Closing. The Closing (as defined in the Stock Purchase
-------
Agreement) shall have occurred, the Initial Loans (as defined in the Credit
Agreement) shall have been made and the closing of the initial purchase of the
Notes (as defined in the Senior Subordinated Note Agreement) shall have
occurred, all simultaneously with the Closing hereunder.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF INVESTOR
The obligations of Investor hereunder to purchase the Shares are
subject to the fulfillment of each of the following conditions (all or any of
which may be waived in whole or in part by Investor in its sole discretion):
6.01 Representations and Warranties. The representations and
------------------------------
warranties made by Holding in this Agreement shall be true and correct, in all
material respects, on and as of the Closing Date as though made on and as of the
Closing Date.
6.02 Closing. The Closing (as defined in the Stock Purchase
-------
Agreement) shall have occurred, the Initial Loans (as defined in the Credit
Agreement) shall have been made and the closing of the initial purchase of the
Notes (as defined in the Senior Subordinated Note Agreement) shall have
occurred, all simultaneously with the Closing hereunder.
ARTICLE VII
REGISTRATION RIGHTS
7.01 Requested Registrations.
-----------------------
(a) Registration Requests. At any time (subject to Sections
---------------------
7.01(b) and (c)) after the earliest of (1) the time when Holding shall have
effected a Public Offering representing, together with any other Public
Offerings effected after the date hereof (with the number of shares sold in any
such prior Public Offering being appropriately adjusted for this purpose to
reflect any intervening recapitalization, stock dividend, stock split or reverse
stock split or the like as to Holding), a number of shares which, in the
aggregate, is equal to at least the lesser
- 8 -
<PAGE>
of five percent (5%) of the issued and outstanding shares of Common Stock as of
the time of the written request hereinafter referred to, other than shares of
Common Stock held in the treasury of Holding, and twenty percent (20%) of the
total shares of Common Stock originally issued and sold under this Agreement (an
"IPO"), (2) the date of an IPO (as defined in the Lender Subscription
---
Agreements), and (3) the fifth anniversary of the date of this Agreement, upon
the written request of one or more Initiating Holders requesting that Holding
effect the registration under the Securities Act of all or part of such
Initiating Holders' Registrable Securities and specifying the number of
Registrable Securities to be registered and the intended method of disposition
thereof, Holding will promptly, and in no event more than ten (10) Business Days
after receipt of such request, give written notice (a "Notice of Requested
-------------------
Registration") of such request to all other holders of Registrable Securities,
- ------------
and thereupon will use its best efforts to effect the registration under the
Securities Act of
(i) the Registrable Securities which Holding has been so requested to
register by such Initiating Holder or Holders, and
(ii) all other Registrable Securities the holders of which have made
written requests to Holding for registration thereof within 10 days after
the giving of the Notice of Requested Registration (which requests shall
specify the intended method of disposition thereof),
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof) of the Registrable Securities so to be registered. If
requested by the holders of a majority of the Registrable Securities requested
to be included in any Requested Registration, the method of disposition of all
Registrable Securities included in such registration shall be an underwritten
offering effected in accordance with Section 7.04(a). Subject to Section
--------------- -------
7.01(f), Holding may include in such registration other securities of the same
- -------
class as the Registrable Securities for sale for its own account or for the
account of any other Person. Neither Holding nor any of its securityholders
shall have the right to include any securities of Holding (other than
Registrable Securities) in a registration statement to be filed as part of a
Requested Registration unless (i) such securities are of the same class as the
Registrable Securities, and (ii) if such Requested Registration is an
underwritten offering, Holding or such securityholders, as applicable, agree in
writing to sell, subject to Section 7.01(f), to their securities on the same
---------------
terms and conditions as apply to the Registrable Securities being sold. If any
securityholders of Holding (other than the holders of Registrable Securities in
such capacity) register securities of Holding in a Requested Registration in
accordance with this Section 7.01, such holders shall pay the fees and expenses
------------
of their counsel and their pro rata share, on the basis of the respective
--- ----
amounts of the
- 9 -
<PAGE>
securities included in such registration on behalf of each such holder, of the
Registration Expenses if the Registration Expenses for such registration are not
payable by Holding pursuant hereto.
(b) Limitations on Requested Registrations. Notwithstanding anything
--------------------------------------
herein to the contrary, Holding shall not be required to honor a request for a
Requested Registration if:
(i) the Registrable Securities requested by Initiating Holders
to be so registered do not constitute at least twenty
percent (20%) of the aggregate number of shares of Common
Stock originally issued and sold under this Agreement
(adjusted proportionately to reflect any recapitalization,
stock dividend, subdivision, stock split or reverse stock
split or the like effected with respect to the Common
Stock);
(ii) such request is received from any Requesting Holder with
respect to Registrable Securities that may immediately be
sold under Rule 144 in full during any ninety (90) day
period;
(iii) the intended method of distribution requested is an initial
underwritten Public Offering, and Holding is unable to enter
into a firm commitment underwriting agreement with respect
to such Public Offering unless the Initiating Holders
consent to such registration being other than pursuant to an
underwritten Public Offering.
For purposes of determining whether holders have joined in a request pursuant to
this Section 7.01, each holder of Registrable Securities shall be entitled to
------------
one vote for each share of Common Stock constituting Registrable Securities then
outstanding.
(c) Additional Conditions and Limitations Relating to Requested
-----------------------------------------------------------
Registrations. The registration rights granted by Section 7.01(a) are subject
- ------------- ----------------
to the following additional conditions and limitations:
(i) Notwithstanding the receipt of a request for a registration
under Section 7.01(a), Holding shall always have the right
---------------
to initiate a primary offering of its securities at any
time. If Holding elects to do so, it may either (A)
postpone the filing of a Registration Statement in response
to such request for up to ninety (90) calendar days after
receipt of such request for registration, or (B) include the
securities
- 10 -
<PAGE>
subject to the request in such Registration Statement as a
registration pursuant to Section 7.02, while providing each
------------
holder of Registrable Securities the opportunity to withdraw
such Registrable Securities from the offering;
(ii) Notwithstanding anything to the contrary contained herein,
no request may be made under Section 7.01(a) within ninety
---------------
(90) days after the effective date of a registration
statement filed by Holding covering an underwritten public
offering or within one hundred eighty (180) days after the
effective date of any previous registration statement filed
in connection with a Requested Registration; and
(iii) Notwithstanding the provisions of this Section 7.01,
-------------
Holding's obligation to file a Registration Statement, or
cause such Registration Statement to become and remain
effective, shall be suspended for a period not to exceed
ninety (90) calendar days in any 12-month period if, in the
good faith opinion of Holding's Board of Directors, filing
such Registration Statement or causing it to become or
remain effective would adversely affect a material
financing, acquisition, disposition of assets or stock,
merger or other comparable transaction or would require
Holding to make public disclosure of information the public
disclosure of which would have a material adverse effect
upon Holding.
(d) Rights if Registration Request Withdrawn. In the event the
----------------------------------------
request for a registration made pursuant to Section 7.01(a) is withdrawn in
---------------
accordance with this Agreement, Requesting Holders shall be entitled to make a
subsequent request under Section 7.01(a).
---------------
(e) Registration Expenses. All Registration Expenses incurred in
---------------------
connection with Requested Registrations pursuant to this Section 7.01 shall be
------------
paid by Holding.
(f) Priority in Cutback Registrations. If a Requested Registration
---------------------------------
becomes a Cutback Registration, Holding will include in any such registration to
the extent of the number which the Managing Underwriter advises Holding can be
sold in such offering (the "Underwriters Maximum Number"), first , the
--------------------------- -----
Registrable Securities requested to be included in such registration by the
Initiating Holders, or if all such Registrable Securities exceed the
Underwriters Maximum Number, allocated pro rata among the
--- ----
- 11 -
<PAGE>
Initiating Holders on the basis of the number of Registrable Securities
requested to be included therein by each such holder, and, to the extent the
Underwriters Maximum Number is not fully allotted to the Initiating Holders,
second, any Registrable Securities requested to be included by holders thereof
- ------
other than the Initiating Holders, and third, any equity securities requested to
-----
be included in such registration by Holding and any other holders of such
securities, allocated as determined by Holding subject to any agreements between
Holding and any such holders. If the Initiating Holders are unable to register
at least the lesser of (A) 50% of the number of Registrable Securities then held
by them, or (B) 80% of the Registrable Securities which they have requested to
be registered, then such registration shall not count as a Requested
Registration for the purposes of this Section 7.01, and the Requesting Holders
------------
will be entitled to request the registration of their Registrable Securities on
an additional occasion.
(g) Registration Statement Form. Requested Registrations shall be on
---------------------------
such appropriate registration form promulgated by the Commission as shall be
selected by Holding, and shall be reasonably acceptable to the holders of a
majority of the Registrable Securities to which such registration relates, and
shall permit the disposition of such Registrable Securities in accordance with
the intended method or methods specified in their request for such registration.
7.02 Piggyback Registrations.
-----------------------
(a) Right to Include Registrable Securities. Notwithstanding any
---------------------------------------
limitation contained in Section 7.01, if Holding at any time proposes after the
------------
date hereof to effect a Piggyback Registration, including in accordance with
Section 7.01(c)(i), it will each such time give written notice (a "Notice of
- -------------------- ---------
Piggyback Registration") at least 20 days prior to the anticipated filing date,
- ----------------------
to all holders of Registrable Securities of its intention to do so and of such
holders' rights under this Section 7.02, which Notice of Piggyback Registration
------------
shall include a description of the intended method of disposition of such
securities. Upon the written request of any such holder made within 10 days
after receipt of a Notice of Piggyback Registration (which request shall specify
the Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), Holding will use its best efforts to
include in the registration statement relating to such Piggyback Registration
all Registrable Securities which Holding has been so requested to register.
Notwithstanding the foregoing, if, at any time after giving a Notice of
Piggyback Registration and prior to the effective date of the registration
statement filed in connection with such registration, Holding shall determine
for any reason not to register or to delay registration of such securities,
Holding may, at its election, give written notice of such determination to each
holder of Registrable Securities and, thereupon, (i) in the case of a
- 12 -
<PAGE>
determination not to register, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not from
its obligation to pay the Registration Expenses in connection therewith) without
prejudice, however, to the rights of any Requesting Holder entitled to do so to
request that such registration be effected as a Requested Registration under
Section 7.01, and (ii) in the case of a determination to delay registering,
- ------------
shall be permitted to delay registering any Registrable Securities for the same
period as the delay in registering such other securities. No registration
effected under this Section 7.02 shall relieve Holding of its obligations to
------------
effect a Requested Registration under Section 7.01.
------------
(b) Registration Expenses. All Registration Expenses incurred in
---------------------
connection with Piggyback Registrations pursuant to this Section 7.02 shall be
------------
paid by Holding.
(c) Priority in Cutback Registrations. If a Piggyback Registration
---------------------------------
becomes a Cutback Registration, Holding will include in such registration to the
extent of the amount of the securities which the Managing Underwriter advises
Holding can be sold in such offering:
(i) if such registration as initially proposed by Holding was solely
a primary registration of its securities, (x) first, the securities
-----
proposed by Holding to be sold for its own account, and (y) second, any
------
Registrable Securities requested to be included in such registration by
Requesting Holders, any Lender Investor Requested Securities (together with
such Registrable Securities, the "DNL/Lender Investor Securities")and any
------------------------------
other securities of Holding proposed to be included in such registration
(1) as between the DNL/Lender Investor Securities and such other
securities, pro rata on the basis of the numbers of the DNL/Lender Investor
--- ----
Securities and such other securities, respectively, (2) as between such
Registrable Securities and any Lender Investor Requested Securities, pro
---
rata on the basis of (A) in the case of Registrable Securities, 50.98% of
----
the number of Registrable Securities requested to be included by such
holders and (B) in the case of Lender Investor Requested Securities, the
sum of the Lender Investor Requested Securities and 49.02% of the
Registrable Securities requested to be included by such holders, (3) as
among such Registrable Securities, pro rata on the basis of the number of
--- ----
Registrable Securities requested to be included by such holders and (4) as
among such other securities, allocated among the holders thereof in
accordance with the priorities then existing among Holding and such
holders; and
(ii) if such registration as initially proposed by Holding was in
whole or in part requested by holders of securities of Holding, other than
holders of Registrable Securities in their capacities as such, pursuant to
demand
- 13 -
<PAGE>
registration rights, (x) first, such securities held by the holders
-----
initiating such registration and, if applicable, any securities proposed by
Holding to be sold for its own account, allocated in accordance with the
priorities then existing among Holding and such holders, and (y) second,
------
any Registrable Securities requested to be included in such registration by
Requesting Holders and any other securities of Holding proposed to be
included in such registration (1) as between such Registrable Securities
and such other securities, pro rata on the basis of the numbers of such
--- ----
Registrable Securities and such other securities, respectively, (2) as
among such Registrable Securities, pro rata on the basis of the number of
--- ----
Registrable Securities requested to be included by such holders and (3) as
among such other securities, allocated among the holders thereof in
accordance with the priorities then existing among Holding and the holders
of such other securities;
and any securities so excluded shall be withdrawn from and shall not be included
in such Piggyback Registration.
7.03 Registration Procedures. If and whenever Holding is required to
-----------------------
use its best efforts to effect the registration of any Registrable Securities
under the Securities Act pursuant to Section 7.01 or Section 7.02, Holding will
------------ ------------
use its best efforts to effect the registration and sale of such Registrable
Securities in accordance with the intended methods of disposition thereof
specified by the Requesting Holders. Without limiting the foregoing, Holding in
each such case will, as expeditiously as possible:
(a) prepare and file with the Commission (as promptly as practicable
after Holding's receipt of the request therefor from the Requesting
Holders) the requisite registration statement to effect such registration
and use its best efforts to cause such registration statement to become
effective, provided that as far in advance as practical before filing such
--------
registration statement or any amendment thereto, Holding will furnish to
the Requesting Holders copies of reasonably complete drafts of all such
documents proposed to be filed (including exhibits), and any such holder
shall have the opportunity to object to any information pertaining solely
to such holder that is contained therein and Holding will make the
corrections reasonably requested by such holder with respect to such
information prior to filing any such registration statement or amendment;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and any prospectus used in
connection therewith as may be necessary to maintain the effectiveness of
such registration statement and to comply with the provisions of the
Securities Act with respect to the disposition of all
- 14 -
<PAGE>
Registrable Securities covered by such registration statement, in
accordance with the intended methods of disposition thereof, until the
earlier of (i) such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement and (ii) 180 days
after such registration statement becomes effective; provided, however,
-------- -------
that such 180 day period shall be extended for a period of time equal to
the period the holder during such 180 day period refrains from selling any
securities included in such registration in accordance with the provisions
of Section 7.05;
------------
(c) promptly notify each Requesting Holder and the underwriter or
underwriters, if any:
(i) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has been
filed and, with respect to such registration statement or any post-
effective amendment thereto, when the same has become effective;
(ii) of any written comments from the Commission with respect to
any filing referred to in clause (i) and of any written request by the
Commission for amendments or supplements to such registration
statement or prospectus;
(iii) of the notification to Holding by the Commission of its
initiation of any proceeding with respect to the issuance by the
Commission of, or of the issuance by the Commission of, any stop order
suspending the effectiveness of such registration statement; and
(iv) of the receipt by Holding of any notification with respect to
the suspension of the qualification of any Registrable Securities for
sale under the applicable securities or blue sky laws of any
jurisdiction;
(d) furnish to each seller of Registrable Securities covered by such
registration statement such number of conformed copies of such registration
statement and of each amendment and supplement thereto (in each case
including all exhibits and documents incorporated by reference), such
number of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any
other prospectus filed under Rule 424 promulgated under the Securities Act
relating to such holder's Registrable Securities, and such other documents,
as such seller may
- 15 -
<PAGE>
reasonably request to facilitate the disposition of its Registrable
Securities;
(e) use its best efforts to register or qualify all Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each holder thereof
shall reasonably request, to keep such registration or qualification in
effect for so long as such registration statement remains in effect, and
take any other action which may be reasonably necessary or advisable to
enable such holder to consummate the disposition in such jurisdictions of
the Registrable Securities owned by such holder, except that Holding shall
not for any such purpose be required (i) to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not
but for the requirements of this paragraph (e) be obligated to be so
-------------
qualified, (ii) to subject itself to taxation in any such jurisdiction or
(iii) to consent to general service of process in any jurisdiction;
(f) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
each holder thereof to consummate the disposition of such Registrable
Securities;
(g) furnish to each Requesting Holder a signed counterpart, addressed
to such holder (and the underwriters, if any), of
(i) an opinion of counsel for Holding, dated the effective date
of such registration statement (or, if such registration includes an
underwritten Public Offering, dated the date of any closing under the
underwriting agreement), reasonably satisfactory in form and substance
to such holder, and
(ii) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten Public Offering, dated the date of any closing under the
underwriting agreement), signed by the independent public accountants
who have certified Holding's financial statements included in such
registration statement,
in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the
case of the accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten Public
- 16 -
<PAGE>
Offerings of securities and, in the case of the accountants' letter, such
other financial matters, as such holder (or the underwriters, if any) may
reasonably request;
(h) notify each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event as a result of which any prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and at the request of any such
holder promptly prepare and furnish to such holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(i) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, but not more than
eighteen (18) months, beginning with the first full calendar month after
the effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 promulgated thereunder;
(j) make available for inspection by any Requesting Holder, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or any such underwriter (collectively, the "Inspectors"), all
----------
financial and other records, pertinent corporate documents and properties
of Holding (collectively, the "Records") as shall be reasonably necessary
-------
to enable them to exercise their due diligence responsibility, and cause
Holding's officers, directors and employees to supply all information
reasonably requested by any such Inspector in connection with such
registration statement, and permit the Inspectors to participate in the
preparation of such registration statement and any prospectus contained
therein and any amendment or supplement thereto to the extent they
reasonably request. Records which Holding determines, in good faith, to be
confidential and which it notifies the Inspectors are confidential shall
not be disclosed by the Inspectors unless (i) the disclosure of such
Records is
- 17 -
<PAGE>
necessary to avoid or correct a misstatement or omission in the
registration statement, (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction or (iii) the information in such Records has been made
generally available to the public. The seller of Registrable Securities
agrees by acquisition of such Registrable Securities that it will, upon
learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to Holding and allow Holding, at Holding's
expense, to undertake appropriate action to prevent disclosure of the
Records deemed confidential;
(k) provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement; and
(l) use its best efforts to cause all Registrable Securities covered
by such registration statement to be listed, upon official notice of
issuance, on any securities exchange or system on which any of the
securities of the same class as the Registrable Securities are then listed
or traded, or if the same class of securities is not then listed, to use
its best efforts to effect a listing on a national securities exchange or
system.
Holding may require each holder of Registrable Securities as to which
any registration is being effected to, and each such holder, as a condition to
including Registrable Securities in such registration, shall, furnish Holding
with such information and affidavits regarding such holder and the distribution
of such securities as Holding may from time to time reasonably request in
writing in connection with such registration.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from Holding of the
happening of any event of the kind described in paragraph (h), such holder will
-------------
forthwith discontinue such holder's disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities
until such holder's receipt of the copies of the supplemented or amended
prospectus contemplated by paragraph (h) and, if so directed by Holding, will
--------------
deliver to Holding (at Holding's expense) all copies, other than permanent file
copies, then in such holder's possession of the prospectus relating to such
Registrable Securities current at the time of receipt of such notice. In the
event Holding shall give any such notice, the period referred to in paragraph
---------
(b) shall be extended by a number of days equal to the number of days during the
- ---
period from and including the giving of notice pursuant to paragraph (h) and to
--------------
and including the date when each holder of any
- 18 -
<PAGE>
Registrable Securities shall receive the copies of the supplemented or amended
prospectus contemplated by paragraph (h).
-------------
7.04 Underwritten Offerings.
----------------------
(a) Underwritten Requested Offerings. In the case of any
--------------------------------
underwritten Public Offering being effected pursuant to a Requested
Registration, the Managing Underwriter and any other underwriter or underwriters
with respect to such offering shall be selected, after consultation with
Holding, by the holders of a majority of the Registrable Securities to be
included in such underwritten offering with the consent of Holding, which
consent shall not be unreasonably withheld. Holding shall enter into an
underwriting agreement in customary form with such underwriter or underwriters,
which shall include, among other provisions, indemnities to the effect and to
the extent provided in Section 7.07. Subject to the following sentence,
--------------
holders of Registrable Securities to be distributed by such underwriters shall
be parties to such underwriting agreement and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, Holding to and for the benefit of such underwriters also be made to
and for their benefit and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement also be
conditions precedent to their obligations. No holder of Registrable Securities
shall be required to make any representations or warranties to or agreements
with Holding or the underwriters other than representations, warranties or
agreements regarding such holder and its ownership of the securities being
registered on its behalf and such holder's intended method of distribution and
any other representation required by law. Subject to the preceding sentence, no
Requesting Holder may participate in such underwritten offering unless such
holder agrees to sell its Registrable Securities on the basis provided in such
underwriting agreement and completes and executes all questionnaires, powers of
attorney, indemnities and other documents reasonably required under the terms of
such underwriting agreement. If any Requesting Holder disapproves of the terms
of an underwriting, such holder may elect to withdraw therefrom and from such
registration by notice to Holding and the Managing Underwriter, and each of the
remaining Requesting Holders shall be entitled to increase the number of
Registrable Securities being registered to the extent of the Registrable
Securities so withdrawn in the proportion which the number of Registrable
Securities being registered by such remaining Requesting Holder bears to the
total number of Registrable Securities being registered by all such remaining
Requesting Holders.
(b) Underwritten Piggyback Offerings. If Holding at any time
--------------------------------
proposes to register any of its securities in a Piggyback Registration and such
securities are to be distributed by or through one or more underwriters, Holding
will, subject to the provisions of Section 7.02(c), use its best efforts, if
---------------
- 19 -
<PAGE>
requested by any holder of Registrable Securities, to arrange for such
underwriters to include the Registrable Securities to be offered and sold by
Requesting Holders among the securities to be distributed by such underwriters,
and such holders shall be obligated to sell their Registrable Securities in such
Piggyback Registration through such underwriters on the same terms and
conditions as apply to the other securities of Holding to be sold by such
underwriters in connection with such Piggyback Registration. Subject to the
following sentence, the holders of Registrable Securities to be distributed by
such underwriters shall be parties to the underwriting agreement between Holding
and such underwriter or underwriters and may, at their option, require that any
or all of the representations and warranties by, and the other agreements on the
part of, Holding to and for the benefit of such underwriters also be made to and
for their benefit and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement also be
conditions precedent to their obligations. No holder of Registrable Securities
shall be required to make any representations or warranties to or agreements
with Holding or the underwriters other than representations, warranties or
agreements regarding such holder and its ownership of the securities being
registered on its behalf and such holder's intended method of distribution and
any other representation required by law. Subject to the preceding sentence, no
Requesting Holders may participate in such underwritten offering unless such
holder agrees to sell its Registrable Securities on the basis provided in such
underwriting agreement and completes and executes all questionnaires, powers of
attorney, indemnities and other documents reasonably required under the terms of
such underwriting agreement. If any Requesting Holder disapproves of the terms
of an underwriting, such holder may elect to withdraw therefrom and from such
registration by notice to Holding and the Managing Underwriter, and each of the
remaining Requesting Holders shall be entitled to increase the number of
Registrable Securities being registered to the extent of the Registrable
Securities so withdrawn in the proportion which the number of Registrable
Securities being registered by such remaining Requesting Holder bears to the
total number of Registrable Securities being registered by all such remaining
Requesting Holders.
7.05 Holdback Agreements.
-------------------
(a) By the Holders of Registrable Securities. Unless the Managing
----------------------------------------
Underwriter (or, in the case of a non-underwritten Public Offering, Holding)
otherwise agrees, each holder of Registrable Securities, by acquisition of such
Registrable Securities, agrees not to effect any public sale or distribution
(including a sale under Rule 144, Rule 144A or Regulation S) of such securities
during the 10 days prior to and the 90 days after the effective date of any
registration statement filed by Holding in connection with a primary offering
of Common Stock on behalf of Holding (or for such shorter period of time as is
sufficient
- 20 -
<PAGE>
and appropriate, in the opinion of the Managing Underwriter (or, in the case of
a non-underwritten Public Offering, Holding), in order to complete the sale and
distribution of the securities included in such registration), except as part of
such registration statement, whether or not such holder participates in such
registration, provided, however , that all holders of Common Stock of Holding
-------- -------
enter into agreements with Holding having terms substantially similar to this
Section 7.05(a).
- ---------------
(b) By Holding and Other Securityholders. Unless the Managing
------------------------------------
Underwriter otherwise agrees, Holding agrees (x) not to effect any public sale
or distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the 10 days prior to and
the 90 days after the effective date of the registration statement filed in
connection with an underwritten offering made pursuant to a Requested
Registration (or for such shorter period of time as is sufficient and
appropriate, in the opinion of the Managing Underwriter, in order to complete
the sale and distribution of the securities included in such registration),
except as part of such underwritten registration and except pursuant to
registrations on Form S-4 or Form S-8 promulgated by the Commission or any
successor or similar forms thereto, and (y) to cause each holder of its equity
securities, or of any securities convertible into or exchangeable or exercisable
for such securities, in each case purchased from Holding at any time after the
date of this Agreement (other than in a Public Offering), to agree, to the
extent permitted by law, not to effect any such public sale or distribution of
such securities (including a sale under Rule 144, Rule 144A or Regulation S),
during such period, except as part of such underwritten registration.
(c) Exception. The foregoing provisions of this Section 7.05 shall
--------- -------------
not apply to any holder of securities of Holding to the extent such holder is
prohibited by applicable law from agreeing to withhold from sale.
7.06 Registration Rights Transferable. The rights granted by this
--------------------------------
Agreement are transferable and shall inure to the benefit of Investor and all
subsequent holders of the Shares from time to time, subject in all events to the
last sentence of the definition of "Registrable Securities" in Section 8.01.
------------
7.07 Indemnification.
---------------
(a) Indemnification by Holding. Holding shall, to the full extent
--------------------------
permitted by law, indemnify and hold harmless each seller of Registrable
Securities included in any registration statement filed in connection with a
Requested Registration or a Piggyback Registration, its directors and officers,
and each other Person, if any, who controls any such seller within the meaning
of the Securities Act, against any Losses, claims, damages, expenses or
liabilities, joint or several (together, "Losses"), to which such seller or any
------
such director or officer
- 21 -
<PAGE>
or controlling Person may become subject under the Securities Act or otherwise,
insofar as such Losses (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made) not
misleading, or any violation (or alleged violation) by Holding of any provision
of the Securities Act, or any rule or regulation promulgated under the
Securities Act, applicable to Holding in connection with any such registration,
qualification or compliance, and Holding will reimburse such seller and each
such director, officer and controlling Person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such Loss (or action or proceeding in respect thereof); provided
--------
that Holding shall not be liable in any such case to the extent that any such
Loss (or action or proceeding in respect thereof) arises out of or is based upon
(x) an untrue statement or alleged untrue statement or omission or alleged
omission made in any such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information as to the matters referred to in the fourth
sentence of Section 7.04(a) or the third sentence of Section 7.04(b), furnished
--------------- ---------------
to Holding through an instrument duly executed by such seller specifically
stating that it is for use in the preparation thereof or (y) such seller's
failure to send or give a copy of the final prospectus to the Persons asserting
an untrue statement or alleged untrue statement or omission or alleged omission
at or prior to the written confirmation of the sale of Registrable Securities to
such Person if such statement or omission was corrected in such final
prospectus. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such seller or any such director,
officer or controlling Person, and shall survive the transfer of such securities
by such seller. Holding shall also indemnify each other Person who participates
(including as an underwriter) in the offering or sale of Registrable Securities,
their officers and directors and each other Person, if any, who controls any
such participating Person within the meaning of the Securities Act to the same
extent as provided above with respect to sellers of Registrable Securities.
(b) Indemnification by the Sellers of Registrable Securities. Each
--------------------------------------------------------
holder of Registrable Securities which are included or are to be included in any
registration statement filed in connection with a Requested Registration or a
Piggyback Registration, as a condition to including Registrable Securities in
such registration statement, shall, to the full extent permitted by law,
indemnify and hold harmless Holding, its
- 22 -
<PAGE>
directors and officers, and each other Person, if any, who controls Holding
within the meaning of the Securities Act, against any Losses to which Holding or
any such director or officer or controlling Person may become subject under the
Securities Act or otherwise, insofar as such Losses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of a prospectus, in the light of the circumstances under
which they were made) not misleading, if such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information as to the matters referred to in the fourth
sentence of Section 7.04(a) or the third sentence of Section 7.04(b), furnished
--------------- ---------------
to Holding through an instrument duly executed by such seller specifically
stating that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement; provided, that the liability of a holder for indemnity under this
--------
Section 7.07(b) shall not exceed the gross proceeds from the offering received
- ---------------
by such holder. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of Holding or any such director,
officer or controlling Person and shall survive the transfer of such securities
by such seller. Such holders shall also indemnify each other Person who
participates (including as an underwriter) in the offering or sale of
Registrable Securities, their officers and directors and each other Person, if
any, who controls any such participating Person within the meaning of the
Securities Act to the same extent as provided above with respect to Holding.
(c) Notices of Claims, etc. Promptly after receipt by an Indemnified
-----------------------
Party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding paragraph (a) or (b) of this Section 7.07,
-------------------- ------------
such Indemnified Party will, if a claim in respect thereof is to be made against
an Indemnifying Party pursuant to such paragraphs, give written notice to the
latter of the commencement of such action, provided that the failure of any
--------
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under the preceding paragraphs of this
Section 7.07, except to the extent that the Indemnifying Party is actually
- ------------
prejudiced by such failure to give notice. In case any such action is brought
against an Indemnified Party, the Indemnifying Party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
Indemnifying Party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such Indemnified Party, and after notice from
the Indemnifying Party to such Indemnified Party of
- 23 -
<PAGE>
its election so to assume the defense thereof, the Indemnifying Party shall not
be liable to such Indemnified Party for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof other
than reasonable costs of investigation; provided that the Indemnified Party may
---------
participate in such defense at the Indemnified Party's expense; and provided
--------
further that the Indemnified Party or Indemnified Parties shall have the right
- -------
to employ one counsel to represent it or them if, in the reasonable judgment of
the Indemnified Party or Indemnified Parties, it is advisable for it or them to
be represented by separate counsel by reason of having legal defenses which are
different from or in addition to those available to the Indemnifying Party, and
in that event the reasonable fees and expenses of such one counsel shall be paid
by the Indemnifying Party. If the Indemnifying Party is not entitled to, or
elects not to, assume the defense of a claim, it will not be obligated to pay
the fees and expenses of more than one counsel for the Indemnified Parties with
respect to such claim, unless in the reasonable judgment of any Indemnified
Party a conflict of interest may exist between such Indemnified Party and any
other Indemnified Parties with respect to such claim, in which event the
Indemnifying Party shall be obligated to pay the fees and expenses of such
additional counsel for the Indemnified Parties or counsels. No Indemnifying
Party shall consent to entry of any judgment or enter into any settlement
without the consent of the Indemnified Party which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. No Indemnifying Party shall be subject to any liability for any
settlement made without its consent, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing sentence, if at any time an Indemnified
Party or any person who controls an Indemnified Party shall have requested an
Indemnifying Party to reimburse an Indemnified Party or such control person for
reasonable fees and expenses actually incurred by counsel for which such
Indemnified Party or person is entitled to be so reimbursed pursuant to this
Agreement, the Indemnifying Party agrees that it shall be liable for any
settlement of any proceeding affected without its consent if (i) such settlement
is entered into more than 60 days after receipt by such Indemnifying Party of
the aforesaid request and (ii) such Indemnifying Party shall not have reimbursed
the Indemnified Party or such control person in accordance with such request
prior to the date of such settlement; provided, however, that the Indemnifying
-------- -------
Party shall not be liable for any settlement effected without its consent
pursuant to this sentence if the Indemnifying Party is contesting, in good
faith, the request for reimbursement and shall have reimbursed all amounts not
so contested.
(d) Contribution. If the indemnity and reimbursement obligation
------------
provided for in any paragraph of this Section 7.07 is unavailable or
------------
insufficient to hold harmless an Indemnified Party in respect of any Losses (or
actions or proceedings in respect thereof) referred to therein, then the
Indemnifying Party shall contribute to the amount paid or payable by the
Indemnified Party
- 24 -
<PAGE>
as a result of such Losses (or actions or proceedings in respect thereof) in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and the Indemnified Party on the other hand
in connection with statements or omissions which resulted in such Losses, as
well as any other relevant equitable considerations. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Indemnifying Party or the
Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The parties hereto agree that it would not be just and equitable if
contributions pursuant to this paragraph were to be determined by pro rata
--- ----
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the first sentence of this
paragraph. The amount paid by an Indemnified Party as a result of the Losses
referred to in the first sentence of this paragraph shall be deemed to include
any legal and other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any Loss which is the subject of this
paragraph.
No Indemnified Party guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from the Indemnifying Party if the Indemnifying Party was not
guilty of such fraudulent misrepresentation.
(e) Other Indemnification. Indemnification similar to that specified
---------------------
in the preceding paragraphs of this Section 7.07 (with appropriate
------------
modifications) shall be given by Holding and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation of any governmental
authority other than the Securities Act. The provisions of this Section 7.07
------------
shall be in addition to any other rights to indemnification or contribution
which an Indemnified Party may have pursuant to law, equity, contract or
otherwise.
(f) Indemnification Payments. The indemnification required by this
------------------------
Section 7.07 shall be made by periodic payments of the amount thereof during the
- ------------
course of the investigation or defense, as and when bills are received or Losses
are incurred.
7.08 Covenants Relating to Rule 144. If at any time Holding is
------------------------------
required to file reports in compliance with either Section 13 or Section 15(d)
of the Exchange Act, Holding will file reports in compliance with the Exchange
Act, and will, at its expense, forthwith upon the request of any holder of
Registrable Securities, deliver to such holder a certificate, signed by
Holding's principal financial officer, stating (a) Holding's name, address and
telephone number (including area
- 25 -
<PAGE>
code), (b) Holding's Internal Revenue Service identification number, (c)
Holding's Commission file number, (d) the number of shares of each class of
capital stock outstanding as shown by the most recent report or statement
published by Holding, and (e) whether Holding has filed the reports required to
be filed under the Exchange Act for a period of at least ninety (90) days prior
to the date of such certificate and in addition has filed the most recent annual
report required to be filed thereunder.
7.09 Other Registration Rights.
-------------------------
(a) No Existing Agreements. Holding represents and warrants to the
----------------------
holders of Registrable Securities that there is not in effect on the date hereof
any agreement by Holding pursuant to which any holders of securities of Holding
have a right to cause Holding to register or qualify such securities under the
Securities Act or any securities or blue sky laws of any jurisdiction other than
as set forth in Schedule I hereto. None of such agreements conflicts or is
inconsistent with any provision of this Agreement.
(b) Future Agreements. Holding shall not hereafter agree with the
-----------------
holders of any securities issued or to be issued by Holding to register or
qualify such securities under the Securities Act or any securities or blue sky
laws of any jurisdiction unless such agreement specifically provides that (i)
such holder of such securities may not participate in any Requested Registration
except as provided in Section 7.01; and (ii) the holder of such securities may
------------
not participate in any Piggyback Registration except as provided in Section
-------
7.02, and (iii) the Investors may participate in any registration initiated by
such holders on terms consistent with Section 7.02(c)(ii).
-------------------
(c) Best Registration Rights. If Holding grants to any Person other
------------------------
than a holder of Registrable Securities (an " Other Holder") with respect to any
-------------
security issued by Holding registration rights that provide for terms that,
taken as a whole, are materially more favorable to the Other Holder than the
terms granted to the holders of the Registrable Securities (or if Holding amends
or waives any provision of any agreement providing registration rights to an
Other Holder or takes any other action whatsoever to provide for terms with
respect to registration rights that in either case results in the terms with
respect to registration rights of an Other Holder, taken as a whole, being
materially more favorable to such Other Holder than the terms provided to the
holders of Registrable Securities), then Holding shall promptly so notify the
holders of Registrable Securities in writing and, if the holders of a majority
of the Registrable Securities shall notify Holding not later than 30 days after
their receipt of such notice from Holding that such holders elect to amend this
Agreement as hereinafter provided, this Agreement shall as promptly as
practicable thereafter be amended to conform the provisions of this Article VII
as closely as practicable to the registration rights of such Other Holder.
- 26 -
<PAGE>
ARTICLE VIII
PREEMPTIVE RIGHTS
8.01 Preemptive Rights upon Common Stock Distribution.
------------------------------------------------
(a) If Holding shall after the date hereof issue or otherwise sell or
distribute any shares of Common Stock or Options for cash other than (i)
pursuant to Options, (ii) to employees and directors, or to a fiduciary acting
on behalf of employees and directors, of Holding and its direct and indirect
subsidiaries in circumstances determined in good faith by the Board of Directors
of Holding to be in the best interests of Holding and its subsidiaries, all of
which issuances, sales, distributions and grants pursuant to this subclause (ii)
will not result in the issuance, sale, distribution or grant after the date
hereof to such employees and directors pursuant to this subclause (ii) of in
excess of 10% of the outstanding Common Stock in the aggregate, (iii) in
connection with any recapitalization, stock dividend, stock split or the like in
which all holders of Common Stock are treated on an equal basis, (iv) the
issuance of Common Stock pursuant to this Section 8.01, or (v) the issuance of
------------
Common Stock pursuant to the Lender Subscription Agreements (any such event,
other than those described in subclauses (i) through (v) above, being referred
to herein as a "Common Stock Distribution"), then, effective as of the Common
-------------------------
Stock Distribution, the Holders shall have the right to participate in such
Common Stock Distribution in the manner set forth below.
(b) Not less than 20 Business Days prior to any Common Stock
Distribution referred to in Section 8.01(a) above, Holding will give written
notice thereof (a "Distribution Notice") to Investor. Such Distribution Notice
-------------------
shall name the Person or Persons to whom such Common Stock Distribution is
proposed to be made (the "Purchasers") and specify the price and other terms and
----------
conditions of such Common Stock Distribution. If Investor elects to participate
in such Common Stock Distribution it shall give written notice of its election
to participate in such Common Stock Distribution to Holding not later than 10
Business Days after its receipt of a Distribution Notice.
(c) In the event of such a Common Stock Distribution, Holding may, at
its option (i) reduce the number of shares of Common Stock or units of Options,
as the case may be, to be sold to the Purchasers pursuant to such Common Stock
Distribution by, and sell to each Electing Holder upon the same terms and
conditions applicable to the Purchasers, that number of shares of Common Stock
or units of Options, as the case may be, derived by multiplying the total number
of shares of Common Stock or units of Options, as the case may be, to be sold in
such Common Stock Distribution, by the Electing Holder's Ownership Interest (as
defined below), rounded to the nearest whole number or (ii) in addition to the
Common Stock or units of Options, as the case may be, to be sold to the
Purchasers pursuant to such Common Stock Distribution, sell to Investor, upon
the same terms and
- 27 -
<PAGE>
conditions applicable to the Purchasers, that number of shares of Common Stock
or units of Options, as the case may be, equal to the excess of (A) the number
of shares of Common Stock or units of Options, as the case may be, derived by
multiplying the number of shares of Common Stock outstanding, on a fully-diluted
basis, after giving effect to such Common Stock Distribution to the Purchasers,
by the Investor's Ownership Interest, rounded to the nearest whole number over
(B) the number of shares of Common Stock held by such Holder, on a fully-diluted
basis, immediately prior to the Common Stock Distribution to the Purchasers.
For purposes of this Section, "Ownership Interest" means (x) the sum of the
------------------
total number of shares of Common Stock owned by Investor, divided by (y) the sum
of the total number of shares of Common Stock outstanding, in both instances,
immediately prior to the proposed Common Stock Distribution.
(d) All shares of Common Stock or Options issued upon the application
of this Section shall be validly issued, fully paid and nonassessable and free
from all preemptive rights of any stockholder, and from all taxes, liens and
charges with respect to the issue thereof (other than transfer taxes).
(e) After such time as Holding has completed a public offering of
Common Stock pursuant to the Securities Act of 1993, as amended, Holding shall
not be required to issue fractions of shares of Common Stock pursuant to this
Section. If, after such time, any fraction of a share would, but for this
paragraph (e), be issuable upon any application of this Section, in lieu of such
fractional share Holding shall pay to the Holder, in cash, an amount equal to
such fraction price per share of the Common Stock being sold pursuant to such
Common Stock Distribution. Prior to such time as Holding has completed such a
public offering of Common Stock, Holding shall not, in lieu of issuing any
fraction of a share of Common Stock, pay to the Holder, in cash or other
consideration, an amount equal to such fraction price per share of the Common
Stock being sold pursuant to such Common Stock Distribution; provided, however,
-------- -------
if Investor consents to such a payment in lieu of the issuance of such fraction
of a share, Holding may, at its option, make such a payment.
(f) Each certificate for shares of Common Stock issued pursuant to
this Section, unless at the time of exercise such shares are registered under
the Securities Act of 1933, as amended, shall bear the legend as provided in
Section 4.01 until such time as the shares are registered under the Securities
- ------------
Act or sold pursuant to Rule 144 thereunder.
8.02 Article III Definitions. For purposes of this Article VIII the
----------------------- ------------
following terms have the following respective meanings:
"Common Stock Distribution" has the meaning ascribed to it in Section
------------------------- -------
8.01(a).
- -------
- 28 -
<PAGE>
"Convertible Securities" means any stock or other securities
----------------------
convertible into, exercisable for or exchangeable into shares of Common Stock of
Holding.
"Holder" means a holder of Shares.
------
"Options" means any rights to subscribe for or to purchase, or any
-------
warrants or options for the purchase of, shares of Common Stock, or any rights,
warrants or options to purchase Convertible Securities, pursuant to any
agreement which relates in whole or in part to the Common Stock.
"Ownership Interest" has the meaning ascribed to it in Section
------------------ -------
8.01(c).
ARTICLE IX
DEFINITIONS
8.01 Definitions. Except as otherwise specifically indicated,
-----------
the following terms will have the following meanings for all purposes of this
Agreement:
"Acquisition Corp." means DNL Savannah Acquisition Corp., a Delaware
-----------------
corporation.
"Affiliate" means with respect to any Person, any other Person
---------
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such Person.
"Agreement" means this Subscription Agreement, as the same shall be
---------
amended from time to time.
"Business Day" means a day other than Saturday, Sunday or any other
------------
day on which banks located in New York City are authorized or obligated to
close.
"Class A Common Stock" has the meaning ascribed to it in the forepart
--------------------
of this Agreement.
"Class B Common Stock" has the meaning ascribed to it in Section 2.03.
--------------------
"Closing" has the meaning ascribed to it in Section 1.03.
------- ------------
"Closing Date" means the date of the Closing.
------------
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time and the regulations promulgated thereunder.
"Commission" means the United States Securities and Exchange
----------
Commission, or any successor governmental agency or authority.
- 29 -
<PAGE>
"Common Stock" means shares of Class A Common Stock or Class B Common
------------
Stock, as constituted on the date hereof, and any stock into which such Class A
Common Stock or Class B Common Stock shall have been changed or any stock
resulting from any reclassification of such Class A Common Stock or Class B
Common Stock.
"Company" means Aminco, Inc., a Delaware corporation.
-------
"Contract" means any agreement, lease, license, evidence of
--------
Indebtedness, mortgage, indenture, security agreement or other contract.
"Credit Agreement" has the meaning ascribed to it in Section 2.08.
---------------- -------------
"Cutback Registration" means any Requested Registration or Piggyback
--------------------
Registration to be effected as an underwritten Public Offering in which the
Managing Underwriter with respect thereto advises Holding and the Requesting
Holders in writing that, in its opinion, the number of securities requested to
be included in such registration (including securities of Holding which are not
Registrable Securities) exceed the number which can be sold in such offering
without a material reduction in the selling price anticipated to be received for
the securities to be sold in such Public Offering.
"DNL/Lender Investor Securities" has the meaning ascribed in Section
------------------------------ -------
7.02(b)(i).
- ----------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated thereunder.
"GAAP" means generally accepted accounting principles in the United
----
States of America as in effect from time to time.
"Holding" has the meaning ascribed to it in the preamble.
-------
"Indebtedness" of any Person means all obligations of such Person (i)
------------
for borrowed money, (ii) evidenced by noted, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any Person.
"Indemnified Party" means a party entitled to indemnity in accordance
-----------------
with Section 7.07.
------------
"Indemnifying Party" means a party obligated to provide indemnity in
------------------
accordance with Section 7.07.
------------
- 30 -
<PAGE>
"Initiating Holders" means any holder or holders of Registrable
------------------
Securities making a written request pursuant to Section 7.01 for the
-------------
registration of Registrable Securities.
"Inspectors" has the meaning ascribed to it in Section 7.03(j).
---------- ---------------
"Investor" has the meaning ascribed to it in the preamble.
--------
"IPO" has the meaning ascribed to it in Section 7.01(a).
--- ---------------
"Lender Investor Requested Securities" means, with respect to any
------------------------------------
Piggyback Registration, any securities of Holding requested to be included in
such registration by the Lender Investors, pursuant to the agreement or
agreements between the Lender Investors and Holding providing for registration
rights.
"Lender Investors" means the parties, other than Holding, to the
----------------
Lender Subscription Agreement.
"Lender Subscription Agreements" means the two Subscription Agreements
------------------------------
each dated as of the date hereof by and between Holding and, respectively, (i)
Indosuez Carson Partners and Indosuez CM II, Inc. and (ii) Indosuez CM II, Inc.
and three other investors.
"Liens" means any mortgage, pledge, assessment, security interest,
-----
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract to give any of the foregoing, but excluding, in
the case of securities, restrictions under the Securities Act on the sale of
such securities.
"Losses" has the meaning ascribed to it in Section 7.07(a).
------ ----------------
"Managing Underwriter" means, with respect to any Public Offering, the
--------------------
underwriter or underwriters managing such Public Offering.
"Morgan" means [TO COME].
------
"NASD" means the National Association of Securities Dealers, Inc.
----
"Notice of Piggyback Registration" has the meaning ascribed to it in
--------------------------------
Section 7.02(a).
- ---------------
"Notice of Requested Registration" has the meaning ascribed to it in
--------------------------------
Section 7.01(a).
- ---------------
- 31 -
<PAGE>
"Person" means any natural person, corporation, general partnership,
------
limited partnership, proprietorship, other business organization, trust, union
or association.
"Piggyback Registration" means any registration of equity securities
----------------------
of Holding of the same class as the Registrable Securities under the Securities
Act (other than a registration in respect of a dividend reinvestment or similar
plan for stockholders of Holding or on Form S-4 or Form S-8 promulgated by the
Commission, or any successor or similar forms thereto), whether for sale for the
account of Holding or for the account of any holder of securities of Holding
(other than Registrable Securities), including a registration by Holding under
the circumstances described in Section 7.01(c)(i).
------------------
"Public Offering" means any offering of Common Stock to the public,
---------------
either on behalf of Holding or any of its securityholders, pursuant to an
effective registration statement under the Securities Act.
"Purchase Price" has the meaning ascribed to it in Section 1.02.
-------------- -------------
"Records" has the meaning ascribed to it in Section 7.03(j).
------- ---------------
"Registrable Securities" means (i) the Shares, (ii) any additional
----------------------
shares of Class A Common Stock issued or distributed by way of a dividend, stock
split or other distribution in respect of the Shares or acquired by way of any
rights offering or similar offering made in respect of the Shares. As to any
particular Registrable Securities, such securities shall cease to be Registrable
Securities (i) when a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, (ii) when they shall have been distributed to the public pursuant to
Rule 144, or (iii) when they shall have ceased to be outstanding.
"Registration Expenses" means all expenses incident to Holding's
---------------------
performance of or compliance with its obligations under this Agreement to effect
the registration of Registrable Securities in a Requested Registration or a
Piggyback Registration, including, without limitation, all registration, filing,
securities exchange listing and NASD fees, all registration, filing,
qualification and other fees and expenses of complying with securities or blue
sky laws, all word processing, duplicating and printing expenses, messenger and
delivery expenses, the fees and disbursements of counsel for Holding and of its
independent public accountants, including the expenses of any special audits or
"cold comfort" letters required by or incident to such performance and
compliance, the reasonable fees and disbursements of a single counsel retained
by the holders of a majority of Registrable Securities being registered,
premiums and other costs of policies of insurance against
- 32 -
<PAGE>
liabilities arising out of the Public Offering of the Registrable Securities
being registered and any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any, in respect of Registrable Securities,
which shall be payable by each holder thereof.
"Regulation S" means Regulation S promulgated by the Commission under
------------
the Securities Act, and any successor provision thereto.
"Requested Registration" means any registration of Registrable
----------------------
Securities under the Securities Act effected in accordance with Section 7.01.
------------
"Requesting Holders" means, with respect to any Requested Registration
------------------
or Piggyback Registration, the holders of Registrable Securities requesting to
have Registrable Securities included in such registration in accordance with
this Agreement.
"Rule 144" means Rule 144 promulgated by the Commission under the
--------
Securities Act, and any successor provision thereto.
"Rule 144A" means Rule 144A promulgated by the Commission under the
---------
Securities Act, and any successor provision thereto.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder.
"Sellers" has the meaning ascribed thereto in the Stock Purchase
-------
Agreement.
"Senior Subordinated Note Agreement" has the meaning ascribed to it in
----------------------------------
Section 2.08.
- ------------
"Shares" has the meaning ascribed to it in the preamble.
------
"Stock Purchase Agreement" means the Stock Purchase Agreement dated as
------------------------
of May 11, 1995, as amended, by and between Acquisition Corp., the Sellers named
therein, and the Company.
8.02 Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; and (iv) the term "Section" refers to the specified
Section of this Agreement. Whenever this Agreement refers to a number of days,
such number shall refer to calendar days unless Business Days are specified.
Any representation or warranty contained herein as to the enforceability of a
Contract shall be subject to the effect of any bankruptcy, insolvency,
reorganization, moratorium or other similar law affecting the enforcement of
creditors' rights
- 33 -
<PAGE>
generally and to general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
ARTICLE X
MISCELLANEOUS
10.01 Notices. All notices, requests and other communications
-------
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
If to Holding, to:
DNL Savannah Holding Corp.
1 Morningside Drive, North
Suite 200
Westport, Connecticut 06880
Facsimile No.: (203) 226-8011
Attn: Vincent A. Wasik
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Facsimile No.: (212) 530-5219
Attn: G. Malcolm Holderness, Esq.
and Robert E. Rice, Esq.
If to Investor to:
DNL Partners, Limited Partnership
c/o DNL Group, L.L.C.
1 Morningside Drive North
Suite 200
Westport, Connecticut 06880
Facsimile No.: (203) 226-8011
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 10.01 be deemed given
--------------
upon delivery, (ii) if delivered by facsimile transmission to the facsimile
number as provided in this Section 10.01 be deemed given upon receipt, and (iii)
-------------
if delivered by mail in the manner described above to the address as provided in
this Section 10.01 be deemed given upon receipt (in each case regardless of
-------------
whether such notice, request or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this Section
-------
10.01). Any party from time to time may change its address, facsimile number or
- -----
other information for the purpose of notices to that
- 34 -
<PAGE>
party by giving notice specifying such change to the other parties hereto.
10.02 Entire Agreement. This Agreement supersedes all prior
----------------
discussions and agreements between the parties with respect to the subject
matter hereof, and contains the sole and entire agreement between the parties
hereto with respect to the subject matter hereof.
10.03 Amendment. This Agreement may be amended, supplemented or
---------
modified only by a written instrument (which may be executed in any number of
counterparts) duly executed by or on behalf of each of Holding and Investor.
10.04 Waiver. Any term or condition of this Agreement may be waived
------
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same term or condition of
this Agreement on any future occasion.
10.05 No Third Party Beneficiary. The terms and provisions of this
--------------------------
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under Section 7.07.
------------
10.06 Successors and Assigns. This Agreement is binding upon, inures
----------------------
to the benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
10.07 Headings. The headings used in this Agreement have been
--------
inserted for convenience of reference only and do not define or limit the
provisions hereof.
10.08 Invalid Provisions. If any provision of this Agreement is held
------------------
to be illegal, invalid or unenforceable under any present or future law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
10.09 Remedies. Except as otherwise expressly provided for herein,
--------
no remedy conferred by any of the specific
- 35 -
<PAGE>
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise. The election of any one or more remedies by any party
hereto shall not constitute a waiver by any such party of the right to pursue
any other available remedies.
Damages in the event of breach of this Agreement by a party hereto
would be difficult, if not impossible, to ascertain, and it is therefore agreed
that each such Person, in addition to and without limiting any other remedy or
right it may have, will have the right to an injunction or other equitable
relief in any court of competent jurisdiction, enjoining any such breach, and
enforcing specifically the terms and provisions hereof, and Holding and
Investor, by its acquisition of its Registrable Securities, hereby waive any and
all defenses they may have on the ground of lack of jurisdiction or competence
of the court to grant such an injunction or other equitable relief. The
existence of this right will not preclude any such Person from pursuing any
other rights and remedies at law or in equity which such Person may have.
10.10 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
10.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
- 36 -
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first above written.
DNL SAVANNAH HOLDING CORP.
By: _________________________
Name: Vincent A. Wasik
Title: Chairman of the
Board and President
DNL PARTNERS, LIMITED PARTNERSHIP
By: DNL GROUP, L.L.C.
its General Partner
By:__________________________
Name: Vincent A. Wasik
Title: Managing Member
- 37 -
<PAGE>
SCHEDULE I
Certain Agreements Referred to in Section 7.09(a)
-------------------------------------------------
1. This Agreement.
2 The Lender Agreements.
3. The Registration Rights Agreement (as defined in
the Stock Purchase Agreement).
4. The Registration Rights Agreement dated as of the date hereof between
Holding and Dr. Leroy Keith.
<PAGE>
EXHIBIT 10.17
SUBSCRIPTION AGREEMENT
dated as of August 23, 1995
by and among
DNL SAVANNAH HOLDING CORP.,
INDOSUEZ CARSON PARTNERS
and
INDOSUEZ CM II, INC.
with respect to shares of the
capital stock of
DNL SAVANNAH HOLDING CORP.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
PURCHASE AND SALE......................................... 1
1.01 Issuance of Shares............................. 1
1.02 Purchase Price................................. 2
1.03 Closing........................................ 2
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF HOLDING...... 2
2.01 Corporate Existence............................ 2
2.02 Authority...................................... 2
2.03 Capital Stock; the Shares...................... 3
2.04 Regarding the Stock Purchase Agreement......... 3
2.05 Regarding the Credit Agreement and the Senior
Subordinated Note Agreement.................... 4
2.06 Ownership of Stock of Acquisition Corp......... 4
2.07 Ownership of Stock of the Company.............. 4
2.08 Conduct of Business............................ 4
2.09 No Conflicts................................... 4
2.10 Financial Statements........................... 5
2.11 Investment Company Act......................... 5
2.12 Further Assurances............................. 5
2.13 Dividend Payment by Wire Transfer.............. 6
2.14 Sales of Stock by Holding...................... 6
2.15 Transactions with Affiliates................... 6
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH INVESTOR 6
3.01 Corporate Power................................ 7
3.02 Authority...................................... 7
3.03 Investment Representations and Agreement....... 7
3.04 No Conflicts................................... 7
ARTICLE IV
LEGENDS................................................... 8
4.01 Legends........................................ 8
ARTICLE V
CONDITIONS TO OBLIGATIONS OF HOLDING...................... 8
5.01 Representations and Warranties................. 8
5.02 Closing........................................ 8
(i)
<PAGE>
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF INVESTOR..................... 8
6.01 Representations and Warranties................. 9
6.02 Officers' Certificate.......................... 9
6.03 Closing........................................ 9
6.04 Opinion of Counsel............................. 9
ARTICLE VII
REGISTRATION RIGHTS....................................... 9
7.01 Requested Registrations........................ 9
(a) Registration Requests...................... 9
(b) Limitations on Requested Registrations..... 10
(c) Additional Conditions and Limitations
Relating to Requested Registrations 11..... 11
(d) Rights if Registration Request Withdrawn... 12
(e) Registration Expenses...................... 12
(f) Priority in Cutback Registrations.......... 12
(g) Registration Statement Form................ 13
7.02 Piggyback Registrations........................ 13
(a) Right to Include Registrable Securities.... 13
(b) Registration Expenses...................... 14
(c) Priority in Cutback Registrations.......... 14
7.03 Registration Procedures........................ 15
7.04 Underwritten Offerings......................... 19
(a) Underwritten Requested Offerings........... 19
(b) Underwritten Piggyback Offerings........... 20
7.05 Holdback Agreements............................ 21
(a) By the Holders of Registrable Securities... 21
(b) By Holding and Other Securityholders....... 21
(c) Exception.................................. 22
7.06 Registration Rights Transferable............... 22
7.07 Indemnification................................ 22
(a) Indemnification by Holding................. 22
(b) Indemnification by the Sellers of Registrable
Securities................................. 23
(c) Notices of Claims, etc..................... 24
(d) Contribution............................... 25
(e) Other Indemnification...................... 26
(f) Indemnification Payments................... 26
7.08 Covenants Relating to Rule 144................. 26
7.09 Other Registration Rights...................... 26
(a) No Existing Agreements..................... 26
(b) Future Agreements.......................... 26
(c) Best Registration Rights................... 27
ARTICLE VIII
DEFINITIONS............................................... 27
8.01 Definitions.................................... 27
(ii)
<PAGE>
ARTICLE IX
MISCELLANEOUS............................................. 32
9.01 Notices........................................ 32
9.02 Entire Agreement............................... 33
9.03 Amendment...................................... 33
9.04 Waiver......................................... 33
9.05 No Third Party Beneficiary..................... 34
9.06 Successors and Assigns......................... 34
9.07 Headings....................................... 34
9.08 Invalid Provisions............................. 34
9.09 Remedies....................................... 34
9.10 Governing Law.................................. 35
9.11 Counterparts................................... 35
SCHEDULES AND EXHIBITS
SCHEDULE I Investors
SCHEDULE II Certain Agreements
EXHIBIT A Officer's Certificate
EXHIBIT B Secretary's Certificate
(iii)
<PAGE>
This SUBSCRIPTION AGREEMENT, dated as of August 23, 1995, is made and
entered into by and between DNL Savannah Holding Corp., a Delaware corporation
("Holding"), Indosuez Carson Partners, a Delaware general partnership ("ICP"),
------- ---
and Indosuez CM II, Inc., a Delaware corporation ("ICM II") and a wholly owned
------
subsidiary of Banque Indosuez ("Indosuez"), (each of ICP and ICM II being
referred to herein as an "Investor" and together the "Investors"). Capitalized
-------- ---------
terms not otherwise defined herein have the meanings set forth in Section 8.01.
------------
WHEREAS, Holding desires to issue and sell, and ICP desires to
purchase, 50 newly issued shares (the "ICP Shares") of the Class B Common Stock,
----------
par value $.01 per share, of Holding ("Class B Common Stock") that will, after
--------------------
giving effect to the issuance of other shares of the Common Stock of Holding to
be issued on the Closing Date, constitute 5.00% of the outstanding Common Stock
of Holding, on the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, Holding desires to issue 40.5 shares of Class B Common Stock
to ICM II (the "ICM II Shares", together with the ICP Shares the "Shares") for
------------- ------
services rendered to Holding by Indosuez, New York Branch, that will, after
giving effect to the issuance of other shares of the Common Stock of Holding to
be issued on the Closing Date, constitute 4.05% of the outstanding Common Stock
of Holding on the terms and subject to the conditions set forth in this
Agreement.
WHEREAS, the consideration to Holding in exchange for the Shares, as
contemplated by Article I, is made pursuant to one overall plan, together with
---------
other transfers to Holding by other Persons in exchange for shares of capital
stock of Holding to occur on the Closing Date, and such issuances are intended
to constitute a transaction in which, pursuant to Section 351 of the Code, no
gain or loss is recognized.
NOW, THEREFORE, in consideration of the mutual covenants and agreement
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE
1.01 Issuance of Shares. (a) Holding agrees to issue and sell to
------------------
ICP, and ICP agrees to purchase from Holding the number of ICP Shares set forth
opposite its name in Schedule I hereto.
----------
(b) Holding agrees to issue to ICM II for services rendered to
Holding by Indosuez, and ICM II agrees to accept as
<PAGE>
compensation for such services the number of ICM II Shares set forth opposite
its name in Schedule I hereto.
1.02 Purchase Price. (a) The purchase price for the ICP Shares (the
--------------
"Purchase Price") shall be one million dollars ($1,000,000), payable in
--------------
immediately available United States funds at the Closing in the manner provided
in Section 1.03.
------------
(b) It is agreed that the consideration received by Holding for the
ICM II Shares in the form of services rendered to Holding by Indosuez is at
least one cent ($.01) per share.
1.03 Closing. The closing (the "Closing") of the transactions
------- -------
contemplated by this Article I will take place at the offices of Milbank, Tweed,
---------
Hadley & McCloy, 1 Chase Manhattan Plaza, New York, New York 10005, or at such
other place as Holding and each Investor agrees, simultaneously with the
Closing, as that term is defined in the Stock Purchase Agreement. At the
Closing, (a) each Investor will pay its portion of the Purchase Price to Holding
by wire transfer of immediately available funds to such account as Holding may
reasonably direct by written notice delivered to each Investor by Holding at
least two (2) Business Days before the Closing Date and (b) Holding shall issue
and sell to Investor Shares, free and clear of all liens, by delivery to each
Investor of a certificate representing such Investors Shares registered in the
name of such Investor, with requisite stock transfer tax stamps, if any,
attached the obligations of each Investor under this Agreement shall be several
and not joint and no Investor shall be liable or responsible for the acts of the
other Investor. Such certificates representing the Shares shall bear the
endorsements provided for in Section 4.01. At the Closing, there shall also be
------------
delivered to the parties the opinion and certificates to be delivered under
Articles V and VI.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF HOLDING
A. Holding hereby represents and warrants to Investor that:
2.01 Corporate Existence. Holding is a corporation duly
-------------------
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Holding has full power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby.
2.02 Authority. The execution and delivery by Holding of this
---------
Agreement, and the performance by Holding of its obligations hereunder, have
been duly and validly authorized by the Board of Directors of Holding, no other
corporate action on the part of Holding or its stockholders being necessary.
This Agreement has been duly and validly executed and delivered by
- 2 -
<PAGE>
Holding and constitutes a legal, valid and binding obligation of Holding
enforceable against Holding in accordance with its terms. Holding has, prior to
the execution of this Agreement, furnished to Investors copies of the Restated
Certificate of Incorporation of Holding, and no changes to such Restated
Certificate of Incorporation have been made.
2.03 Capital Stock; the Shares. The authorized capital stock of
-------------------------
Holding consists exclusively of 20,000 shares of Class A Common Stock, par value
$.01 per share ("Class A Common Stock"), and 10,000 shares of Class B Common
--------------------
Stock. As of the Closing Date, giving effect to the issuance of all shares of
the Common Stock of Holding (including the Shares) to be issued on the Closing
Date, the Shares will constitute 9.05% of the outstanding Common Stock of
Holding. The delivery to each Investor of a certificate at the Closing
representing such Investors Shares in the manner provided in Section 1.03 will
------------
transfer to such Investor good and valid title to such Investor's Shares, free
and clear of all Liens. Upon such delivery and upon payment for the Shares as
contemplated by Section 1.03, the Shares will be validly issued, fully paid and
-------------
nonassessable.
2.04 Regarding the Stock Purchase Agreement.
--------------------------------------
(a) The Stock Purchase Agreement constitutes a legal, valid and
binding obligation of Acquisition Corp., enforceable against Acquisition Corp.
in accordance with its terms.
(b) The representations and warranties made by Acquisition Corp. in
the Stock Purchase Agreement are true and correct, in all material respects, on
and as of the dates made and as of the date hereof and will be true and correct
in all material respects as of the Closing Date.
(c) To the best knowledge of Holding, the Stock Purchase Agreement
constitutes a legal, valid and binding obligation of the Sellers and the
Company, enforceable against the Sellers and the Company in accordance with its
terms.
(d) To the best knowledge of Holding, the representations and
warranties made by the Sellers and the Company in the Stock Purchase Agreement
are true and correct, in all material respects, on and as of the dates made and
as of the date hereof and will be true and correct in all material respects as
of the Closing Date. Prior to entering into the Stock Purchase Agreement,
Acquisition Corp. conducted, including by the use of outside counsel and
accountants, what it believed to be reasonable due diligence with respect to the
Company and its subsidiaries.
(e) True and complete copies of the Stock Purchase Agreement, the
Disclosure Schedule, the Purchaser Disclosure Schedule (as those terms are
defined in the Stock Purchase Agreement), and the financial statements referred
to in Section
- 3 -
<PAGE>
2.14(a) of the Stock Purchase Agreement, have been furnished to Investors prior
to the execution of this Agreement.
2.05 Regarding the Credit Agreement and the Senior Subordinated Note
---------------------------------------------------------------
Agreement. The Credit Agreement and the Senior Subordinated Note Agreement
- ---------
constitute legal, valid, binding and enforceable obligations of Acquisition
Corp., enforceable against Acquisition Corp. in accordance with their respective
terms.
2.06 Ownership of Stock of Acquisition Corp. Holding owns all of the
--------------------------------------
issued and outstanding capital stock of Acquisition Corp., beneficially and of
record, free and clear of all Liens except, as of the Closing Date, for a pledge
thereof pursuant to the Credit Agreement.
2.07 Ownership of Stock of the Company. After the post-closing
---------------------------------
merger referred to in Section 1.06 of the Stock Purchase Agreement, whereby
Acquisition Corp. shall merge itself into the Company, Holding will own all of
the issued and outstanding capital stock of the Company, beneficially and of
record, free and clear of all Liens except for a pledge thereof pursuant to the
Credit Agreement.
2.08 Conduct of Business. Holding has, since its incorporation,
-------------------
conducted no business except (a) the acquisition of all of the issued and
outstanding capital stock of Acquisition Corp., (b) the transactions
contemplated by the Stock Purchase Agreement, the Credit Agreement (the "Credit
------
Agreement") dated as of August 23, 1995 between Acquisition Corp., Indosuez, as
- ---------
Agent, and the Lending Institutions listed therein, and the Note Purchase
Agreement dated as of August 23, 1995 (the "Senior Subordinated Note Agreement")
----------------------------------
between Acquisition Corp. and the Purchasers named therein, and (c) the offering
and sale of Holding's stock in transactions not involving a public offering.
2.09 No Conflicts. The execution, delivery and performance by
------------
Holding of this Agreement and the consummation of the transactions contemplated
hereby do not and will not: (a) require any consent or approval that has not
been obtained and each such consent and approval that has been obtained is in
full force and effect, (b) conflict with, result in a breach of, or constitute a
default under, any law or any regulation, rule or order of any governmental body
to which Holding is subject, the certificate of incorporation or bylaws of
Holding or any indenture or loan or credit agreement or any other agreement,
lease or instrument to which Holding is a party or by which it or its property
may be bound or affected or (c) result in, or create any Lien upon or with
respect to any of the property now owned or hereafter acquired by Holding.
B. Holding covenants and agrees with each Investor as follows
(except, as to a particular Investor, as otherwise agreed or consented to or
waived in writing by such Investor):
- 4 -
<PAGE>
2.10 Financial Statements. (a) Holding will, until the occurrence
--------------------
of an IPO or the time when Holding otherwise becomes subject to the periodic
reporting requirements of the Exchange Act, furnish to each Investor as soon as
available and in any event within 90 days after the close of each fiscal year of
Holding, the consolidated balance sheets of Holding and its Subsidiaries as at
the end of such fiscal year and the related consolidated statements of income,
of shareholders' equity and of cash flows for such fiscal year, setting forth
comparative consolidated figures for the preceding fiscal year (other than in
the case of the first fiscal year of Holding when no such comparative figures
shall be required), and a report on such consolidated balance sheets and
financial statements by independent certified public accountants of recognized
national standing, which report shall not be qualified as to the scope of audit
and shall state that such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Holding and its
Subsidiaries as at the dates indicated and the results of their operations and
their cash flows for the periods indicated in conformity with GAAP applied on a
basis consistent with prior years (except for such changes with which the
independent certified public accountants concur) and that the examination by
such accountants was conducted in accordance with generally accepted auditing
standards.
(b) Holding will, until the occurrence of an IPO or the time when
Holding otherwise becomes subject to the periodic reporting requirements of the
Exchange Act, furnish to each Investor as soon as practicable and in any event
within 45 days after the end of the first full fiscal quarter ending after the
Closing Date and each fiscal quarter thereafter, (i) the consolidated balance
sheet of Holding and its Subsidiaries as at the end of such period and (ii) the
related consolidated statements of income and cash flows of Holding in the form
customarily prepared by management, in each case for such fiscal quarter and for
the period from the beginning of the then current fiscal year to the end of such
fiscal quarter, setting forth in comparative form the same information for the
corresponding periods of the prior fiscal year together with a brief narrative
discussion and analysis prepared by management describing the Company's results
of operations for such fiscal quarter.
2.11 Investment Company Act. Holding shall not register as, or
----------------------
conduct its business or take any action that would cause it to become or be
deemed to be, an investment company as defined in the Investment Company Act of
1940, as amended.
2.12 Further Assurances. Holding shall promptly execute and deliver
------------------
all further instruments and documents, and take all further action, that the
Investors, individually or collectively, may reasonably request in order more
fully to give effect to the provisions of this Agreement.
- 5 -
<PAGE>
2.13 Dividend Payment by Wire Transfer. Holding shall pay dividends
---------------------------------
payable with respect to the Shares, if any, by wire transfer of immediately
available funds to the account of the applicable Investor reasonably specified
by such Investor to Holding.
2.14 Sales of Stock by Holding. Holding and any Person acting on
-------------------------
Holding's behalf shall not sell, offer, attempt to offer or solicit an offer to
buy stock of Holding (a) except in a transaction registered or exempt from
registration under the Securities Act and (b) in any manner that would cause the
sale of the stock to the Investors, pursuant to this Agreement to fail to
qualify as an exempted transaction under the Securities Act. Holding will
provide to the Investors a copy of any agreement or other evidence of the terms
on which it is selling its Common Stock to others and shall not sell stock to
any Person other than as contemplated in this Agreement, the Other Subscription
Agreement or such other terms as are disclosed to the Investors.
2.15 Transactions with Affiliates. Holding will not, and will not
----------------------------
permit any subsidiary of Holding to, enter into any transaction or series of
transactions, whether or not in the ordinary course of business, with any holder
(excluding Morgan or Indosuez) of 5% or more of any class of equity securities
of Holding or with any Affiliate of Holding other than on terms and conditions
substantially as favorable to Holding or such subsidiary as would be obtainable
by Holding or such subsidiary at the time in a comparable arm's-length
transaction with a Person other than a holder of 5% or more of any class of
equity securities of Holding or an Affiliate of Holding; provided that the
--------
foregoing restrictions shall not apply to (i) transactions between Holding and
any of its Wholly Owned Subsidiaries (as defined in the Senior Subordinated Note
Purchase Agreement) and between Wholly Owned Subsidiaries (as so defined), (ii)
the payment of reasonable fees to Indosuez and its Affiliates for financial
services, such fees not to exceed the usual and customary fees for similar
services, (iii) transactions, including the issuance of capital stock of Holding
or any of its subsidiaries, pursuant to any pension, stock option, profit
sharing or other employee benefit plan or agreement of Holding or any of its
subsidiaries in the ordinary course of business, (iv) the Management Assistance
Agreement between Morningside Capital Group LLC and the Company (as renamed
Carson Products Company) dated as of the Closing Date, and (v) this Agreement,
the Other Subscription Agreement, the Partnership Subscription Agreement and the
Stock Purchase Agreement and the transactions contemplated thereby.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH INVESTOR
Each Investor, severally and not jointly, hereby represents and
warrants, as of the date hereof and as of the
- 6 -
<PAGE>
Closing Date, and (as to Section 3.03) covenants to Holding that, as to itself:
------------
3.01 Corporate Power. Each Investor has full power and authority to
---------------
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby.
3.02 Authority. The execution and delivery by Investor of this
---------
Agreement, and the performance by each Investor of its obligations hereunder,
have been duly and validly authorized by all necessary corporate or partnership
action, as the case may be, no other action on the part of any Investor being
necessary. This Agreement has been duly and validly executed and delivered by
Investor and constitutes a legal, valid and binding obligation of Investor
enforceable against Investor in accordance with its terms.
3.03 Investment Representations and Agreement. Investor understands
----------------------------------------
that the Shares have not been registered under the Securities Act. Investor is
acquiring the Shares for Investor's own account, for investment and not with a
view to the distribution thereof; provided, that the disposition of each
--------
Investor's property and the property of any accounts for which such Investor is
acting as fiduciary or agent shall at all times be and remain within the control
of that Investor and each Investor may at any time and from time to time sell
some or all of its Shares in its sole discretion, subject to applicable law.
Investor agrees that Investor will not, and understands that under the
Securities Act Investor may not, sell or otherwise dispose of any of the Shares
except pursuant to an effective registration statement under the Securities Act
or in a transaction exempt from the registration requirements of the Securities
Act.
3.04 No Conflicts. The execution, delivery and performance by
------------
Investor of this Agreement and the consummation of the transactions contemplated
hereby do not and will not: (a) require any consent or approval that has not
been obtained and each such consent and approval that has been obtained is in
full force and effect, (b) conflict with, result in a breach of, or constitute a
default under, any law or any regulation, rule or order of any governmental body
to which Investor is subject, the certificate of incorporation or bylaws, or
equivalent documents, of Investor or any indenture or loan or credit agreement
or any other agreement, lease or instrument to which Investor is a party or by
which it or its property may be bound or affected or (d) result in, or create
any Lien upon or with respect to any of the property now owned or hereafter
acquired by Investor.
3.05 Source of Funds. With respect to each source of funds to be
---------------
used by Investor to purchase the Shares hereunder (each being referred to as
"Equity Source"), at least one of the statements contained in clauses (i)
- ---------------
through (iv) of Section 2(f) of the Senior Subordinated Note Agreement (with
reference in such
- 7 -
<PAGE>
clauses to "Source" being deemed to be references to Equity Source) is accurate
as of the date hereof.
ARTICLE IV
LEGENDS
4.01 Legends. Each outstanding certificate representing Shares
-------
shall, until such Shares are sold in a Public Offering or pursuant to Rule 144,
bear endorsements reading substantially as follows:
The sale, assignment, pledge, encumbrance or other transfer of the
shares represented by this certificate is subject to the provisions of
a Subscription Agreement, dated as of August 23, 1995, among DNL
Savannah Holding Corp., Indosuez Carson Partners and to Indosuez CM
II, a copy of which is on file at the principal executive office of
DNL Savannah Holding Corp.
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
otherwise disposed of except pursuant to an effective registration
statement under such Act or in a transaction exempt from the
registration requirements of such Act.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF HOLDING
The obligations of Holding hereunder to issue and sell the Shares are
subject to the fulfillment of each of the following conditions (all or any of
which may be waived in whole or in part by Holding in its sole discretion):
5.01 Representations and Warranties. The representations and
------------------------------
warranties made by each Investor in this Agreement shall be true and correct, in
all material respects, on and as of the Closing Date as though made on and as of
the Closing Date.
5.02 Closing. The Closing (as defined in the Stock Purchase
-------
Agreement) shall have occurred, the Initial Loans (as defined in the Credit
Agreement) shall have been made and the closing of the initial purchase of the
Notes (as defined in the Senior Subordinated Note Agreement) shall have
occurred, all simultaneously with the Closing hereunder.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF INVESTOR
- 8 -
<PAGE>
The obligations of Investors hereunder to purchase the Shares are
subject to the fulfillment of each of the following conditions (all or any of
which may be waived in whole or in part by Investors in their sole discretion):
6.01 Representations and Warranties. The representations and
------------------------------
warranties made by Holding in this Agreement shall be true and correct, in all
material respects, on and as of the Closing Date as though made on and as of the
Closing Date.
6.02 Officers' Certificate. Holding shall have delivered to each
---------------------
Investor a certificate of Holding, dated the Closing Date, executed on its
behalf by the Chairman of the Board, the President or any Vice President of
Holding, substantially in the form of Exhibit A hereto, and a certificate of
---------
Holding, dated the Closing Date, executed on its behalf by the Secretary of
Holding, substantially in the form of Exhibit B hereto.
---------
6.03 Closing. The Closing (as defined in the Stock Purchase
-------
Agreement) shall have occurred, the Initial Loans (as defined in the Credit
Agreement) shall have been made and the closing of the initial purchase of the
Notes (as defined in the Senior Subordinated Note Agreement) shall have
occurred, all simultaneously with the Closing hereunder.
6.04 Opinion of Counsel. Each Investor shall have received the
------------------
opinion of Milbank, Tweed, Hadley & McCloy, counsel to Holding, dated the
Closing Date, substantially in the form and to the effect of Exhibit 5(j) to the
Credit Agreement.
ARTICLE VII
REGISTRATION RIGHTS
7.01 Requested Registrations.
-----------------------
(a) Registration Requests. At any time (subject to Sections 7.01(b)
---------------------
and (c)) after the earlier of (1) the time when Holding shall have effected a
Public Offering representing, together with any other Public Offerings effected
after the date hereof (with the number of shares sold in any such prior Public
Offering being appropriately adjusted for this purpose to reflect any
intervening recapitalization, stock dividend, stock split or reverse stock split
or the like as to Holding), a number of shares which, in the aggregate, is equal
to at least the lesser of five percent (5%) of the issued and outstanding shares
of Common Stock as of the time of the written request hereinafter referred to,
other than shares of Common Stock held in the treasury of Holding, and twenty
percent (20%) of the total shares of Common Stock originally issued and sold
under this Agreement and the Other Subscription Agreement (an "IPO"), and (2)
---
the fifth anniversary of the date of this Agreement, upon the written request of
one or more Initiating Holders requesting that Holding effect the registration
under the Securities Act of all or part
- 9 -
<PAGE>
of such Initiating Holders' Registrable Securities and specifying the number of
Registrable Securities to be registered and the intended method of disposition
thereof, Holding will promptly, and in no event more than ten (10) Business Days
after receipt of such request, give written notice (a "Notice of Requested
-------------------
Registration") of such request to all other holders of Registrable Securities,
- ------------
and thereupon will use its best efforts to effect the registration under the
Securities Act of
(i) the Registrable Securities which Holding has been so requested to
register by such Initiating Holder or Holders, and
(ii) all other Registrable Securities the holders of which have made
written requests to Holding for registration thereof within 10 days after
the giving of the Notice of Requested Registration (which requests shall
specify the intended method of disposition thereof),
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof) of the Registrable Securities so to be registered. If
requested by the holders of a majority of the Registrable Securities requested
to be included in any Requested Registration, the method of disposition of all
Registrable Securities included in such registration shall be an underwritten
offering effected in accordance with Section 7.04(a). Subject to Section
--------------- -------
7.01(f), Holding may include in such registration other securities of the same
- -------
class as the Registrable Securities for sale for its own account or for the
account of any other Person. Neither Holding nor any of its securityholders
shall have the right to include any securities of Holding (other than
Registrable Securities) in a registration statement to be filed as part of a
Requested Registration unless (i) such securities are of the same class as the
Registrable Securities, and (ii) if such Requested Registration is an
underwritten offering, Holding or such securityholders, as applicable, agree in
writing to sell, subject to Section 7.01(f), to their securities on the same
---------------
terms and conditions as apply to the Registrable Securities being sold. If any
securityholders of Holding (other than the holders of Registrable Securities in
such capacity) register securities of Holding in a Requested Registration in
accordance with this Section 7.01, such holders shall pay the fees and expenses
------------
of their counsel and their pro rata share, on the basis of the respective
--- ----
amounts of the securities included in such registration on behalf of each such
holder, of the Registration Expenses if the Registration Expenses for such
registration are not payable by Holding pursuant hereto.
(b) Limitations on Requested Registrations. Notwithstanding anything
--------------------------------------
herein to the contrary, Holding shall not be required to honor a request for a
Requested Registration if:
(i) the Registrable Securities requested by Initiating Holders
to be so registered do not
- 10 -
<PAGE>
constitute at least twenty percent (20%) of the aggregate
number of shares of Common Stock originally issued and sold
under this Agreement and the Other Subscription Agreement
(adjusted proportionately to reflect any recapitalization,
stock dividend, subdivision, stock split or reverse stock
split or the like effected with respect to the Common
Stock);
(ii) such request is received from any Requesting Holder with
respect to Registrable Securities that may immediately be
sold under Rule 144 in full during any ninety (90) day
period; or
(iii) the intended method of distribution requested is an initial
underwritten Public Offering, and Holding is unable to enter
into a firm commitment underwriting agreement with respect
to such Public Offering unless the Initiating Holders
consent to such registration being other than pursuant to an
underwritten Public Offering.
For purposes of determining whether holders have joined in a request pursuant to
this Section 7.01, each holder of Registrable Securities shall be entitled to
------------
one vote for each share of Common Stock constituting Registrable Securities then
outstanding.
(c) Additional Conditions and Limitations Relating to Requested
-----------------------------------------------------------
Registrations. The registration rights granted by Section 7.01(a) are subject
- ------------- ----------------
to the following additional conditions and limitations:
(i) Notwithstanding the receipt of a request for a registration
under Section 7.01(a), Holding shall always have the right
---------------
to initiate a primary offering of its securities at any
time. If Holding elects to do so, it may either (A)
postpone the filing of a Registration Statement in response
to such request for up to ninety (90) calendar days after
receipt of such request for registration, or (B) include the
securities subject to the request in such Registration
Statement as a registration pursuant to Section 7.02, while
------------
providing each holder of Registrable Securities the
opportunity to withdraw such Registrable Securities from the
offering;
(ii) Notwithstanding anything to the contrary contained herein,
no request may be made under Section 7.01(a) within ninety
---------------
(90) days after the effective date of a registration
- 11 -
<PAGE>
statement filed by Holding covering an underwritten public
offering or within one hundred eighty (180) days after the
effective date of any previous registration statement filed
in connection with a Requested Registration; and
(iii) Notwithstanding the provisions of this Section 7.01,
-------------
Holding's obligation to file a Registration Statement, or
cause such Registration Statement to become and remain
effective, shall be suspended for a period not to exceed
ninety (90) calendar days in any 12-month period if, in the
good faith opinion of Holding's Board of Directors, filing
such Registration Statement or causing it to become or
remain effective would adversely affect a material
financing, acquisition, disposition of assets or stock,
merger or other comparable transaction or would require
Holding to make public disclosure of information the public
disclosure of which would have a material adverse effect
upon Holding.
(d) Rights if Registration Request Withdrawn. In the event the
----------------------------------------
request for a registration made pursuant to Section 7.01(a) is withdrawn in
---------------
accordance with this Agreement, Requesting Holders shall be entitled to make a
subsequent request under Section 7.01(a).
---------------
(e) Registration Expenses. All Registration Expenses incurred in
---------------------
connection with Requested Registrations pursuant to this Section 7.01 shall be
------------
paid by Holding.
(f) Priority in Cutback Registrations. If a Requested Registration
---------------------------------
becomes a Cutback Registration, Holding will include in any such registration to
the extent of the number which the Managing Underwriter advises Holding can be
sold in such offering (the "Underwriters Maximum Number"), first , the
--------------------------- -----
Registrable Securities requested to be included in such registration by the
Initiating Holders, or if all such Registrable Securities exceed the
Underwriters Maximum Number, allocated pro rata among the Initiating Holders on
--- ----
the basis of the number of Registrable Securities requested to be included
therein by each such holder, and, to the extent the Underwriters Maximum Number
is not fully allotted to the Initiating Holders, second, any Registrable
------
Securities requested to be included by holders thereof other than the Initiating
Holders, and third, any equity securities requested to be included in such
-----
registration by Holding and any other holders of such securities, allocated as
determined by Holding subject to any agreements between Holding and any such
holders. If the Initiating Holders are unable to register at least the lesser
of (A) 50% of the number of Registrable Securities then held by them, or (B) 80%
of the Registrable
- 12 -
<PAGE>
Securities which they have requested to be registered, then such registration
shall not count as a Requested Registration for the purposes of this Section
-------
7.01, and the Requesting Holders will be entitled to request the registration of
- ----
their Registrable Securities on an additional occasion.
(g) Registration Statement Form. Requested Registrations shall be on
---------------------------
such appropriate registration form promulgated by the Commission as shall be
selected by Holding, and shall be reasonably acceptable to the holders of a
majority of the Registrable Securities to which such registration relates, and
shall permit the disposition of such Registrable Securities in accordance with
the intended method or methods specified in their request for such registration.
7.02 Piggyback Registrations.
-----------------------
(a) Right to Include Registrable Securities. Notwithstanding any
---------------------------------------
limitation contained in Section 7.01, if Holding at any time proposes after the
------------
date hereof to effect a Piggyback Registration, including in accordance with
Section 7.01(c)(i), it will each such time give written notice (a "Notice of
- -------------------- ---------
Piggyback Registration") at least 20 days prior to the anticipated filing date,
- ----------------------
to all holders of Registrable Securities of its intention to do so and of such
holders' rights under this Section 7.02, which Notice of Piggyback Registration
------------
shall include a description of the intended method of disposition of such
securities. Upon the written request of any such holder made within 10 days
after receipt of a Notice of Piggyback Registration (which request shall specify
the Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), Holding will use its best efforts to
include in the registration statement relating to such Piggyback Registration
all Registrable Securities which Holding has been so requested to register.
Notwithstanding the foregoing, if, at any time after giving a Notice of
Piggyback Registration and prior to the effective date of the registration
statement filed in connection with such registration, Holding shall determine
for any reason not to register or to delay registration of such securities,
Holding may, at its election, give written notice of such determination to each
holder of Registrable Securities and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not from
its obligation to pay the Registration Expenses in connection therewith) without
prejudice, however, to the rights of any Requesting Holder entitled to do so to
request that such registration be effected as a Requested Registration under
Section 7.01, and (ii) in the case of a determination to delay registering,
- ------------
shall be permitted to delay registering any Registrable Securities for the same
period as the delay in registering such other securities. No registration
effected under this Section 7.02 shall relieve Holding of its obligations to
------------
effect a Requested Registration under Section 7.01.
------------
- 13 -
<PAGE>
(b) Registration Expenses. All Registration Expenses incurred in
---------------------
connection with Piggyback Registrations pursuant to this Section 7.02 shall be
------------
paid by Holding.
(c) Priority in Cutback Registrations. If a Piggyback Registration
---------------------------------
becomes a Cutback Registration, Holding will include in such registration to the
extent of the amount of the securities which the Managing Underwriter advises
Holding can be sold in such offering:
(i) if such registration as initially proposed by Holding was solely
a primary registration of its securities, (x) first, the securities
-----
proposed by Holding to be sold for its own account, and (y) second, any
------
Registrable Securities requested to be included in such registration by
Requesting Holders, any DNL Requested Securities (together with such
Registrable Securities, the "DNL/Investor Securities")and any other
-----------------------
securities of Holding proposed to be included in such registration (1) as
between the DNL/Investor Securities and such other securities, pro rata on
--- ----
the basis of the numbers of the DNL/Investor Securities and such other
securities, respectively, (2) as between such Registrable Securities and
any DNL Requested Securities, pro rata on the basis of (A) in the case of
--- ----
Registrable Securities, the sum of the number of Registrable Securities
requested to be included by such holders and 49.02% of the DNL Requested
Securities and (B) in the case of DNL Requested Securities, 50.98% of the
DNL Requested Securities, (3) as among such Registrable Securities, pro
---
rata on the basis of the number of Registrable Securities requested to be
----
included by such holders and (4) as among such other securities, allocated
among the holders thereof in accordance with the priorities then existing
among Holding and such holders; and
(ii) if such registration as initially proposed by Holding was in
whole or in part requested by holders of securities of Holding, other than
holders of Registrable Securities in their capacities as such, pursuant to
demand registration rights, (x) first, such securities held by the holders
-----
initiating such registration and, if applicable, any securities proposed by
Holding to be sold for its own account, allocated in accordance with the
priorities then existing among Holding and such holders, and (y) second,
------
any Registrable Securities requested to be included in such registration by
Requesting Holders and any other securities of Holding proposed to be
included in such registration (1) as between such Registrable Securities
and such other securities, pro rata on the basis of the numbers of such
--- ----
Registrable Securities and such other securities, respectively, (2) as
among such registrable Securities, pro rata on the basis of the number of
--- ----
Registrable Securities requested to be included by such holders and (3) as
among such other securities, allocated among the holders thereof in
accordance with the priorities then existing among Holding and the holders
of such other securities;
- 14 -
<PAGE>
and any securities so excluded shall be withdrawn from and shall not be
included in such Piggyback Registration.
7.03 Registration Procedures. If and whenever Holding is required to
-----------------------
use its best efforts to effect the registration of any Registrable Securities
under the Securities Act pursuant to Section 7.01 or Section 7.02, Holding will
------------ ------------
use its best efforts to effect the registration and sale of such Registrable
Securities in accordance with the intended methods of disposition thereof
specified by the Requesting Holders. Without limiting the foregoing, Holding in
each such case will, as expeditiously as possible:
(a) prepare and file with the Commission (as promptly as practicable
after Holding's receipt of the request therefor from the Requesting
Holders) the requisite registration statement to effect such registration
and use its best efforts to cause such registration statement to become
effective, provided that as far in advance as practical before filing such
--------
registration statement or any amendment thereto, Holding will furnish to
the Requesting Holders copies of reasonably complete drafts of all such
documents proposed to be filed (including exhibits), and any such holder
shall have the opportunity to object to any information pertaining solely
to such holder that is contained therein and Holding will make the
corrections reasonably requested by such holder with respect to such
information prior to filing any such registration statement or amendment;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and any prospectus used in
connection therewith as may be necessary to maintain the effectiveness of
such registration statement and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement, in accordance with the
intended methods of disposition thereof, until the earlier of (i) such time
as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth
in such registration statement and (ii) 180 days after such registration
statement becomes effective; provided, however, that such 180 day period
-------- -------
shall be extended for a period of time equal to the period the holder
during such 180 day period refrains from selling any securities included in
such registration in accordance with the provisions of Section 7.05;
------------
(c) promptly notify each Requesting Holder and the underwriter or
underwriters, if any:
(i) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has been
filed and,
- 15 -
<PAGE>
with respect to such registration statement or any post-effective
amendment thereto, when the same has become effective;
(ii) of any written comments from the Commission with respect to
any filing referred to in clause (i) and of any written request by the
Commission for amendments or supplements to such registration
statement or prospectus;
(iii) of the notification to Holding by the Commission of its
initiation of any proceeding with respect to the issuance by the
Commission of, or of the issuance by the Commission of, any stop order
suspending the effectiveness of such registration statement; and
(iv) of the receipt by Holding of any notification with respect to
the suspension of the qualification of any Registrable Securities for
sale under the applicable securities or blue sky laws of any
jurisdiction;
(d) furnish to each seller of Registrable Securities covered by such
registration statement such number of conformed copies of such registration
statement and of each amendment and supplement thereto (in each case
including all exhibits and documents incorporated by reference), such
number of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any
other prospectus filed under Rule 424 promulgated under the Securities Act
relating to such holder's Registrable Securities, and such other documents,
as such seller may reasonably request to facilitate the disposition of its
Registrable Securities;
(e) use its best efforts to register or qualify all Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each holder thereof
shall reasonably request, to keep such registration or qualification in
effect for so long as such registration statement remains in effect, and
take any other action which may be reasonably necessary or advisable to
enable such holder to consummate the disposition in such jurisdictions of
the Registrable Securities owned by such holder, except that Holding shall
not for any such purpose be required (i) to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not
but for the requirements of this paragraph (e) be obligated to be so
-------------
qualified, (ii) to subject itself to taxation in any such jurisdiction or
(iii) to consent to general service of process in any jurisdiction;
- 16 -
<PAGE>
(f) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
each holder thereof to consummate the disposition of such Registrable
Securities;
(g) furnish to each Requesting Holder a signed counterpart, addressed
to such holder (and the underwriters, if any), of
(i) an opinion of counsel for Holding, dated the effective date
of such registration statement (or, if such registration includes an
underwritten Public Offering, dated the date of any closing under the
underwriting agreement), reasonably satisfactory in form and substance
to such holder, and
(ii) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten Public Offering, dated the date of any closing under the
underwriting agreement), signed by the independent public accountants
who have certified Holding's financial statements included in such
registration statement,
in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the
case of the accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten Public Offerings of securities and, in the
case of the accountants' letter, such other financial matters, as such
holder (or the underwriters, if any) may reasonably request;
(h) notify each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event as a result of which any prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and at the request of any such
holder promptly prepare and furnish to such holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements
- 17 -
<PAGE>
therein, in the light of the circumstances under which they were made, not
misleading;
(i) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, but not more than
eighteen (18) months, beginning with the first full calendar month after
the effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 promulgated thereunder;
(j) make available for inspection by any Requesting Holder, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or any such underwriter (collectively, the "Inspectors"), all
----------
financial and other records, pertinent corporate documents and properties
of Holding (collectively, the "Records") as shall be reasonably necessary
-------
to enable them to exercise their due diligence responsibility, and cause
Holding's officers, directors and employees to supply all information
reasonably requested by any such Inspector in connection with such
registration statement, and permit the Inspectors to participate in the
preparation of such registration statement and any prospectus contained
therein and any amendment or supplement thereto to the extent they
reasonably request. Records which Holding determines, in good faith, to be
confidential and which it notifies the Inspectors are confidential shall
not be disclosed by the Inspectors unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in the
registration statement, (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction or (iii) the information in such Records has been made
generally available to the public. The seller of Registrable Securities
agrees by acquisition of such Registrable Securities that it will, upon
learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to Holding and allow Holding, at Holding's
expense, to undertake appropriate action to prevent disclosure of the
Records deemed confidential;
(k) provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement; and
(l) use its best efforts to cause all Registrable Securities covered
by such registration statement to be listed, upon official notice of
issuance, on any securities exchange or system on which any of the
securities of the
- 18 -
<PAGE>
same class as the Registrable Securities are then listed or traded, or if
the same class of securities is not then listed, to use its best efforts to
effect a listing on a national securities exchange or system.
Holding may require each holder of Registrable Securities as to which
any registration is being effected to, and each such holder, as a condition to
including Registrable Securities in such registration, shall, furnish Holding
with such information and affidavits regarding such holder and the distribution
of such securities as Holding may from time to time reasonably request in
writing in connection with such registration.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from Holding of the
happening of any event of the kind described in paragraph (h), such holder will
-------------
forthwith discontinue such holder's disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities
until such holder's receipt of the copies of the supplemented or amended
prospectus contemplated by paragraph (h) and, if so directed by Holding, will
--------------
deliver to Holding (at Holding's expense) all copies, other than permanent file
copies, then in such holder's possession of the prospectus relating to such
Registrable Securities current at the time of receipt of such notice. In the
event Holding shall give any such notice, the period referred to in paragraph
---------
(b) shall be extended by a number of days equal to the number of days during the
- ---
period from and including the giving of notice pursuant to paragraph (h) and to
--------------
and including the date when each holder of any Registrable Securities shall
receive the copies of the supplemented or amended prospectus contemplated by
paragraph (h).
- -------------
7.04 Underwritten Offerings.
----------------------
(a) Underwritten Requested Offerings. In the case of any
--------------------------------
underwritten Public Offering being effected pursuant to a Requested
Registration, the Managing Underwriter and any other underwriter or underwriters
with respect to such offering shall be selected, after consultation with
Holding, by the holders of a majority of the Registrable Securities to be
included in such underwritten offering with the consent of Holding, which
consent shall not be unreasonably withheld. Holding shall enter into an
underwriting agreement in customary form with such underwriter or underwriters,
which shall include, among other provisions, indemnities to the effect and to
the extent provided in Section 7.07. Subject to the following sentence,
--------------
holders of Registrable Securities to be distributed by such underwriters shall
be parties to such underwriting agreement and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, Holding to and for the benefit of such underwriters also be made to
and for their benefit and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting
- 19 -
<PAGE>
agreement also be conditions precedent to their obligations. No holder of
Registrable Securities shall be required to make any representations or
warranties to or agreements with Holding or the underwriters other than
representations, warranties or agreements regarding such holder and its
ownership of the securities being registered on its behalf and such holder's
intended method of distribution and any other representation required by law.
Subject to the preceding sentence, no Requesting Holder may participate in such
underwritten offering unless such holder agrees to sell its Registrable
Securities on the basis provided in such underwriting agreement and completes
and executes all questionnaires, powers of attorney, indemnities and other
documents reasonably required under the terms of such underwriting agreement.
If any Requesting Holder disapproves of the terms of an underwriting, such
holder may elect to withdraw therefrom and from such registration by notice to
Holding and the Managing Underwriter, and each of the remaining Requesting
Holders shall be entitled to increase the number of Registrable Securities being
registered to the extent of the Registrable Securities so withdrawn in the
proportion which the number of Registrable Securities being registered by such
remaining Requesting Holder bears to the total number of Registrable Securities
being registered by all such remaining Requesting Holders.
(b) Underwritten Piggyback Offerings. If Holding at any time
--------------------------------
proposes to register any of its securities in a Piggyback Registration and such
securities are to be distributed by or through one or more underwriters, Holding
will, subject to the provisions of Section 7.02(c), use its best efforts, if
---------------
requested by any holder of Registrable Securities, to arrange for such
underwriters to include the Registrable Securities to be offered and sold by
Requesting Holders among the securities to be distributed by such underwriters,
and such holders shall be obligated to sell their Registrable Securities in such
Piggyback Registration through such underwriters on the same terms and
conditions as apply to the other securities of Holding to be sold by such
underwriters in connection with such Piggyback Registration. Subject to the
following sentence, the holders of Registrable Securities to be distributed by
such underwriters shall be parties to the underwriting agreement between Holding
and such underwriter or underwriters and may, at their option, require that any
or all of the representations and warranties by, and the other agreements on the
part of, Holding to and for the benefit of such underwriters also be made to and
for their benefit and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement also be
conditions precedent to their obligations. No holder of Registrable Securities
shall be required to make any representations or warranties to or agreements
with Holding or the underwriters other than representations, warranties or
agreements regarding such holder and its ownership of the securities being
registered on its behalf and such holder's intended method of distribution and
any other representation required by law. Subject to the preceding sentence, no
- 20 -
<PAGE>
Requesting Holders may participate in such underwritten offering unless such
holder agrees to sell its Registrable Securities on the basis provided in such
underwriting agreement and completes and executes all questionnaires, powers of
attorney, indemnities and other documents reasonably required under the terms of
such underwriting agreement. If any Requesting Holder disapproves of the terms
of an underwriting, such holder may elect to withdraw therefrom and from such
registration by notice to Holding and the Managing Underwriter, and each of the
remaining Requesting Holders shall be entitled to increase the number of
Registrable Securities being registered to the extent of the Registrable
Securities so withdrawn in the proportion which the number of Registrable
Securities being registered by such remaining Requesting Holder bears to the
total number of Registrable Securities being registered by all such remaining
Requesting Holders.
7.05 Holdback Agreements.
-------------------
(a) By the Holders of Registrable Securities. Unless the Managing
----------------------------------------
Underwriter (or, in the case of a non-underwritten Public Offering, Holding)
otherwise agrees, each holder of Registrable Securities, by acquisition of such
Registrable Securities, agrees not to effect any public sale or distribution
(including a sale under Rule 144, Rule 144A or Regulation S) of such securities
during the 10 days prior to and the 90 days after the effective date of any
registration statement filed by Holding in connection with a primary offering
of Common Stock on behalf of Holding (or for such shorter period of time as is
sufficient and appropriate, in the opinion of the Managing Underwriter (or, in
the case of a non-underwritten Public Offering, Holding), in order to complete
the sale and distribution of the securities included in such registration),
except as part of such registration statement, whether or not such holder
participates in such registration, provided, however , that all holders of
-------- -------
Common Stock of Holding enter into agreements with Holding having terms
substantially similar to this Section 7.05(a).
---------------
(b) By Holding and Other Securityholders. Unless the Managing
------------------------------------
Underwriter otherwise agrees, Holding agrees (x) not to effect any public sale
or distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the 10 days prior to and
the 90 days after the effective date of the registration statement filed in
connection with an underwritten offering made pursuant to a Requested
Registration (or for such shorter period of time as is sufficient and
appropriate, in the opinion of the Managing Underwriter, in order to complete
the sale and distribution of the securities included in such registration),
except as part of such underwritten registration and except pursuant to
registrations on Form S-4 or Form S-8 promulgated by the Commission or any
successor or similar forms thereto, and (y) to cause each holder of its equity
securities, or of any securities convertible into or exchangeable or exercisable
for such securities, in each case purchased from Holding at any time after
- 21 -
<PAGE>
the date of this Agreement (other than in a Public Offering), to agree, to the
extent permitted by law, not to effect any such public sale or distribution of
such securities (including a sale under Rule 144, Rule 144A or Regulation S),
during such period, except as part of such underwritten registration.
(c) Exception. The foregoing provisions of this Section 7.05 shall
--------- -------------
not apply to any holder of securities of Holding to the extent such holder is
prohibited by applicable law from agreeing to withhold from sale.
7.06 Registration Rights Transferable. The rights granted by this
--------------------------------
Agreement are transferable and shall inure to the benefit of the Investors (or
the investor or investors for which Investors are acting as fiduciary or agent,
as the case may be) and all subsequent holders of the Shares from time to time,
subject in all events to the last sentence of the definition of "Registrable
Securities" in Section 8.01.
------------
7.07 Indemnification.
---------------
(a) Indemnification by Holding. Holding shall, to the full extent
--------------------------
permitted by law, indemnify and hold harmless each seller of Registrable
Securities included in any registration statement filed in connection with a
Requested Registration or a Piggyback Registration, its directors and officers,
and each other Person, if any, who controls any such seller within the meaning
of the Securities Act, against any Losses, claims, damages, expenses or
liabilities, joint or several (together, "Losses"), to which such seller or any
------
such director or officer or controlling Person may become subject under the
Securities Act or otherwise, insofar as such Losses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of a prospectus, in the light of the circumstances under
which they were made) not misleading, or any violation (or alleged violation) by
Holding of any provision of the Securities Act, or any rule or regulation
promulgated under the Securities Act, applicable to Holding in connection with
any such registration, qualification or compliance, and Holding will reimburse
such seller and each such director, officer and controlling Person for any legal
or any other expenses reasonably incurred by them in connection with
investigating or defending any such Loss (or action or proceeding in respect
thereof); provided that Holding shall not be liable in any such case to the
--------
extent that any such Loss (or action or proceeding in respect thereof) arises
out of or is based upon (x) an untrue statement or alleged untrue statement or
omission or alleged omission made in any such registration statement,
preliminary prospectus, final prospectus,
- 22 -
<PAGE>
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information as to the matters referred to in the fourth sentence of
Section 7.04(a) or the third sentence of Section 7.04(b), furnished to Holding
- --------------- ---------------
through an instrument duly executed by such seller specifically stating that it
is for use in the preparation thereof or (y) such seller's failure to send or
give a copy of the final prospectus to the Persons asserting an untrue statement
or alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such Person if
such statement or omission was corrected in such final prospectus. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such seller or any such director, officer or controlling
Person, and shall survive the transfer of such securities by such seller.
Holding shall also indemnify each other Person who participates (including as an
underwriter) in the offering or sale of Registrable Securities, their officers
and directors and each other Person, if any, who controls any such participating
Person within the meaning of the Securities Act to the same extent as provided
above with respect to sellers of Registrable Securities.
(b) Indemnification by the Sellers of Registrable Securities. Each
--------------------------------------------------------
holder of Registrable Securities which are included or are to be included in any
registration statement filed in connection with a Requested Registration or a
Piggyback Registration, as a condition to including Registrable Securities in
such registration statement, shall, to the full extent permitted by law,
indemnify and hold harmless Holding, its directors and officers, and each other
Person, if any, who controls Holding within the meaning of the Securities Act,
against any Losses to which Holding or any such director or officer or
controlling Person may become subject under the Securities Act or otherwise,
insofar as such Losses (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made) not
misleading, if such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information as to the matters referred to in the fourth sentence of Section
-------
7.04(a) or the third sentence of Section 7.04(b), furnished to Holding through
- ------- ---------------
an instrument duly executed by such seller specifically stating that it is for
use in the preparation of such registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement; provided, that
--------
the liability of a holder for indemnity under this Section 7.07(b) shall not
---------------
exceed the gross proceeds from the offering received by such holder. Such
indemnity shall remain in full force and
- 23 -
<PAGE>
effect regardless of any investigation made by or on behalf of Holding or any
such director, officer or controlling Person and shall survive the transfer of
such securities by such seller. Such holders shall also indemnify each other
Person who participates (including as an underwriter) in the offering or sale of
Registrable Securities, their officers and directors and each other Person, if
any, who controls any such participating Person within the meaning of the
Securities Act to the same extent as provided above with respect to Holding.
(c) Notices of Claims, etc. Promptly after receipt by an Indemnified
-----------------------
Party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding paragraph (a) or (b) of this Section 7.07,
-------------------- ------------
such Indemnified Party will, if a claim in respect thereof is to be made against
an Indemnifying Party pursuant to such paragraphs, give written notice to the
latter of the commencement of such action, provided that the failure of any
--------
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under the preceding paragraphs of this
Section 7.07, except to the extent that the Indemnifying Party is actually
- ------------
prejudiced by such failure to give notice. In case any such action is brought
against an Indemnified Party, the Indemnifying Party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
Indemnifying Party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such Indemnified Party, and after notice from
the Indemnifying Party to such Indemnified Party of its election so to assume
the defense thereof, the Indemnifying Party shall not be liable to such
Indemnified Party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation; provided that the Indemnified Party may participate in such
---------
defense at the Indemnified Party's expense; and provided further that the
-------- -------
Indemnified Party or Indemnified Parties shall have the right to employ one
counsel to represent it or them if, in the reasonable judgment of the
Indemnified Party or Indemnified Parties, it is advisable for it or them to be
represented by separate counsel by reason of having legal defenses which are
different from or in addition to those available to the Indemnifying Party, and
in that event the reasonable fees and expenses of such one counsel shall be paid
by the Indemnifying Party. If the Indemnifying Party is not entitled to, or
elects not to, assume the defense of a claim, it will not be obligated to pay
the fees and expenses of more than one counsel for the Indemnified Parties with
respect to such claim, unless in the reasonable judgment of any Indemnified
Party a conflict of interest may exist between such Indemnified Party and any
other Indemnified Parties with respect to such claim, in which event the
Indemnifying Party shall be obligated to pay the fees and expenses of such
additional counsel for the Indemnified Parties or counsels. No Indemnifying
Party shall consent to entry of any judgment or enter into any settlement
without the consent of the Indemnified Party which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all
- 24 -
<PAGE>
liability in respect to such claim or litigation. No Indemnifying Party shall
be subject to any liability for any settlement made without its consent, which
consent shall not be unreasonably withheld. Notwithstanding the foregoing
sentence, if at any time an Indemnified Party or any person who controls an
Indemnified Party shall have requested an Indemnifying Party to reimburse an
Indemnified Party or such control person for reasonable fees and expenses
actually incurred by counsel for which such Indemnified Party or person is
entitled to be so reimbursed pursuant to this Agreement, the Indemnifying Party
agrees that it shall be liable for any settlement of any proceeding affected
without its consent if (i) such settlement is entered into more than 60 days
after receipt by such Indemnifying Party of the aforesaid request and (ii) such
Indemnifying Party shall not have reimbursed the Indemnified Party or such
control person in accordance with such request prior to the date of such
settlement; provided, however, that the Indemnifying Party shall not be liable
-------- -------
for any settlement effected without its consent pursuant to this sentence if the
Indemnifying Party is contesting, in good faith, the request for reimbursement
and shall have reimbursed all amounts not so contested.
(d) Contribution. If the indemnity and reimbursement obligation
------------
provided for in any paragraph of this Section 7.07 is unavailable or
------------
insufficient to hold harmless an Indemnified Party in respect of any Losses (or
actions or proceedings in respect thereof) referred to therein, then the
Indemnifying Party shall contribute to the amount paid or payable by the
Indemnified Party as a result of such Losses (or actions or proceedings in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party on the one hand and the Indemnified Party on the
other hand in connection with statements or omissions which resulted in such
Losses, as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Indemnifying Party or the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The parties hereto agree that it would not be
just and equitable if contributions pursuant to this paragraph were to be
determined by pro rata allocation or by any other method of allocation which
--- ----
does not take account of the equitable considerations referred to in the first
sentence of this paragraph. The amount paid by an Indemnified Party as a result
of the Losses referred to in the first sentence of this paragraph shall be
deemed to include any legal and other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any Loss which
is the subject of this paragraph.
No Indemnified Party guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from the
- 25 -
<PAGE>
Indemnifying Party if the Indemnifying Party was not guilty of such fraudulent
misrepresentation.
(e) Other Indemnification. Indemnification similar to that specified
---------------------
in the preceding paragraphs of this Section 7.07 (with appropriate
------------
modifications) shall be given by Holding and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation of any governmental
authority other than the Securities Act. The provisions of this Section 7.07
------------
shall be in addition to any other rights to indemnification or contribution
which an Indemnified Party may have pursuant to law, equity, contract or
otherwise.
(f) Indemnification Payments. The indemnification required by this
------------------------
Section 7.07 shall be made by periodic payments of the amount thereof during the
- ------------
course of the investigation or defense, as and when bills are received or Losses
are incurred.
7.08 Covenants Relating to Rule 144. If at any time Holding is
------------------------------
required to file reports in compliance with either Section 13 or Section 15(d)
of the Exchange Act, Holding will file reports in compliance with the Exchange
Act, and will, at its expense, forthwith upon the request of any holder of
Registrable Securities, deliver to such holder a certificate, signed by
Holding's principal financial officer, stating (a) Holding's name, address and
telephone number (including area code), (b) Holding's Internal Revenue Service
identification number, (c) Holding's Commission file number, (d) the number of
shares of each class of capital stock outstanding as shown by the most recent
report or statement published by Holding, and (e) whether Holding has filed the
reports required to be filed under the Exchange Act for a period of at least
ninety (90) days prior to the date of such certificate and in addition has filed
the most recent annual report required to be filed thereunder.
7.09 Other Registration Rights.
-------------------------
(a) No Existing Agreements. Holding represents and warrants to the
----------------------
holders of Registrable Securities that there is not in effect on the date hereof
any agreement by Holding pursuant to which any holders of securities of Holding
have a right to cause Holding to register or qualify such securities under the
Securities Act or any securities or blue sky laws of any jurisdiction other than
as set forth in Schedule II hereto. None of such agreements conflicts or is
-----------
inconsistent with any provision of this Agreement.
(b) Future Agreements. Holding shall not hereafter agree with the
-----------------
holders of any securities issued or to be issued by Holding to register or
qualify such securities under the Securities Act or any securities or blue sky
laws of any jurisdiction unless such agreement specifically provides that (i)
such holder of such securities may not participate in any Requested Registration
except as provided in Section 7.01; and
------------
- 26 -
<PAGE>
(ii) the holder of such securities may not participate in any Piggyback
Registration except as provided in Section 7.02, and (iii) the Investors may
------------
participate in any registration initiated by such holders on terms consistent
with Section 7.02(c)(ii).
-------------------
(c) Best Registration Rights. If Holding grants to any Person other
------------------------
than a holder of Registrable Securities (an " Other Holder") with respect to any
-------------
security issued by Holding registration rights that provide for terms that,
taken as a whole, are materially more favorable to the Other Holder than the
terms granted to the holders of the Registrable Securities (or if Holding amends
or waives any provision of any agreement providing registration rights to an
Other Holder or takes any other action whatsoever to provide for terms with
respect to registration rights that in either case results in the terms with
respect to registration rights of an Other Holder, taken as a whole, being
materially more favorable to such Other Holder than the terms provided to the
holders of Registrable Securities), then Holding shall promptly so notify the
holders of Registrable Securities in writing and, if the holders of a majority
of the Registrable Securities shall notify Holding not later than 30 days after
their receipt of such notice from Holding that such holders elect to amend this
Agreement as hereinafter provided, this Agreement shall as promptly as
practicable thereafter be amended to conform the provisions of this Article VII
as closely as practicable to the registration rights of such Other Holder.
ARTICLE VIII
DEFINITIONS
8.01 Definitions. Except as otherwise specifically indicated, the
-----------
following terms will have the following meanings for all purposes of this
Agreement:
"Acquisition Corp." means DNL Savannah Acquisition Corp., a Delaware
-----------------
corporation.
"Affiliate" means with respect to any Person, any other Person
---------
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such Person.
"Agreement" means this Subscription Agreement, as the same shall be
---------
amended from time to time.
"Business Day" means a day other than Saturday, Sunday or any other
------------
day on which banks located in New York City are authorized or obligated to
close.
"Class A Common Stock" has the meaning ascribed to it in Section 2.03.
-------------------- ------------
"Class B Common Stock" has the meaning ascribed to it in the preamble.
--------------------
- 27 -
<PAGE>
"Closing" has the meaning ascribed to it in Section 1.03.
------- ------------
"Closing Date" means the date of the Closing.
------------
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time and the regulations promulgated thereunder.
"Commission" means the United States Securities and Exchange
----------
Commission, or any successor governmental agency or authority.
"Common Stock" means shares of Class A Common Stock or Class B Common
------------
Stock, as constituted on the date hereof, and any stock into which such Class A
Common Stock or Class B Common Stock shall have been changed or any stock
resulting from any reclassification of such Class A Common Stock or Class B
Common Stock.
"Company" means Aminco, Inc., a Delaware corporation.
-------
"Contract" means any agreement, lease, license, evidence of
--------
Indebtedness, mortgage, indenture, security agreement or other contract.
"Credit Agreement" has the meaning ascribed to it in Section 2.08.
---------------- -------------
"Cutback Registration" means any Requested Registration or Piggyback
--------------------
Registration to be effected as an underwritten Public Offering in which the
Managing Underwriter with respect thereto advises Holding and the Requesting
Holders in writing that, in its opinion, the number of securities requested to
be included in such registration (including securities of Holding which are not
Registrable Securities) exceed the number which can be sold in such offering
without a material reduction in the selling price anticipated to be received for
the securities to be sold in such Public Offering.
"DNL Requested Securities" means, with respect to any Piggyback
------------------------
Registration, any securities of Holding requested to be included in such
registration by DNL Partners, Limited Partnership, a Delaware limited
partnership ("DNL"), pursuant to the agreement or agreements between DNL and
---
Holding providing for registration rights.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated thereunder.
"GAAP" means generally accepted accounting principles in the United
----
States of America as in effect from time to time.
"Holding" has the meaning ascribed to it in the preamble.
-------
- 28 -
<PAGE>
"ICP Shares" has the meaning ascribed to it in the preamble.
----------
"ICM II Shares" has the meaning ascribed to it in the preamble.
-------------
"Indebtedness" of any Person means all obligations of such Person (i)
------------
for borrowed money, (ii) evidenced by noted, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any Person.
"Indemnified Party" means a party entitled to indemnity in accordance
-----------------
with Section 7.07.
------------
"Indemnifying Party" means a party obligated to provide indemnity in
------------------
accordance with Section 7.07.
------------
"Indosuez" has the meaning ascribed to it in the preamble.
--------
"Initiating Holders" means any holder or holders of Registrable
------------------
Securities making a written request pursuant to Section 7.01, or Section 7.01
-------------
of the Other Subscription Agreement, for the registration of Registrable
Securities.
"Inspectors" has the meaning ascribed to it in Section 7.03(j).
---------- ---------------
"Investor" has the meaning ascribed to it in the preamble.
--------
"IPO" has the meaning ascribed to it in Section 7.01(a).
--- ---------------
"Liens" means any mortgage, pledge, assessment, security interest,
-----
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract to give any of the foregoing, but excluding, in
the case of securities, restrictions under the Securities Act on the sale of
such securities.
"Losses" has the meaning ascribed to it in Section 7.07(a).
------ ----------------
"Managing Underwriter" means, with respect to any Public Offering, the
--------------------
underwriter or underwriters managing such Public Offering.
"Morgan" means, collectively, (i) Morgan Guaranty Trust Company of New
------
York as Trustee of a Commingled Pension Fund -Multi-Market Special Investment
Fund II, (ii) Multi-Special Investment Trust Fund of Morgan Guaranty Trust
Company of New
- 29 -
<PAGE>
York and (iii) Morgan Guaranty Trust Company of New York, as Investment Manager
and Agent for the Alfred P. Sloane Foundation - Multi-Market Account.
"NASD" means the National Association of Securities Dealers, Inc.
----
"Notice of Piggyback Registration" has the meaning ascribed to it in
--------------------------------
Section 7.02(a).
- ---------------
"Notice of Requested Registration" has the meaning ascribed to it in
--------------------------------
Section 7.01(a).
- ---------------
"Other Subscription Agreement" means the Subscription Agreement dated
----------------------------
as of the date hereof by and between Holding, Investor and certain other
investors.
"Other Subscription Agreement Shares" means the Shares, as defined in
-----------------------------------
the Other Subscription Agreement.
"Partnership Subscription Agreement" means the Subscription Agreement
----------------------------------
dated as of the date hereof by and between Holding and DNL Partners, Limited
Partnership, a Delaware limited partnership.
"Person" means any natural person, corporation, general partnership,
------
limited partnership, proprietorship, other business organization, trust, union
or association.
"Piggyback Registration" means any registration of equity securities
----------------------
of Holding of the same class as the Registrable Securities under the Securities
Act (other than a registration in respect of a dividend reinvestment or similar
plan for stockholders of Holding or on Form S-4 or Form S-8 promulgated by the
Commission, or any successor or similar forms thereto), whether for sale for the
account of Holding or for the account of any holder of securities of Holding
(other than Registrable Securities), including a registration by Holding under
the circumstances described in Section 7.01(c)(i) or Section 7.01(c)(i) of the
------------------ ------------------
Other Subscription Agreement.
"Public Offering" means any offering of Common Stock to the public,
---------------
either on behalf of Holding or any of its securityholders, pursuant to an
effective registration statement under the Securities Act.
"Purchase Price" has the meaning ascribed to it in Section 1.02.
-------------- -------------
"Records" has the meaning ascribed to it in Section 7.03(j).
------- ---------------
"Registrable Securities" means (i) the Class A Shares (as defined in
----------------------
the Other Subscription Agreement), (ii) any shares of Class A Common Stock into
which the Shares or the Other Subscription Agreement Shares have been converted,
and (iii) any
- 30 -
<PAGE>
additional shares of Class A Common Stock or (to the extent they have been
converted into shares of Class A Common Stock) Class B Common Stock issued or
distributed by way of a dividend, stock split or other distribution in respect
of the Shares or the Other Subscription Agreement Shares or acquired by way of
any rights offering or similar offering made in respect of the Shares, the Other
Subscription Agreement Shares. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities (i) when a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (ii) when they shall have
been distributed to the public pursuant to Rule 144, or (iii) when they shall
have ceased to be outstanding.
"Registration Expenses" means all expenses incident to Holding's
---------------------
performance of or compliance with its obligations under this Agreement to effect
the registration of Registrable Securities in a Requested Registration or a
Piggyback Registration, including, without limitation, all registration, filing,
securities exchange listing and NASD fees, all registration, filing,
qualification and other fees and expenses of complying with securities or blue
sky laws, all word processing, duplicating and printing expenses, messenger and
delivery expenses, the fees and disbursements of counsel for Holding and of its
independent public accountants, including the expenses of any special audits or
"cold comfort" letters required by or incident to such performance and
compliance, the reasonable fees and disbursements of a single counsel retained
by the holders of a majority of Registrable Securities being registered,
premiums and other costs of policies of insurance against liabilities arising
out of the Public Offering of the Registrable Securities being registered and
any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities, but excluding underwriting discounts and commissions and
transfer taxes, if any, in respect of Registrable Securities, which shall be
payable by each holder thereof.
"Regulation S" means Regulation S promulgated by the Commission under
------------
the Securities Act, and any successor provision thereto.
"Requested Registration" means any registration of Registrable
----------------------
Securities under the Securities Act effected in accordance with Section 7.01 or
------------
Section 7.01 of the Other Subscription Agreement.
"Requesting Holders" means, with respect to any Requested Registration
------------------
or Piggyback Registration, the holders of Registrable Securities requesting to
have Registrable Securities included in such registration in accordance with
this Agreement or the Other Subscription Agreement.
"Rule 144" means Rule 144 promulgated by the Commission under the
--------
Securities Act, and any successor provision thereto.
- 31 -
<PAGE>
"Rule 144A" means Rule 144A promulgated by the Commission under the
---------
Securities Act, and any successor provision thereto.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder.
"Sellers" has the meaning ascribed thereto in the Stock Purchase
-------
Agreement.
"Senior Subordinated Note Agreement" has the meaning ascribed to it in
----------------------------------
Section 2.08.
- ------------
"Shares" has the meaning ascribed to it in the preamble.
------
"Stock Purchase Agreement" means the Stock Purchase Agreement dated as
------------------------
of May 11, 1995, as amended, by and between Acquisition Corp., the Sellers named
therein, and the Company.
8.02 Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; and (iv) the term "Section" refers to the specified
Section of this Agreement. Whenever this Agreement refers to a number of days,
such number shall refer to calendar days unless Business Days are specified.
Any representation or warranty contained herein as to the enforceability of a
Contract shall be subject to the effect of any bankruptcy, insolvency,
reorganization, moratorium or other similar law affecting the enforcement of
creditors' rights generally and to general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
ARTICLE IX
MISCELLANEOUS
9.01 Notices. All notices, requests and other communications
-------
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
If to Holding, to:
DNL Savannah Holding Corp.
1 Morningside Drive, North
Suite 200
Westport, Connecticut 06880
Facsimile No.: (203) 226-8011
Attn: Vincent A. Wasik
- 32 -
<PAGE>
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Facsimile No.: (212) 530-5219
Attn: G. Malcolm Holderness, Esq.
and Robert E. Rice, Esq.
If to Investors to:
Indosuez Carson Partners, or
Indosuez CM II, Inc.,
c/o Banque Indosuez
1211 Avenue of the Americas
7th Floor
New York, New York 10036
Facsimile No.: (212) 278-2828
Attn: Michael Walsh, Esq.
with a copy to:
Cahill Gordon & Reindel
Eighty Pine Street
New York, New York 10005-1702
Facsimile No.: (212) 269-5420
Attn: Jonathan I. Mark, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 9.01 be deemed given upon
-------------
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section 9.01 be deemed given upon receipt, and (iii) if
------------
delivered by mail in the manner described above to the address as provided in
this Section 9.01 be deemed given upon receipt (in each case regardless of
------------
whether such notice, request or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this Section
-------
9.01). Any party from time to time may change its address, facsimile number or
- ----
other information for the purpose of notices to that party by giving notice
specifying such change to the other parties hereto.
9.02 Entire Agreement. This Agreement supersedes all prior
----------------
discussions and agreements between the parties with respect to the subject
matter hereof, and contains the sole and entire agreement between the parties
hereto with respect to the subject matter hereof.
9.03 Amendment. This Agreement may be amended, supplemented or
---------
modified only by a written instrument (which may be executed in any number of
counterparts) duly executed by or on behalf of Holding and the Investors.
9.04 Waiver. Any term or condition of this Agreement may be waived
------
at any time by the party that is entitled to the
- 33 -
<PAGE>
benefit thereof, but no such waiver shall be effective unless set forth in a
written instrument duly executed by or on behalf of the party waiving such term
or condition. No waiver by any party of any term or condition of this
Agreement, in any one or more instances, shall be deemed to be or construed as a
waiver of the same term or condition of this Agreement on any future occasion.
9.05 No Third Party Beneficiary. The terms and provisions of this
--------------------------
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under Section 7.07.
------------
9.06 Successors and Assigns. This Agreement is binding upon, inures
----------------------
to the benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
9.07 Headings. The headings used in this Agreement have been
--------
inserted for convenience of reference only and do not define or limit the
provisions hereof.
9.08 Invalid Provisions. If any provision of this Agreement is held
------------------
to be illegal, invalid or unenforceable under any present or future law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
9.09 Remedies. Except as otherwise expressly provided for herein, no
--------
remedy conferred by any of the specific provisions of this Agreement is intended
to be exclusive of any other remedy, and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise. The
election of any one or more remedies by any party hereto shall not constitute a
waiver by any such party of the right to pursue any other available remedies.
Damages in the event of breach of this Agreement by a party hereto
would be difficult, if not impossible, to ascertain, and it is therefore agreed
that each such Person, in addition to and without limiting any other remedy or
right it may have, will have the right to an injunction or other equitable
relief in any court of competent jurisdiction, enjoining any such breach, and
enforcing specifically the terms and provisions hereof, and Holding and the
Investors, by its acquisition of its Registrable
- 34 -
<PAGE>
Securities, hereby waive any and all defenses they may have on the ground of
lack of jurisdiction or competence of the court to grant such an injunction or
other equitable relief. The existence of this right will not preclude any such
Person from pursuing any other rights and remedies at law or in equity which
such Person may have.
9.10 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
9.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
- 35 -
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first above written.
DNL SAVANNAH HOLDING CORP.
By: _________________________
Name:
Title:
INDOSUEZ CARSON PARTNERS
By: INDOSUEZ CM II, INC.,
its Managing General Partner
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
INDOSUEZ CM II, INC.
By:____________________________
Name:
Title:
By:_____________________________
Name:
Title:
- 36 -
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Investor Securities to be Purchased
- -------- --------------------------
<S> <C>
Indosuez Carson Partners 50 Shares of Class B Common Stock
Wire Instructions:
Designated Bank: Banque Indosuez
Grand Cayman Island Branch
Address: 1211 Avenue of the Americas
New York, NY 10036-8701
Bank ABA Number: 0260 0266 8
Attention: Loan Administration
Ref: Carson Products Corp.
Contact Person: Michael Walsh, Esq.
Nominee (name in which the Shares are
to be registered, if different from
the name of the Purchaser:
_________________________________
Tax Identification Number of
Nominee, if applicable:
__________________________________
Indosuez CM II, Inc. 40.5 Shares of Class B Common Stock
Wire Instructions:
Designated Bank: Banque Indosuez
Grand Cayman Island Branch
Address: 1211 Avenue of the Americas
New York, New York 10036-8701
Bank ABA Number: 0260 0266 8
Attention: Loan Administrator
Ref.: Carson Products
Contact Person: Michael Walsh, Esq.
Nominee (name in which the Shares are
to be registered, if different from
the name of the Purchaser:
_________________________________
Tax Identification Number of
Nominee, if applicable:
_________________________________
</TABLE>
<PAGE>
SCHEDULE II
Certain Agreements Referred to in Section 7.09(a)
-------------------------------------------------
1. This Agreement.
2. The Other Subscription Agreement.
3. The Partnership Subscription Agreement.
4. The Registration Rights Agreement (as defined in
the Stock Purchase Agreement).
5. The Registration Rights Agreement dated as of the date hereof between
Holding and Dr. Leroy Keith.
<PAGE>
EXHIBIT 10.18
SUBSCRIPTION AND REGISTRATION RIGHTS AGREEMENT
----------------------------------------------
This Subscription and Registration Rights Agreement (this "Agreement"),
dated as of August 15, 1996, among Carson, Inc., a Delaware corporation (the
"Company"), and the individuals named on the signature page hereto (the
"Stockholders").
W I T N E S S E T H :
WHEREAS, the Stockholders are directors of the Company and are being
offered the opportunity to purchase shares of Class A Common Stock, par value
$.01 per share, of the Company (the "Shares"); and
WHEREAS, the Company and the Stockholders desire to provide for certain
registration rights and obligations of the parties hereto with respect to the
Shares held by them;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, and other valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
The following terms shall have the definitions set forth below:
"Affiliate" has the meaning set forth in Rule 12b-2 promulgated under the
Exchange Act.
"Business Day" means any day (other than a day which is a Saturday, Sunday
or legal holiday in the State of New York) on which banks are open for business
in New York.
"Commission" means the Securities and Exchange Commission.
"Cutback Registration" means any Piggyback Registration to be effected as
an underwritten Public Offering in which the Managing Underwriter with respect
thereto advises the Company and the Requesting Stockholders in writing that, in
its opinion, the number of securities requested to be included in such
registration (including securities of the Company which are not Registrable
Securities) exceeds the number which can be sold in such offering without a
reduction in the selling price anticipated to be received for the securities to
be sold in such Public Offering.
<PAGE>
2
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Indemnified Party" means a party entitled to indemnity in accordance with
Section 5.5 hereof.
"Indemnifying Party" means a party obligated to provide indemnification in
accordance with Section 5.5 hereof.
"Managing Underwriter" means, with respect to any Public Offering, the lead
managing underwriter for such Public Offering.
"NASD" means the National Association of Securities Dealers.
"Person" means nay natural person, corporation, general partnership,
limited partnership, proprietorship, other business organization, trust, union
or association.
"Piggyback Registration" means any registration of equity securities of the
Company of the same class as the Registrable Securities under the Securities Act
(other than a registration in respect of a dividend reinvestment or similar plan
or on Form S-4 or Form S-8 promulgated by the Commission, or any successor or
similar forms thereto), whether for sale for the account of the Company or for
the account of any holder of securities of the Company (other than the Company's
initial public offering).
"Public Offering" means any offering of common stock to the public, either
on behalf of the Company or any of its securityholders, pursuant to an effective
registration statement under the Securities Act (other than the Company's
initial public offering of the Shares).
"Registrable Securities" means the shares of common stock at any time
outstanding, including additional shares of common stock issued or distributed
as a dividend, stock split or other distribution in respect thereof, provided,
--------
that any Registrable Securities shall cease to be Registrable Securities when
(x) a registration statement with respect to the sale of such Registrable
Securities shall have become effective under the Securities Act and such
Registrable Securities shall have been disposed of in accordance with such
registration statement or (y) such Registrable Securities shall have been
distributed to the public pursuant to Rule 144.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with its obligations under this Agreement to effect
the registration of Registrable Securities in a Piggyback Registration,
including, without limitation, all registration, filing, securities exchange
listing and NASD fees, all registration, filing, qualification and other fees
and expenses of complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or "cold comfort"
letters required by or incident
<PAGE>
3
to such performance and compliance, premiums and other costs of policies of
insurance against liabilities arising out of the Public Offering of the
Registrable Securities being registered and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities, but excluding
underwriting discounts and commissions and transfer taxes, if any, in respect of
Registrable Securities, which shall be payable by the Stockholders selling the
same.
"Request for Registration" means a written request by a Stockholder to the
Company for registration of Registrable Securities in response to a Notice of
Piggyback Registration, which request shall specify the Registrable Securities
intended to be disposed of and the intended method of disposition thereof.
"Requesting Stockholders" mean, with respect to any registration, the
Stockholders requesting to have Registrable Securities included in a
registration.
"Rule 144" means Rule 144 promulgated under the Securities Act, and any
successor provision thereto.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Stockholders" means each of the individuals named on the signature pages
hereto and their respective Permitted Transferees that hold Shares at the time
(after the Closing) of application of a provision of this Agreement to
Stockholders.
ARTICLE II
SUBSCRIPTION
Section 2.1. Subscription for the Shares. On the terms and subject to the
---------------------------
conditions of this Agreement, each of the Stockholders hereby subscribes for and
agrees to purchase, and the Company agrees to issue and sell to each such
Stockholder, the number of Shares for the consideration, set forth below such
party's signature hereto (the "Purchase Price" of such Shares).
Section 2.2. Closing Date. The consummation of the purchase and sale of
------------
the Shares contemplated by this Agreement (the "Closing") shall take place at
such time and place and on such date not later than 30 days after the execution
hereof as the Company and the Stockholders mutually agree (the "Closing Date").
Section 2.3. Conditions to Closing. The obligations of each party hereto
---------------------
to consummate the transactions contemplated by this Article II shall be
conditioned on the issuance, purchase of and payment for the Shares to be
purchased and sold hereunder not being prohibited by any applicable law, court
order or governmental regulation.
<PAGE>
4
Section 2.4. Issuances of and Payment for Shares. At the Closing, (a) the
-----------------------------------
Company shall deliver to each Stockholder stock certificates registered in the
name of such party and representing the Shares being purchased by such
Stockholder pursuant hereto; (b) each such Stockholder shall deliver to the
Company the aggregate Consideration for the Shares being purchased by such
Stockholder pursuant hereto in cash, or by certified or official bank check
payable to the order of the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
A. The Company hereby represents and warrants to the Stockholders as
follows:
Section 3.A.1. Organization. The Company is a corporation duly organized
------------
and validly existing and in good standing under the laws of the State of
Delaware.
Section 3.A.2. Due Authorization. The execution and delivery of this
-----------------
Agreement and the consummation of the transactions contemplated hereby to be
consummated by it (i) are within the corporate powers and authority of the
Company and (ii) have been duly authorized by all requisite corporate
proceedings on the part of the Company. This Agreement is a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, reorganization, insolvency,
moratorium and other laws affecting creditors' rights generally and, as to
enforceability, general equitable principles.
Section 3.A.3. Status of Shares. The Shares, when issued to the
----------------
Stockholders pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
B. Each Stockholder hereby severally (and not jointly) represents and
warrants to the Company and the other Stockholders with respect to such
Stockholder and the Shares to be acquired by such Stockholder pursuant to this
Agreement, and not with respect to any other Stockholder or any other Shares as
follows:
Section 3.B.1. Authorization. Such Stockholder has full power and
-------------
authority to execute and deliver, to perform his or her obligations under and to
consummate the transactions contemplated by this Agreement. This Agreement is a
valid and legally binding agreement of such Stockholder, enforceable against
such Stockholder in accordance with its terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights generally and, as to enforceability, general equitable principles.
Section 3.B.2. Acquisition for Investment. (a) Such Stockholder
--------------------------
acknowledges that he or she has sufficient knowledge and experience in business
and financial matters and with respect to investments in securities to enable
such Stockholder to understand and evaluate the risks of the investment in the
Shares contemplated hereby to be made by
<PAGE>
5
such Stockholder and to form an investment decision with respect thereto, and is
able to bear the risk of such investment for an indefinite period and to afford
a complete loss thereof. Such Stockholder is director of the Company and has
access to information about the Company, the Company's financial condition and
about the Shares sufficient to enable him or her to evaluate his or her
investment in the Shares. Such Stockholder further acknowledges that he or she,
as a director of the Company, has the opportunity (1) to ask such questions as
he or she may deem necessary of, and to receive answers from, appropriate
representatives of the Company concerning the terms of the offering of the
Shares to him or her and the merits and risks of investing in the Shares and (2)
to obtain such additional information which the Company possesses or can acquire
without unreasonable effort or expense.
(b) Such Stockholder is acquiring the Shares for his or her own account
for the purpose of investment and not with a view to or for sale in connection
with any distribution thereof, and such Stockholder has no present intention or
plan to effect any distribution of the Shares.
ARTICLE IV
TRANSFERS OF SHARES
Section 4.1. Restrictions on Transfers; Permitted Transferees. (a) Each
------------------------------------------------
Stockholder hereby acknowledges and agrees that such Stockholder will not
directly and indirectly, offer, sell, assign, pledge, encumber or otherwise
transfer any Shares or solicit any offers to purchase or otherwise acquire or
make a pledge of any Shares unless either (A) any such offer, sale, assignment,
pledge, encumbrance or other transfer shall have been pursuant to an effective
registration statement under the Securities Act and shall have been registered
under all applicable state securities or "blue sky" laws or (B) such Stockholder
shall have furnished the Company with an opinion of counsel, which opinion of
counsel shall have been reasonably satisfactory to the Company, to the effect
that no such registration is required because of the availability of an
exemption from registration under the Securities Act and all applicable state
securities or "blue sky" laws.
(b) In addition to the restrictions contained in Section 4.1(a), except in
the case of a sale of Shares pursuant to an effective registration statement
under the Securities Act, or a sale of Shares pursuant to a transaction
complying with Rule 144, no Stockholder shall sell, assign, pledge, encumber or
otherwise transfer any Shares to any Person (regardless of the manner in which
such Stockholder initially acquired such Shares) nor shall the Company register
the transfer of any Shares to any Person (all Persons acquiring Shares from a
Stockholder, regardless of the method of transfer, shall be referred to as
"Transferees") unless (i) such Shares bear legends as provided in Section 4.6
hereof and (ii) such Transferee shall have executed and delivered to the
Company, as a condition precedent to any acquisition of the Shares, an
instrument in form and substance satisfactory to the Company confirming that
such Transferee takes such Shares subject to all the terms and conditions of
this Agreement applicable to the transferor of such Shares, and agrees to be
bound by the terms of
<PAGE>
6
this Agreement. The Company shall not be obligated to register the transfer of
any Shares to any Person except in accordance with this Agreement.
(c) Except as specifically contemplated hereby, no Stockholder shall grant
any proxy or enter into or agree to be bound by any voting trust with respect to
any Shares nor shall any Stockholder enter into any stockholder agreements or
arrangements of any kind with any Person with respect to any Shares inconsistent
with the provisions of this Agreement (whether or not such agreements and
arrangements are with other Stockholders or holders of Shares who are not
parties to this Agreement), including but not limited to, agreements or
arrangements with respect to the acquisition, disposition or voting of Shares,
nor shall any Stockholder act, for any reason, as a member of a group or in
concert with any other Persons (other than Permitted Transferees) in connection
with the acquisition, disposition or voting of Shares in any manner which is
inconsistent with the provisions of this Agreement.
(d) None of the restrictions contained in this Agreement with respect to
transfers of Shares (other than those set forth in Sections 4.1(a), 4.1(b) and
4.3 hereof) shall apply: (i) to any transfer by any Stockholder to any spouse,
child, parent, sibling or grandchild of such Stockholder, or by any of such
relatives to such Stockholder or to any one or more of such relatives, or by any
Stockholder or any such relatives to a trust of which there are no principal
beneficiaries other than such Stockholder, such Stockholder and one or more of
such relatives, or one or more of such relatives; (ii) to any transfer to a
legal representative of any Stockholder in the event such Stockholder becomes
mentally incompetent; (iii) to any transfer by will or the laws of descent; or
(iv) to any transfer by any Stockholder to the Company or any Affiliate thereof
(a "Permitted Transferee"). For the purposes hereof, the Permitted Transferees
of a Stockholder shall include the Permitted Transferees of such Stockholder's
Permitted Transferees.
Section 4.2. Merger Transactions. Notwithstanding any other provision of
-------------------
this Agreement to the contrary, the Company may enter into an agreement to
consolidate with or merge into any other corporation or have any other
corporation merged into it if such agreement is approved by the Board of
Directors of the Company and by the requisite vote of the holders of the capital
stock of the Company in accordance with the General Corporation Law and any
other applicable laws of the State of Delaware. If this Agreement is not
terminated, all provisions of this Agreement (including without limitation this
Section 4.2) shall continue in full force and effect as to all subsequent
transactions in Shares (or the securities or other consideration to be received
therefor), and if the Company is not to be the surviving corporation in such
consolidation or merger, the Company shall make appropriate arrangements for the
continuation of such provisions.
Section 4.3. Legend on Certificates. Each outstanding. certificate
----------------------
representing Shares that are subject to this Agreement shall bear a legend
reading substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A PRIVATE
PLACEMENT, WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND IN RELIANCE UPON THE HOLDER'S REPRESENTATION
THAT SUCH
<PAGE>
7
SHARES WERE BEING ACQUIRED FOR INVESTMENT AND NOT FOR RESALE. NO
TRANSFER OF SUCH SHARES MAY BE MADE ON THE BOOKS OF THE COMPANY UNLESS
ACCOMPANIED BY AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY,
THAT SUCH TRANSFER MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACT
OR THAT SUCH SHARES HAVE BEEN SO REGISTERED UNDER A REGISTRATION
STATEMENT WHICH IS IN EFFECT AT THE DATE OF SUCH TRANSFER.
THE SALE, ASSIGNMENT, PLEDGE, ENCUMBRANCE OR OTHER TRANSFER OF THE
SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE PROVISIONS OF
A SUBSCRIPTION AND REGISTRATION RIGHTS AGREEMENT, DATED AS OF AUGUST
15, 1996, AMONG THE COMPANY AND THE OTHER PARTIES NAMED IN THE
SIGNATURE PAGES THERETO, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE COMPANY.
Section 4.4. Involuntary Transfers. If a Stockholder involuntarily
---------------------
transfers directly or indirectly any or all of his or her Shares for any reason
and such transfer is not to a Permitted Transferee, the Transferee of such
Shares shall be required, at the Company's election, to offer all of the Shares
held by such Transferee to the Company.
ARTICLE V
REGISTRATION RIGHTS
Section 5.1. Piggyback Registration.
----------------------
(a) Right to Include Registrable Securities. If the Company proposes
---------------------------------------
to effect a Piggyback Registration, it will give prompt written notice (a
"Notice of piggyback Registration") to all Stockholders of its intention to do
so and of such Stockholders rights under this Article V to participate in such
Piggyback Registration, which Notice of Piggyback Registration shall include a
description of the intended method of disposition of such securities. If any
such Stockholder delivers a Request for Registration to the Company within 15
days after such Stockholder receives a Notice of Piggyback Registration, the
Company will use its best efforts to effect the registration under the
Securities Act of the Registrable Securities relating to such Piggyback
Registration which the Company has been so requested to register.
Notwithstanding the foregoing (i) if at any time after giving a Notice of
Piggyback Registration and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Stockholder and, thereupon, (A) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not from
its obligation to pay the Registration Expenses in connection therewith) and (B)
in the case of a determination to delay
<PAGE>
8
registering, shall be permitted to delay registering any Registrable Securities
for the same period as the delay in registering such other securities, and (ii)
if such registration involves an underwritten offering, the Requesting
Stockholder requesting to be included in the Company's registration must sell
its Registrable Securities to the underwriters selected by the Company on the
same terms and conditions as apply to the Company or other selling holders, with
such differences, including any with respect to indemnification and liability
insurance, as may be customary or appropriate for such underwriters in combined
primary and secondary offerings. If a registration requested pursuant to this
Section 5.1(a) involves an underwritten public offering, the Requesting
Stockholder requesting to be included in such registration may elect, in writing
prior to the effective date of the registration statement filed in connection
with such registration, not to register such securities in connection with such
registration.
(b) Registration Expenses. The Company will pay all Registration
---------------------
Expenses incurred in connection with each Piggyback Registration.
(c) Priority in Cutback Registrations. If a Piggyback
---------------------------------
Registration becomes a Cutback Registration, the Company will include in such
registration to the extent of the amount of the securities which the Managing
Underwriter advises the Company can be sold in such offering without a reduction
in the selling price anticipated to be received for the securities to be sold in
such Public Offering: (A) first, any securities proposed by the Company to be
-----
sold for its own account; (B) second, any securities other than Registrable
------
Securities proposed to be sold for the account of one or more securityholders of
the Company; and (C) third, any Registrable Securities included in the Requests
-----
for Registration of Requesting Stockholders, pro rata in proportion to the
--- ----
respective numbers thereof. Any securities excluded shall be withdrawn from and
shall not be included in such Piggyback Registration.
Section 5.2. Registration Procedures. If and whenever the Company is
-----------------------
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act pursuant to Section 5.1 hereof, the Company
will (subject to its rights under Section 5.1 hereof not to register or to delay
registration of Registrable Securities), as expeditiously as possible:
(a) prepare and file with the Commission the requisite registration
statement to effect such registration (including such audited financial
statements as may be required by the Securities Act or the rules and
regulations promulgated thereunder) and use its best efforts to cause such
registration statement to become effective; provided, that as far in
--------
advance as practical before filing such registration statement or any
amendment thereto, the Company will furnish to counsel for the Requesting
Stockholders copies of reasonably complete drafts of all such documents
proposed to be filed (including exhibits), and any such Stockholder shall
have the opportunity to object to any information pertaining solely to such
Stockholder that is contained therein, and the Company will make the
corrections reasonably requested by such Stockholder with respect to such
information prior to filing any such registration statement or amendment;
<PAGE>
9
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and any prospectus used in
connection therewith as may be necessary to maintain the effectiveness of
such registration statement and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities included in such registration statement, in accordance with the
intended methods of disposition thereof, until the earlier of (i) such time
as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth
in such registration statement and (ii) 90 days after such registration
statement becomes effective;
(c) promptly notify each Requesting Stockholder and the underwriter
or underwriters, if any:
(i) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has been
filed and, with respect to such registration statement or any post-
effective amendment thereto, when the same has become effective;
(ii) of any written request by the Commission for amendments
or supplements to such registration statement or prospectus;
(iii) of the notification to the Company by the Commission of
its initiation of any proceeding with respect to the issuance by the
Commission of, or of the issuance by the Commission of, any stop order
suspending the effectiveness of such registration statement; and
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable
Securities for sale under the applicable securities or blue sky laws
of any jurisdiction;
(d) furnish to each seller of Registrable Securities included in such
registration statement such number of conformed copies of such registration
statement and of each amendment and supplement thereto (in each case
including all exhibits and documents incorporated by reference), such
number of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any
other prospectus filed under Rule 424 promulgated under the Securities Act
relating to such Seller's Registrable Securities, and such other documents,
as such seller may reasonably request to facilitate the disposition of its
Registrable Securities;
(e) use its best efforts to register or qualify all Registrable
Securities included in such registration statement under such other
securities or blue sky laws of such jurisdictions as each seller thereof
shall reasonably request and to keep such registration or qualification in
effect for so long as such registration statement remains in effect, and
take any other action which may be reasonably necessary or advisable to
<PAGE>
10
enable such Stockholder to consummate the disposition in such jurisdictions
of the Registrable Securities owned by such Stockholder, except that the
Company shall not for any such purpose be required (i) to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it
would not but for the requirements of this paragraph (e) be obligated to be
so qualified, (ii) to subject itself to taxation in any such jurisdiction
or (iii) to consent to general service of process in any jurisdiction;
(f) use its best efforts to cause all Registrable Securities included
in such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
each Stockholder thereof to consummate the disposition of such Registrable
Securities;
(g) to the extent any of the following are obtained by or furnished
to the Company or the underwriters, furnish to each Requesting Stockholder
a signed counterpart, addressed to such Requesting Stockholder (and the
underwriters, if any), of
(i) an opinion of counsel for the Company, dated the effective
date of such registration statement (or, if such registration includes
an underwritten Public offering, dated the date of any closing under
the underwriting agreement), and
(ii) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten Public Offering, dated the date of any closing under the
underwriting agreement), signed by the independent public accountants
who have certified the Company's financial statements included in such
registration statement,
in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the
case of the accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten Public Offerings of securities;
(h) notify each Stockholder whose Registrable Securities are included
in such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which any prospectus included in such
registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and at the
request of any such Stockholder promptly prepare and furnish to such
Stockholder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a
<PAGE>
11
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(i) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, but not more than
eighteen (18) months, beginning with the first full calendar month after
the effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 promulgated thereunder;
(j) make available for inspection by any Requesting Stockholder, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such
Stockholder or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company reasonably necessary to
enable such Persons to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(k) provide a transfer agent and registrar for all Registrable
Securities included in such registration statement not later than the
effective date of such registration statement; and
(l) use its best efforts to cause all Registrable Securities included
in such registration statement to be listed, upon official notice of
issuance, on any securities exchange on which any of the securities of the
same class as the Registrable Securities are then listed.
The Company may require each Stockholder whose Registrable Securities
are being registered to, and each such Stockholder, as a condition to including
Registrable Securities in such registration, shall, furnish the Company and the
underwriters with such information and affidavits regarding such Stockholder and
the distribution of such securities as the Company and the underwriters may from
time to time reasonably request in writing in connection with such registration.
Upon receipt of any notice from the Company of the happening of any
event of the kind described in paragraph (h) of this Section 5.2, each
Stockholder will forthwith discontinue such Stockholder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such Stockholder receives the copies of the
supplemented or amended prospectus contemplated by paragraph (h) of this
Section 5.2 and, if so directed by the Company, shall deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such Stockholder' s possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice. In the event the
Company shall give any such notice, the period
<PAGE>
12
referred to in paragraph (b) of this Section 5.2 shall be extended by a number
of days equal to the number of days during the period from and including the
giving of notice pursuant to paragraph (h) of this Section 5.2 and to and
including the date when each Stockholder whose Registrable Securities are
included in such registration statement receives the copies of the supplemented
or amended prospectus contemplated by paragraph (h) of this Section 5.2.
Section 5.3. Underwritten Offerings. If the Company at any time
----------------------
proposes to register any of its securities in a Piggyback Registration and such
securities are to be distributed by or through one or more underwriters, the
Company will, subject to the provisions of Section 5.1(c), use its best efforts,
if requested by any Stockholder whose Registrable Securities are included in
such registration, to arrange for such underwriters to include the Registrable
Securities to be offered and sold by such Stockholder among the securities to be
distributed by such underwriters, and such Stockholders shall be obligated to
sell their Registrable Securities in such Piggyback Registration through such
underwriters on the same terms and conditions as apply to the other Company
securities to be sold by such underwriters in connection with such Piggyback
Registration. The Stockholders whose Registrable Securities are to be
distributed by such underwriters shall be parties to the underwriting agreement
between the Company and such underwriter or underwriters. No Requesting
Stockholder may participate in such underwritten offering unless such
Stockholder agrees to sell its Registrable Securities on the basis provided in
such underwriting agreement and completes and executes all questionnaires,
powers of attorney, indemnities and other documents reasonably required under
the terms of such underwriting agreement. If any Requesting Stockholder
disapproves of the terms of an underwriting, such Stockholder may elect to
withdraw therefrom and from such registration by notice to the Company and the
Managing Underwriter, and each of the remaining Requesting Stockholders shall be
entitled to increase the number of Registrable Securities being registered to
the extent of the Registrable Securities so withdrawn (i) in the case of a
Cutback Registration, in accordance with the priorities set forth in Section
5.1(c) and (ii) in all other cases in the proportion which the number of
Registrable Securities being registered by such remaining Requesting Stockholder
bears to the total number of Registrable Securities being registered by all such
remaining Requesting Stockholders.
Section 5.4. Holdback Agreements.
-------------------
(a) By the Stockholders. Unless the Managing Underwriter (or, in the
-------------------
case of a non-underwritten Public offering, the Company) otherwise agrees, no
Stockholder shall effect any public sale or distribution (including a sale under
Rule 144) of any Registrable Securities, or any securities convertible into or
exchangeable or exercisable for Registrable Securities, during the 14 days prior
to and the 90 days after the effective date of any registration statement filed
by the Company in connection with a Public Offering (or for such shorter period
of time as is sufficient and appropriate, in the opinion of the Managing
Underwriter (or, in the case of a non-underwritten Public Offering, the
Company), in order to complete the sale and distribution of the securities
included in such registration) except as part of such registration statement,
whether or not such Stockholder participates in such registration.
<PAGE>
13
(b) By the Company and Other Securityholders. Unless the Managing
----------------------------------------
Underwriter otherwise agrees, the Company (i) shall not effect any public sale
or distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the 14 days prior to and
the 90 days after the effective date of the registration statement filed in
connection with an underwritten offering made pursuant to a Piggyback
Registration (or for such shorter period of time as is sufficient and
appropriate, in the opinion of the Managing Underwriter, in order to complete
the sale and distribution of the securities included in such registration),
except as part of such underwritten registration and except pursuant to
registrations on Form S-4 or Form S-8 promulgated by the Commission or any
successor or similar forms thereto, and (ii) shall cause each holder of its
equity securities, or of any securities convertible into or exchangeable or
exercisable for such securities, in each case purchased from the Company at any
time after the date of this Agreement (other than in a Public Offering) , to
agree not to effect any such public sale or distribution of such securities
(including a sale under Rule 144), during such period, except as part of such
underwritten registration.
Section 5.5. Indemnification.
---------------
(a) Indemnification by the Company. The Company shall, to the full
------------------------------
extent permitted by law, indemnify and hold harmless each seller of Registrable
Securities included in any registration statement filed in connection with a
Piggyback Registration, its directors, officers, and partners, and each other
Person, if any, who controls any such seller within the meaning of the
Securities Act, against any losses, claims, damages, expenses or liabilities,
joint or several (together, "Losses"), to which such seller or any such
director, officer, partner or controlling Person may become subject under the
Securities Act or otherwise, insofar as such Losses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of a prospectus, in the light of the circumstances under
which they were made) not misleading, and the Company will reimburse such seller
and each such director, officer, partner and controlling Person for any legal or
any other expenses reasonably incurred by them in connection with investigating
or defending any such Loss (or action or proceeding in respect thereof) ;
provided, that the Company shall not be liable in any such case to the extent
- --------
that any such Loss (or action or proceeding in respect thereof) arises out of or
is based upon (i) an untrue statement or alleged untrue statement or omission or
alleged omission made in any such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such seller in his capacity as a selling stockholder specifically
stating that it is for use in the preparation thereof, or (ii) such seller's
failure to send or give a copy of the final prospectus to the Persons asserting
an untrue statement or alleged untrue statement or omission or alleged omission
at or prior to the written confirmation of the sale of Registrable Securities to
such Person if such statement or omission was corrected in such final
prospectus. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of
<PAGE>
14
such seller or any such director, officer, partner or controlling Person, and
shall survive the transfer of such securities by such seller. The Company shall
also indemnify each other Person who participates (including as an underwriter)
in the offering or sale of Registrable Securities, their officers and directors,
and partners, and each other Person, if any, who controls any such participating
Person within the meaning of the Securities Act to the same extent as provided
above with respect to sellers of Registrable Securities.
(b) Indemnification by the Sellers. Each Stockholder whose
------------------------------
Registrable Securities are included or are to be included in any registration
statement filed in connection with a Piggyback Registration, as a condition to
including Registrable Securities in such registration statement, shall, to the
full extent permitted by law, indemnify and hold harmless the Company, its
directors and officers, and each other Person, if any, who controls the Company
within the meaning of the Securities Act, against any Losses to which the
Company or any such director or officer or controlling Person may become subject
under the Securities Act or otherwise, insofar as such Losses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in the light of the
circumstances under which they were made) not misleading, if such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by such seller in his capacity as a selling stockholder specifically
stating that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement; provided, however, that the obligation to provide indemnification
--------
pursuant to this Section 5.5(b) shall be several, and not joint and several,
among such Indemnifying Parties. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Company or
any such director, officer or controlling Person and shall survive the transfer
of such securities by such seller. Such Stockholder shall also indemnify each
other Person who participates (including as an underwriter) in the offering or
sale of Registrable Securities, their officers and directors and each other
Person, if any, who controls any such participating Person within the meaning of
the Securities Act to the same extent as provided above with respect to the
Company.
(c) Notices of Claims, etc. Promptly after receipt by an Indemnified
----------------------
Party of notice of the commencement of any action or proceeding involving a
claim referred to in this Section 5.5, such Indemnified Party shall, if a claim
in respect thereof is to be made against an Indemnifying Party pursuant to this
Section 5.5, give written notice to the latter of the commencement of such
action; provided that the failure of any Indemnified Party to give notice as
--------
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 5.5, except to the extent that the Indemnifying Party is
actually prejudiced by such failure to give notice. In case any such action is
brought against an Indemnified Party, the Indemnifying Party shall be entitled
to participate in and to assume the defense thereof, jointly with any other
Indemnifying Party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such Indemnified Party, and after notice from
the
<PAGE>
15
Indemnifying Party to such Indemnified Party of its election so to assume the
defense thereof, the Indemnifying Party shall not be liable to such Indemnified
Party for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation; provided that the Indemnified Party may participate in such
--------
defense at the Indemnified Party's expense; and provided further that the
----------------
Indemnified Party or Indemnified Parties shall have the right to employ one
counsel to represent it or them if, in the reasonable judgment of the
Indemnified Party's or Indemnified Parties' counsel representation of both the
Indemnifying Party and the Indemnified Party would be inappropriate under the
applicable standards of professional conduct due to actual or potential
differing interests between them, and in that event the reasonable fees and
expenses of such one counsel shall be paid by the Indemnifying Party. If the
Indemnifying Party is not entitled to, or elects not to, assume the defense of a
claim, it will not be obligated to pay the fees and expenses of more than one
counsel for the Indemnified Parties with respect to such claim. No Indemnifying
Party shall consent to entry of any judgment or enter into any settlement
without the consent of the Indemnified Party which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. No Indemnifying Party shall be subject to any liability for any
settlement made without its consent, which consent shall not be unreasonably
withheld.
(d) Contribution. If the indemnity and reimbursement obligation
------------
provided for in any paragraph of this Section 5.5 is unavailable or insufficient
to hold harmless an Indemnified Party in respect of any Losses (or actions or
proceedings in respect thereof) referred to therein, then the Indemnifying Party
shall contribute to the amount paid or payable by the Indemnified Party as a
result of such Losses (or actions or proceedings in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and the Indemnified Party on the other hand in connection
with statements or omissions which resulted in such Losses, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Indemnifying Party or the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
parties hereto agree that it would not be just and equitable if contributions
pursuant to this Section 5.5(d) were to be determined by pro rata allocation or
--------
by any other method of allocation which does not take account of the equitable
considerations referred to in the first sentence of this Section 5.5(d). The
amount paid by an Indemnified Party as a result of the Losses referred to in the
first sentence of this Section 5.5(d) shall be deemed to include any legal and
other expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any Loss which is the subject of this Section 5.5(d).
No Indemnified Party guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from the Indemnifying Party if the Indemnifying Party was not
guilty of such fraudulent misrepresentation.
<PAGE>
16
(e) Other Indemnification. Indemnification similar to that specified
---------------------
in the preceding subsections of this Section 5.5 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation of any governmental
authority other than the Securities Act. The provisions of this Section 5.5
shall be in addition to any other rights to indemnification or contribution
which an Indemnified Party may have pursuant to law, equity, contract or
otherwise.
(f) Indemnification Payments. The indemnification required by this
------------------------
Section 5.5 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or Losses
are incurred.
Section 5.6. Covenants Relating to Rule 144. If at any time after an
------------------------------
initial Public Offering the Company is required to file reports in compliance
with either Section 13 or Section 15(d) of the Exchange Act, the Company will
(a) file reports in compliance with the Exchange Act, (b) comply with all rules
and regulations of the Commission applicable in connection with the use of Rule
144 and take such other actions and furnish each Stockholder with such other
information as such Stockholder may request in order to avail itself of such
rule or any other rule or regulation of the Commission allowing such Stockholder
to sell any Registrable Securities without registration, and (c) at its expense,
forthwith upon the request of any Stockholder, deliver to such Stockholder a
certificate, signed by the Company's principal financial officer, stating (i)
the Company's name, address and telephone number (including area code), (ii) the
Company's Internal Revenue Service identification number, (iii) the Company's
Commission file number, (iv) the number of shares of each class of capital stock
outstanding as shown by the most recent report or statement published by the
Company, and (v) whether the Company has filed the reports required to be filed
under the Exchange Act for a period of at least ninety (90) days prior to the
date of such certificate and in addition has filed the most recent annual report
required to be filed thereunder. If at any time the Company is not required to
file reports in compliance with either Section 13 or Section 15(d) of the
Exchange Act, the Company at its expense will, forthwith upon the written
request of the Stockholder of any Registrable Securities, make available
adequate current public information with respect to the Company within the
meaning of paragraph (c)(2) of Rule 144.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Amendment. This Agreement may be modified or amended
---------
only by a writing duly executed by or on behalf of the Company, on one hand, and
Stockholders holding a majority of the Shares then held by all Stockholders, on
the other hand.
Section 6.2. Management of the Company. Each Stockholder
-------------------------
acknowledges that it is his or her desire, and hereby agrees, that the Company
shall be managed by its Board of Directors in accordance with the business
judgment of the Board of Directors,
<PAGE>
17
regardless of the time periods over which or methods by which the Board of
Directors seeks to achieve value for the stockholders of the Company or any
other legitimate objectives of the Board of Directors. Each Stockholder
therefore agrees that he or she will not make any claims or demands as to the
manner in which the Company is managed or the possible adverse effect which such
management may have on the fair market value of the Shares or any other measure
of value of the Shares or the timing of realization thereof and, in
consideration of the right to subscribe for Shares pursuant to the terms of this
Agreement, hereby waives his or her right to make any such claims or demands.
Section 6.3. Notices. All notices to be given by any party hereunder
-------
shall be in writing and shall be deemed to have been duly given if mailed, by
first class or registered mail, 5 Business Days after mailing by first class
mail or if telecopied or delivered by hand or overnight courier, when
confirmation is received, in each case as follows: (i) in the case of any
Stockholder, to such Stockholder at its address set forth in the stock ledger of
the Company; (ii) in the case of the Company, to:
Carson, Inc.
64 Ross Road
Savannah, Georgia 31405
Facsimile: (912) 651-3424
Attention: Dr. Leroy Keith
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Facsimile: (212) 530-5219
Attention: Arnold B. Peinado III
The parties may change their respective addresses for purposes of notice
hereunder by giving notice of such change to all other parties in the manner
provided in this Section 6.3.
Section 6.4. Binding Effect. This Agreement supersedes all prior
--------------
negotiations, statements and agreements of the parties hereto with respect to
the subject matter of this Agreement, and shall be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto. If any
Transferee of any Stockholder shall acquire any Shares in any manner, whether by
operation of law or otherwise, such Shares shall be held subject to all of the
terms of this Agreement, and by taking and holding such Shares such person shall
be conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement.
<PAGE>
18
Section 6.5. Complete Agreement. This Agreement represents the
------------------
entire agreement among the Stockholders and the Company with respect to the
matters set forth herein, and the parties hereto acknowledge that there have
been no representations, warranties, covenants or agreements made by any party
hereto other than those contained in this Agreement.
Section 6.6. Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be executed by or on behalf of the Company and
one or more Stockholders and all of which shall be deemed to be one and the same
agreement.
Section 6.7. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware, without regard
to its conflicts of law doctrine. By execution and delivery of this Agreement,
each of the Stockholders accepts, generally and unconditionally, the
nonexclusive jurisdiction of the state or federal courts in Delaware.
Section 6.8. Injunctive Relief. It is hereby agreed and acknowledged
-----------------
that it will be impossible to measure in money the damages that would be
suffered if the parties to this Agreement fail to comply with any of the
obligations imposed on them by this Agreement and that in the event of any such
failure, an aggrieved Person will be irreparably damaged and will not have an
adequate remedy at law. Any such Person shall, therefore, be entitled to
injunctive relief, including specific performance, to enforce such obligations,
and if any action should be brought in equity to enforce any of the provisions
of this Agreement, none of the parties hereto shall raise the defense that there
is an adequate remedy at law.
Section 6.9. Severability. The invalidity or unenforceability of any
------------
provisions of this Agreement in any jurisdiction shall not affect the validity,
legality or enforceability of the remainder of this Agreement in such
jurisdiction or the validity, legality or enforceability of any provision of
this Agreement in any other jurisdiction, it being intended that all rights and
obligations of the parties hereunder shall be enforceable to the fullest extent
permitted by law.
Section 6.10. Recapitalization, etc. In the event that any capital
---------------------
stock or other securities are issued in respect of, in exchange for, or in
substitution of, any Shares by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to
Stockholders or combination of the Shares or any other change in the Company's
capital structure, appropriate adjustments shall be made to the provisions of
this Agreement so as to fairly and equitably preserve, as far as practicable,
the original rights and obligations of the parties hereto under this Agreement.
<PAGE>
19
IN WITNESS WHEREOF, the undersigned, thereunto duly authorized, have
hereunto set their respective hands as of the day and year first above written.
CARSON, INC.
By:_______________________________
Name: Dr. Leroy Keith
Title: Chief Executive Officer
THE STOCKHOLDERS:
----------------
See Annexed Signature Pages
<PAGE>
SIGNATURE PAGE ANNEX 1
THE STOCKHOLDERS:
----------------
____________________________________
Name: Jack Kemp
Number of Shares: 4.058
Consideration: $100,000 in cash
____________________________________
Name: John L. Sabre
Number of Shares: 2.029
Consideration: $50,000 in cash
____________________________________
Name: Abbey J. Butler
Number of Shares: 1.015
Consideration: $25,000 in cash
____________________________________
Name: Melvyn J. Estrin
Number of Shares: 1.015
Consideration: $25,000 in cash
<PAGE>
2
____________________________________
Name: James L. Hudson
Number of Shares: 1.015
Consideration: $25,000 in cash
____________________________________
Name: Suzanne de Passe
Number of Shares: 1.015
Consideration: $25,000 in cash
<PAGE>
EXHIBIT 10.19
SUBSCRIPTION AND REGISTRATION RIGHTS AGREEMENT
----------------------------------------------
This Subscription and Registration Rights Agreement (this "Agreement"),
dated as of August 15, 1996, among Carson, Inc., a Delaware corporation (the
"Company"), and the individuals named on the signature page hereto (the
"Stockholders").
W I T N E S S E T H :
WHEREAS, the Stockholders are executives of the Company and are being
offered the opportunity to purchase shares of Class A Common Stock, par value
$.01 per share, of the Company (the "Shares"); and
WHEREAS, the Company and the Stockholders desire to provide for certain
registration rights and obligations of the parties hereto with respect to the
Shares held by them;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, and other valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
The following terms shall have the definitions set forth below:
"Affiliate" has the meaning set forth in Rule 12b-2 promulgated under the
Exchange Act.
"Business Day" means any day (other than a day which is a Saturday, Sunday
or legal holiday in the State of New York) on which banks are open for business
in New York.
"Commission" means the Securities and Exchange Commission.
"Cutback Registration" means any Piggyback Registration to be effected as
an underwritten Public Offering in which the Managing Underwriter with respect
thereto advises the Company and the Requesting Stockholders in writing that, in
its opinion, the number of securities requested to be included in such
registration (including securities of the Company which are not Registrable
Securities) exceeds the number which can be sold in such offering
<PAGE>
2
without a reduction in the selling price anticipated to be received for the
securities to be sold in such Public Offering.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Indemnified Party" means a party entitled to indemnity in accordance with
Section 5.5 hereof.
"Indemnifying Party" means a party obligated to provide indemnification in
accordance with Section 5.5 hereof.
"Managing Underwriter" means, with respect to any Public Offering, the lead
managing underwriter for such Public Offering.
"NASD" means the National Association of Securities Dealers.
"Person" means nay natural person, corporation, general partnership,
limited partnership, proprietorship, other business organization, trust, union
or association.
"Piggyback Registration" means any registration of equity securities of the
Company of the same class as the Registrable Securities under the Securities Act
(other than a registration in respect of a dividend reinvestment or similar plan
or on Form S-4 or Form S-8 promulgated by the Commission, or any successor or
similar forms thereto), whether for sale for the account of the Company or for
the account of any holder of securities of the Company (other than the Company's
initial public offering).
"Public Offering" means any offering of common stock to the public, either
on behalf of the Company or any of its securityholders, pursuant to an effective
registration statement under the Securities Act (other than the Company's
initial public offering of the Shares).
"Registrable Securities" means the shares of common stock at any time
outstanding, including additional shares of common stock issued or distributed
as a dividend, stock split or other distribution in respect thereof, provided,
--------
that any Registrable Securities shall cease to be Registrable Securities when
(x) a registration statement with respect to the sale of such Registrable
Securities shall have become effective under the Securities Act and such
Registrable Securities shall have been disposed of in accordance with such
registration statement or (y) such Registrable Securities shall have been
distributed to the public pursuant to Rule 144.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with its obligations under this Agreement to effect
the registration of Registrable Securities in a Piggyback Registration,
including, without
<PAGE>
3
limitation, all registration, filing, securities exchange listing and NASD fees,
all registration, filing, qualification and other fees and expenses of complying
with securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance, premiums and other costs of policies of
insurance against liabilities arising out of the Public Offering of the
Registrable Securities being registered and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities, but excluding
underwriting discounts and commissions and transfer taxes, if any, in respect of
Registrable Securities, which shall be payable by the Stockholders selling the
same.
"Request for Registration" means a written request by a Stockholder to the
Company for registration of Registrable Securities in response to a Notice of
Piggyback Registration, which request shall specify the Registrable Securities
intended to be disposed of and the intended method of disposition thereof.
"Requesting Stockholders" mean, with respect to any registration, the
Stockholders requesting to have Registrable Securities included in a
registration.
"Rule 144" means Rule 144 promulgated under the Securities Act, and any
successor provision thereto.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Stockholders" means each of the individuals named on the signature pages
hereto and their respective Permitted Transferees that hold Shares at the time
(after the Closing) of application of a provision of this Agreement to
Stockholders.
ARTICLE II
SUBSCRIPTION
Section 2.1. Subscription for the Shares. On the terms and subject to the
---------------------------
conditions of this Agreement, each of the Stockholders hereby subscribes for and
agrees to purchase, and the Company agrees to issue and sell to each such
Stockholder, the number of Shares for the consideration, set forth below such
party's signature hereto (the "Purchase Price" of such Shares).
Section 2.2. Closing Date. The consummation of the purchase and sale of
------------
the Shares contemplated by this Agreement (the "Closing") shall take place at
such time and
<PAGE>
4
place and on such date not later than 30 days after the execution hereof as the
Company and the Stockholders mutually agree (the "Closing Date").
Section 2.3. Conditions to Closing. The obligations of each party hereto
---------------------
to consummate the transactions contemplated by this Article II shall be
conditioned on the issuance, purchase of and payment for the Shares to be
purchased and sold hereunder not being prohibited by any applicable law, court
order or governmental regulation.
Section 2.4. Issuances of and Payment for Shares. At the Closing, (a) the
-----------------------------------
Company shall deliver to each Stockholder stock certificates registered in the
name of such party and representing the Shares being purchased by such
Stockholder pursuant hereto; (b) each such Stockholder shall deliver to the
Company the aggregate Consideration for the Shares being purchased by such
Stockholder pursuant hereto, (i) in the case of cash, by certified or official
bank check payable to the order of the Company and (ii) in the case of Recourse
Notes, by issuance and delivery to the Company of a Recourse Note, substantially
in the form of Exhibit A hereto (each, a "Recourse Note"); and (c) the Company
---------
and each Stockholder shall execute and deliver a Pledge Agreement, substantially
in the form of Exhibit B hereto (each, a "Pledge Agreement").
---------
ARTICLE III
REPRESENTATIONS AND WARRANTIES
A. The Company hereby represents and warrants to the Stockholders as
follows:
Section 3.A.1. Organization. The Company is a corporation duly organized
------------
and validly existing and in good standing under the laws of the State of
Delaware.
Section 3.A.2. Due Authorization. The execution and delivery of this
-----------------
Agreement and the consummation of the transactions contemplated hereby to be
consummated by it (i) are within the corporate powers and authority of the
Company and (ii) have been duly authorized by all requisite corporate
proceedings on the part of the Company. This Agreement is a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, reorganization, insolvency,
moratorium and other laws affecting creditors' rights generally and, as to
enforceability, general equitable principles.
Section 3.A.3. Status of Shares. The Shares, when issued to the
----------------
Stockholders pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
B. Each Stockholder hereby severally (and not jointly) represents and
warrants to the Company and the other Stockholders with respect to such
Stockholder and the
<PAGE>
5
Shares to be acquired by such Stockholder pursuant to this Agreement, and not
with respect to any other Stockholder or any other Shares as follows:
Section 3.B.1. Authorization. Such Stockholder has full power and
-------------
authority to execute and deliver, to perform his or her obligations under and to
consummate the transactions contemplated by this Agreement. This Agreement is a
valid and legally binding agreement of such Stockholder, enforceable against
such Stockholder in accordance with its terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights generally and, as to enforceability, general equitable principles.
Section 3.B.2. Acquisition for Investment. (a) Such Stockholder
--------------------------
acknowledges that he or she has sufficient knowledge and experience in business
and financial matters and with respect to investments in securities to enable
such Stockholder to understand and evaluate the risks of the investment in the
Shares contemplated hereby to be made by such Stockholder and to form an
investment decision with respect thereto, and is able to bear the risk of such
investment for an indefinite period and to afford a complete loss thereof. Such
Stockholder is an executive officer of the Company and has access to information
about the Company, the Company's financial condition and about the Shares
sufficient to enable him or her to evaluate his or her investment in the Shares.
Such Stockholder further acknowledges that he or she, in the regular course of
his or her employment by the Company, has the opportunity (1) to ask such
questions as he or she may deem necessary of, and to receive answers from,
appropriate representatives of the Company concerning the terms of the offering
of the Shares to him or her and the merits and risks of investing in the Shares
and (2) to obtain such additional information which the Company possesses or can
acquire without unreasonable effort or expense.
(b) Such Stockholder is acquiring the Shares for his or her own account
for the purpose of investment and not with a view to or for sale in connection
with any distribution thereof, and such Stockholder has no present intention or
plan to effect any distribution of the Shares.
ARTICLE IV
TRANSFERS OF SHARES
Section 4.1. Restrictions on Transfers; Permitted Transferees. (a) Each
------------------------------------------------
Stockholder hereby acknowledges and agrees that such Stockholder will not (other
than as required by the Pledge Agreement), directly and indirectly, offer, sell,
assign, pledge, encumber or otherwise transfer any Shares or solicit any offers
to purchase or otherwise acquire or make a pledge of any Shares unless either
(A) any such offer, sale, assignment, pledge, encumbrance or other transfer
shall have been pursuant to an effective registration statement under the
Securities Act and shall have been registered under all applicable state
securities or "blue sky" laws or (B) such Stockholder shall have furnished the
Company with
<PAGE>
6
an opinion of counsel, which opinion of counsel shall have been reasonably
satisfactory to the Company, to the effect that no such registration is required
because of the availability of an exemption from registration under the
Securities Act and all applicable state securities or "blue sky" laws.
(b) In addition to the restrictions contained in Section 4.1(a), except in
the case of a sale of Shares pursuant to an effective registration statement
under the Securities Act, a sale of Shares pursuant to a transaction complying
with Rule 144 or a pledge of the Shares pursuant to the Pledge Agreement, no
Stockholder shall sell, assign, pledge, encumber or otherwise transfer any
Shares to any Person (regardless of the manner in which such Stockholder
initially acquired such Shares) nor shall the Company register the transfer of
any Shares to any Person (all Persons acquiring Shares from a Stockholder,
regardless of the method of transfer, shall be referred to as "Transferees")
unless (i) such Shares bear legends as provided in Section 4.6 hereof and (ii)
such Transferee shall have executed and delivered to the Company, as a condition
precedent to any acquisition of the Shares, an instrument in form and substance
satisfactory to the Company confirming that such Transferee takes such Shares
subject to all the terms and conditions of this Agreement applicable to the
transferor of such Shares, and agrees to be bound by the terms of this
Agreement. The Company shall not be obligated to register the transfer of any
Shares to any Person except in accordance with this Agreement.
(c) Except as specifically contemplated hereby, no Stockholder shall grant
any proxy or enter into or agree to be bound by any voting trust with respect to
any Shares nor shall any Stockholder enter into any stockholder agreements or
arrangements of any kind with any Person with respect to any Shares inconsistent
with the provisions of this Agreement (whether or not such agreements and
arrangements are with other Stockholders or holders of Shares who are not
parties to this Agreement), including but not limited to, agreements or
arrangements with respect to the acquisition, disposition or voting of Shares,
nor shall any Stockholder act, for any reason, as a member of a group or in
concert with any other Persons (other than Permitted Transferees) in connection
with the acquisition, disposition or voting of Shares in any manner which is
inconsistent with the provisions of this Agreement.
(d) None of the restrictions contained in this Agreement with respect to
transfers of Shares (other than those set forth in Sections 4.1(a), 4.1(b) and
4.3 hereof) shall apply: (i) to any transfer by any Stockholder to any spouse,
child, parent, sibling or grandchild of such Stockholder, or by any of such
relatives to such Stockholder or to any one or more of such relatives, or by any
Stockholder or any such relatives to a trust of which there are no principal
beneficiaries other than such Stockholder, such Stockholder and one or more of
such relatives, or one or more of such relatives; (ii) to any transfer to a
legal representative of any Stockholder in the event such Stockholder becomes
mentally incompetent; (iii) to any transfer by will or the laws of descent; or
(iv) to any transfer by any Stockholder to the Company or any Affiliate thereof
(a "Permitted Transferee"). Each Permitted Transferee shall agree to be bound
by the Pledge Agreement and the Recourse Note to the same extent as the
transferring Stockholder is bound thereby with respect to such
<PAGE>
7
Shares. For the purposes hereof, the Permitted Transferees of a Stockholder
shall include the Permitted Transferees of such Stockholder's Permitted
Transferees.
Section 4.2. Merger Transactions. Notwithstanding any other provision of
-------------------
this Agreement to the contrary, the Company may enter into an agreement to
consolidate with or merge into any other corporation or have any other
corporation merged into it if such agreement is approved by the Board of
Directors of the Company and by the requisite vote of the holders of the capital
stock of the Company in accordance with the General Corporation Law and any
other applicable laws of the State of Delaware. If this Agreement is not
terminated, all provisions of this Agreement (including without limitation this
Section 4.2) shall continue in full force and effect as to all subsequent
transactions in Shares (or the securities or other consideration to be received
therefor), and if the Company is not to be the surviving corporation in such
consolidation or merger, the Company shall make appropriate arrangements for the
continuation of such provisions.
Section 4.3. Legend on Certificates. Each outstanding. certificate
----------------------
representing Shares that are subject to this Agreement shall bear a legend
reading substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A PRIVATE
PLACEMENT, WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND IN RELIANCE UPON THE HOLDER'S REPRESENTATION
THAT SUCH SHARES WERE BEING ACQUIRED FOR INVESTMENT AND NOT FOR
RESALE. NO TRANSFER OF SUCH SHARES MAY BE MADE ON THE BOOKS OF THE
COMPANY UNLESS ACCOMPANIED BY AN OPINION OF COUNSEL, SATISFACTORY TO
THE COMPANY, THAT SUCH TRANSFER MAY BE EFFECTED WITHOUT REGISTRATION
UNDER THE ACT OR THAT SUCH SHARES HAVE BEEN SO REGISTERED UNDER A
REGISTRATION STATEMENT WHICH IS IN EFFECT AT THE DATE OF SUCH
TRANSFER.
THE SALE, ASSIGNMENT, PLEDGE, ENCUMBRANCE OR OTHER TRANSFER OF THE
SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE PROVISIONS OF
A SUBSCRIPTION AND REGISTRATION RIGHTS AGREEMENT, DATED AS OF AUGUST
15, 1996, AMONG THE COMPANY AND THE OTHER PARTIES NAMED IN THE
SIGNATURE PAGES THERETO, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE COMPANY.
Section 4.4. Involuntary Transfers. If a Stockholder involuntarily
---------------------
transfers directly or indirectly any or all of his or her Shares for any reason
and such transfer is not to a Permitted Transferee, the Transferee of such
Shares shall be required, at the Company's election, to offer all of the Shares
held by such Transferee to the Company.
<PAGE>
8
ARTICLE V
REGISTRATION RIGHTS
Section 5.1. Piggyback Registration.
----------------------
(a) Right to Include Registrable Securities. If the Company proposes
---------------------------------------
to effect a Piggyback Registration, it will give prompt written notice (a
"Notice of piggyback Registration") to all Stockholders of its intention to do
so and of such Stockholders rights under this Article V to participate in such
Piggyback Registration, which Notice of Piggyback Registration shall include a
description of the intended method of disposition of such securities. If any
such Stockholder delivers a Request for Registration to the Company within 15
days after such Stockholder receives a Notice of Piggyback Registration, the
Company will use its best efforts to effect the registration under the
Securities Act of the Registrable Securities relating to such Piggyback
Registration which the Company has been so requested to register.
Notwithstanding the foregoing (i) if at any time after giving a Notice of
Piggyback Registration and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Stockholder and, thereupon, (A) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not from
its obligation to pay the Registration Expenses in connection therewith) and (B)
in the case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities for the same period as the delay in
registering such other securities, and (ii) if such registration involves an
underwritten offering, the Requesting Stockholder requesting to be included in
the Company's registration must sell its Registrable Securities to the
underwriters selected by the Company on the same terms and conditions as apply
to the Company or other selling holders, with such differences, including any
with respect to indemnification and liability insurance, as may be customary or
appropriate for such underwriters in combined primary and secondary offerings.
If a registration requested pursuant to this Section 5.1(a) involves an
underwritten public offering, the Requesting Stockholder requesting to be
included in such registration may elect, in writing prior to the effective date
of the registration statement filed in connection with such registration, not to
register such securities in connection with such registration.
(b) Registration Expenses. The Company will pay all Registration
---------------------
Expenses incurred in connection with each Piggyback Registration.
(c) Priority in Cutback Registrations. If a Piggyback
---------------------------------
Registration becomes a Cutback Registration, the Company will include in such
registration to the extent of the amount of the securities which the Managing
Underwriter advises the Company can be sold in such offering without a reduction
in the selling price anticipated to be received for the securities to be sold in
such Public Offering: (A) first, any securities proposed by the Company to be
-----
sold for its own account; (B) second, any securities other than Registrable
------
<PAGE>
9
Securities proposed to be sold for the account of one or more securityholders of
the Company; and (C) third, any Registrable Securities included in the Requests
-----
for Registration of Requesting Stockholders, pro rata in proportion to the
--- ----
respective numbers thereof. Any securities excluded shall be withdrawn from and
shall not be included in such Piggyback Registration.
Section 5.2. Registration Procedures. If and whenever the Company is
-----------------------
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act pursuant to Section 5.1 hereof, the Company
will (subject to its rights under Section 5.1 hereof not to register or to delay
registration of Registrable Securities), as expeditiously as possible:
(a) prepare and file with the Commission the requisite registration
statement to effect such registration (including such audited financial
statements as may be required by the Securities Act or the rules and
regulations promulgated thereunder) and use its best efforts to cause such
registration statement to become effective; provided, that as far in
--------
advance as practical before filing such registration statement or any
amendment thereto, the Company will furnish to counsel for the Requesting
Stockholders copies of reasonably complete drafts of all such documents
proposed to be filed (including exhibits), and any such Stockholder shall
have the opportunity to object to any information pertaining solely to such
Stockholder that is contained therein, and the Company will make the
corrections reasonably requested by such Stockholder with respect to such
information prior to filing any such registration statement or amendment;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and any prospectus used in
connection therewith as may be necessary to maintain the effectiveness of
such registration statement and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities included in such registration statement, in accordance with the
intended methods of disposition thereof, until the earlier of (i) such time
as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth
in such registration statement and (ii) 90 days after such registration
statement becomes effective;
(c) promptly notify each Requesting Stockholder and the underwriter
or underwriters, if any:
(i) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has been
filed and, with respect to such registration statement or any post-
effective amendment thereto, when the same has become effective;
<PAGE>
10
(ii) of any written request by the Commission for amendments
or supplements to such registration statement or prospectus;
(iii) of the notification to the Company by the Commission of
its initiation of any proceeding with respect to the issuance by the
Commission of, or of the issuance by the Commission of, any stop order
suspending the effectiveness of such registration statement; and
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable
Securities for sale under the applicable securities or blue sky laws
of any jurisdiction;
(d) furnish to each seller of Registrable Securities included in such
registration statement such number of conformed copies of such registration
statement and of each amendment and supplement thereto (in each case
including all exhibits and documents incorporated by reference), such
number of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any
other prospectus filed under Rule 424 promulgated under the Securities Act
relating to such Seller's Registrable Securities, and such other documents,
as such seller may reasonably request to facilitate the disposition of its
Registrable Securities;
(e) use its best efforts to register or qualify all Registrable
Securities included in such registration statement under such other
securities or blue sky laws of such jurisdictions as each seller thereof
shall reasonably request and to keep such registration or qualification in
effect for so long as such registration statement remains in effect, and
take any other action which may be reasonably necessary or advisable to
enable such Stockholder to consummate the disposition in such jurisdictions
of the Registrable Securities owned by such Stockholder, except that the
Company shall not for any such purpose be required (i) to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it
would not but for the requirements of this paragraph (e) be obligated to be
so qualified, (ii) to subject itself to taxation in any such jurisdiction
or (iii) to consent to general service of process in any jurisdiction;
(f) use its best efforts to cause all Registrable Securities included
in such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
each Stockholder thereof to consummate the disposition of such Registrable
Securities;
(g) to the extent any of the following are obtained by or furnished
to the Company or the underwriters, furnish to each Requesting Stockholder
a signed counterpart, addressed to such Requesting Stockholder (and the
underwriters, if any), of
<PAGE>
11
(i) an opinion of counsel for the Company, dated the effective date
of such registration statement (or, if such registration includes an
underwritten Public offering, dated the date of any closing under the
underwriting agreement), and
(ii) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten Public Offering, dated the date of any closing under the
underwriting agreement), signed by the independent public accountants
who have certified the Company's financial statements included in such
registration statement,
in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the
case of the accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten Public Offerings of securities;
(h) notify each Stockholder whose Registrable Securities are included
in such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which any prospectus included in such
registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and at the
request of any such Stockholder promptly prepare and furnish to such
Stockholder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(i) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, but not more than
eighteen (18) months, beginning with the first full calendar month after
the effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 promulgated thereunder;
(j) make available for inspection by any Requesting Stockholder, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such
Stockholder or underwriter, all financial and other records, pertinent
corporate documents and
<PAGE>
12
properties of the Company reasonably necessary to enable such Persons to
exercise their due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement;
(k) provide a transfer agent and registrar for all Registrable
Securities included in such registration statement not later than the
effective date of such registration statement; and
(l) use its best efforts to cause all Registrable Securities included
in such registration statement to be listed, upon official notice of
issuance, on any securities exchange on which any of the securities of the
same class as the Registrable Securities are then listed.
The Company may require each Stockholder whose Registrable Securities
are being registered to, and each such Stockholder, as a condition to including
Registrable Securities in such registration, shall, furnish the Company and the
underwriters with such information and affidavits regarding such Stockholder and
the distribution of such securities as the Company and the underwriters may from
time to time reasonably request in writing in connection with such registration.
Upon receipt of any notice from the Company of the happening of any
event of the kind described in paragraph (h) of this Section 5.2, each
Stockholder will forthwith discontinue such Stockholder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such Stockholder receives the copies of the
supplemented or amended prospectus contemplated by paragraph (h) of this
Section 5.2 and, if so directed by the Company, shall deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such Stockholder' s possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice. In the event the
Company shall give any such notice, the period referred to in paragraph (b) of
this Section 5.2 shall be extended by a number of days equal to the number of
days during the period from and including the giving of notice pursuant to
paragraph (h) of this Section 5.2 and to and including the date when each
Stockholder whose Registrable Securities are included in such registration
statement receives the copies of the supplemented or amended prospectus
contemplated by paragraph (h) of this Section 5.2.
Section 5.3. Underwritten Offerings. If the Company at any time
----------------------
proposes to register any of its securities in a Piggyback Registration and such
securities are to be distributed by or through one or more underwriters, the
Company will, subject to the provisions of Section 5.1(c), use its best efforts,
if requested by any Stockholder whose Registrable Securities are included in
such registration, to arrange for such underwriters to include the Registrable
Securities to be offered and sold by such Stockholder among the securities to be
distributed by such underwriters, and such Stockholders shall be obligated to
<PAGE>
13
sell their Registrable Securities in such Piggyback Registration through such
underwriters on the same terms and conditions as apply to the other Company
securities to be sold by such underwriters in connection with such Piggyback
Registration. The Stockholders whose Registrable Securities are to be
distributed by such underwriters shall be parties to the underwriting agreement
between the Company and such underwriter or underwriters. No Requesting
Stockholder may participate in such underwritten offering unless such
Stockholder agrees to sell its Registrable Securities on the basis provided in
such underwriting agreement and completes and executes all questionnaires,
powers of attorney, indemnities and other documents reasonably required under
the terms of such underwriting agreement. If any Requesting Stockholder
disapproves of the terms of an underwriting, such Stockholder may elect to
withdraw therefrom and from such registration by notice to the Company and the
Managing Underwriter, and each of the remaining Requesting Stockholders shall be
entitled to increase the number of Registrable Securities being registered to
the extent of the Registrable Securities so withdrawn (i) in the case of a
Cutback Registration, in accordance with the priorities set forth in Section
5.1(c) and (ii) in all other cases in the proportion which the number of
Registrable Securities being registered by such remaining Requesting Stockholder
bears to the total number of Registrable Securities being registered by all such
remaining Requesting Stockholders.
Section 5.4. Holdback Agreements.
-------------------
(a) By the Stockholders. Unless the Managing Underwriter (or, in the
-------------------
case of a non-underwritten Public offering, the Company) otherwise agrees, no
Stockholder shall effect any public sale or distribution (including a sale under
Rule 144) of any Registrable Securities, or any securities convertible into or
exchangeable or exercisable for Registrable Securities, during the 14 days prior
to and the 90 days after the effective date of any registration statement filed
by the Company in connection with a Public Offering (or for such shorter period
of time as is sufficient and appropriate, in the opinion of the Managing
Underwriter (or, in the case of a non-underwritten Public Offering, the
Company), in order to complete the sale and distribution of the securities
included in such registration) except as part of such registration statement,
whether or not such Stockholder participates in such registration.
(b) By the Company and Other Securityholders. Unless the Managing
----------------------------------------
Underwriter otherwise agrees, the Company (i) shall not effect any public sale
or distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the 14 days prior to and
the 90 days after the effective date of the registration statement filed in
connection with an underwritten offering made pursuant to a Piggyback
Registration (or for such shorter period of time as is sufficient and
appropriate, in the opinion of the Managing Underwriter, in order to complete
the sale and distribution of the securities included in such registration),
except as part of such underwritten registration and except pursuant to
registrations on Form S-4 or Form S-8 promulgated by the Commission or any
successor or similar forms thereto, and (ii) shall cause each holder of its
equity securities, or of any securities convertible into or exchangeable or
exercisable for such securities, in each
<PAGE>
14
case purchased from the Company at any time after the date of this Agreement
(other than in a Public Offering) , to agree not to effect any such public sale
or distribution of such securities (including a sale under Rule 144), during
such period, except as part of such underwritten registration.
Section 5.5. Indemnification.
---------------
(a) Indemnification by the Company. The Company shall, to the full
------------------------------
extent permitted by law, indemnify and hold harmless each seller of Registrable
Securities included in any registration statement filed in connection with a
Piggyback Registration, its directors, officers, and partners, and each other
Person, if any, who controls any such seller within the meaning of the
Securities Act, against any losses, claims, damages, expenses or liabilities,
joint or several (together, "Losses"), to which such seller or any such
director, officer, partner or controlling Person may become subject under the
Securities Act or otherwise, insofar as such Losses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of a prospectus, in the light of the circumstances under
which they were made) not misleading, and the Company will reimburse such seller
and each such director, officer, partner and controlling Person for any legal or
any other expenses reasonably incurred by them in connection with investigating
or defending any such Loss (or action or proceeding in respect thereof) ;
provided, that the Company shall not be liable in any such case to the extent
- --------
that any such Loss (or action or proceeding in respect thereof) arises out of or
is based upon (i) an untrue statement or alleged untrue statement or omission or
alleged omission made in any such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such seller in his capacity as a selling stockholder specifically
stating that it is for use in the preparation thereof, or (ii) such seller's
failure to send or give a copy of the final prospectus to the Persons asserting
an untrue statement or alleged untrue statement or omission or alleged omission
at or prior to the written confirmation of the sale of Registrable Securities to
such Person if such statement or omission was corrected in such final
prospectus. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such seller or any such director,
officer, partner or controlling Person, and shall survive the transfer of such
securities by such seller. The Company shall also indemnify each other Person
who participates (including as an underwriter) in the offering or sale of
Registrable Securities, their officers and directors, and partners, and each
other Person, if any, who controls any such participating Person within the
meaning of the Securities Act to the same extent as provided above with respect
to sellers of Registrable Securities.
(b) Indemnification by the Sellers. Each Stockholder whose
------------------------------
Registrable Securities are included or are to be included in any registration
statement filed in connection
<PAGE>
15
with a Piggyback Registration, as a condition to including Registrable
Securities in such registration statement, shall, to the full extent permitted
by law, indemnify and hold harmless the Company, its directors and officers, and
each other Person, if any, who controls the Company within the meaning of the
Securities Act, against any Losses to which the Company or any such director or
officer or controlling Person may become subject under the Securities Act or
otherwise, insofar as such Losses (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made) not
misleading, if such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such seller in his capacity as a selling
stockholder specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement; provided, however, that the obligation to
--------
provide indemnification pursuant to this Section 5.5(b) shall be several, and
not joint and several, among such Indemnifying Parties. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling Person and
shall survive the transfer of such securities by such seller. Such Stockholder
shall also indemnify each other Person who participates (including as an
underwriter) in the offering or sale of Registrable Securities, their officers
and directors and each other Person, if any, who controls any such participating
Person within the meaning of the Securities Act to the same extent as provided
above with respect to the Company.
(c) Notices of Claims, etc. Promptly after receipt by an Indemnified
----------------------
Party of notice of the commencement of any action or proceeding involving a
claim referred to in this Section 5.5, such Indemnified Party shall, if a claim
in respect thereof is to be made against an Indemnifying Party pursuant to this
Section 5.5, give written notice to the latter of the commencement of such
action; provided that the failure of any Indemnified Party to give notice as
--------
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 5.5, except to the extent that the Indemnifying Party is
actually prejudiced by such failure to give notice. In case any such action is
brought against an Indemnified Party, the Indemnifying Party shall be entitled
to participate in and to assume the defense thereof, jointly with any other
Indemnifying Party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such Indemnified Party, and after notice from
the Indemnifying Party to such Indemnified Party of its election so to assume
the defense thereof, the Indemnifying Party shall not be liable to such
Indemnified Party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation; provided that the Indemnified Party may participate in such
--------
defense at the Indemnified Party's expense; and provided further that the
----------------
Indemnified Party or Indemnified Parties shall have the right to employ one
counsel to represent it or them if, in the reasonable judgment of the
Indemnified Party's or Indemnified Parties' counsel
<PAGE>
16
representation of both the Indemnifying Party and the Indemnified Party would be
inappropriate under the applicable standards of professional conduct due to
actual or potential differing interests between them, and in that event the
reasonable fees and expenses of such one counsel shall be paid by the
Indemnifying Party. If the Indemnifying Party is not entitled to, or elects not
to, assume the defense of a claim, it will not be obligated to pay the fees and
expenses of more than one counsel for the Indemnified Parties with respect to
such claim. No Indemnifying Party shall consent to entry of any judgment or
enter into any settlement without the consent of the Indemnified Party which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. No Indemnifying Party shall be subject to any
liability for any settlement made without its consent, which consent shall not
be unreasonably withheld.
(d) Contribution. If the indemnity and reimbursement obligation
------------
provided for in any paragraph of this Section 5.5 is unavailable or insufficient
to hold harmless an Indemnified Party in respect of any Losses (or actions or
proceedings in respect thereof) referred to therein, then the Indemnifying Party
shall contribute to the amount paid or payable by the Indemnified Party as a
result of such Losses (or actions or proceedings in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and the Indemnified Party on the other hand in connection
with statements or omissions which resulted in such Losses, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Indemnifying Party or the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
parties hereto agree that it would not be just and equitable if contributions
pursuant to this Section 5.5(d) were to be determined by pro rata allocation or
--------
by any other method of allocation which does not take account of the equitable
considerations referred to in the first sentence of this Section 5.5(d). The
amount paid by an Indemnified Party as a result of the Losses referred to in the
first sentence of this Section 5.5(d) shall be deemed to include any legal and
other expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any Loss which is the subject of this Section 5.5(d).
No Indemnified Party guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from the Indemnifying Party if the Indemnifying Party was not
guilty of such fraudulent misrepresentation.
(e) Other Indemnification. Indemnification similar to that specified
---------------------
in the preceding subsections of this Section 5.5 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation of any governmental
authority other than the Securities Act. The provisions of this Section 5.5
shall
<PAGE>
17
be in addition to any other rights to indemnification or contribution which an
Indemnified Party may have pursuant to law, equity, contract or otherwise.
(f) Indemnification Payments. The indemnification required by this
------------------------
Section 5.5 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or Losses
are incurred.
Section 5.6. Covenants Relating to Rule 144. If at any time after an
------------------------------
initial Public Offering the Company is required to file reports in compliance
with either Section 13 or Section 15(d) of the Exchange Act, the Company will
(a) file reports in compliance with the Exchange Act, (b) comply with all rules
and regulations of the Commission applicable in connection with the use of Rule
144 and take such other actions and furnish each Stockholder with such other
information as such Stockholder may request in order to avail itself of such
rule or any other rule or regulation of the Commission allowing such Stockholder
to sell any Registrable Securities without registration, and (c) at its expense,
forthwith upon the request of any Stockholder, deliver to such Stockholder a
certificate, signed by the Company's principal financial officer, stating (i)
the Company's name, address and telephone number (including area code), (ii) the
Company's Internal Revenue Service identification number, (iii) the Company's
Commission file number, (iv) the number of shares of each class of capital stock
outstanding as shown by the most recent report or statement published by the
Company, and (v) whether the Company has filed the reports required to be filed
under the Exchange Act for a period of at least ninety (90) days prior to the
date of such certificate and in addition has filed the most recent annual report
required to be filed thereunder. If at any time the Company is not required to
file reports in compliance with either Section 13 or Section 15(d) of the
Exchange Act, the Company at its expense will, forthwith upon the written
request of the Stockholder of any Registrable Securities, make available
adequate current public information with respect to the Company within the
meaning of paragraph (c)(2) of Rule 144.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Amendment. This Agreement may be modified or amended
---------
only by a writing duly executed by or on behalf of the Company, on one hand, and
Stockholders holding a majority of the Shares then held by all Stockholders, on
the other hand.
Section 6.2. Management of the Company. Each Stockholder
-------------------------
acknowledges that it is his or her desire, and hereby agrees, that the Company
shall be managed by its Board of Directors in accordance with the business
judgment of the Board of Directors, regardless of the time periods over which or
methods by which the Board of Directors seeks to achieve value for the
stockholders of the Company or any other legitimate objectives of the Board of
Directors. Each Stockholder therefore agrees that he or she will not make any
<PAGE>
18
claims or demands as to the manner in which the Company is managed or the
possible adverse effect which such management may have on the fair market value
of the Shares or any other measure of value of the Shares or the timing of
realization thereof and, in consideration of the right to subscribe for Shares
pursuant to the terms of this Agreement, hereby waives his or her right to make
any such claims or demands.
Section 6.3. Notices. All notices to be given by any party hereunder
-------
shall be in writing and shall be deemed to have been duly given if mailed, by
first class or registered mail, 5 Business Days after mailing by first class
mail or if telecopied or delivered by hand or overnight courier, when
confirmation is received, in each case as follows: (i) in the case of any
Stockholder, to such Stockholder at its address set forth in the stock ledger of
the Company; (ii) in the case of the Company, to:
Carson, Inc.
64 Ross Road
Savannah, Georgia 31405
Facsimile: (912) 651-3424
Attention: Dr. Leroy Keith
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Facsimile: (212) 530-5219
Attention: Arnold B. Peinado III
The parties may change their respective addresses for purposes of notice
hereunder by giving notice of such change to all other parties in the manner
provided in this Section 6.3.
Section 6.4. Binding Effect. This Agreement supersedes all prior
--------------
negotiations, statements and agreements of the parties hereto with respect to
the subject matter of this Agreement, and shall be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto. If any
Transferee of any Stockholder shall acquire any Shares in any manner, whether by
operation of law or otherwise, such Shares shall be held subject to all of the
terms of this Agreement, and by taking and holding such Shares such person shall
be conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement.
<PAGE>
19
Section 6.5. Complete Agreement. This Agreement represents the
------------------
entire agreement among the Stockholders and the Company with respect to the
matters set forth herein, and the parties hereto acknowledge that there have
been no representations, warranties, covenants or agreements made by any party
hereto other than those contained in this Agreement.
Section 6.6. Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be executed by or on behalf of the Company and
one or more Stockholders and all of which shall be deemed to be one and the same
agreement.
Section 6.7. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware, without regard
to its conflicts of law doctrine. By execution and delivery of this Agreement,
each of the Stockholders accepts, generally and unconditionally, the
nonexclusive jurisdiction of the state or federal courts in Delaware.
Section 6.8. Injunctive Relief. It is hereby agreed and acknowledged
-----------------
that it will be impossible to measure in money the damages that would be
suffered if the parties to this Agreement fail to comply with any of the
obligations imposed on them by this Agreement and that in the event of any such
failure, an aggrieved Person will be irreparably damaged and will not have an
adequate remedy at law. Any such Person shall, therefore, be entitled to
injunctive relief, including specific performance, to enforce such obligations,
and if any action should be brought in equity to enforce any of the provisions
of this Agreement, none of the parties hereto shall raise the defense that there
is an adequate remedy at law.
Section 6.9. Severability. The invalidity or unenforceability of any
------------
provisions of this Agreement in any jurisdiction shall not affect the validity,
legality or enforceability of the remainder of this Agreement in such
jurisdiction or the validity, legality or enforceability of any provision of
this Agreement in any other jurisdiction, it being intended that all rights and
obligations of the parties hereunder shall be enforceable to the fullest extent
permitted by law.
Section 6.10. Recapitalization, etc. In the event that any capital
---------------------
stock or other securities are issued in respect of, in exchange for, or in
substitution of, any Shares by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to
Stockholders or combination of the Shares or any other change in the Company's
capital structure, appropriate adjustments shall be made to the provisions of
this Agreement so as to fairly and equitably preserve, as far as practicable,
the original rights and obligations of the parties hereto under this Agreement.
<PAGE>
20
IN WITNESS WHEREOF, the undersigned, thereunto duly authorized, have
hereunto set their respective hands as of the day and year first above written.
CARSON, INC.
By:_______________________________
Name: Dr. Leroy Keith
Title: Chief Executive Officer
THE STOCKHOLDERS:
----------------
See Annexed Signature Pages
<PAGE>
SIGNATURE PAGE ANNEX 1
THE STOCKHOLDERS:
- ----------------
____________________________________
Name: Joyce Roche
Number of Shares: 10.4409
Consideration: $500,000 principal amount
Recourse Note
____________________________________
Name: Dennis Smith
Number of Shares: 5.2205
Consideration: $250,000 principal amount
Recourse Note
____________________________________
Name: Miriam Muley
Number of Shares: 5.2205
Consideration: $250,000 principal amount
Recourse Note
____________________________________
Name: John P. Brown, Jr.
Number of Shares: 5.2205
Consideration: $250,000 principal amountRecourse
Recourse Note
<PAGE>
2
____________________________________
Name: Donald Cowsar
Number of Shares: 2.6102
Consideration: $125,000 principal amount
Resousce Note
____________________________________
Name: Arthur Gnann
Number of Shares: 2.6102
Consideration: $125,000 principal amount
Recourse Note
____________________________________
Name: Sharon Davis
Number of Shares: 2.6102
Consideration: $125,000 principal amount
Recourse Note
<PAGE>
Exhibit 10.28
$500,000 Savannah, Georgia
as of August 15, 1996
PROMISSORY NOTE
FOR VALUE RECEIVED, Joyce Roche (the "Payor") hereby unconditionally
-----
promises to pay to the order of Carson, Inc., a Delaware corporation (the
"Payee"), the principal sum of Five Hundred Thousand Dollars ($500,000) on the
-----
third anniversary of the date of this Note (the "Maturity Date"). Capitalized
-------------
terms used but not otherwise defined herein have the respective meanings given
to such terms in Article 4 hereof.
ARTICLE 1
PRINCIPAL AND INTEREST
Section 1.1 Principal. The entire unpaid principal amount of this
---------
Note shall be paid on the Maturity Date (or on such earlier date as this Note
shall become due as hereinafter provided). Promptly following the payment in
full of this Note, the Payee shall surrender this Note to the Payor for
cancellation.
Section 1.2 Interest. No interest shall accrue on the daily unpaid
--------
principal amount of this Note.
ARTICLE 2
PAYMENTS AND PREPAYMENTS
Section 2.1 Payments Generally. All payments of principal to be made
------------------
by the Payor under this Note shall be made in Dollars, by personal, certified or
official bank check payable to the order of the Payee, not later than 11:00 a.m.
Savannah, Georgia time on the date on which such payment shall become due (each
such payment made after such time on such due date to be deemed to have been
made on the next succeeding business Day). If the due date of any payment under
this Note would otherwise fall on a day that is not a Business Day, such due
date shall be extended to the next succeeding Business Day. All amounts payable
under this Note shall be paid free and clear of, and without reduction by reason
of, any deduction, set-off or counterclaim.
<PAGE>
2
ARTICLE 3
EVENTS OF DEFAULT
Section 3.1 Events of Defaults. The occurrence of one or ore of the
------------------
following events shall constitute an "Event of Default" for the purposes of this
----------------
Note:
(a) the Payor fails to pay any amount owing under this Note when due
(whether at stated maturity, by acceleration, or otherwise);
(b) the Payor shall default in the performance of, or shall breach,
any covenant or warranty of the Payor under or in respect of this
Note;
(c) the Payor shall terminate employment with Carson Products Company
for any reason;
(d) the Payor shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee,
examiner or liquidator of the Payor or of its assets or property,
(ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary cause under the Federal Bankruptcy
Code, (iv) file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization,
liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a
timely and appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under the
Federal Bankruptcy Code or (vi) take any action for the purpose
of effecting any of the foregoing; or
(e) a proceeding or case shall be commenced, without the application
or consent of the Payor, in any court of competent jurisdiction,
seeking (i) its reorganization, liquidation or arrangement, or
the composition or readjustment of its debts, (ii) the
appointment of a receiver, custodian, trustee, examiner,
liquidator or the like of the Payor or of its property, or (iii)
similar relief in respect of the Payor under any law relating to
bankruptcy, insolvency, reorganization, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 60 or more says; or an
order for relief against the Payor shall be entered in an
involuntary case under the Federal Bankruptcy Code.
Section 3.2 Acceleration of Maturity, Rescission and Annulment. If
--------------------------------------------------
any Event of Default occurs and is continuing, then and in every such case the
Payee may declare the unpaid principal of this Note to be due and payable
immediately, by a notice to the Payor, and upon any such declaration such
principal shall become due and payable immediately,
<PAGE>
3
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by the Payor.
Notwithstanding any of the foregoing, at any time after such a
declaration of acceleration has been made and before a judgment or decree for
payment of the money due has been obtained, the Payee may rescind and annul such
declaration and its consequences if it so notifies the Payor of its desire to do
so. No such rescission and annulment shall affect any subsequent default or
impair any right consequent thereon.
The Payor agrees to pay or reimburse the Payee for paying: (a) all
costs and expenses of the Payee (including, without limitation, reasonable
counsels' fees) in connection with any default and any enforcement or collection
proceedings resulting therefrom; and (b) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of this Note or any other document referred to
herein.
ARTICLE 4
DEFINITIONS
Section 4.1 Definitions. The following terms shall have the meanings
-----------
set forth below:
"Business Day" means any day (other than a day which is a Saturday,
------------
Sunday or legal holiday in the State of Georgia) on which banks are open for
business in Savannah, Georgia.
"Dollars" and "$" means lawful money of the United States of America.
-------
"Note" means this Promissory Note, as modified and supplemented and in
----
effect from time to time.
"Person" means any individual, corporation, partnership, joint venue,
------
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
ARTICLE 5
WAIVER AND AMENDMENT
Section 5.1 Amendment. No amendment of this Note shall be effective
---------
unless in writing and signed by the Payee and the Payor.
<PAGE>
4
Section 5.2 Waiver. No waiver of any provision of this Note shall be
------
effective unless in writing and signed by the Payee.
Section 5.3 Restoration of Rights and Remedies. If the Payee has
----------------------------------
instituted any proceeding to enforce any right or remedy under this Note and
such proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Payee, then and in every such case the Payor and the
Payee shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Payee shall continue as through no such
proceeding had been instituted.
Section 5.4 Rights and Remedies Cumulative. No right or remedy
------------------------------
herein conferred upon or reserved to the Payee is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 5.5 Delay or Omission Not Waiver. No delay or omission of
----------------------------
the Payee to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein.
Section 5.6 Waiver of Past Defaults. The Payee may waive any past
-----------------------
default hereunder and its consequences. Upon and to the extent of any such
waiver, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this Note, but
no such waiver shall extend to any subsequent or other default or impair any
right consequent thereon.
ARTICLE 6
MISCELLANEOUS
Section 6.2 Notice. All notices and other communications in respect
------
of this Note (including, without limitation, any modifications of, or requests,
waivers or consents under, this Note) shall be given or made in writing
(including, without limitation, by telecopy) to the Payor at the "Address for
Notices" specified below its name on the signature page hereof and to the Payee
at 64 Ross Road, Savannah Industrial Park, Savannah, Georgia 31405; or at such
other address as shall be designated by any such party in a notice to the other
party. Except as otherwise provided in this Note, all such communications shall
be deemed to have been duly given when transmitted by telecopier or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid.
<PAGE>
5
Section 6.3 Governing Law; Submission to Jurisdiction; Venue. This
------------------------------------------------
Note shall be governed by, and construed in accordance with, the law of the
State of Georgia without regard to the conflicts of laws provisions thereof.
The Payor hereby submits to the non-exclusive jurisdiction of the United States
District Court for the Southern District of Georgia and of any Georgia State
court sitting in Chatham County, Georgia for the purposes of all legal
proceedings arising out of or relating to this Note. The Payor irrevocably
waives, to the fullest extent permitted by applicable law, any objection which
it amy now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
Section 6.4 Successors. All agreements of the Payor in this Note
----------
shall bind its successors and assigns.
Section 6.5 Severability. In case any provision in this Note shall
------------
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 6.6 Headings, etc. The headings of the Articles and Sections
-------------
of this Note have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
Section 6.7 Waiver of Jury Trial. THE PAYOR HEREBY IRREVOCABLY
--------------------
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
PAYOR
___________________________
Name: Joyce Roche
Address for Notices:
-------------------
c/o Carson Products Company
71A Ross Road
Savannah, Georgia 31405
<PAGE>
Exhibit 10.29
$250,000 Savannah, Georgia
as of August 15, 1996
PROMISSORY NOTE
FOR VALUE RECEIVED, John P. Brown, Jr. (the "Payor") hereby
-----
unconditionally promises to pay to the order of Carson, Inc., a Delaware
corporation (the "Payee"), the principal sum of Two Hundred Fifty Thousand
-----
Dollars ($250,000) on the third anniversary of the date of this Note (the
"Maturity Date"). Capitalized terms used but not otherwise defined herein have
- --------------
the respective meanings given to such terms in Article 4 hereof.
ARTICLE 1
PRINCIPAL AND INTEREST
Section 1.1 Principal. The entire unpaid principal amount of this
---------
Note shall be paid on the Maturity Date (or on such earlier date as this Note
shall become due as hereinafter provided). Promptly following the payment in
full of this Note, the Payee shall surrender this Note to the Payor for
cancellation.
Section 1.2 Interest. No interest shall accrue on the daily unpaid
--------
principal amount of this Note.
ARTICLE 2
PAYMENTS AND PREPAYMENTS
Section 2.1 Payments Generally. All payments of principal to be made
------------------
by the Payor under this Note shall be made in Dollars, by personal, certified or
official bank check payable to the order of the Payee, not later than 11:00 a.m.
Savannah, Georgia time on the date on which such payment shall become due (each
such payment made after such time on such due date to be deemed to have been
made on the next succeeding business Day). If the due date of any payment under
this Note would otherwise fall on a day that is not a Business Day, such due
date shall be extended to the next succeeding Business Day. All amounts payable
under this Note shall be paid free and clear of, and without reduction by reason
of, any deduction, set-off or counterclaim.
<PAGE>
2
ARTICLE 3
EVENTS OF DEFAULT
Section 3.1 Events of Defaults. The occurrence of one or ore of the
------------------
following events shall constitute an "Event of Default" for the purposes of this
----------------
Note:
(a) the Payor fails to pay any amount owing under this Note when due
(whether at stated maturity, by acceleration, or otherwise);
(b) the Payor shall default in the performance of, or shall breach,
any covenant or warranty of the Payor under or in respect of this
Note;
(c) the Payor shall terminate employment with Carson Products Company
for any reason;
(d) the Payor shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee,
examiner or liquidator of the Payor or of its assets or property,
(ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary cause under the Federal Bankruptcy
Code, (iv) file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization,
liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a
timely and appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under the
Federal Bankruptcy Code or (vi) take any action for the purpose
of effecting any of the foregoing; or
(e) a proceeding or case shall be commenced, without the application
or consent of the Payor, in any court of competent jurisdiction,
seeking (i) its reorganization, liquidation or arrangement, or
the composition or readjustment of its debts, (ii) the
appointment of a receiver, custodian, trustee, examiner,
liquidator or the like of the Payor or of its property, or (iii)
similar relief in respect of the Payor under any law relating to
bankruptcy, insolvency, reorganization, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 60 or more says; or an
order for relief against the Payor shall be entered in an
involuntary case under the Federal Bankruptcy Code.
Section 3.2 Acceleration of Maturity, Rescission and Annulment. If
--------------------------------------------------
any Event of Default occurs and is continuing, then and in every such case the
Payee may declare the unpaid principal of this Note to be due and payable
immediately, by a notice to the Payor, and upon any such declaration such
principal shall become due and payable immediately,
<PAGE>
3
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by the Payor.
Notwithstanding any of the foregoing, at any time after such a
declaration of acceleration has been made and before a judgment or decree for
payment of the money due has been obtained, the Payee may rescind and annul such
declaration and its consequences if it so notifies the Payor of its desire to do
so. No such rescission and annulment shall affect any subsequent default or
impair any right consequent thereon.
The Payor agrees to pay or reimburse the Payee for paying: (a) all
costs and expenses of the Payee (including, without limitation, reasonable
counsels' fees) in connection with any default and any enforcement or collection
proceedings resulting therefrom; and (b) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of this Note or any other document referred to
herein.
ARTICLE 4
DEFINITIONS
Section 4.1 Definitions. The following terms shall have the meanings
-----------
set forth below:
"Business Day" means any day (other than a day which is a Saturday,
------------
Sunday or legal holiday in the State of Georgia) on which banks are open for
business in Savannah, Georgia.
"Dollars" and "$" means lawful money of the United States of America.
-------
"Note" means this Promissory Note, as modified and supplemented and in
----
effect from time to time.
"Person" means any individual, corporation, partnership, joint venue,
------
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
ARTICLE 5
WAIVER AND AMENDMENT
Section 5.1 Amendment. No amendment of this Note shall be effective
---------
unless in writing and signed by the Payee and the Payor.
<PAGE>
4
Section 5.2 Waiver. No waiver of any provision of this Note shall be
------
effective unless in writing and signed by the Payee.
Section 5.3 Restoration of Rights and Remedies. If the Payee has
----------------------------------
instituted any proceeding to enforce any right or remedy under this Note and
such proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Payee, then and in every such case the Payor and the
Payee shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Payee shall continue as through no such
proceeding had been instituted.
Section 5.4 Rights and Remedies Cumulative. No right or remedy
------------------------------
herein conferred upon or reserved to the Payee is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 5.5 Delay or Omission Not Waiver. No delay or omission of
----------------------------
the Payee to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein.
Section 5.6 Waiver of Past Defaults. The Payee may waive any past
-----------------------
default hereunder and its consequences. Upon and to the extent of any such
waiver, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this Note, but
no such waiver shall extend to any subsequent or other default or impair any
right consequent thereon.
ARTICLE 6
MISCELLANEOUS
Section 6.1 Notice. All notices and other communications in respect
------
of this Note (including, without limitation, any modifications of, or requests,
waivers or consents under, this Note) shall be given or made in writing
(including, without limitation, by telecopy) to the Payor at the "Address for
Notices" specified below its name on the signature page hereof and to the Payee
at 64 Ross Road, Savannah Industrial Park, Savannah, Georgia 31405; or at such
other address as shall be designated by any such party in a notice to the other
party. Except as otherwise provided in this Note, all such communications shall
be deemed to have been duly given when transmitted by telecopier or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid.
<PAGE>
5
Section 6.2 Governing Law; Submission to Jurisdiction; Venue. This
------------------------------------------------
Note shall be governed by, and construed in accordance with, the law of the
State of Georgia without regard to the conflicts of laws provisions thereof.
The Payor hereby submits to the non-exclusive jurisdiction of the United States
District Court for the Southern District of Georgia and of any Georgia State
court sitting in Chatham County, Georgia for the purposes of all legal
proceedings arising out of or relating to this Note. The Payor irrevocably
waives, to the fullest extent permitted by applicable law, any objection which
it amy now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
Section 6.3 Successors. All agreements of the Payor in this Note
----------
shall bind its successors and assigns.
Section 6.4 Severability. In case any provision in this Note shall
------------
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 6.5 Headings, etc. The headings of the Articles and Sections
-------------
of this Note have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
Section 6.6 Waiver of Jury Trial. THE PAYOR HEREBY IRREVOCABLY
--------------------
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
PAYOR
___________________________
Name: John P. Brown, Jr.
Address for Notices:
-------------------
c/o Carson Products Company
71A Ross Road
Savannah, Georgia 31405
<PAGE>
Exhibit 10.30
$250,000 Savannah, Georgia
as of August 15, 1996
PROMISSORY NOTE
FOR VALUE RECEIVED, Dennis Smith (the "Payor") hereby unconditionally
-----
promises to pay to the order of Carson, Inc., a Delaware corporation (the
"Payee"), the principal sum of Two Hundred Fifty Thousand Dollars ($250,000) on
-----
the third anniversary of the date of this Note (the "Maturity Date").
-------------
Capitalized terms used but not otherwise defined herein have the respective
meanings given to such terms in Article 4 hereof.
ARTICLE 1
PRINCIPAL AND INTEREST
Section 1.1 Principal. The entire unpaid principal amount of this
---------
Note shall be paid on the Maturity Date (or on such earlier date as this Note
shall become due as hereinafter provided). Promptly following the payment in
full of this Note, the Payee shall surrender this Note to the Payor for
cancellation.
Section 1.2 Interest. No interest shall accrue on the daily unpaid
--------
principal amount of this Note.
ARTICLE 2
PAYMENTS AND PREPAYMENTS
Section 2.1 Payments Generally. All payments of principal to be made
------------------
by the Payor under this Note shall be made in Dollars, by personal, certified or
official bank check payable to the order of the Payee, not later than 11:00 a.m.
Savannah, Georgia time on the date on which such payment shall become due (each
such payment made after such time on such due date to be deemed to have been
made on the next succeeding business Day). If the due date of any payment under
this Note would otherwise fall on a day that is not a Business Day. All amounts
payable under this Note shall be paid free and clear of, and without reduction
by reason of, any deduction, set-off or counterclaim.
<PAGE>
2
ARTICLE 3
EVENTS OF DEFAULT
Section 3.1 Events of Defaults. The occurrence of one or ore of the
------------------
following events shall constitute an "Event of Default" for the purposes of this
----------------
Note:
(a) the Payor fails to pay any amount owing under this Note when due
(whether at stated maturity, by acceleration, or otherwise);
(b) the Payor shall default in the performance of, or shall breach,
any covenant or warranty of the Payor under or in respect of this
Note;
(c) the Payor shall terminate employment with Carson Products Company
for any reason;
(d) the Payor shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee,
examiner or liquidator of the Payor or of its assets or property,
(ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary cause under the Federal Bankruptcy
Code, (iv) file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization,
liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a
timely and appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under the
Federal Bankruptcy Code or (vi) take any action for the purpose
of effecting any of the foregoing; or
(e) a proceeding or case shall be commenced, without the application
or consent of the Payor, in any court of competent jurisdiction,
seeking (i) its reorganization, liquidation or arrangement, or
the composition or readjustment of its debts, (ii) the
appointment of a receiver, custodian, trustee, examiner,
liquidator or the like of the Payor or of its property, or (iii)
similar relief in respect of the Payor under any law relating to
bankruptcy, insolvency, reorganization, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 60 or more says; or an
order for relief against the Payor shall be entered in an
involuntary case under the Federal Bankruptcy Code.
Section 3.2 Acceleration of Maturity, Rescission and Annulment. If
--------------------------------------------------
any Event of Default occurs and is continuing, then and in every such case the
Payee may declare the unpaid principal of this Note to be due and payable
immediately, by a notice to the Payor, and upon any such declaration such
principal shall become due and payable immediately,
<PAGE>
3
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by the Payor.
Notwithstanding any of the foregoing, at any time after such a
declaration of acceleration has been made and before a judgment or decree for
payment of the money due has been obtained, the Payee may rescind and annul such
declaration and its consequences if it so notifies the Payor of its desire to do
so. No such rescission and annulment shall affect any subsequent default or
impair any right consequent thereon.
The Payor agrees to pay or reimburse the Payee for paying: (a) all
costs and expenses of the Payee (including, without limitation, reasonable
counsels' fees) in connection with any default and any enforcement or collection
proceedings resulting therefrom; and (b) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of this Note or any other document referred to
herein.
ARTICLE 4
DEFINITIONS
Section 4.1 Definitions. The following terms shall have the meanings
-----------
set forth below:
"Business Day" means any day (other than a day which is a Saturday,
------------
Sunday or legal holiday in the State of Georgia) on which banks are open for
business in Savannah, Georgia.
"Dollars" and "$" means lawful money of the United States of America.
-------
"Note" means this Promissory Note, as modified and supplemented and in
----
effect from time to time.
"Person" means any individual, corporation, partnership, joint venue,
------
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
ARTICLE 5
WAIVER AND AMENDMENT
Section 5.1 Amendment. No amendment of this Note shall be effective
---------
unless in writing and signed by the Payee and the Payor.
<PAGE>
4
Section 5.2 Waiver. No waiver of any provision of this Note shall be
------
effective unless in writing and signed by the Payee.
Section 5.3 Restoration of Rights and Remedies. If the Payee has
----------------------------------
instituted any proceeding to enforce any right or remedy under this Note and
such proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Payee, then and in every such case the Payor and the
Payee shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Payee shall continue as through no such
proceeding had been instituted.
Section 5.4 Rights and Remedies Cumulative. No right or remedy
------------------------------
herein conferred upon or reserved to the Payee is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 5.5 Delay or Omission Not Waiver. No delay or omission of
----------------------------
the Payee to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein.
Section 5.6 Waiver of Past Defaults. The Payee may waive any past
-----------------------
default hereunder and its consequences. Upon and to the extent of any such
waiver, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this Note, but
no such waiver shall extend to any subsequent or other default or impair any
right consequent thereon.
ARTICLE 6
MISCELLANEOUS
Section 6.1Notice. All notices and other communications in respect of
------
this Note (including, without limitation, any modifications of, or requests,
waivers or consents under, this Note) shall be given or made in writing
(including, without limitation, by telecopy) to the Payor at the "Address for
Notices" specified below its name on the signature page hereof and to the Payee
at 64 Ross Road, Savannah Industrial Park, Savannah, Georgia 31405; or at such
other address as shall be designated by any such party in a notice to the other
party. Except as otherwise provided in this Note, all such communications shall
be deemed to have been duly given when transmitted by telecopier or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid.
<PAGE>
5
Section 6.2 Governing Law; Submission to Jurisdiction; Venue. This
------------------------------------------------
Note shall be governed by, and construed in accordance with, the law of the
State of Georgia without regard to the conflicts of laws provisions thereof.
The Payor hereby submits to the non-exclusive jurisdiction of the United States
District Court for the Southern District of Georgia and of any Georgia State
court sitting in Chatham County, Georgia for the purposes of all legal
proceedings arising out of or relating to this Note. The Payor irrevocably
waives, to the fullest extent permitted by applicable law, any objection which
it amy now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
Section 6.3 Successors. All agreements of the Payor in this Note
----------
shall bind its successors and assigns.
Section 6.4 Severability. In case any provision in this Note shall
------------
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 6.5 Headings, etc. The headings of the Articles and Sections
-------------
of this Note have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
Section 6.6 Waiver of Jury Trial. THE PAYOR HEREBY IRREVOCABLY
--------------------
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
PAYOR
___________________________
Name: Dennis Smith
Address for Notices:
-------------------
24 Cardiff Road
Savannah, Georgia 31419
<PAGE>
Exhibit 10.31
$125,000 Savannah, Georgia
as of August 15, 1996
PROMISSORY NOTE
FOR VALUE RECEIVED, Donald Cowsar (the "Payor") hereby unconditionally
-----
promises to pay to the order of Carson, Inc., a Delaware corporation (the
"Payee"), the principal sum of One Hundred Twenty Five Thousand Dollars
-----
($125,000) on the third anniversary of the date of this Note (the "Maturity
--------
Date"). Capitalized terms used but not otherwise defined herein have the
respective meanings given to such terms in Article 4 hereof.
ARTICLE 1
PRINCIPAL AND INTEREST
Section 1.1 Principal. The entire unpaid principal amount of this
---------
Note shall be paid on the Maturity Date (or on such earlier date as this Note
shall become due as hereinafter provided). Promptly following the payment in
full of this Note, the Payee shall surrender this Note to the Payor for
cancellation.
Section 1.2 Interest. No interest shall accrue on the daily unpaid
--------
principal amount of this Note.
ARTICLE 2
PAYMENTS AND PREPAYMENTS
Section 2.1 Payments Generally. All payments of principal to be made
------------------
by the Payor under this Note shall be made in Dollars, by personal, certified or
official bank check payable to the order of the Payee, not later than 11:00 a.m.
Savannah, Georgia time on the date on which such payment shall become due (each
such payment made after such time on such due date to be deemed to have been
made on the next succeeding business Day). If the due date of any payment under
this Note would otherwise fall on a day that is not a Business Day, such due
date shall be extended to the next succeeding Business Day. All amounts payable
under this Note shall be paid free and clear of, and without reduction by reason
of, any deduction, set-off or counterclaim.
<PAGE>
2
ARTICLE 3
EVENTS OF DEFAULT
Section 3.1 Events of Defaults. The occurrence of one or ore of the
------------------
following events shall constitute an "Event of Default" for the purposes of this
----------------
Note:
(a) the Payor fails to pay any amount owing under this Note when due
(whether at stated maturity, by acceleration, or otherwise);
(b) the Payor shall default in the performance of, or shall breach,
any covenant or warranty of the Payor under or in respect of this
Note;
(c) the Payor shall terminate employment with Carson Products Company
for any reason;
(d) the Payor shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee,
examiner or liquidator of the Payor or of its assets or property,
(ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary cause under the Federal Bankruptcy
Code, (iv) file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization,
liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a
timely and appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under the
Federal Bankruptcy Code or (vi) take any action for the purpose
of effecting any of the foregoing; or
(e) a proceeding or case shall be commenced, without the application
or consent of the Payor, in any court of competent jurisdiction,
seeking (i) its reorganization, liquidation or arrangement, or
the composition or readjustment of its debts, (ii) the
appointment of a receiver, custodian, trustee, examiner,
liquidator or the like of the Payor or of its property, or (iii)
similar relief in respect of the Payor under any law relating to
bankruptcy, insolvency, reorganization, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 60 or more says; or an
order for relief against the Payor shall be entered in an
involuntary case under the Federal Bankruptcy Code.
Section 3.2 Acceleration of Maturity, Rescission and Annulment. If
--------------------------------------------------
any Event of Default occurs and is continuing, then and in every such case the
Payee may declare the unpaid principal of this Note to be due and payable
immediately, by a notice to the Payor, and upon any such declaration such
principal shall become due and payable immediately,
<PAGE>
3
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by the Payor.
Notwithstanding any of the foregoing, at any time after such a
declaration of acceleration has been made and before a judgment or decree for
payment of the money due has been obtained, the Payee may rescind and annul such
declaration and its consequences if it so notifies the Payor of its desire to do
so. No such rescission and annulment shall affect any subsequent default or
impair any right consequent thereon.
The Payor agrees to pay or reimburse the Payee for paying: (a) all
costs and expenses of the Payee (including, without limitation, reasonable
counsels' fees) in connection with any default and any enforcement or collection
proceedings resulting therefrom; and (b) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of this Note or any other document referred to
herein.
ARTICLE 4
DEFINITIONS
Section 4.1 Definitions. The following terms shall have the meanings
-----------
set forth below:
"Business Day" means any day (other than a day which is a Saturday,
------------
Sunday or legal holiday in the State of Georgia) on which banks are open for
business in Savannah, Georgia.
"Dollars" and "$" means lawful money of the United States of America.
-------
"Note" means this Promissory Note, as modified and supplemented and in
----
effect from time to time.
"Person" means any individual, corporation, partnership, joint venue,
------
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
ARTICLE 5
WAIVER AND AMENDMENT
Section 5.1 Amendment. No amendment of this Note shall be effective
---------
unless in writing and signed by the Payee and the Payor.
<PAGE>
4
Section 5.2 Waiver. No waiver of any provision of this Note shall be
------
effective unless in writing and signed by the Payee.
Section 5.3 Restoration of Rights and Remedies. If the Payee has
----------------------------------
instituted any proceeding to enforce any right or remedy under this Note and
such proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Payee, then and in every such case the Payor and the
Payee shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Payee shall continue as through no such
proceeding had been instituted.
Section 5.4 Rights and Remedies Cumulative. No right or remedy
------------------------------
herein conferred upon or reserved to the Payee is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 5.5 Delay or Omission Not Waiver. No delay or omission of
----------------------------
the Payee to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein.
Section 5.6 Waiver of Past Defaults. The Payee may waive any past
-----------------------
default hereunder and its consequences. Upon and to the extent of any such
waiver, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this Note, but
no such waiver shall extend to any subsequent or other default or impair any
right consequent thereon.
ARTICLE 6
MISCELLANEOUS
Section 6.1 Notice. All notices and other communications in respect
------
of this Note (including, without limitation, any modifications of, or requests,
waivers or consents under, this Note) shall be given or made in writing
(including, without limitation, by telecopy) to the Payor at the "Address for
Notices" specified below its name on the signature page hereof and to the Payee
at 64 Ross Road, Savannah Industrial Park, Savannah, Georgia 31405; or at such
other address as shall be designated by any such party in a notice to the other
party. Except as otherwise provided in this Note, all such communications shall
be deemed to have been duly given when transmitted by telecopier or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid.
<PAGE>
5
Section 6.2 Governing Law; Submission to Jurisdiction; Venue. This
------------------------------------------------
Note shall be governed by, and construed in accordance with, the law of the
State of Georgia without regard to the conflicts of laws provisions thereof.
The Payor hereby submits to the non-exclusive jurisdiction of the United States
District Court for the Southern District of Georgia and of any Georgia State
court sitting in Chatham County, Georgia for the purposes of all legal
proceedings arising out of or relating to this Note. The Payor irrevocably
waives, to the fullest extent permitted by applicable law, any objection which
it amy now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
Section 6.3 Successors. All agreements of the Payor in this Note
----------
shall bind its successors and assigns.
Section 6.4 Severability. In case any provision in this Note shall
------------
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 6.5 Headings, etc. The headings of the Articles and Sections
-------------
of this Note have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
Section 6.6 Waiver of Jury Trial. THE PAYOR HEREBY IRREVOCABLY
--------------------
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
PAYOR
___________________________
Name: Donald Coswar
Address for Notices:
-------------------
24 Twelve Oaks Drive
Savannah, Georgia 31410
<PAGE>
Exhibit 10.32
$125,000 Savannah, Georgia
as of August 15, 1996
PROMISSORY NOTE
FOR VALUE RECEIVED, Arthur P. Gnann III (the "Payor") hereby
-----
unconditionally promises to pay to the order of Carson, Inc., a Delaware
corporation (the "Payee"), the principal sum of One Hundred Twenty Five Thousand
-----
Dollars ($125,000) on the third anniversary of the date of this Note (the
"Maturity Date"). Capitalized terms used but not otherwise defined herein have
- --------------
the respective meanings given to such terms in Article 4 hereof.
ARTICLE 1
PRINCIPAL AND INTEREST
Section 1.1 Principal. The entire unpaid principal amount of this
---------
Note shall be paid on the Maturity Date (or on such earlier date as this Note
shall become due as hereinafter provided). Promptly following the payment in
full of this Note, the Payee shall surrender this Note to the Payor for
cancellation.
Section 1.2 Interest. No interest shall accrue on the daily unpaid
--------
principal amount of this Note.
ARTICLE 2
PAYMENTS AND PREPAYMENTS
Section 2.1 Payments Generally. All payments of principal and
------------------
interest to be made by the Payor under this Note shall be made in Dollars, by
personal, certified or official bank check payable to the order of the Payee,
not later than 11:00 a.m. Savannah, Georgia time on the date on which such
payment shall become due (each such payment made after such time on such due
date to be deemed to have been made on the next succeeding business Day). If
the due date of any payment under this Note would otherwise fall on a day that
is not a Business Day, such due date shall be extended to the next succeeding
Business Day. All amounts payable under this Note shall be paid free and clear
of, and without reduction by reason of, any deduction, set-off or counterclaim.
<PAGE>
2
ARTICLE 3
EVENTS OF DEFAULT
Section 3.1 Events of Defaults. The occurrence of one or ore of the
------------------
following events shall constitute an "Event of Default" for the purposes of this
----------------
Note:
(a) the Payor fails to pay any amount owing under this Note when due
(whether at stated maturity, by acceleration, or otherwise);
(b) the Payor shall default in the performance of, or shall breach,
any covenant or warranty of the Payor under or in respect of this
Note;
(c) the Payor shall terminate employment with Carson Products Company
for any reason;
(d) the Payor shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee,
examiner or liquidator of the Payor or of its assets or property,
(ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary cause under the Federal Bankruptcy
Code, (iv) file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization,
liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a
timely and appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under the
Federal Bankruptcy Code or (vi) take any action for the purpose
of effecting any of the foregoing; or
(e) a proceeding or case shall be commenced, without the application
or consent of the Payor, in any court of competent jurisdiction,
seeking (i) its reorganization, liquidation or arrangement, or
the composition or readjustment of its debts, (ii) the
appointment of a receiver, custodian, trustee, examiner,
liquidator or the like of the Payor or of its property, or (iii)
similar relief in respect of the Payor under any law relating to
bankruptcy, insolvency, reorganization, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 60 or more says; or an
order for relief against the Payor shall be entered in an
involuntary case under the Federal Bankruptcy Code.
Section 3.2 Acceleration of Maturity, Rescission and Annulment. If
--------------------------------------------------
any Event of Default occurs and is continuing, then and in every such case the
Payee may declare the unpaid principal of this Note to be due and payable
immediately, by a notice to the Payor, and upon any such declaration such
principal shall become due and payable immediately,
<PAGE>
3
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by the Payor.
Notwithstanding any of the foregoing, at any time after such a
declaration of acceleration has been made and before a judgment or decree for
payment of the money due has been obtained, the Payee may rescind and annul such
declaration and its consequences if it so notifies the Payor of its desire to do
so. No such rescission and annulment shall affect any subsequent default or
impair any right consequent thereon.
The Payor agrees to pay or reimburse the Payee for paying: (a) all
costs and expenses of the Payee (including, without limitation, reasonable
counsels' fees) in connection with any default and any enforcement or collection
proceedings resulting therefrom; and (b) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of this Note or any other document referred to
herein.
ARTICLE 4
DEFINITIONS
Section 4.1 Definitions. The following terms shall have the meanings
-----------
set forth below:
"Business Day" means any day (other than a day which is a Saturday,
------------
Sunday or legal holiday in the State of Georgia) on which banks are open for
business in Savannah, Georgia.
"Dollars" and "$" means lawful money of the United States of America.
-------
"Note" means this Promissory Note, as modified and supplemented and in
----
effect from time to time.
"Person" means any individual, corporation, partnership, joint venue,
------
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
ARTICLE 5
WAIVER AND AMENDMENT
Section 5.1 Amendment. No amendment of this Note shall be effective
---------
unless in writing and signed by the Payee and the Payor.
<PAGE>
4
Section 5.2 Waiver. No waiver of any provision of this Note shall be
------
effective unless in writing and signed by the Payee.
Section 5.3 Restoration of Rights and Remedies. If the Payee has
----------------------------------
instituted any proceeding to enforce any right or remedy under this Note and
such proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Payee, then and in every such case the Payor and the
Payee shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Payee shall continue as through no such
proceeding had been instituted.
Section 5.4 Rights and Remedies Cumulative. No right or remedy
------------------------------
herein conferred upon or reserved to the Payee is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 5.5 Delay or Omission Not Waiver. No delay or omission of
----------------------------
the Payee to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein.
Section 5.6 Waiver of Past Defaults. The Payee may waive any past
-----------------------
default hereunder and its consequences. Upon and to the extent of any such
waiver, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this Note, but
no such waiver shall extend to any subsequent or other default or impair any
right consequent thereon.
ARTICLE 6
MISCELLANEOUS
Section 6.1 Notice. All notices and other communications in respect
------
of this Note (including, without limitation, any modifications of, or requests,
waivers or consents under, this Note) shall be given or made in writing
(including, without limitation, by telecopy) to the Payor at the "Address for
Notices" specified below its name on the signature page hereof and to the Payee
at 64 Ross Road, Savannah Industrial Park, Savannah, Georgia 31405; or at such
other address as shall be designated by any such party in a notice to the other
party. Except as otherwise provided in this Note, all such communications shall
be deemed to have been duly given when transmitted by telecopier or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid.
<PAGE>
5
Section 6.2 Governing Law; Submission to Jurisdiction; Venue. This
------------------------------------------------
Note shall be governed by, and construed in accordance with, the law of the
State of Georgia without regard to the conflicts of laws provisions thereof.
The Payor hereby submits to the non-exclusive jurisdiction of the United States
District Court for the Southern District of Georgia and of any Georgia State
court sitting in Chatham County, Georgia for the purposes of all legal
proceedings arising out of or relating to this Note. The Payor irrevocably
waives, to the fullest extent permitted by applicable law, any objection which
it amy now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
Section 6.3 Successors. All agreements of the Payor in this Note
----------
shall bind its successors and assigns.
Section 6.4 Severability. In case any provision in this Note shall
------------
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 6.5 Headings, etc. The headings of the Articles and Sections
-------------
of this Note have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
Section 6.6 Waiver of Jury Trial. THE PAYOR HEREBY IRREVOCABLY
--------------------
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
PAYOR
___________________________
Name: Arthur P. Gnann III
Address for Notices:
-------------------
c/o Carson Products Company
71 Ross Road
Savannah, Georgia 31405
<PAGE>
Exhibit 10.33
$125,000 Savannah, Georgia
as of August 15, 1996
PROMISSORY NOTE
FOR VALUE RECEIVED, Sharon A. Davis (the "Payor") hereby
-----
unconditionally promises to pay to the order of Carson, Inc., a Delaware
corporation (the "Payee"), the principal sum of One Hundred Twenty Five Thousand
-----
Dollars ($125,000) on the third anniversary of the date of this Note (the
"Maturity Date"). Capitalized terms used but not otherwise defined herein have
- --------------
the respective meanings given to such terms in Article 4 hereof.
ARTICLE 1
PRINCIPAL AND INTEREST
Section 1.1 Principal. The entire unpaid principal amount of this
---------
Note shall be paid on the Maturity Date (or on such earlier date as this Note
shall become due as hereinafter provided). Promptly following the payment in
full of this Note, the Payee shall surrender this Note to the Payor for
cancellation.
Section 1.2 Interest. No interest shall accrue on the daily unpaid
--------
principal amount of this Note.
ARTICLE 2
PAYMENTS AND PREPAYMENTS
Section 2.1 Payments Generally. All payments of principal to be made
------------------
by the Payor under this Note shall be made in Dollars, by personal, certified or
official bank check payable to the order of the Payee, not later than 11:00 a.m.
Savannah, Georgia time on the date on which such payment shall become due (each
such payment made after such time on such due date to be deemed to have been
made on the next succeeding business Day). If the due date of any payment under
this Note would otherwise fall on a day that is not a Business Day, such due
date shall be extended to the next succeeding Business Day. All amounts payable
under this Note shall be paid free and clear of, and without reduction by reason
of, any deduction, set-off or counterclaim.
<PAGE>
2
ARTICLE 3
EVENTS OF DEFAULT
Section 3.1 Events of Defaults. The occurrence of one or ore of the
------------------
following events shall constitute an "Event of Default" for the purposes of this
----------------
Note:
(a) the Payor fails to pay any amount owing under this Note when due
(whether at stated maturity, by acceleration, or otherwise);
(b) the Payor shall default in the performance of, or shall breach,
any covenant or warranty of the Payor under or in respect of this
Note;
(c) the Payor shall terminate employment with Carson Products Company
for any reason;
(d) the Payor shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee,
examiner or liquidator of the Payor or of its assets or property,
(ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary cause under the Federal Bankruptcy
Code, (iv) file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization,
liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a
timely and appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under the
Federal Bankruptcy Code or (vi) take any action for the purpose
of effecting any of the foregoing; or
(e) a proceeding or case shall be commenced, without the application
or consent of the Payor, in any court of competent jurisdiction,
seeking (i) its reorganization, liquidation or arrangement, or
the composition or readjustment of its debts, (ii) the
appointment of a receiver, custodian, trustee, examiner,
liquidator or the like of the Payor or of its property, or (iii)
similar relief in respect of the Payor under any law relating to
bankruptcy, insolvency, reorganization, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 60 or more says; or an
order for relief against the Payor shall be entered in an
involuntary case under the Federal Bankruptcy Code.
Section 3.2 Acceleration of Maturity, Rescission and Annulment. If
--------------------------------------------------
any Event of Default occurs and is continuing, then and in every such case the
Payee may declare the unpaid principal of this Note to be due and payable
immediately, by a notice to the Payor, and upon any such declaration such
principal shall become due and payable immediately,
<PAGE>
3
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by the Payor.
Notwithstanding any of the foregoing, at any time after such a
declaration of acceleration has been made and before a judgment or decree for
payment of the money due has been obtained, the Payee may rescind and annul such
declaration and its consequences if it so notifies the Payor of its desire to do
so. No such rescission and annulment shall affect any subsequent default or
impair any right consequent thereon.
The Payor agrees to pay or reimburse the Payee for paying: (a) all
costs and expenses of the Payee (including, without limitation, reasonable
counsels' fees) in connection with any default and any enforcement or collection
proceedings resulting therefrom; and (b) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of this Note or any other document referred to
herein.
ARTICLE 4
DEFINITIONS
Section 4.1 Definitions. The following terms shall have the meanings
-----------
set forth below:
"Business Day" means any day (other than a day which is a Saturday,
------------
Sunday or legal holiday in the State of Georgia) on which banks are open for
business in Savannah, Georgia.
"Dollars" and "$" means lawful money of the United States of America.
-------
"Note" means this Promissory Note, as modified and supplemented and in
----
effect from time to time.
"Person" means any individual, corporation, partnership, joint venue,
------
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
ARTICLE 5
WAIVER AND AMENDMENT
Section 5.1 Amendment. No amendment of this Note shall be effective
---------
unless in writing and signed by the Payee and the Payor.
<PAGE>
4
Section 5.2 Waiver. No waiver of any provision of this Note shall be
------
effective unless in writing and signed by the Payee.
Section 5.3 Restoration of Rights and Remedies. If the Payee has
----------------------------------
instituted any proceeding to enforce any right or remedy under this Note and
such proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Payee, then and in every such case the Payor and the
Payee shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Payee shall continue as through no such
proceeding had been instituted.
Section 5.4 Rights and Remedies Cumulative. No right or remedy
------------------------------
herein conferred upon or reserved to the Payee is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 5.5 Delay or Omission Not Waiver. No delay or omission of
----------------------------
the Payee to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein.
Section 5.6 Waiver of Past Defaults. The Payee may waive any past
-----------------------
default hereunder and its consequences. Upon and to the extent of any such
waiver, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this Note, but
no such waiver shall extend to any subsequent or other default or impair any
right consequent thereon.
ARTICLE 6
MISCELLANEOUS
Section 6.1 Notice. All notices and other communications in respect
------
of this Note (including, without limitation, any modifications of, or requests,
waivers or consents under, this Note) shall be given or made in writing
(including, without limitation, by telecopy) to the Payor at the "Address for
Notices" specified below its name on the signature page hereof and to the Payee
at 64 Ross Road, Savannah Industrial Park, Savannah, Georgia 31405; or at such
other address as shall be designated by any such party in a notice to the other
party. Except as otherwise provided in this Note, all such communications shall
be deemed to have been duly given when transmitted by telecopier or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid.
<PAGE>
5
Section 6.2 Governing Law; Submission to Jurisdiction; Venue. This
------------------------------------------------
Note shall be governed by, and construed in accordance with, the law of the
State of Georgia without regard to the conflicts of laws provisions thereof.
The Payor hereby submits to the non-exclusive jurisdiction of the United States
District Court for the Southern District of Georgia and of any Georgia State
court sitting in Chatham County, Georgia for the purposes of all legal
proceedings arising out of or relating to this Note. The Payor irrevocably
waives, to the fullest extent permitted by applicable law, any objection which
it amy now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
Section 6.3 Successors. All agreements of the Payor in this Note
----------
shall bind its successors and assigns.
Section 6.4 Severability. In case any provision in this Note shall
------------
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 6.5 Headings, etc. The headings of the Articles and Sections
-------------
of this Note have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
Section 6.6 Waiver of Jury Trial. THE PAYOR HEREBY IRREVOCABLY
--------------------
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
PAYOR
___________________________
Name: Sharon A. Davis
Address for Notices:
-------------------
c/o Carson Products Company
71A Ross Road
Savannah, Georgia 31405
<PAGE>
Exhibit 10.34
PLEDGE AGREEMENT
PLEDGE AGREEMENT (this "Agreement") dated as of August 15, 1996,
---------
between Mr. Arthur P. Gnann III ("Pledgor") and Carson, Inc., a Delaware
-------
corporation ("Pledgee").
-------
WHEREAS, Pledgor, is party to an Employment Agreement, dated as of
September 1, 1995 and a Subscription and Registration Rights Agreement, dated as
of August 15, 1996, pursuant to which, on the date hereof, Pledgor purchased
from Pledgee, and Pledgee issued to Pledgor, ___________ shares of Class A
Common Stock, par value $.01 per share (the "Class A Common Stock"), of Pledgee
--------------------
(the "Class A Shares"); and
--------------
WHEREAS, this Agreement is being executed and delivered for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and Pledgor has agreed to pledge and grant a security interest in
the Collateral (as hereinafter defined) as security for the Secured Obligations
(as hereinafter defined). Accordingly, the parties hereto agree as follows:
Section 1. Definitions. As used herein:
-----------
"Collateral" shall have the meaning ascribed thereto in Section 3.01
----------
hereof.
"Event of Default" shall have the meaning ascribed thereto in the
----------------
Recourse Note.
"Liens" means any mortgage, pledge, assessment, security interest,
-----
lease, lien, adverse claim, levy, charge or other encumbrance of any kind,
or any conditional sale contract, title retention contract or other
contract to give any of the foregoing.
"Pledged Class A Stock" shall have the meaning ascribed thereto in
---------------------
Section 3.01(a) hereof.
"Recourse Note" shall mean the recourse promissory note, dated as of
-------------
August 15, 1996, executed by Pledgor, a copy of which is attached hereto as
Exhibit I.
---------
"Secured Obligations" shall mean, collectively, (a) all obligations of
-------------------
Pledgor to Pledgee under the Recourse Note, payable to the order of Pledgee
and (b) all obligations of Pledgor to Pledgee hereunder.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
-----------------------
effect from time to time in the State of New York.
Section 2. Representations and Warranties. Pledgor represents and
------------------------------
warrants to Pledgee that:
<PAGE>
- 2 -
2.01 No Breach. None of the execution and delivery of this
---------
Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, any applicable law or regulation, or
any order, writ, injunction or decree of any court or governmental authority or
agency, or any agreement or instrument to which Pledgor is a party or by which
Pledgor is bound or to which Pledgor is subject, or constitute a default under
any such agreement or instrument, or result in the creation or imposition of any
Lien upon Pledgor or Pledgor's assets or properties pursuant to the terms of any
such agreement or instrument.
2.02 Action. This Agreement has been duly and validly executed and
------
delivered by Pledgor and constitutes Pledgor's legal, valid and binding
obligation, enforceable in accordance with the terms hereof.
2.03 Approvals. No authorizations, approvals or consents of, and no
---------
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by Pledgor of
this Agreement or for the validity or enforceability hereof.
2.04 Pledged Class A Stock.
---------------------
(a) Pledgor is the sole beneficial owner of the Collateral and no
Lien exists or will exist upon such Collateral at any time (and no right or
option to acquire the same exists in favor of any other person), except for
the pledge and security interest in favor of Pledgee created or provided
for herein, which pledge and security interest constitute a first priority
perfected pledge and security interest in and to all of such Collateral.
(b) Exhibit II correctly identifies, as at the date hereof, the
----------
respective class and par value of the shares comprising such Pledged Class
A Stock and the respective number of shares (and registered owners thereof)
represented by each such certificate.
Section 3. The Pledge. As collateral security for the prompt payment
----------
in full when due (whether at stated maturity, by mandatory prepayment or by
acceleration or otherwise) of the Secured Obligations:
3.01 Pledge by Pledgor. Pledgor hereby pledges and grants to Pledgee
-----------------
a security interest in and to all of Pledgor's right, title and interest in the
following property, whether now owned by Pledgor or hereafter acquired and
whether now existing or hereafter coming into existence (all being collectively
referred to herein as "Collateral"):
----------
(a) the shares of Class A Common Stock of Pledgee represented by the
certificates identified in Exhibit II hereto under the name of Pledgor and
----------
all other shares of capital stock of whatever class of Pledgee, now or
hereafter owned by Pledgor (other than any new issuance thereof purchased
by Pledgor for value), in each
<PAGE>
- 3 -
case together with the certificates representing the same (collectively,
the "Pledged Class A Stock");
---------------------
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Class A Stock, or representing a
distribution or return of capital upon or in respect of the Pledged Class A
Stock, or resulting from a split-up, revision, reclassification or other
like change of the Pledged Class A Stock or otherwise received in exchange
therefor, and any subscription warrants, rights or options issued to the
holders of, or otherwise in respect of, the Pledged Class A Stock;
(c) in the event of any consolidation or merger in which Pledgee is
not the surviving corporation, all shares of each class of the capital
stock of the successor corporation formed by or resulting from such
consolidation or merger; and
(d) all proceeds of and to any of the property of Pledgor described
in the preceding clauses of this Section 3.01 (including, without
limitation, all causes of action, claims and warranties now or hereafter
held by Pledgor in respect of any of the items listed above).
Section 4. Further Assurances; Remedies. In furtherance of the grant
----------------------------
of the pledge and security interest pursuant to Section 3 hereof, Pledgor hereby
agrees with Pledgee as follows:
4.01 Delivery and Other Perfection by Pledgor. Pledgor shall:
----------------------------------------
(a) if any of the shares, securities, moneys or property required to
be pledged by Pledgor under clauses (a), (b) and (c) of Section 3.01 hereof
are received by Pledgor, forthwith either (i) transfer and deliver to
Pledgee such shares or securities so received by Pledgor (together with the
certificates for any such shares and securities duly endorsed in blank or
accompanied by undated stock powers duly executed in blank), all of which
thereafter shall be held by Pledgee, pursuant to the terms of this
Agreement, as part of the Collateral or (ii) take such other action as
Pledgee shall deem necessary or appropriate to duly record the Lien created
hereunder in such shares, securities, moneys or property in said clauses
(a), (b) and (c); and
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of Pledgee) to create, preserve,
perfect or validate the security interest granted pursuant hereto or to
enable Pledgee to exercise and enforce its rights hereunder with respect to
such pledge and security interest, including, without limitation, causing
any or all of the Collateral to be transferred of record into the name of
Pledgee or its nominee (and Pledgee agrees that if any Collateral is
transferred into its name or the name of its nominee, Pledgee will
thereafter promptly give to Pledgor copies of any notices and
communications received by it with respect to the Collateral pledged by
Pledgor hereunder).
<PAGE>
- 4 -
4.02 Other Financing Statements and Liens. Without the prior written
------------------------------------
consent of Pledgee, Pledgor shall not file or suffer to be on file, or authorize
or permit to be filed or to be on file, in any jurisdiction, any financing
statement or like instrument with respect to the Collateral in which Pledgee is
not named as the sole secured party.
4.03 Collateral.
----------
(a) So long as no Event of Default shall have occurred and be
continuing, Pledgor shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Collateral for all purposes
not inconsistent with the terms of this Agreement, or any other instrument
or agreement referred to herein, provided that Pledgor agrees that it will
--------
not vote the Collateral in any manner that is inconsistent with the terms
of this Agreement or any such other instrument or agreement; and Pledgee
shall execute and deliver to Pledgor or cause to be executed and delivered
to Pledgor all such proxies, powers of attorney, dividend and other orders,
and all such instruments, without recourse, as Pledgor may reasonably
request for the purpose of enabling Pledgor to exercise the rights and
powers that it is entitled to exercise pursuant to this Section 4.03(a).
(b) Unless and until an Event of Default has occurred and is
continuing, Pledgor shall be entitled to receive and retain any dividends
on the Collateral paid in cash.
(c) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not Pledgee exercises any
available right to declare any Secured Obligation due and payable or seeks
or pursues any other relief or remedy available to it under applicable law
or under this Agreement, or any other agreement referred to herein or
relating to such Secured Obligation, all dividends and other distributions
on the Collateral shall be paid directly to and retained by Pledgee as part
of the Collateral, subject to the terms of this Agreement, and, if Pledgee
shall so request in writing, Pledgor agrees to execute and deliver to
Pledgee appropriate additional dividend, distribution and other orders and
documents to that end, provided, however, that if such Event of Default is
-------- -------
cured, any such dividend or distribution theretofore paid to Pledgee shall,
upon request of Pledgor (except to the extent theretofore applied to the
Secured Obligations), be returned by Pledgee to Pledgor.
4.04 Events of Default, Etc. During the period during which an Event
----------------------
of Default shall have occurred and be continuing:
(a) Pledgee shall have all of the rights and remedies with respect to
the Collateral of a secured party under the Uniform Commercial Code
(whether or not said Code is in effect in the jurisdiction where the rights
and remedies are asserted) and such additional rights and remedies to which
a secured party is entitled under the laws in effect in any jurisdiction
where any rights and remedies hereunder may be asserted, including, without
limitation, the right, to the maximum extent permitted by law, to exercise
all voting, consensual and other powers of ownership pertaining to the
<PAGE>
- 5 -
Collateral as if Pledgee were the sole and absolute owner thereof (and
Pledgor agrees to take all such action as may be appropriate to give effect
to such right);
(b) Pledgee in its sole discretion may, in its name or in the name of
Pledgor or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for
any of the Collateral, but shall be under no obligation to do so; and
(c) Pledgee may, upon ten (10) business days' prior written notice to
Pledgor of the time and place, with respect to the Collateral or any part
thereof that shall then be or shall thereafter come into the possession,
custody or control of Pledgee or any of its agents, sell, lease, assign or
otherwise dispose of all or any part of such Collateral at such place or
places as Pledgee deems best, and for cash or for credit or for future
delivery (without thereby assuming any credit risk), at public or private
sale, without demand of performance or notice of intention to effect any
such disposition or of the time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived), and Pledgee
or anyone else may be the purchaser, lessee, assignee or recipient of any
or all of the Collateral so disposed of at any public sale (or, to the
extent permitted by law, at any private sale) and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise), of Pledgor, any
such demand, notice and right or equity being hereby expressly waived and
released. Pledgee may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
4.04 shall be applied in accordance with Section 4.07 hereof.
Pledgor recognizes that, by reason of certain prohibitions contained
in the Securities Act of 1933, as amended, and applicable state securities laws,
Pledgee may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire the Collateral for their own account, for investment and not with a view
to the distribution or resale thereof. Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable to Pledgee than those
obtainable through a public sale without such restrictions, and, notwithstanding
such circumstances, agree that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that Pledgee shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the issuer thereof to
register it for public sale.
4.05 Deficiency. If the proceeds of sale, collection or other
----------
realization of or upon the Collateral pursuant to Section 4.04 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, Pledgor shall remain liable for any
deficiency.
<PAGE>
- 6 -
4.06 Private Sale. Pledgee shall incur no liability as a result of
------------
the sale of the Collateral or any part thereof, at any private sale pursuant to
Section 4.04 hereof conducted in a commercially reasonable manner. Pledgor
hereby waives any claims against Pledgee arising by reason of the fact that the
price at which the Collateral may have been sold at such a private sale was less
than the price that might have been obtained at a public sale or was less than
the aggregate amount of the Secured Obligations, even if Pledgee accepts the
first offer received and does not offer the Collateral to more than one offeree.
4.07 Application of Proceeds. Except as otherwise herein expressly
-----------------------
provided and except as provided below in this Section 4.07, the proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by Pledgee under this
Section 4, shall be applied by Pledgee:
First, to the payment of the costs and expenses of such collection,
-----
sale or other realization, including reasonable out-of-pocket costs and
expenses of Pledgee and the fees and expenses of its agents and counsel,
and all expenses incurred and advances made by Pledgee in connection
therewith;
Next, to the payment in full of all amounts owed to Pledgee pursuant
----
to the terms and provisions of the Recourse Note;
Next, to the payment in full of the remaining Secured Obligations; and
----
Finally, to the payment to Pledgor or its respective heirs, executors,
-------
administrators, successors or assigns, or as a court of competent
jurisdiction may direct, of any surplus then remaining.
As used in this Section 4, "proceeds" of Collateral shall mean cash,
--------
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of Pledgor, or any issuer of or obligor on any
of the Collateral.
4.08 Attorney-in-Fact. Without limiting any rights or powers granted
----------------
by this Agreement to Pledgee while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default Pledgee is hereby appointed the attorney-in-fact of Pledgor for the
purpose of carrying out the provisions of this Section 4 and taking any action
and executing any instruments that Pledgee may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, so long as Pledgee shall be entitled under this Section 4 to make
collections in respect of the Collateral, Pledgee shall have the right and power
to receive, endorse and collect all checks made payable to the order of Pledgor
representing any dividend, payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the same.
4.09 Perfection. Prior to or concurrently with the execution and
----------
delivery of this Agreement, Pledgor shall deliver to Pledgee all certificates
identified in Exhibit II hereto,
----------
<PAGE>
- 7 -
accompanied by undated stock powers duly executed in blank and requisite stock
transfer tax stamps, if any.
4.10 Termination. When all Secured Obligations shall have been paid
-----------
in full, this Agreement shall terminate, and Pledgee shall forthwith cause to be
assigned, transferred and delivered, against receipt but without any recourse,
warranty or representation whatsoever, any remaining Collateral and money
received in respect thereof, to or on the order of Pledgor.
4.11 Further Assurances. Pledgor agrees that, from time to time upon
------------------
the written request of Pledgee, it will execute and deliver such further
documents and do such other acts and things as Pledgee may reasonably request in
order fully to effect the purposes of this Agreement.
4.12 Release of Pledged Class A Stock. Upon the payment in full of
--------------------------------
the Secured Obligations, the Pledgee shall release its lien on, and security
interest in, all such shares of Pledged Class A Stock, and shall execute in
favor of the Pledgor, such releases, endorsements or assignments, without
recourse or warranty, as shall be necessary to evidence the Pledgee's release of
such Collateral.
Section 5. Miscellaneous.
-------------
5.01 No Waiver. No failure on the part of Pledgee to exercise, and
---------
no course of dealing with respect to, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by Pledgee of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies herein are cumulative and are not
exclusive of any remedies provided by law.
5.02 Notices. All notices, requests, consents and demands hereunder
-------
shall be in writing and telecopied or delivered to the intended recipient at the
"Address for Notices" specified beneath its name on the signature pages hereof
or, as to any party, at such other address as shall be designated by such party
in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
5.03 Expenses. Pledgor agrees to reimburse Pledgee for all
--------
reasonable costs and expenses of Pledgee (including, without limitation, the
reasonable fees and expenses of legal counsel) in connection with (a) any
default and any enforcement or collection proceeding resulting therefrom,
including, without limitation, all manner of participation in or other
involvement with (i) performance by Pledgee of any obligations of Pledgor in
respect of the Collateral that it has failed or refused to perform, (ii)
bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement in respect of any of the Collateral, and
for the care of the Collateral, and defending or asserting rights and claims of
<PAGE>
- 8 -
Pledgee in respect thereof, by litigation or otherwise, (iii) judicial or
regulatory proceedings and (iv) workout, restructuring or other negotiations or
proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (b) the enforcement of this Section
5.03, and all such costs and expenses shall be Secured Obligations entitled to
the benefits of the collateral security provided pursuant to Section 3 hereof.
5.04 Amendments, Etc. The terms of this Agreement may be waived,
---------------
altered or amended only by an instrument in writing duly executed by the parties
hereto. Any such amendment or waiver shall be binding upon Pledgee, each holder
of any of the Secured Obligations and Pledgor.
5.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the respective heirs, executors, administrators,
successors and assigns of Pledgor, Pledgee and each holder of any of the Secured
Obligations (provided, however, that Pledgor shall not assign or transfer its
-------- -------
rights hereunder without the prior written consent of Pledgee).
5.06 Captions. The captions and section headings appearing herein
--------
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
5.07 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
5.08 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
5.09 Consent to Jurisdiction and Service of Process. Each party
----------------------------------------------
hereby irrevocably submits to the non-exclusive jurisdiction of the United
States District Court for the Southern District of Georgia or any court of the
State of Georgia located in the County of Chatham in any such action, suit or
proceeding, and agrees that any such action, suit or proceeding shall be brought
only in such court (and waives any objection based on forum non conveniens or
----- --- ----------
any other objection to venue therein); provided, however, that such consent to
-------- -------
jurisdiction is solely for the purpose referred to in this Section and shall not
be deemed to be a general submission to the jurisdiction of said courts or in
the State of Georgia other than for such purpose. EACH OF PLEDGEE AND PLEDGOR
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
5.10 Severability. If any provision hereof is invalid and
------------
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of Pledgee in order to
carry out the intentions of the parties hereto as nearly as may be possible
<PAGE>
- 9 -
and (b) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
PLEDGOR
-------
_______________________________________
Name: Arthur P. Gnann III
Address for Notices:
c/o Carson Products Company
71A Ross Road
Savannah, Georgia 31405
PLEDGEE
-------
CARSON, INC.
By:____________________________________
Name: Dr. Leroy Keith
Title: Chairman and Chief Executive Officer
Address for Notices:
Carson, Inc.
64 Ross Road
Savannah, Georgia 31405
Facsimile No.: (912) 651-3424
Attn: Dr. Leroy Keith
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Facsimile No.: 212-530-5219
Attn: Arnold B. Peinado III, Esq.
<PAGE>
Exhibit II
----------
Pledged Class A Stock
---------------------
Certificate No(s). Number of Shares
- ------------------ ----------------
2.6102 shares of Class A Common Stock, par
value $.01 per share, of Carson, Inc.
<PAGE>
Exhibit 10.35
PLEDGE AGREEMENT
PLEDGE AGREEMENT (this "Agreement") dated as of August 15, 1996,
---------
between Ms. Sharon A. Davis ("Pledgor") and Carson, Inc., a Delaware corporation
-------
("Pledgee").
-------
WHEREAS, Pledgor, is party to an Employment Agreement, dated as of
April 1, 1996 and a Subscription and Registration Rights Agreement, dated as of
August 15, 1996, pursuant to which, on the date hereof, Pledgor purchased from
Pledgee, and Pledgee issued to Pledgor, 2.6102 shares of Class A Common Stock,
par value $.01 per share (the "Class A Common Stock"), of Pledgee (the "Class A
-------------------- -------
Shares"); and
- ------
WHEREAS, this Agreement is being executed and delivered for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and Pledgor has agreed to pledge and grant a security interest in
the Collateral (as hereinafter defined) as security for the Secured Obligations
(as hereinafter defined). Accordingly, the parties hereto agree as follows:
Section 1. Definitions. As used herein:
-----------
"Collateral" shall have the meaning ascribed thereto in Section 3.01
----------
hereof.
"Event of Default" shall have the meaning ascribed thereto in the
----------------
Recourse Note.
"Liens" means any mortgage, pledge, assessment, security interest,
-----
lease, lien, adverse claim, levy, charge or other encumbrance of any kind,
or any conditional sale contract, title retention contract or other
contract to give any of the foregoing.
"Pledged Class A Stock" shall have the meaning ascribed thereto in
---------------------
Section 3.01(a) hereof.
"Recourse Note" shall mean the recourse promissory note, dated as of
-------------
August 15, 1996, executed by Pledgor, a copy of which is attached hereto as
Exhibit I.
---------
"Secured Obligations" shall mean, collectively, (a) all obligations of
-------------------
Pledgor to Pledgee under the Recourse Note, payable to the order of Pledgee
and (b) all obligations of Pledgor to Pledgee hereunder.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
-----------------------
effect from time to time in the State of New York.
Section 2. Representations and Warranties. Pledgor represents and
------------------------------
warrants to Pledgee that:
<PAGE>
- 2 -
2.01 No Breach. None of the execution and delivery of this
---------
Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, any applicable law or regulation, or
any order, writ, injunction or decree of any court or governmental authority or
agency, or any agreement or instrument to which Pledgor is a party or by which
Pledgor is bound or to which Pledgor is subject, or constitute a default under
any such agreement or instrument, or result in the creation or imposition of any
Lien upon Pledgor or Pledgor's assets or properties pursuant to the terms of any
such agreement or instrument.
2.02 Action. This Agreement has been duly and validly executed and
------
delivered by Pledgor and constitutes Pledgor's legal, valid and binding
obligation, enforceable in accordance with the terms hereof.
2.03 Approvals. No authorizations, approvals or consents of, and no
---------
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by Pledgor of
this Agreement or for the validity or enforceability hereof.
2.04 Pledged Class A Stock.
---------------------
(a) Pledgor is the sole beneficial owner of the Collateral and no
Lien exists or will exist upon such Collateral at any time (and no right or
option to acquire the same exists in favor of any other person), except for
the pledge and security interest in favor of Pledgee created or provided
for herein, which pledge and security interest constitute a first priority
perfected pledge and security interest in and to all of such Collateral.
(b) Exhibit II correctly identifies, as at the date hereof, the
----------
respective class and par value of the shares comprising such Pledged Class
A Stock and the respective number of shares (and registered owners thereof)
represented by each such certificate.
Section 3. The Pledge. As collateral security for the prompt payment
----------
in full when due (whether at stated maturity, by mandatory prepayment or by
acceleration or otherwise) of the Secured Obligations:
3.01 Pledge by Pledgor. Pledgor hereby pledges and grants to Pledgee
-----------------
a security interest in and to all of Pledgor's right, title and interest in the
following property, whether now owned by Pledgor or hereafter acquired and
whether now existing or hereafter coming into existence (all being collectively
referred to herein as "Collateral"):
----------
(a) the shares of Class A Common Stock of Pledgee represented by the
certificates identified in Exhibit II hereto under the name of Pledgor and
----------
all other shares of capital stock of whatever class of Pledgee, now or
hereafter owned by Pledgor (other than any new issuance thereof purchased
by Pledgor for value), in each
<PAGE>
- 3 -
case together with the certificates representing the same (collectively,
the "Pledged Class A Stock");
---------------------
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Class A Stock, or representing a
distribution or return of capital upon or in respect of the Pledged Class A
Stock, or resulting from a split-up, revision, reclassification or other
like change of the Pledged Class A Stock or otherwise received in exchange
therefor, and any subscription warrants, rights or options issued to the
holders of, or otherwise in respect of, the Pledged Class A Stock;
(c) in the event of any consolidation or merger in which Pledgee is
not the surviving corporation, all shares of each class of the capital
stock of the successor corporation formed by or resulting from such
consolidation or merger; and
(d) all proceeds of and to any of the property of Pledgor described
in the preceding clauses of this Section 3.01 (including, without
limitation, all causes of action, claims and warranties now or hereafter
held by Pledgor in respect of any of the items listed above).
Section 4. Further Assurances; Remedies. In furtherance of the grant
----------------------------
of the pledge and security interest pursuant to Section 3 hereof, Pledgor hereby
agrees with Pledgee as follows:
4.01 Delivery and Other Perfection by Pledgor. Pledgor shall:
----------------------------------------
(a) if any of the shares, securities, moneys or property required to
be pledged by Pledgor under clauses (a), (b) and (c) of Section 3.01 hereof
are received by Pledgor, forthwith either (i) transfer and deliver to
Pledgee such shares or securities so received by Pledgor (together with the
certificates for any such shares and securities duly endorsed in blank or
accompanied by undated stock powers duly executed in blank), all of which
thereafter shall be held by Pledgee, pursuant to the terms of this
Agreement, as part of the Collateral or (ii) take such other action as
Pledgee shall deem necessary or appropriate to duly record the Lien created
hereunder in such shares, securities, moneys or property in said clauses
(a), (b) and (c); and
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of Pledgee) to create, preserve,
perfect or validate the security interest granted pursuant hereto or to
enable Pledgee to exercise and enforce its rights hereunder with respect to
such pledge and security interest, including, without limitation, causing
any or all of the Collateral to be transferred of record into the name of
Pledgee or its nominee (and Pledgee agrees that if any Collateral is
transferred into its name or the name of its nominee, Pledgee will
thereafter promptly give to Pledgor copies of any notices and
communications received by it with respect to the Collateral pledged by
Pledgor hereunder).
<PAGE>
- 4 -
4.02 Other Financing Statements and Liens. Without the prior written
------------------------------------
consent of Pledgee, Pledgor shall not file or suffer to be on file, or authorize
or permit to be filed or to be on file, in any jurisdiction, any financing
statement or like instrument with respect to the Collateral in which Pledgee is
not named as the sole secured party.
4.03 Collateral.
----------
(a) So long as no Event of Default shall have occurred and be
continuing, Pledgor shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Collateral for all purposes
not inconsistent with the terms of this Agreement, or any other instrument
or agreement referred to herein, provided that Pledgor agrees that it will
--------
not vote the Collateral in any manner that is inconsistent with the terms
of this Agreement or any such other instrument or agreement; and Pledgee
shall execute and deliver to Pledgor or cause to be executed and delivered
to Pledgor all such proxies, powers of attorney, dividend and other orders,
and all such instruments, without recourse, as Pledgor may reasonably
request for the purpose of enabling Pledgor to exercise the rights and
powers that it is entitled to exercise pursuant to this Section 4.03(a).
(b) Unless and until an Event of Default has occurred and is
continuing, Pledgor shall be entitled to receive and retain any dividends
on the Collateral paid in cash.
(c) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not Pledgee exercises any
available right to declare any Secured Obligation due and payable or seeks
or pursues any other relief or remedy available to it under applicable law
or under this Agreement, or any other agreement referred to herein or
relating to such Secured Obligation, all dividends and other distributions
on the Collateral shall be paid directly to and retained by Pledgee as part
of the Collateral, subject to the terms of this Agreement, and, if Pledgee
shall so request in writing, Pledgor agrees to execute and deliver to
Pledgee appropriate additional dividend, distribution and other orders and
documents to that end, provided, however, that if such Event of Default is
-------- -------
cured, any such dividend or distribution theretofore paid to Pledgee shall,
upon request of Pledgor (except to the extent theretofore applied to the
Secured Obligations), be returned by Pledgee to Pledgor.
4.04 Events of Default, Etc. During the period during which an Event
----------------------
of Default shall have occurred and be continuing:
(a) Pledgee shall have all of the rights and remedies with respect to
the Collateral of a secured party under the Uniform Commercial Code
(whether or not said Code is in effect in the jurisdiction where the rights
and remedies are asserted) and such additional rights and remedies to which
a secured party is entitled under the laws in effect in any jurisdiction
where any rights and remedies hereunder may be asserted, including, without
limitation, the right, to the maximum extent permitted by law, to exercise
all voting, consensual and other powers of ownership pertaining to the
<PAGE>
- 5 -
Collateral as if Pledgee were the sole and absolute owner thereof (and
Pledgor agrees to take all such action as may be appropriate to give effect
to such right);
(b) Pledgee in its sole discretion may, in its name or in the name of
Pledgor or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for
any of the Collateral, but shall be under no obligation to do so; and
(c) Pledgee may, upon ten (10) business days' prior written notice to
Pledgor of the time and place, with respect to the Collateral or any part
thereof that shall then be or shall thereafter come into the possession,
custody or control of Pledgee or any of its agents, sell, lease, assign or
otherwise dispose of all or any part of such Collateral at such place or
places as Pledgee deems best, and for cash or for credit or for future
delivery (without thereby assuming any credit risk), at public or private
sale, without demand of performance or notice of intention to effect any
such disposition or of the time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived), and Pledgee
or anyone else may be the purchaser, lessee, assignee or recipient of any
or all of the Collateral so disposed of at any public sale (or, to the
extent permitted by law, at any private sale) and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise), of Pledgor, any
such demand, notice and right or equity being hereby expressly waived and
released. Pledgee may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
4.04 shall be applied in accordance with Section 4.07 hereof.
Pledgor recognizes that, by reason of certain prohibitions contained
in the Securities Act of 1933, as amended, and applicable state securities laws,
Pledgee may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire the Collateral for their own account, for investment and not with a view
to the distribution or resale thereof. Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable to Pledgee than those
obtainable through a public sale without such restrictions, and, notwithstanding
such circumstances, agree that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that Pledgee shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the issuer thereof to
register it for public sale.
4.05 Deficiency. If the proceeds of sale, collection or other
----------
realization of or upon the Collateral pursuant to Section 4.04 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, Pledgor shall remain liable for any
deficiency.
<PAGE>
- 6 -
4.06 Private Sale. Pledgee shall incur no liability as a result of
------------
the sale of the Collateral or any part thereof, at any private sale pursuant to
Section 4.04 hereof conducted in a commercially reasonable manner. Pledgor
hereby waives any claims against Pledgee arising by reason of the fact that the
price at which the Collateral may have been sold at such a private sale was less
than the price that might have been obtained at a public sale or was less than
the aggregate amount of the Secured Obligations, even if Pledgee accepts the
first offer received and does not offer the Collateral to more than one offeree.
4.07 Application of Proceeds. Except as otherwise herein expressly
-----------------------
provided and except as provided below in this Section 4.07, the proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by Pledgee under this
Section 4, shall be applied by Pledgee:
First, to the payment of the costs and expenses of such collection,
-----
sale or other realization, including reasonable out-of-pocket costs and
expenses of Pledgee and the fees and expenses of its agents and counsel,
and all expenses incurred and advances made by Pledgee in connection
therewith;
Next, to the payment in full of all amounts owed to Pledgee pursuant
----
to the terms and provisions of the Recourse Note;
Next, to the payment in full of the remaining Secured Obligations; and
----
Finally, to the payment to Pledgor or its respective heirs, executors,
-------
administrators, successors or assigns, or as a court of competent
jurisdiction may direct, of any surplus then remaining.
As used in this Section 4, "proceeds" of Collateral shall mean cash,
--------
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of Pledgor, or any issuer of or obligor on any
of the Collateral.
4.08 Attorney-in-Fact. Without limiting any rights or powers granted
----------------
by this Agreement to Pledgee while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default Pledgee is hereby appointed the attorney-in-fact of Pledgor for the
purpose of carrying out the provisions of this Section 4 and taking any action
and executing any instruments that Pledgee may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, so long as Pledgee shall be entitled under this Section 4 to make
collections in respect of the Collateral, Pledgee shall have the right and power
to receive, endorse and collect all checks made payable to the order of Pledgor
representing any dividend, payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the same.
4.09 Perfection. Prior to or concurrently with the execution and
----------
delivery of this Agreement, Pledgor shall deliver to Pledgee all certificates
identified in Exhibit II hereto,
----------
<PAGE>
- 7 -
accompanied by undated stock powers duly executed in blank and requisite stock
transfer tax stamps, if any.
4.10 Termination. When all Secured Obligations shall have been paid
-----------
in full, this Agreement shall terminate, and Pledgee shall forthwith cause to be
assigned, transferred and delivered, against receipt but without any recourse,
warranty or representation whatsoever, any remaining Collateral and money
received in respect thereof, to or on the order of Pledgor.
4.11 Further Assurances. Pledgor agrees that, from time to time upon
------------------
the written request of Pledgee, it will execute and deliver such further
documents and do such other acts and things as Pledgee may reasonably request in
order fully to effect the purposes of this Agreement.
4.12 Release of Pledged Class A Stock. Upon the payment in full of
--------------------------------
the Secured Obligations, the Pledgee shall release its lien on, and security
interest in, all such shares of Pledged Class A Stock, and shall execute in
favor of the Pledgor, such releases, endorsements or assignments, without
recourse or warranty, as shall be necessary to evidence the Pledgee's release of
such Collateral.
Section 5. Miscellaneous.
-------------
5.01 No Waiver. No failure on the part of Pledgee to exercise, and
---------
no course of dealing with respect to, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by Pledgee of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies herein are cumulative and are not
exclusive of any remedies provided by law.
5.02 Notices. All notices, requests, consents and demands hereunder
-------
shall be in writing and telecopied or delivered to the intended recipient at the
"Address for Notices" specified beneath its name on the signature pages hereof
or, as to any party, at such other address as shall be designated by such party
in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
5.03 Expenses. Pledgor agrees to reimburse Pledgee for all
--------
reasonable costs and expenses of Pledgee (including, without limitation, the
reasonable fees and expenses of legal counsel) in connection with (a) any
default and any enforcement or collection proceeding resulting therefrom,
including, without limitation, all manner of participation in or other
involvement with (i) performance by Pledgee of any obligations of Pledgor in
respect of the Collateral that it has failed or refused to perform, (ii)
bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement in respect of any of the Collateral, and
for the care of the Collateral, and defending or asserting rights and claims of
<PAGE>
- 8 -
Pledgee in respect thereof, by litigation or otherwise, (iii) judicial or
regulatory proceedings and (iv) workout, restructuring or other negotiations or
proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (b) the enforcement of this Section
5.03, and all such costs and expenses shall be Secured Obligations entitled to
the benefits of the collateral security provided pursuant to Section 3 hereof.
5.04 Amendments, Etc. The terms of this Agreement may be waived,
---------------
altered or amended only by an instrument in writing duly executed by the parties
hereto. Any such amendment or waiver shall be binding upon Pledgee, each holder
of any of the Secured Obligations and Pledgor.
5.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the respective heirs, executors, administrators,
successors and assigns of Pledgor, Pledgee and each holder of any of the Secured
Obligations (provided, however, that Pledgor shall not assign or transfer its
-------- -------
rights hereunder without the prior written consent of Pledgee).
5.06 Captions. The captions and section headings appearing herein
--------
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
5.07 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
5.08 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
5.09 Consent to Jurisdiction and Service of Process. Each party
----------------------------------------------
hereby irrevocably submits to the non-exclusive jurisdiction of the United
States District Court for the Southern District of Georgia or any court of the
State of Georgia located in the County of Chatham in any such action, suit or
proceeding, and agrees that any such action, suit or proceeding shall be brought
only in such court (and waives any objection based on forum non conveniens or
----- --- ----------
any other objection to venue therein); provided, however, that such consent to
-------- -------
jurisdiction is solely for the purpose referred to in this Section and shall not
be deemed to be a general submission to the jurisdiction of said courts or in
the State of Georgia other than for such purpose. EACH OF PLEDGEE AND PLEDGOR
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
5.10 Severability. If any provision hereof is invalid and
------------
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of Pledgee in order to
carry out the intentions of the parties hereto as nearly as may be possible
<PAGE>
- 9 -
and (b) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
PLEDGOR
-------
_______________________________________
Name: Sharon A. Davis
Address for Notices:
c/o Carson Products Company
71A Ross Road
Savannah, Georgia 31405
PLEDGEE
-------
CARSON, INC.
By:____________________________________
Name: Dr. Leroy Keith
Title: Chairman and Chief Executive Officer
Address for Notices:
Carson, Inc.
64 Ross Road
Savannah, Georgia 31405
Facsimile No.: (912) 651-3424
Attn: Dr. Leroy Keith
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Facsimile No.: 212-530-5219
Attn: Arnold B. Peinado III, Esq.
<PAGE>
Exhibit II
----------
Pledged Class A Stock
---------------------
Certificate No(s). Number of Shares
- ------------------ ----------------
2.6102 shares of Class A Common Stock, par
value $.01 per share, of Carson, Inc.
<PAGE>
Exhibit 10.36
PLEDGE AGREEMENT
PLEDGE AGREEMENT (this "Agreement") dated as of August 15, 1996,
---------
between Mr. Donald Cowsar ("Pledgor") and Carson, Inc., a Delaware corporation
-------
("Pledgee").
-------
WHEREAS, Pledgor, is party to an Employment Agreement, dated as of
June 22, 1995 and a Subscription and Registration Rights Agreement, dated as of
August 15, 1996, pursuant to which, on the date hereof, Pledgor purchased from
Pledgee, and Pledgee issued to Pledgor, 2.6102 shares of Class A Common Stock,
par value $.01 per share (the "Class A Common Stock"), of Pledgee (the "Class A
-------------------- -------
Shares"); and
- ------
WHEREAS, this Agreement is being executed and delivered for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and Pledgor has agreed to pledge and grant a security interest in
the Collateral (as hereinafter defined) as security for the Secured Obligations
(as hereinafter defined). Accordingly, the parties hereto agree as follows:
Section 1. Definitions. As used herein:
-----------
"Collateral" shall have the meaning ascribed thereto in Section 3.01
----------
hereof.
"Event of Default" shall have the meaning ascribed thereto in the
----------------
Recourse Note.
"Liens" means any mortgage, pledge, assessment, security interest,
-----
lease, lien, adverse claim, levy, charge or other encumbrance of any kind,
or any conditional sale contract, title retention contract or other
contract to give any of the foregoing.
"Pledged Class A Stock" shall have the meaning ascribed thereto in
---------------------
Section 3.01(a) hereof.
"Recourse Note" shall mean the recourse promissory note, dated as of
-------------
August 15, 1996, executed by Pledgor, a copy of which is attached hereto as
Exhibit I.
---------
"Secured Obligations" shall mean, collectively, (a) all obligations of
-------------------
Pledgor to Pledgee under the Recourse Note, payable to the order of Pledgee
and (b) all obligations of Pledgor to Pledgee hereunder.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
-----------------------
effect from time to time in the State of New York.
Section 2. Representations and Warranties. Pledgor represents and
------------------------------
warrants to Pledgee that:
<PAGE>
- 2 -
2.01 No Breach. None of the execution and delivery of this
---------
Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, any applicable law or regulation, or
any order, writ, injunction or decree of any court or governmental authority or
agency, or any agreement or instrument to which Pledgor is a party or by which
Pledgor is bound or to which Pledgor is subject, or constitute a default under
any such agreement or instrument, or result in the creation or imposition of any
Lien upon Pledgor or Pledgor's assets or properties pursuant to the terms of any
such agreement or instrument.
2.02 Action. This Agreement has been duly and validly executed and
------
delivered by Pledgor and constitutes Pledgor's legal, valid and binding
obligation, enforceable in accordance with the terms hereof.
2.03 Approvals. No authorizations, approvals or consents of, and no
---------
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by Pledgor of
this Agreement or for the validity or enforceability hereof.
2.04 Pledged Class A Stock.
---------------------
(a) Pledgor is the sole beneficial owner of the Collateral and no
Lien exists or will exist upon such Collateral at any time (and no right or
option to acquire the same exists in favor of any other person), except for
the pledge and security interest in favor of Pledgee created or provided
for herein, which pledge and security interest constitute a first priority
perfected pledge and security interest in and to all of such Collateral.
(b) Exhibit II correctly identifies, as at the date hereof, the
----------
respective class and par value of the shares comprising such Pledged Class
A Stock and the respective number of shares (and registered owners thereof)
represented by each such certificate.
Section 3. The Pledge. As collateral security for the prompt payment
----------
in full when due (whether at stated maturity, by mandatory prepayment or by
acceleration or otherwise) of the Secured Obligations:
3.01 Pledge by Pledgor. Pledgor hereby pledges and grants to Pledgee
-----------------
a security interest in and to all of Pledgor's right, title and interest in the
following property, whether now owned by Pledgor or hereafter acquired and
whether now existing or hereafter coming into existence (all being collectively
referred to herein as "Collateral"):
----------
(a) the shares of Class A Common Stock of Pledgee represented by the
certificates identified in Exhibit II hereto under the name of Pledgor and
----------
all other shares of capital stock of whatever class of Pledgee, now or
hereafter owned by Pledgor (other than any new issuance thereof purchased
by Pledgor for value), in each
<PAGE>
- 3 -
case together with the certificates representing the same (collectively,
the "Pledged Class A Stock");
---------------------
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Class A Stock, or representing a
distribution or return of capital upon or in respect of the Pledged Class A
Stock, or resulting from a split-up, revision, reclassification or other
like change of the Pledged Class A Stock or otherwise received in exchange
therefor, and any subscription warrants, rights or options issued to the
holders of, or otherwise in respect of, the Pledged Class A Stock;
(c) in the event of any consolidation or merger in which Pledgee is
not the surviving corporation, all shares of each class of the capital
stock of the successor corporation formed by or resulting from such
consolidation or merger; and
(d) all proceeds of and to any of the property of Pledgor described
in the preceding clauses of this Section 3.01 (including, without
limitation, all causes of action, claims and warranties now or hereafter
held by Pledgor in respect of any of the items listed above).
Section 4. Further Assurances; Remedies. In furtherance of the grant
----------------------------
of the pledge and security interest pursuant to Section 3 hereof, Pledgor hereby
agrees with Pledgee as follows:
4.01 Delivery and Other Perfection by Pledgor. Pledgor shall:
----------------------------------------
(a) if any of the shares, securities, moneys or property required to
be pledged by Pledgor under clauses (a), (b) and (c) of Section 3.01 hereof
are received by Pledgor, forthwith either (i) transfer and deliver to
Pledgee such shares or securities so received by Pledgor (together with the
certificates for any such shares and securities duly endorsed in blank or
accompanied by undated stock powers duly executed in blank), all of which
thereafter shall be held by Pledgee, pursuant to the terms of this
Agreement, as part of the Collateral or (ii) take such other action as
Pledgee shall deem necessary or appropriate to duly record the Lien created
hereunder in such shares, securities, moneys or property in said clauses
(a), (b) and (c); and
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of Pledgee) to create, preserve,
perfect or validate the security interest granted pursuant hereto or to
enable Pledgee to exercise and enforce its rights hereunder with respect to
such pledge and security interest, including, without limitation, causing
any or all of the Collateral to be transferred of record into the name of
Pledgee or its nominee (and Pledgee agrees that if any Collateral is
transferred into its name or the name of its nominee, Pledgee will
thereafter promptly give to Pledgor copies of any notices and
communications received by it with respect to the Collateral pledged by
Pledgor hereunder).
<PAGE>
- 4 -
4.02 Other Financing Statements and Liens. Without the prior written
------------------------------------
consent of Pledgee, Pledgor shall not file or suffer to be on file, or authorize
or permit to be filed or to be on file, in any jurisdiction, any financing
statement or like instrument with respect to the Collateral in which Pledgee is
not named as the sole secured party.
4.03 Collateral.
----------
(a) So long as no Event of Default shall have occurred and be
continuing, Pledgor shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Collateral for all purposes
not inconsistent with the terms of this Agreement, or any other instrument
or agreement referred to herein, provided that Pledgor agrees that it will
--------
not vote the Collateral in any manner that is inconsistent with the terms
of this Agreement or any such other instrument or agreement; and Pledgee
shall execute and deliver to Pledgor or cause to be executed and delivered
to Pledgor all such proxies, powers of attorney, dividend and other orders,
and all such instruments, without recourse, as Pledgor may reasonably
request for the purpose of enabling Pledgor to exercise the rights and
powers that it is entitled to exercise pursuant to this Section 4.03(a).
(b) Unless and until an Event of Default has occurred and is
continuing, Pledgor shall be entitled to receive and retain any dividends
on the Collateral paid in cash.
(c) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not Pledgee exercises any
available right to declare any Secured Obligation due and payable or seeks
or pursues any other relief or remedy available to it under applicable law
or under this Agreement, or any other agreement referred to herein or
relating to such Secured Obligation, all dividends and other distributions
on the Collateral shall be paid directly to and retained by Pledgee as part
of the Collateral, subject to the terms of this Agreement, and, if Pledgee
shall so request in writing, Pledgor agrees to execute and deliver to
Pledgee appropriate additional dividend, distribution and other orders and
documents to that end, provided, however, that if such Event of Default is
-------- -------
cured, any such dividend or distribution theretofore paid to Pledgee shall,
upon request of Pledgor (except to the extent theretofore applied to the
Secured Obligations), be returned by Pledgee to Pledgor.
4.04 Events of Default, Etc. During the period during which an Event
----------------------
of Default shall have occurred and be continuing:
(a) Pledgee shall have all of the rights and remedies with respect to
the Collateral of a secured party under the Uniform Commercial Code
(whether or not said Code is in effect in the jurisdiction where the rights
and remedies are asserted) and such additional rights and remedies to which
a secured party is entitled under the laws in effect in any jurisdiction
where any rights and remedies hereunder may be asserted, including, without
limitation, the right, to the maximum extent permitted by law, to exercise
all voting, consensual and other powers of ownership pertaining to the
<PAGE>
- 5 -
Collateral as if Pledgee were the sole and absolute owner thereof (and
Pledgor agrees to take all such action as may be appropriate to give effect
to such right);
(b) Pledgee in its sole discretion may, in its name or in the name of
Pledgor or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for
any of the Collateral, but shall be under no obligation to do so; and
(c) Pledgee may, upon ten (10) business days' prior written notice to
Pledgor of the time and place, with respect to the Collateral or any part
thereof that shall then be or shall thereafter come into the possession,
custody or control of Pledgee or any of its agents, sell, lease, assign or
otherwise dispose of all or any part of such Collateral at such place or
places as Pledgee deems best, and for cash or for credit or for future
delivery (without thereby assuming any credit risk), at public or private
sale, without demand of performance or notice of intention to effect any
such disposition or of the time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived), and Pledgee
or anyone else may be the purchaser, lessee, assignee or recipient of any
or all of the Collateral so disposed of at any public sale (or, to the
extent permitted by law, at any private sale) and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise), of Pledgor, any
such demand, notice and right or equity being hereby expressly waived and
released. Pledgee may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
4.04 shall be applied in accordance with Section 4.07 hereof.
Pledgor recognizes that, by reason of certain prohibitions contained
in the Securities Act of 1933, as amended, and applicable state securities laws,
Pledgee may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire the Collateral for their own account, for investment and not with a view
to the distribution or resale thereof. Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable to Pledgee than those
obtainable through a public sale without such restrictions, and, notwithstanding
such circumstances, agree that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that Pledgee shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the issuer thereof to
register it for public sale.
4.05 Deficiency. If the proceeds of sale, collection or other
----------
realization of or upon the Collateral pursuant to Section 4.04 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, Pledgor shall remain liable for any
deficiency.
<PAGE>
- 6 -
4.06 Private Sale. Pledgee shall incur no liability as a result of
------------
the sale of the Collateral or any part thereof, at any private sale pursuant to
Section 4.04 hereof conducted in a commercially reasonable manner. Pledgor
hereby waives any claims against Pledgee arising by reason of the fact that the
price at which the Collateral may have been sold at such a private sale was less
than the price that might have been obtained at a public sale or was less than
the aggregate amount of the Secured Obligations, even if Pledgee accepts the
first offer received and does not offer the Collateral to more than one offeree.
4.07 Application of Proceeds. Except as otherwise herein expressly
-----------------------
provided and except as provided below in this Section 4.07, the proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by Pledgee under this
Section 4, shall be applied by Pledgee:
First, to the payment of the costs and expenses of such collection,
-----
sale or other realization, including reasonable out-of-pocket costs and
expenses of Pledgee and the fees and expenses of its agents and counsel,
and all expenses incurred and advances made by Pledgee in connection
therewith;
Next, to the payment in full of all amounts owed to Pledgee pursuant
----
to the terms and provisions of the Recourse Note;
Next, to the payment in full of the remaining Secured Obligations; and
----
Finally, to the payment to Pledgor or its respective heirs, executors,
-------
administrators, successors or assigns, or as a court of competent
jurisdiction may direct, of any surplus then remaining.
As used in this Section 4, "proceeds" of Collateral shall mean cash,
--------
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of Pledgor, or any issuer of or obligor on any
of the Collateral.
4.08 Attorney-in-Fact. Without limiting any rights or powers granted
----------------
by this Agreement to Pledgee while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default Pledgee is hereby appointed the attorney-in-fact of Pledgor for the
purpose of carrying out the provisions of this Section 4 and taking any action
and executing any instruments that Pledgee may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, so long as Pledgee shall be entitled under this Section 4 to make
collections in respect of the Collateral, Pledgee shall have the right and power
to receive, endorse and collect all checks made payable to the order of Pledgor
representing any dividend, payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the same.
4.09 Perfection. Prior to or concurrently with the execution and
----------
delivery of this Agreement, Pledgor shall deliver to Pledgee all certificates
identified in Exhibit II hereto,
----------
<PAGE>
- 7 -
accompanied by undated stock powers duly executed in blank and requisite stock
transfer tax stamps, if any.
4.10 Termination. When all Secured Obligations shall have been paid
-----------
in full, this Agreement shall terminate, and Pledgee shall forthwith cause to be
assigned, transferred and delivered, against receipt but without any recourse,
warranty or representation whatsoever, any remaining Collateral and money
received in respect thereof, to or on the order of Pledgor.
4.11 Further Assurances. Pledgor agrees that, from time to time upon
------------------
the written request of Pledgee, it will execute and deliver such further
documents and do such other acts and things as Pledgee may reasonably request in
order fully to effect the purposes of this Agreement.
4.12 Release of Pledged Class A Stock. Upon the payment in full of
--------------------------------
the Secured Obligations, the Pledgee shall release its lien on, and security
interest in, all such shares of Pledged Class A Stock, and shall execute in
favor of the Pledgor, such releases, endorsements or assignments, without
recourse or warranty, as shall be necessary to evidence the Pledgee's release of
such Collateral.
Section 5. Miscellaneous.
-------------
5.01 No Waiver. No failure on the part of Pledgee to exercise, and
---------
no course of dealing with respect to, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by Pledgee of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies herein are cumulative and are not
exclusive of any remedies provided by law.
5.02 Notices. All notices, requests, consents and demands hereunder
-------
shall be in writing and telecopied or delivered to the intended recipient at the
"Address for Notices" specified beneath its name on the signature pages hereof
or, as to any party, at such other address as shall be designated by such party
in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
5.03 Expenses. Pledgor agrees to reimburse Pledgee for all
--------
reasonable costs and expenses of Pledgee (including, without limitation, the
reasonable fees and expenses of legal counsel) in connection with (a) any
default and any enforcement or collection proceeding resulting therefrom,
including, without limitation, all manner of participation in or other
involvement with (i) performance by Pledgee of any obligations of Pledgor in
respect of the Collateral that it has failed or refused to perform, (ii)
bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement in respect of any of the Collateral, and
for the care of the Collateral, and defending or asserting rights and claims of
<PAGE>
- 8 -
Pledgee in respect thereof, by litigation or otherwise, (iii) judicial or
regulatory proceedings and (iv) workout, restructuring or other negotiations or
proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (b) the enforcement of this Section
5.03, and all such costs and expenses shall be Secured Obligations entitled to
the benefits of the collateral security provided pursuant to Section 3 hereof.
5.04 Amendments, Etc. The terms of this Agreement may be waived,
---------------
altered or amended only by an instrument in writing duly executed by the parties
hereto. Any such amendment or waiver shall be binding upon Pledgee, each holder
of any of the Secured Obligations and Pledgor.
5.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the respective heirs, executors, administrators,
successors and assigns of Pledgor, Pledgee and each holder of any of the Secured
Obligations (provided, however, that Pledgor shall not assign or transfer its
-------- -------
rights hereunder without the prior written consent of Pledgee).
5.06 Captions. The captions and section headings appearing herein
--------
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
5.07 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
5.08 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
5.09 Consent to Jurisdiction and Service of Process. Each party
----------------------------------------------
hereby irrevocably submits to the non-exclusive jurisdiction of the United
States District Court for the Southern District of Georgia or any court of the
State of Georgia located in the County of Chatham in any such action, suit or
proceeding, and agrees that any such action, suit or proceeding shall be brought
only in such court (and waives any objection based on forum non conveniens or
----- --- ----------
any other objection to venue therein); provided, however, that such consent to
-------- -------
jurisdiction is solely for the purpose referred to in this Section and shall not
be deemed to be a general submission to the jurisdiction of said courts or in
the State of Georgia other than for such purpose. EACH OF PLEDGEE AND PLEDGOR
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
5.10 Severability. If any provision hereof is invalid and
------------
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of Pledgee in order to
carry out the intentions of the parties hereto as nearly as may be possible
<PAGE>
- 9 -
and (b) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
PLEDGOR
-------
_______________________________________
Name: Donald Cowsar
Address for Notices:
24 Twelve Oaks Drive
Savannah, Georgia 31410
PLEDGEE
-------
CARSON, INC.
By:____________________________________
Name: Dr. Leroy Keith
Title: Chairman and Chief Executive Officer
Address for Notices:
Carson, Inc.
64 Ross Road
Savannah, Georgia 31405
Facsimile No.: (912) 651-3424
Attn: Dr. Leroy Keith
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Facsimile No.: 212-530-5219
Attn: Arnold B. Peinado III, Esq.
<PAGE>
Exhibit II
----------
Pledged Class A Stock
---------------------
Certificate No(s). Number of Shares
- ------------------ ----------------
2.6102 shares of Class A Common Stock, par
value $.01 per share, of Carson, Inc.
<PAGE>
Exhibit 10.37
PLEDGE AGREEMENT
PLEDGE AGREEMENT (this "Agreement") dated as of August 15, 1996,
---------
between Mr. John P. Brown, Jr. ("Pledgor") and Carson, Inc., a Delaware
-------
corporation ("Pledgee").
-------
WHEREAS, Pledgor, is party to an Employment Agreement, dated as of
June 7, 1995 and a Subscription and Registration Rights Agreement, dated as of
August 15, 1996, pursuant to which, on the date hereof, Pledgor purchased from
Pledgee, and Pledgee issued to Pledgor, 5.2205 shares of Class A Common Stock,
par value $.01 per share (the "Class A Common Stock"), of Pledgee (the "Class A
-------------------- -------
Shares"); and
- ------
WHEREAS, this Agreement is being executed and delivered for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and Pledgor has agreed to pledge and grant a security interest in
the Collateral (as hereinafter defined) as security for the Secured Obligations
(as hereinafter defined). Accordingly, the parties hereto agree as follows:
Section 1. Definitions. As used herein:
-----------
"Collateral" shall have the meaning ascribed thereto in Section 3.01
----------
hereof.
"Event of Default" shall have the meaning ascribed thereto in the
----------------
Recourse Note.
"Liens" means any mortgage, pledge, assessment, security interest,
-----
lease, lien, adverse claim, levy, charge or other encumbrance of any kind,
or any conditional sale contract, title retention contract or other
contract to give any of the foregoing.
"Pledged Class A Stock" shall have the meaning ascribed thereto in
---------------------
Section 3.01(a) hereof.
"Recourse Note" shall mean the recourse promissory note, dated as of
-------------
August 15, 1996, executed by Pledgor, a copy of which is attached hereto as
Exhibit I.
---------
"Secured Obligations" shall mean, collectively, (a) all obligations of
-------------------
Pledgor to Pledgee under the Recourse Note, payable to the order of Pledgee
and (b) all obligations of Pledgor to Pledgee hereunder.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
-----------------------
effect from time to time in the State of New York.
Section 2. Representations and Warranties. Pledgor represents and
------------------------------
warrants to Pledgee that:
<PAGE>
- 2 -
2.01 No Breach. None of the execution and delivery of this
---------
Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, any applicable law or regulation, or
any order, writ, injunction or decree of any court or governmental authority or
agency, or any agreement or instrument to which Pledgor is a party or by which
Pledgor is bound or to which Pledgor is subject, or constitute a default under
any such agreement or instrument, or result in the creation or imposition of any
Lien upon Pledgor or Pledgor's assets or properties pursuant to the terms of any
such agreement or instrument.
2.02 Action. This Agreement has been duly and validly executed and
------
delivered by Pledgor and constitutes Pledgor's legal, valid and binding
obligation, enforceable in accordance with the terms hereof.
2.03 Approvals. No authorizations, approvals or consents of, and no
---------
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by Pledgor of
this Agreement or for the validity or enforceability hereof.
2.04 Pledged Class A Stock.
---------------------
(a) Pledgor is the sole beneficial owner of the Collateral and no
Lien exists or will exist upon such Collateral at any time (and no right or
option to acquire the same exists in favor of any other person), except for
the pledge and security interest in favor of Pledgee created or provided
for herein, which pledge and security interest constitute a first priority
perfected pledge and security interest in and to all of such Collateral.
(b) Exhibit II correctly identifies, as at the date hereof, the
----------
respective class and par value of the shares comprising such Pledged Class
A Stock and the respective number of shares (and registered owners thereof)
represented by each such certificate.
Section 3. The Pledge. As collateral security for the prompt payment
----------
in full when due (whether at stated maturity, by mandatory prepayment or by
acceleration or otherwise) of the Secured Obligations:
3.01 Pledge by Pledgor. Pledgor hereby pledges and grants to Pledgee
-----------------
a security interest in and to all of Pledgor's right, title and interest in the
following property, whether now owned by Pledgor or hereafter acquired and
whether now existing or hereafter coming into existence (all being collectively
referred to herein as "Collateral"):
----------
(a) the shares of Class A Common Stock of Pledgee represented by the
certificates identified in Exhibit II hereto under the name of Pledgor and
----------
all other shares of capital stock of whatever class of Pledgee, now or
hereafter owned by Pledgor (other than any new issuance thereof purchased
by Pledgor for value), in each
<PAGE>
- 3 -
case together with the certificates representing the same (collectively,
the "Pledged Class A Stock");
---------------------
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Class A Stock, or representing a
distribution or return of capital upon or in respect of the Pledged Class A
Stock, or resulting from a split-up, revision, reclassification or other
like change of the Pledged Class A Stock or otherwise received in exchange
therefor, and any subscription warrants, rights or options issued to the
holders of, or otherwise in respect of, the Pledged Class A Stock;
(c) in the event of any consolidation or merger in which Pledgee is
not the surviving corporation, all shares of each class of the capital
stock of the successor corporation formed by or resulting from such
consolidation or merger; and
(d) all proceeds of and to any of the property of Pledgor described
in the preceding clauses of this Section 3.01 (including, without
limitation, all causes of action, claims and warranties now or hereafter
held by Pledgor in respect of any of the items listed above).
Section 4. Further Assurances; Remedies. In furtherance of the grant
----------------------------
of the pledge and security interest pursuant to Section 3 hereof, Pledgor hereby
agrees with Pledgee as follows:
4.01 Delivery and Other Perfection by Pledgor. Pledgor shall:
----------------------------------------
(a) if any of the shares, securities, moneys or property required to
be pledged by Pledgor under clauses (a), (b) and (c) of Section 3.01 hereof
are received by Pledgor, forthwith either (i) transfer and deliver to
Pledgee such shares or securities so received by Pledgor (together with the
certificates for any such shares and securities duly endorsed in blank or
accompanied by undated stock powers duly executed in blank), all of which
thereafter shall be held by Pledgee, pursuant to the terms of this
Agreement, as part of the Collateral or (ii) take such other action as
Pledgee shall deem necessary or appropriate to duly record the Lien created
hereunder in such shares, securities, moneys or property in said clauses
(a), (b) and (c); and
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of Pledgee) to create, preserve,
perfect or validate the security interest granted pursuant hereto or to
enable Pledgee to exercise and enforce its rights hereunder with respect to
such pledge and security interest, including, without limitation, causing
any or all of the Collateral to be transferred of record into the name of
Pledgee or its nominee (and Pledgee agrees that if any Collateral is
transferred into its name or the name of its nominee, Pledgee will
thereafter promptly give to Pledgor copies of any notices and
communications received by it with respect to the Collateral pledged by
Pledgor hereunder).
<PAGE>
- 4 -
4.02 Other Financing Statements and Liens. Without the prior written
------------------------------------
consent of Pledgee, Pledgor shall not file or suffer to be on file, or authorize
or permit to be filed or to be on file, in any jurisdiction, any financing
statement or like instrument with respect to the Collateral in which Pledgee is
not named as the sole secured party.
4.03 Collateral.
----------
(a) So long as no Event of Default shall have occurred and be
continuing, Pledgor shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Collateral for all purposes
not inconsistent with the terms of this Agreement, or any other instrument
or agreement referred to herein, provided that Pledgor agrees that it will
--------
not vote the Collateral in any manner that is inconsistent with the terms
of this Agreement or any such other instrument or agreement; and Pledgee
shall execute and deliver to Pledgor or cause to be executed and delivered
to Pledgor all such proxies, powers of attorney, dividend and other orders,
and all such instruments, without recourse, as Pledgor may reasonably
request for the purpose of enabling Pledgor to exercise the rights and
powers that it is entitled to exercise pursuant to this Section 4.03(a).
(b) Unless and until an Event of Default has occurred and is
continuing, Pledgor shall be entitled to receive and retain any dividends
on the Collateral paid in cash.
(c) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not Pledgee exercises any
available right to declare any Secured Obligation due and payable or seeks
or pursues any other relief or remedy available to it under applicable law
or under this Agreement, or any other agreement referred to herein or
relating to such Secured Obligation, all dividends and other distributions
on the Collateral shall be paid directly to and retained by Pledgee as part
of the Collateral, subject to the terms of this Agreement, and, if Pledgee
shall so request in writing, Pledgor agrees to execute and deliver to
Pledgee appropriate additional dividend, distribution and other orders and
documents to that end, provided, however, that if such Event of Default is
-------- -------
cured, any such dividend or distribution theretofore paid to Pledgee shall,
upon request of Pledgor (except to the extent theretofore applied to the
Secured Obligations), be returned by Pledgee to Pledgor.
4.04 Events of Default, Etc. During the period during which an Event
----------------------
of Default shall have occurred and be continuing:
(a) Pledgee shall have all of the rights and remedies with respect to
the Collateral of a secured party under the Uniform Commercial Code
(whether or not said Code is in effect in the jurisdiction where the rights
and remedies are asserted) and such additional rights and remedies to which
a secured party is entitled under the laws in effect in any jurisdiction
where any rights and remedies hereunder may be asserted, including, without
limitation, the right, to the maximum extent permitted by law, to exercise
all voting, consensual and other powers of ownership pertaining to the
<PAGE>
- 5 -
Collateral as if Pledgee were the sole and absolute owner thereof (and
Pledgor agrees to take all such action as may be appropriate to give effect
to such right);
(b) Pledgee in its sole discretion may, in its name or in the name of
Pledgor or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for
any of the Collateral, but shall be under no obligation to do so; and
(c) Pledgee may, upon ten (10) business days' prior written notice to
Pledgor of the time and place, with respect to the Collateral or any part
thereof that shall then be or shall thereafter come into the possession,
custody or control of Pledgee or any of its agents, sell, lease, assign or
otherwise dispose of all or any part of such Collateral at such place or
places as Pledgee deems best, and for cash or for credit or for future
delivery (without thereby assuming any credit risk), at public or private
sale, without demand of performance or notice of intention to effect any
such disposition or of the time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived), and Pledgee
or anyone else may be the purchaser, lessee, assignee or recipient of any
or all of the Collateral so disposed of at any public sale (or, to the
extent permitted by law, at any private sale) and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise), of Pledgor, any
such demand, notice and right or equity being hereby expressly waived and
released. Pledgee may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
4.04 shall be applied in accordance with Section 4.07 hereof.
Pledgor recognizes that, by reason of certain prohibitions contained
in the Securities Act of 1933, as amended, and applicable state securities laws,
Pledgee may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire the Collateral for their own account, for investment and not with a view
to the distribution or resale thereof. Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable to Pledgee than those
obtainable through a public sale without such restrictions, and, notwithstanding
such circumstances, agree that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that Pledgee shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the issuer thereof to
register it for public sale.
4.05 Deficiency. If the proceeds of sale, collection or other
----------
realization of or upon the Collateral pursuant to Section 4.04 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, Pledgor shall remain liable for any
deficiency.
<PAGE>
- 6 -
4.06 Private Sale. Pledgee shall incur no liability as a result of
------------
the sale of the Collateral or any part thereof, at any private sale pursuant to
Section 4.04 hereof conducted in a commercially reasonable manner. Pledgor
hereby waives any claims against Pledgee arising by reason of the fact that the
price at which the Collateral may have been sold at such a private sale was less
than the price that might have been obtained at a public sale or was less than
the aggregate amount of the Secured Obligations, even if Pledgee accepts the
first offer received and does not offer the Collateral to more than one offeree.
4.07 Application of Proceeds. Except as otherwise herein expressly
-----------------------
provided and except as provided below in this Section 4.07, the proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by Pledgee under this
Section 4, shall be applied by Pledgee:
First, to the payment of the costs and expenses of such collection,
-----
sale or other realization, including reasonable out-of-pocket costs and
expenses of Pledgee and the fees and expenses of its agents and counsel,
and all expenses incurred and advances made by Pledgee in connection
therewith;
Next, to the payment in full of all amounts owed to Pledgee pursuant
----
to the terms and provisions of the Recourse Note;
Next, to the payment in full of the remaining Secured Obligations; and
----
Finally, to the payment to Pledgor or its respective heirs, executors,
-------
administrators, successors or assigns, or as a court of competent
jurisdiction may direct, of any surplus then remaining.
As used in this Section 4, "proceeds" of Collateral shall mean cash,
--------
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of Pledgor, or any issuer of or obligor on any
of the Collateral.
4.08 Attorney-in-Fact. Without limiting any rights or powers granted
----------------
by this Agreement to Pledgee while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default Pledgee is hereby appointed the attorney-in-fact of Pledgor for the
purpose of carrying out the provisions of this Section 4 and taking any action
and executing any instruments that Pledgee may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, so long as Pledgee shall be entitled under this Section 4 to make
collections in respect of the Collateral, Pledgee shall have the right and power
to receive, endorse and collect all checks made payable to the order of Pledgor
representing any dividend, payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the same.
4.09 Perfection. Prior to or concurrently with the execution and
----------
delivery of this Agreement, Pledgor shall deliver to Pledgee all certificates
identified in Exhibit II hereto,
----------
<PAGE>
- 7 -
accompanied by undated stock powers duly executed in blank and requisite stock
transfer tax stamps, if any.
4.10 Termination. When all Secured Obligations shall have been paid
-----------
in full, this Agreement shall terminate, and Pledgee shall forthwith cause to be
assigned, transferred and delivered, against receipt but without any recourse,
warranty or representation whatsoever, any remaining Collateral and money
received in respect thereof, to or on the order of Pledgor.
4.11 Further Assurances. Pledgor agrees that, from time to time upon
------------------
the written request of Pledgee, it will execute and deliver such further
documents and do such other acts and things as Pledgee may reasonably request in
order fully to effect the purposes of this Agreement.
4.12 Release of Pledged Class A Stock. Upon the payment in full of
--------------------------------
the Secured Obligations, the Pledgee shall release its lien on, and security
interest in, all such shares of Pledged Class A Stock, and shall execute in
favor of the Pledgor, such releases, endorsements or assignments, without
recourse or warranty, as shall be necessary to evidence the Pledgee's release of
such Collateral.
Section 5. Miscellaneous.
-------------
5.01 No Waiver. No failure on the part of Pledgee to exercise, and
---------
no course of dealing with respect to, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by Pledgee of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies herein are cumulative and are not
exclusive of any remedies provided by law.
5.02 Notices. All notices, requests, consents and demands hereunder
-------
shall be in writing and telecopied or delivered to the intended recipient at the
"Address for Notices" specified beneath its name on the signature pages hereof
or, as to any party, at such other address as shall be designated by such party
in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
5.03 Expenses. Pledgor agrees to reimburse Pledgee for all
--------
reasonable costs and expenses of Pledgee (including, without limitation, the
reasonable fees and expenses of legal counsel) in connection with (a) any
default and any enforcement or collection proceeding resulting therefrom,
including, without limitation, all manner of participation in or other
involvement with (i) performance by Pledgee of any obligations of Pledgor in
respect of the Collateral that it has failed or refused to perform, (ii)
bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement in respect of any of the Collateral, and
for the care of the Collateral, and defending or asserting rights and claims of
<PAGE>
- 8 -
Pledgee in respect thereof, by litigation or otherwise, (iii) judicial or
regulatory proceedings and (iv) workout, restructuring or other negotiations or
proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (b) the enforcement of this Section
5.03, and all such costs and expenses shall be Secured Obligations entitled to
the benefits of the collateral security provided pursuant to Section 3 hereof.
5.04 Amendments, Etc. The terms of this Agreement may be waived,
---------------
altered or amended only by an instrument in writing duly executed by the parties
hereto. Any such amendment or waiver shall be binding upon Pledgee, each holder
of any of the Secured Obligations and Pledgor.
5.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the respective heirs, executors, administrators,
successors and assigns of Pledgor, Pledgee and each holder of any of the Secured
Obligations (provided, however, that Pledgor shall not assign or transfer its
-------- -------
rights hereunder without the prior written consent of Pledgee).
5.06 Captions. The captions and section headings appearing herein
--------
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
5.07 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
5.08 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
5.09 Consent to Jurisdiction and Service of Process. Each party
----------------------------------------------
hereby irrevocably submits to the non-exclusive jurisdiction of the United
States District Court for the Southern District of Georgia or any court of the
State of Georgia located in the County of Chatham in any such action, suit or
proceeding, and agrees that any such action, suit or proceeding shall be brought
only in such court (and waives any objection based on forum non conveniens or
----- --- ----------
any other objection to venue therein); provided, however, that such consent to
-------- -------
jurisdiction is solely for the purpose referred to in this Section and shall not
be deemed to be a general submission to the jurisdiction of said courts or in
the State of Georgia other than for such purpose. EACH OF PLEDGEE AND PLEDGOR
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
5.10 Severability. If any provision hereof is invalid and
------------
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of Pledgee in order to
carry out the intentions of the parties hereto as nearly as may be possible
<PAGE>
- 9 -
and (b) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
PLEDGOR
-------
_______________________________________
Name: John P. Brown, Jr.
Address for Notices:
c/o Carson Products Company
71A Ross Road
Savannah, Georgia 31405
PLEDGEE
-------
CARSON, INC.
By:____________________________________
Name: Dr. Leroy Keith
Title: Chairman and Chief Executive Officer
Address for Notices:
Carson, Inc.
64 Ross Road
Savannah, Georgia 31405
Facsimile No.: (912) 651-3424
Attn: Dr. Leroy Keith
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Facsimile No.: 212-530-5219
Attn: Arnold B. Peinado III, Esq.
<PAGE>
Exhibit II
----------
Pledged Class A Stock
---------------------
Certificate No(s). Number of Shares
- ------------------ ----------------
5.2205 shares of Class A Common Stock, par
value $.01 per share, of Carson, Inc.
<PAGE>
Exhibit 10.38
PLEDGE AGREEMENT
PLEDGE AGREEMENT (this "Agreement") dated as of August 13, 1996,
---------
between Ms. Miriam Muley ("Pledgor") and Carson, Inc., a Delaware corporation
-------
("Pledgee").
- ---------
WHEREAS, Pledgor, is party to an Employment Agreement, dated as of
March 11, 1996 and a Subscription and Registration Rights Agreement, dated as of
August 13, 1996, pursuant to which, on the date hereof, Pledgor purchased from
Pledgee, and Pledgee issued to Pledgor, 5.2205 shares of Class A Common Stock,
par value $.01 per share (the "Class A Common Stock"), of Pledgee (the "Class A
-------------------- -------
Shares"); and
- ------
WHEREAS, this Agreement is being executed and delivered for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and Pledgor has agreed to pledge and grant a security interest in
the Collateral (as hereinafter defined) as security for the Secured Obligations
(as hereinafter defined). Accordingly, the parties hereto agree as follows:
Section 1. Definitions. As used herein:
-----------
"Collateral" shall have the meaning ascribed thereto in Section 3.01
----------
hereof.
"Event of Default" shall have the meaning ascribed thereto in the
----------------
Recourse Note.
"Liens" means any mortgage, pledge, assessment, security interest,
-----
lease, lien, adverse claim, levy, charge or other encumbrance of any kind,
or any conditional sale contract, title retention contract or other
contract to give any of the foregoing.
"Pledged Class A Stock" shall have the meaning ascribed thereto in
---------------------
Section 3.01(a) hereof.
"Recourse Note" shall mean the recourse promissory note, dated as of
-------------
August 13, 1996, executed by Pledgor, a copy of which is attached hereto as
Exhibit I.
---------
"Secured Obligations" shall mean, collectively, (a) all obligations of
-------------------
Pledgor to Pledgee under the Recourse Note, payable to the order of
Pledgee) and (b) all obligations of Pledgor to Pledgee hereunder.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
-----------------------
effect from time to time in the State of New York.
Section 2. Representations and Warranties. Pledgor represents and
------------------------------
warrants to Pledgee that:
<PAGE>
- 2 -
2.01 No Breach. None of the execution and delivery of this
---------
Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, any applicable law or regulation, or
any order, writ, injunction or decree of any court or governmental authority or
agency, or any agreement or instrument to which Pledgor is a party or by which
Pledgor is bound or to which Pledgor is subject, or constitute a default under
any such agreement or instrument, or result in the creation or imposition of any
Lien upon Pledgor or Pledgor's assets or properties pursuant to the terms of any
such agreement or instrument.
2.02 Action. This Agreement has been duly and validly executed and
------
delivered by Pledgor and constitutes Pledgor's legal, valid and binding
obligation, enforceable in accordance with the terms hereof.
2.03 Approvals. No authorizations, approvals or consents of, and no
---------
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by Pledgor of
this Agreement or for the validity or enforceability hereof.
2.04 Pledged Class A Stock.
---------------------
(a) Pledgor is the sole beneficial owner of the Collateral and no
Lien exists or will exist upon such Collateral at any time (and no right or
option to acquire the same exists in favor of any other person), except for
the pledge and security interest in favor of Pledgee created or provided
for herein, which pledge and security interest constitute a first priority
perfected pledge and security interest in and to all of such Collateral.
(b) The Pledged Class A Stock represented by the certificates
identified under the name of Pledgor in Exhibit II hereto constitutes all
----------
of the issued and outstanding shares of capital stock of any class of the
issuer thereof beneficially owned by Pledgor on the date hereof (whether or
not registered in the name of Pledgor) and said Exhibit II correctly
----------
identifies, as at the date hereof, the respective class and par value of
the shares comprising such Pledged Class A Stock and the respective number
of shares (and registered owners thereof) represented by each such
certificate.
Section 3. The Pledge. As collateral security for the prompt payment
----------
in full when due (whether at stated maturity, by mandatory prepayment or by
acceleration or otherwise) of the Secured Obligations:
3.01 Pledge by Pledgor. Pledgor hereby pledges and grants to Pledgee
-----------------
a security interest in and to all of Pledgor's right, title and interest in the
following property, whether now owned by Pledgor or hereafter acquired and
whether now existing or hereafter coming into existence (all being collectively
referred to herein as "Collateral"):
----------
<PAGE>
- 3 -
(a) the shares of Class A Common Stock of Pledgee represented by the
certificates identified in Exhibit II hereto under the name of Pledgor and
----------
all other shares of capital stock of whatever class of Pledgee, now or
hereafter owned by Pledgor (other than any new issuance thereof purchased
by Pledgor for value), in each case together with the certificates
representing the same (collectively, the "Pledged Class A Stock");
---------------------
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Class A Stock, or representing a
distribution or return of capital upon or in respect of the Pledged Class A
Stock, or resulting from a split-up, revision, reclassification or other
like change of the Pledged Class A Stock or otherwise received in exchange
therefor, and any subscription warrants, rights or options issued to the
holders of, or otherwise in respect of, the Pledged Class A Stock;
(c) in the event of any consolidation or merger in which Pledgee is
not the surviving corporation, all shares of each class of the capital
stock of the successor corporation formed by or resulting from such
consolidation or merger; and
(d) all proceeds of and to any of the property of Pledgor described
in the preceding clauses of this Section 3.01 (including, without
limitation, all causes of action, claims and warranties now or hereafter
held by Pledgor in respect of any of the items listed above).
Section 4. Further Assurances; Remedies. In furtherance of the grant
----------------------------
of the pledge and security interest pursuant to Section 3 hereof, Pledgor hereby
agrees with Pledgee as follows:
4.01 Delivery and Other Perfection by Pledgor. Pledgor shall:
----------------------------------------
(a) if any of the shares, securities, moneys or property required to
be pledged by Pledgor under clauses (a), (b) and (c) of Section 3.01 hereof
are received by Pledgor, forthwith either (i) transfer and deliver to
Pledgee such shares or securities so received by Pledgor (together with the
certificates for any such shares and securities duly endorsed in blank or
accompanied by undated stock powers duly executed in blank), all of which
thereafter shall be held by Pledgee, pursuant to the terms of this
Agreement, as part of the Collateral or (ii) take such other action as
Pledgee shall deem necessary or appropriate to duly record the Lien created
hereunder in such shares, securities, moneys or property in said clauses
(a), (b) and (c); and
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of Pledgee) to create, preserve,
perfect or validate the security interest granted pursuant hereto or to
enable Pledgee to exercise and enforce its rights hereunder with respect to
such pledge and security interest, including, without limitation, causing
any or all of the Collateral to be transferred of record into the name
<PAGE>
- 4 -
of Pledgee or its nominee (and Pledgee agrees that if any Collateral is
transferred into its name or the name of its nominee, Pledgee will
thereafter promptly give to Pledgor copies of any notices and
communications received by it with respect to the Collateral pledged by
Pledgor hereunder).
4.02 Other Financing Statements and Liens. Without the prior written
------------------------------------
consent of Pledgee, Pledgor shall not file or suffer to be on file, or authorize
or permit to be filed or to be on file, in any jurisdiction, any financing
statement or like instrument with respect to the Collateral in which Pledgee is
not named as the sole secured party.
4.03 Collateral.
----------
(a) So long as no Event of Default shall have occurred and be
continuing, Pledgor shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Collateral for all purposes
not inconsistent with the terms of this Agreement, or any other instrument
or agreement referred to herein, provided that Pledgor agrees that it will
--------
not vote the Collateral in any manner that is inconsistent with the terms
of this Agreement or any such other instrument or agreement; and Pledgee
shall execute and deliver to Pledgor or cause to be executed and delivered
to Pledgor all such proxies, powers of attorney, dividend and other orders,
and all such instruments, without recourse, as Pledgor may reasonably
request for the purpose of enabling Pledgor to exercise the rights and
powers that it is entitled to exercise pursuant to this Section 4.03(a).
(b) Unless and until an Event of Default has occurred and is
continuing, Pledgor shall be entitled to receive and retain any dividends
on the Collateral paid in cash.
(c) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not Pledgee exercises any
available right to declare any Secured Obligation due and payable or seeks
or pursues any other relief or remedy available to it under applicable law
or under this Agreement, or any other agreement referred to herein or
relating to such Secured Obligation, all dividends and other distributions
on the Collateral shall be paid directly to and retained by Pledgee as part
of the Collateral, subject to the terms of this Agreement, and, if Pledgee
shall so request in writing, Pledgor agrees to execute and deliver to
Pledgee appropriate additional dividend, distribution and other orders and
documents to that end, provided, however, that if such Event of Default is
-------- -------
cured, any such dividend or distribution theretofore paid to Pledgee shall,
upon request of Pledgor (except to the extent theretofore applied to the
Secured Obligations), be returned by Pledgee to Pledgor.
4.04 Events of Default, Etc. During the period during which an Event
----------------------
of Default shall have occurred and be continuing:
(a) Pledgee shall have all of the rights and remedies with respect to
the Collateral of a secured party under the Uniform Commercial Code
(whether or not said
<PAGE>
- 5 -
Code is in effect in the jurisdiction where the rights and remedies are
asserted) and such additional rights and remedies to which a secured party
is entitled under the laws in effect in any jurisdiction where any rights
and remedies hereunder may be asserted, including, without limitation, the
right, to the maximum extent permitted by law, to exercise all voting,
consensual and other powers of ownership pertaining to the Collateral as if
Pledgee were the sole and absolute owner thereof (and Pledgor agrees to
take all such action as may be appropriate to give effect to such right);
(b) Pledgee in its sole discretion may, in its name or in the name of
Pledgor or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for
any of the Collateral, but shall be under no obligation to do so; and
(c) Pledgee may, upon ten (10) business days' prior written notice to
Pledgor of the time and place, with respect to the Collateral or any part
thereof that shall then be or shall thereafter come into the possession,
custody or control of Pledgee or any of its agents, sell, lease, assign or
otherwise dispose of all or any part of such Collateral at such place or
places as Pledgee deems best, and for cash or for credit or for future
delivery (without thereby assuming any credit risk), at public or private
sale, without demand of performance or notice of intention to effect any
such disposition or of the time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived), and Pledgee
or anyone else may be the purchaser, lessee, assignee or recipient of any
or all of the Collateral so disposed of at any public sale (or, to the
extent permitted by law, at any private sale) and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise), of Pledgor, any
such demand, notice and right or equity being hereby expressly waived and
released. Pledgee may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
4.04 shall be applied in accordance with Section 4.07 hereof.
Pledgor recognizes that, by reason of certain prohibitions contained
in the Securities Act of 1933, as amended, and applicable state securities laws,
Pledgee may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire the Collateral for their own account, for investment and not with a view
to the distribution or resale thereof. Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable to Pledgee than those
obtainable through a public sale without such restrictions, and, notwithstanding
such circumstances, agree that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that Pledgee shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the issuer thereof to
register it for public sale.
<PAGE>
- 6 -
4.05 Deficiency. If the proceeds of sale, collection or other
----------
realization of or upon the Collateral pursuant to Section 4.04 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, Pledgor shall remain liable for any
deficiency.
4.06 Private Sale. Pledgee shall incur no liability as a result of
------------
the sale of the Collateral or any part thereof, at any private sale pursuant to
Section 4.04 hereof conducted in a commercially reasonable manner. Pledgor
hereby waives any claims against Pledgee arising by reason of the fact that the
price at which the Collateral may have been sold at such a private sale was less
than the price that might have been obtained at a public sale or was less than
the aggregate amount of the Secured Obligations, even if Pledgee accepts the
first offer received and does not offer the Collateral to more than one offeree.
4.07 Application of Proceeds. Except as otherwise herein expressly
-----------------------
provided and except as provided below in this Section 4.07, the proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by Pledgee under this
Section 4, shall be applied by Pledgee:
First, to the payment of the costs and expenses of such collection,
-----
sale or other realization, including reasonable out-of-pocket costs and
expenses of Pledgee and the fees and expenses of its agents and counsel,
and all expenses incurred and advances made by Pledgee in connection
therewith;
Next, to the payment in full of all amounts owed to Pledgee pursuant
----
to the terms and provisions of the Recourse Note;
Next, to the payment in full of the remaining Secured Obligations; and
----
Finally, to the payment to Pledgor or its respective heirs, executors,
-------
administrators, successors or assigns, or as a court of competent
jurisdiction may direct, of any surplus then remaining.
As used in this Section 4, "proceeds" of Collateral shall mean cash,
--------
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of Pledgor, or any issuer of or obligor on any
of the Collateral.
4.08 Attorney-in-Fact. Without limiting any rights or powers granted
----------------
by this Agreement to Pledgee while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default Pledgee is hereby appointed the attorney-in-fact of Pledgor for the
purpose of carrying out the provisions of this Section 4 and taking any action
and executing any instruments that Pledgee may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, so long as Pledgee shall be entitled under this Section 4 to make
collections in respect of the Collateral, Pledgee shall have the right and power
to receive, endorse and collect all checks
<PAGE>
- 7 -
made payable to the order of Pledgor representing any dividend, payment or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.
4.09 Perfection. Prior to or concurrently with the execution and
----------
delivery of this Agreement, Pledgor shall deliver to Pledgee all certificates
identified in Exhibit II hereto, accompanied by undated stock powers duly
----------
executed in blank and requisite stock transfer tax stamps, if any.
4.10 Termination. When all Secured Obligations shall have been paid
-----------
in full, this Agreement shall terminate, and Pledgee shall forthwith cause to be
assigned, transferred and delivered, against receipt but without any recourse,
warranty or representation whatsoever, any remaining Collateral and money
received in respect thereof, to or on the order of Pledgor.
4.11 Further Assurances. Pledgor agrees that, from time to time upon
------------------
the written request of Pledgee, it will execute and deliver such further
documents and do such other acts and things as Pledgee may reasonably request in
order fully to effect the purposes of this Agreement.
4.12 Release of Pledged Class A Stock. Upon the payment in full of
--------------------------------
the Secured Obligations, the Pledgee shall release its lien on, and security
interest in, all such shares of Pledged Class A Stock, and shall execute in
favor of the Pledgor, such releases, endorsements or assignments, without
recourse or warranty, as shall be necessary to evidence the Pledgee's release of
such Collateral.
Section 5. Miscellaneous.
-------------
5.01 No Waiver. No failure on the part of Pledgee to exercise, and
---------
no course of dealing with respect to, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by Pledgee of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies herein are cumulative and are not
exclusive of any remedies provided by law.
5.02 Notices. All notices, requests, consents and demands hereunder
-------
shall be in writing and telecopied or delivered to the intended recipient at the
"Address for Notices" specified beneath its name on the signature pages hereof
or, as to any party, at such other address as shall be designated by such party
in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
5.03 Expenses. Pledgor agrees to reimburse Pledgee for all
--------
reasonable costs and expenses of Pledgee (including, without limitation, the
reasonable fees and expenses of legal counsel) in connection with (a) any
default and any enforcement or collection proceeding resulting therefrom,
including, without limitation, all manner of participation in or
<PAGE>
- 8 -
other involvement with (i) performance by Pledgee of any obligations of Pledgor
in respect of the Collateral that it has failed or refused to perform, (ii)
bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement in respect of any of the Collateral, and
for the care of the Collateral, and defending or asserting rights and claims of
Pledgee in respect thereof, by litigation or otherwise, (iii) judicial or
regulatory proceedings and (iv) workout, restructuring or other negotiations or
proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (b) the enforcement of this Section
5.03, and all such costs and expenses shall be Secured Obligations entitled to
the benefits of the collateral security provided pursuant to Section 3 hereof.
5.04 Amendments, Etc. The terms of this Agreement may be waived,
---------------
altered or amended only by an instrument in writing duly executed by the parties
hereto. Any such amendment or waiver shall be binding upon Pledgee, each holder
of any of the Secured Obligations and Pledgor.
5.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the respective heirs, executors, administrators,
successors and assigns of Pledgor, Pledgee and each holder of any of the Secured
Obligations (provided, however, that Pledgor shall not assign or transfer its
-------- -------
rights hereunder without the prior written consent of Pledgee).
5.06 Captions. The captions and section headings appearing herein
--------
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
5.07 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
5.08 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
5.09 Consent to Jurisdiction and Service of Process. Each party
----------------------------------------------
hereby irrevocably submits to the non-exclusive jurisdiction of the United
States District Court for the Southern District of Georgia or any court of the
State of Georgia located in the County of Chatham in any such action, suit or
proceeding, and agrees that any such action, suit or proceeding shall be brought
only in such court (and waives any objection based on forum non conveniens or
----- --- ----------
any other objection to venue therein); provided, however, that such consent to
-------- -------
jurisdiction is solely for the purpose referred to in this Section and shall not
be deemed to be a general submission to the jurisdiction of said courts or in
the State of Georgia other than for such purpose. EACH OF PLEDGEE AND PLEDGOR
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
<PAGE>
- 9 -
5.10 Severability. If any provision hereof is invalid and
------------
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of Pledgee in order to
carry out the intentions of the parties hereto as nearly as may be possible and
(b) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
PLEDGOR
-------
_______________________________________
Name: Miriam Muley
Address for Notices:
6 Arthur's Court
Warwick, New York 10990
PLEDGEE
-------
CARSON, INC.
By:_____________________________________
Name: Dr. Leroy Keith
Title: Chairman and Chief Executive Officer
Address for Notices:
Carson, Inc.
64 Ross Road
Savannah, Georgia 31405
Facsimile No.: (912) 651-3424
Attn: Dr. Leroy Keith
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Facsimile No.: 212-530-5219
Attn: Arnold B. Peinado III, Esq.
<PAGE>
Exhibit II
----------
Pledged Class A Stock
---------------------
Certificate No(s). Number of Shares
- ------------------ ----------------
5.2205 shares of Class A Common Stock, par
value $.01 per share, of Carson, Inc.
<PAGE>
Exhibit 10.39
PLEDGE AGREEMENT
PLEDGE AGREEMENT (this "Agreement") dated as of August 15, 1996, between
---------
Ms. Joyce Roche ("Pledgor") and Carson, Inc., a Delaware corporation
-------
("Pledgee").
-------
WHEREAS, Pledgor, is party to an Employment Agreement, dated as of June 7,
1995 and a Subscription and Registration Rights Agreement, dated as of August
15, 1996, pursuant to which, on the date hereof, Pledgor purchased from Pledgee,
and Pledgee issued to Pledgor, 10.4409 shares of Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), of Pledgee (the "Class A Shares");
-------------------- --------------
and
WHEREAS, this Agreement is being executed and delivered for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and Pledgor has agreed to pledge and grant a security interest in
the Collateral (as hereinafter defined) as security for the Secured Obligations
(as hereinafter defined). Accordingly, the parties hereto agree as follows:
Section 1. Definitions. As used herein:
-----------
"Collateral" shall have the meaning ascribed thereto in Section 3.01
----------
hereof.
"Event of Default" shall have the meaning ascribed thereto in the
----------------
Recourse Note.
"Liens" means any mortgage, pledge, assessment, security interest,
-----
lease, lien, adverse claim, levy, charge or other encumbrance of any kind,
or any conditional sale contract, title retention contract or other
contract to give any of the foregoing.
"Pledged Class A Stock" shall have the meaning ascribed thereto in
---------------------
Section 3.01(a) hereof.
"Recourse Note" shall mean the recourse promissory note, dated as of
-------------
August 15, 1996, executed by Pledgor, a copy of which is attached hereto as
Exhibit I.
---------
"Secured Obligations" shall mean, collectively, (a) all obligations of
-------------------
Pledgor to Pledgee under the Recourse Note, payable to the order of Pledgee
and (b) all obligations of Pledgor to Pledgee hereunder.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
-----------------------
effect from time to time in the State of New York.
Section 2. Representations and Warranties. Pledgor represents and
------------------------------
warrants to Pledgee that:
<PAGE>
- 2 -
2.01 No Breach. None of the execution and delivery of this
---------
Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, any applicable law or regulation, or
any order, writ, injunction or decree of any court or governmental authority or
agency, or any agreement or instrument to which Pledgor is a party or by which
Pledgor is bound or to which Pledgor is subject, or constitute a default under
any such agreement or instrument, or result in the creation or imposition of any
Lien upon Pledgor or Pledgor's assets or properties pursuant to the terms of any
such agreement or instrument.
2.02 Action. This Agreement has been duly and validly executed and
------
delivered by Pledgor and constitutes Pledgor's legal, valid and binding
obligation, enforceable in accordance with the terms hereof.
2.03 Approvals. No authorizations, approvals or consents of, and no
---------
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by Pledgor of
this Agreement or for the validity or enforceability hereof.
2.04 Pledged Class A Stock.
---------------------
(a) Pledgor is the sole beneficial owner of the Collateral and no
Lien exists or will exist upon such Collateral at any time (and no right or
option to acquire the same exists in favor of any other person), except for
the pledge and security interest in favor of Pledgee created or provided
for herein, which pledge and security interest constitute a first priority
perfected pledge and security interest in and to all of such Collateral.
(b) Exhibit II correctly identifies, as at the date hereof, the
----------
respective class and par value of the shares comprising such Pledged Class
A Stock and the respective number of shares (and registered owners thereof)
represented by each such certificate.
Section 3. The Pledge. As collateral security for the prompt payment
----------
in full when due (whether at stated maturity, by mandatory prepayment or by
acceleration or otherwise) of the Secured Obligations:
3.01 Pledge by Pledgor. Pledgor hereby pledges and grants to Pledgee
-----------------
a security interest in and to all of Pledgor's right, title and interest in the
following property, whether now owned by Pledgor or hereafter acquired and
whether now existing or hereafter coming into existence (all being collectively
referred to herein as "Collateral"):
----------
(a) the shares of Class A Common Stock of Pledgee represented by the
certificates identified in Exhibit II hereto under the name of Pledgor and
----------
all other shares of capital stock of whatever class of Pledgee, now or
hereafter owned by Pledgor (other than any new issuance thereof purchased
by Pledgor for value), in each
<PAGE>
- 3 -
case together with the certificates representing the same (collectively,
the "Pledged Class A Stock");
---------------------
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Class A Stock, or representing a
distribution or return of capital upon or in respect of the Pledged Class A
Stock, or resulting from a split-up, revision, reclassification or other
like change of the Pledged Class A Stock or otherwise received in exchange
therefor, and any subscription warrants, rights or options issued to the
holders of, or otherwise in respect of, the Pledged Class A Stock;
(c) in the event of any consolidation or merger in which Pledgee is
not the surviving corporation, all shares of each class of the capital
stock of the successor corporation formed by or resulting from such
consolidation or merger; and
(d) all proceeds of and to any of the property of Pledgor described
in the preceding clauses of this Section 3.01 (including, without
limitation, all causes of action, claims and warranties now or hereafter
held by Pledgor in respect of any of the items listed above).
Section 4. Further Assurances; Remedies. In furtherance of the grant
----------------------------
of the pledge and security interest pursuant to Section 3 hereof, Pledgor hereby
agrees with Pledgee as follows:
4.01 Delivery and Other Perfection by Pledgor. Pledgor shall:
----------------------------------------
(a) if any of the shares, securities, moneys or property required to
be pledged by Pledgor under clauses (a), (b) and (c) of Section 3.01 hereof
are received by Pledgor, forthwith either (i) transfer and deliver to
Pledgee such shares or securities so received by Pledgor (together with the
certificates for any such shares and securities duly endorsed in blank or
accompanied by undated stock powers duly executed in blank), all of which
thereafter shall be held by Pledgee, pursuant to the terms of this
Agreement, as part of the Collateral or (ii) take such other action as
Pledgee shall deem necessary or appropriate to duly record the Lien created
hereunder in such shares, securities, moneys or property in said clauses
(a), (b) and (c); and
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of Pledgee) to create, preserve,
perfect or validate the security interest granted pursuant hereto or to
enable Pledgee to exercise and enforce its rights hereunder with respect to
such pledge and security interest, including, without limitation, causing
any or all of the Collateral to be transferred of record into the name of
Pledgee or its nominee (and Pledgee agrees that if any Collateral is
transferred into its name or the name of its nominee, Pledgee will
thereafter promptly give to Pledgor copies of any notices and
communications received by it with respect to the Collateral pledged by
Pledgor hereunder).
<PAGE>
- 4 -
4.02 Other Financing Statements and Liens. Without the prior written
------------------------------------
consent of Pledgee, Pledgor shall not file or suffer to be on file, or authorize
or permit to be filed or to be on file, in any jurisdiction, any financing
statement or like instrument with respect to the Collateral in which Pledgee is
not named as the sole secured party.
4.03 Collateral.
----------
(a) So long as no Event of Default shall have occurred and be
continuing, Pledgor shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Collateral for all purposes
not inconsistent with the terms of this Agreement, or any other instrument
or agreement referred to herein, provided that Pledgor agrees that it will
--------
not vote the Collateral in any manner that is inconsistent with the terms
of this Agreement or any such other instrument or agreement; and Pledgee
shall execute and deliver to Pledgor or cause to be executed and delivered
to Pledgor all such proxies, powers of attorney, dividend and other orders,
and all such instruments, without recourse, as Pledgor may reasonably
request for the purpose of enabling Pledgor to exercise the rights and
powers that it is entitled to exercise pursuant to this Section 4.03(a).
(b) Unless and until an Event of Default has occurred and is
continuing, Pledgor shall be entitled to receive and retain any dividends
on the Collateral paid in cash.
(c) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not Pledgee exercises any
available right to declare any Secured Obligation due and payable or seeks
or pursues any other relief or remedy available to it under applicable law
or under this Agreement, or any other agreement referred to herein or
relating to such Secured Obligation, all dividends and other distributions
on the Collateral shall be paid directly to and retained by Pledgee as part
of the Collateral, subject to the terms of this Agreement, and, if Pledgee
shall so request in writing, Pledgor agrees to execute and deliver to
Pledgee appropriate additional dividend, distribution and other orders and
documents to that end, provided, however, that if such Event of Default is
-------- -------
cured, any such dividend or distribution theretofore paid to Pledgee shall,
upon request of Pledgor (except to the extent theretofore applied to the
Secured Obligations), be returned by Pledgee to Pledgor.
4.04 Events of Default, Etc. During the period during which an Event
----------------------
of Default shall have occurred and be continuing:
(a) Pledgee shall have all of the rights and remedies with respect to
the Collateral of a secured party under the Uniform Commercial Code
(whether or not said Code is in effect in the jurisdiction where the rights
and remedies are asserted) and such additional rights and remedies to which
a secured party is entitled under the laws in effect in any jurisdiction
where any rights and remedies hereunder may be asserted, including, without
limitation, the right, to the maximum extent permitted by law, to exercise
all voting, consensual and other powers of ownership pertaining to the
<PAGE>
- 5 -
Collateral as if Pledgee were the sole and absolute owner thereof (and
Pledgor agrees to take all such action as may be appropriate to give effect
to such right);
(b) Pledgee in its sole discretion may, in its name or in the name of
Pledgor or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for
any of the Collateral, but shall be under no obligation to do so; and
(c) Pledgee may, upon ten (10) business days' prior written notice to
Pledgor of the time and place, with respect to the Collateral or any part
thereof that shall then be or shall thereafter come into the possession,
custody or control of Pledgee or any of its agents, sell, lease, assign or
otherwise dispose of all or any part of such Collateral at such place or
places as Pledgee deems best, and for cash or for credit or for future
delivery (without thereby assuming any credit risk), at public or private
sale, without demand of performance or notice of intention to effect any
such disposition or of the time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived), and Pledgee
or anyone else may be the purchaser, lessee, assignee or recipient of any
or all of the Collateral so disposed of at any public sale (or, to the
extent permitted by law, at any private sale) and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise), of Pledgor, any
such demand, notice and right or equity being hereby expressly waived and
released. Pledgee may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
4.04 shall be applied in accordance with Section 4.07 hereof.
Pledgor recognizes that, by reason of certain prohibitions contained
in the Securities Act of 1933, as amended, and applicable state securities laws,
Pledgee may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire the Collateral for their own account, for investment and not with a view
to the distribution or resale thereof. Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable to Pledgee than those
obtainable through a public sale without such restrictions, and, notwithstanding
such circumstances, agree that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that Pledgee shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the issuer thereof to
register it for public sale.
4.05 Deficiency. If the proceeds of sale, collection or other
----------
realization of or upon the Collateral pursuant to Section 4.04 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, Pledgor shall remain liable for any
deficiency.
<PAGE>
- 6 -
4.06 Private Sale. Pledgee shall incur no liability as a result of
------------
the sale of the Collateral or any part thereof, at any private sale pursuant to
Section 4.04 hereof conducted in a commercially reasonable manner. Pledgor
hereby waives any claims against Pledgee arising by reason of the fact that the
price at which the Collateral may have been sold at such a private sale was less
than the price that might have been obtained at a public sale or was less than
the aggregate amount of the Secured Obligations, even if Pledgee accepts the
first offer received and does not offer the Collateral to more than one offeree.
4.07 Application of Proceeds. Except as otherwise herein expressly
-----------------------
provided and except as provided below in this Section 4.07, the proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by Pledgee under this
Section 4, shall be applied by Pledgee:
First, to the payment of the costs and expenses of such collection,
-----
sale or other realization, including reasonable out-of-pocket costs and
expenses of Pledgee and the fees and expenses of its agents and counsel,
and all expenses incurred and advances made by Pledgee in connection
therewith;
Next, to the payment in full of all amounts owed to Pledgee pursuant
----
to the terms and provisions of the Recourse Note;
Next, to the payment in full of the remaining Secured Obligations; and
----
Finally, to the payment to Pledgor or its respective heirs, executors,
-------
administrators, successors or assigns, or as a court of competent
jurisdiction may direct, of any surplus then remaining.
As used in this Section 4, "proceeds" of Collateral shall mean cash,
--------
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of Pledgor, or any issuer of or obligor on any
of the Collateral.
4.08 Attorney-in-Fact. Without limiting any rights or powers granted
----------------
by this Agreement to Pledgee while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default Pledgee is hereby appointed the attorney-in-fact of Pledgor for the
purpose of carrying out the provisions of this Section 4 and taking any action
and executing any instruments that Pledgee may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, so long as Pledgee shall be entitled under this Section 4 to make
collections in respect of the Collateral, Pledgee shall have the right and power
to receive, endorse and collect all checks made payable to the order of Pledgor
representing any dividend, payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the same.
4.09 Perfection. Prior to or concurrently with the execution and
----------
delivery of this Agreement, Pledgor shall deliver to Pledgee all certificates
identified in Exhibit II hereto,
----------
<PAGE>
- 7 -
accompanied by undated stock powers duly executed in blank and requisite stock
transfer tax stamps, if any.
4.10 Termination. When all Secured Obligations shall have been paid
-----------
in full, this Agreement shall terminate, and Pledgee shall forthwith cause to be
assigned, transferred and delivered, against receipt but without any recourse,
warranty or representation whatsoever, any remaining Collateral and money
received in respect thereof, to or on the order of Pledgor.
4.11 Further Assurances. Pledgor agrees that, from time to time upon
------------------
the written request of Pledgee, it will execute and deliver such further
documents and do such other acts and things as Pledgee may reasonably request in
order fully to effect the purposes of this Agreement.
4.12 Release of Pledged Class A Stock. Upon the payment in full of
--------------------------------
the Secured Obligations, the Pledgee shall release its lien on, and security
interest in, all such shares of Pledged Class A Stock, and shall execute in
favor of the Pledgor, such releases, endorsements or assignments, without
recourse or warranty, as shall be necessary to evidence the Pledgee's release of
such Collateral.
Section 5. Miscellaneous.
-------------
5.01 No Waiver. No failure on the part of Pledgee to exercise, and
---------
no course of dealing with respect to, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by Pledgee of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies herein are cumulative and are not
exclusive of any remedies provided by law.
5.02 Notices. All notices, requests, consents and demands hereunder
-------
shall be in writing and telecopied or delivered to the intended recipient at the
"Address for Notices" specified beneath its name on the signature pages hereof
or, as to any party, at such other address as shall be designated by such party
in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
5.03 Expenses. Pledgor agrees to reimburse Pledgee for all
--------
reasonable costs and expenses of Pledgee (including, without limitation, the
reasonable fees and expenses of legal counsel) in connection with (a) any
default and any enforcement or collection proceeding resulting therefrom,
including, without limitation, all manner of participation in or other
involvement with (i) performance by Pledgee of any obligations of Pledgor in
respect of the Collateral that it has failed or refused to perform, (ii)
bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement in respect of any of the Collateral, and
for the care of the Collateral, and defending or asserting rights and claims of
<PAGE>
- 8 -
Pledgee in respect thereof, by litigation or otherwise, (iii) judicial or
regulatory proceedings and (iv) workout, restructuring or other negotiations or
proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (b) the enforcement of this Section
5.03, and all such costs and expenses shall be Secured Obligations entitled to
the benefits of the collateral security provided pursuant to Section 3 hereof.
5.04 Amendments, Etc. The terms of this Agreement may be waived,
---------------
altered or amended only by an instrument in writing duly executed by the parties
hereto. Any such amendment or waiver shall be binding upon Pledgee, each holder
of any of the Secured Obligations and Pledgor.
5.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the respective heirs, executors, administrators,
successors and assigns of Pledgor, Pledgee and each holder of any of the Secured
Obligations (provided, however, that Pledgor shall not assign or transfer its
-------- -------
rights hereunder without the prior written consent of Pledgee).
5.06 Captions. The captions and section headings appearing herein
--------
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
5.07 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
5.08 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
5.09 Consent to Jurisdiction and Service of Process. Each party
----------------------------------------------
hereby irrevocably submits to the non-exclusive jurisdiction of the United
States District Court for the Southern District of Georgia or any court of the
State of Georgia located in the County of Chatham in any such action, suit or
proceeding, and agrees that any such action, suit or proceeding shall be brought
only in such court (and waives any objection based on forum non conveniens or
----- --- ----------
any other objection to venue therein); provided, however, that such consent to
-------- -------
jurisdiction is solely for the purpose referred to in this Section and shall not
be deemed to be a general submission to the jurisdiction of said courts or in
the State of Georgia other than for such purpose. EACH OF PLEDGEE AND PLEDGOR
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
5.10 Severability. If any provision hereof is invalid and
------------
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of Pledgee in order to
carry out the intentions of the parties hereto as nearly as may be possible
<PAGE>
- 9 -
and (b) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
PLEDGOR
-------
______________________________________
Name: Joyce Roche
Address for Notices:
c/o Carson Products Company
65 Ross Road
Savannah, Georgia 31405
PLEDGEE
-------
CARSON, INC.
By:_____________________________________
Name: Dr. Leroy Keith
Title: Chairman and Chief Executive Officer
Address for Notices:
Carson, Inc.
64 Ross Road
Savannah, Georgia 31405
Facsimile No.: (912) 651-3424
Attn: Dr. Leroy Keith
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Facsimile No.: 212-530-5219
Attn: Arnold B. Peinado III, Esq.
<PAGE>
Exhibit II
----------
Pledged Class A Stock
---------------------
Certificate No(s). Number of Shares
- ------------------ ----------------
10.4409 shares of Class A Common Stock, par
value $.01 per share, of Carson, Inc.
<PAGE>
Exhibit 10.40
PLEDGE AGREEMENT
PLEDGE AGREEMENT (this "Agreement") dated as of August 15, 1996,
---------
between Mr. Dennis Smith ("Pledgor") and Carson, Inc., a Delaware corporation
-------
("Pledgee").
- ---------
WHEREAS, Pledgor, is party to an Employment Agreement, dated as of
June 7, 1995 and a Subscription and Registration Rights Agreement, dated as of
August 15, 1996, pursuant to which, on the date hereof, Pledgor purchased from
Pledgee, and Pledgee issued to Pledgor, 5.2205 shares of Class A Common Stock,
par value $.01 per share (the "Class A Common Stock"), of Pledgee (the "Class A
-------------------- -------
Shares"); and
- ------
WHEREAS, this Agreement is being executed and delivered for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and Pledgor has agreed to pledge and grant a security interest in
the Collateral (as hereinafter defined) as security for the Secured Obligations
(as hereinafter defined). Accordingly, the parties hereto agree as follows:
Section 1. Definitions. As used herein:
-----------
"Collateral" shall have the meaning ascribed thereto in Section 3.01
----------
hereof.
"Event of Default" shall have the meaning ascribed thereto in the
----------------
Recourse Note.
"Liens" means any mortgage, pledge, assessment, security interest,
-----
lease, lien, adverse claim, levy, charge or other encumbrance of any kind,
or any conditional sale contract, title retention contract or other
contract to give any of the foregoing.
"Pledged Class A Stock" shall have the meaning ascribed thereto in
---------------------
Section 3.01(a) hereof.
"Recourse Note" shall mean the recourse promissory note, dated as of
-------------
August 15, 1996, executed by Pledgor, a copy of which is attached hereto as
Exhibit I.
---------
"Secured Obligations" shall mean, collectively, (a) all obligations of
-------------------
Pledgor to Pledgee under the Recourse Note, payable to the order of Pledgee
and (b) all obligations of Pledgor to Pledgee hereunder.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
-----------------------
effect from time to time in the State of New York.
Section 2. Representations and Warranties. Pledgor represents and
------------------------------
warrants to Pledgee that:
<PAGE>
- 2 -
2.01 No Breach. None of the execution and delivery of this
---------
Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, any applicable law or regulation, or
any order, writ, injunction or decree of any court or governmental authority or
agency, or any agreement or instrument to which Pledgor is a party or by which
Pledgor is bound or to which Pledgor is subject, or constitute a default under
any such agreement or instrument, or result in the creation or imposition of any
Lien upon Pledgor or Pledgor's assets or properties pursuant to the terms of any
such agreement or instrument.
2.02 Action. This Agreement has been duly and validly executed and
------
delivered by Pledgor and constitutes Pledgor's legal, valid and binding
obligation, enforceable in accordance with the terms hereof.
2.03 Approvals. No authorizations, approvals or consents of, and no
---------
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by Pledgor of
this Agreement or for the validity or enforceability hereof.
2.04 Pledged Class A Stock.
---------------------
(a) Pledgor is the sole beneficial owner of the Collateral and no
Lien exists or will exist upon such Collateral at any time (and no right or
option to acquire the same exists in favor of any other person), except for
the pledge and security interest in favor of Pledgee created or provided
for herein, which pledge and security interest constitute a first priority
perfected pledge and security interest in and to all of such Collateral.
(b) Exhibit II correctly identifies, as at the date hereof, the
----------
respective class and par value of the shares comprising such Pledged Class
A Stock and the respective number of shares (and registered owners thereof)
represented by each such certificate.
Section 3. The Pledge. As collateral security for the prompt payment
----------
in full when due (whether at stated maturity, by mandatory prepayment or by
acceleration or otherwise) of the Secured Obligations:
3.01 Pledge by Pledgor. Pledgor hereby pledges and grants to Pledgee
-----------------
a security interest in and to all of Pledgor's right, title and interest in the
following property, whether now owned by Pledgor or hereafter acquired and
whether now existing or hereafter coming into existence (all being collectively
referred to herein as "Collateral"):
----------
(a) the shares of Class A Common Stock of Pledgee represented by the
certificates identified in Exhibit II hereto under the name of Pledgor and
----------
all other shares of capital stock of whatever class of Pledgee, now or
hereafter owned by Pledgor (other than any new issuance thereof purchased
by Pledgor for value), in each
<PAGE>
- 3 -
case together with the certificates representing the same (collectively,
the "Pledged Class A Stock");
---------------------
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Class A Stock, or representing a
distribution or return of capital upon or in respect of the Pledged Class A
Stock, or resulting from a split-up, revision, reclassification or other
like change of the Pledged Class A Stock or otherwise received in exchange
therefor, and any subscription warrants, rights or options issued to the
holders of, or otherwise in respect of, the Pledged Class A Stock;
(c) in the event of any consolidation or merger in which Pledgee is
not the surviving corporation, all shares of each class of the capital
stock of the successor corporation formed by or resulting from such
consolidation or merger; and
(d) all proceeds of and to any of the property of Pledgor described
in the preceding clauses of this Section 3.01 (including, without
limitation, all causes of action, claims and warranties now or hereafter
held by Pledgor in respect of any of the items listed above).
Section 4. Further Assurances; Remedies. In furtherance of the grant
----------------------------
of the pledge and security interest pursuant to Section 3 hereof, Pledgor hereby
agrees with Pledgee as follows:
4.01 Delivery and Other Perfection by Pledgor. Pledgor shall:
----------------------------------------
(a) if any of the shares, securities, moneys or property required to
be pledged by Pledgor under clauses (a), (b) and (c) of Section 3.01 hereof
are received by Pledgor, forthwith either (i) transfer and deliver to
Pledgee such shares or securities so received by Pledgor (together with the
certificates for any such shares and securities duly endorsed in blank or
accompanied by undated stock powers duly executed in blank), all of which
thereafter shall be held by Pledgee, pursuant to the terms of this
Agreement, as part of the Collateral or (ii) take such other action as
Pledgee shall deem necessary or appropriate to duly record the Lien created
hereunder in such shares, securities, moneys or property in said clauses
(a), (b) and (c); and
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of Pledgee) to create, preserve,
perfect or validate the security interest granted pursuant hereto or to
enable Pledgee to exercise and enforce its rights hereunder with respect to
such pledge and security interest, including, without limitation, causing
any or all of the Collateral to be transferred of record into the name of
Pledgee or its nominee (and Pledgee agrees that if any Collateral is
transferred into its name or the name of its nominee, Pledgee will
thereafter promptly give to Pledgor copies of any notices and
communications received by it with respect to the Collateral pledged by
Pledgor hereunder).
<PAGE>
- 4 -
4.02 Other Financing Statements and Liens. Without the prior written
------------------------------------
consent of Pledgee, Pledgor shall not file or suffer to be on file, or authorize
or permit to be filed or to be on file, in any jurisdiction, any financing
statement or like instrument with respect to the Collateral in which Pledgee is
not named as the sole secured party.
4.03 Collateral.
----------
(a) So long as no Event of Default shall have occurred and be
continuing, Pledgor shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Collateral for all purposes
not inconsistent with the terms of this Agreement, or any other instrument
or agreement referred to herein, provided that Pledgor agrees that it will
--------
not vote the Collateral in any manner that is inconsistent with the terms
of this Agreement or any such other instrument or agreement; and Pledgee
shall execute and deliver to Pledgor or cause to be executed and delivered
to Pledgor all such proxies, powers of attorney, dividend and other orders,
and all such instruments, without recourse, as Pledgor may reasonably
request for the purpose of enabling Pledgor to exercise the rights and
powers that it is entitled to exercise pursuant to this Section 4.03(a).
(b) Unless and until an Event of Default has occurred and is
continuing, Pledgor shall be entitled to receive and retain any dividends
on the Collateral paid in cash.
(c) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not Pledgee exercises any
available right to declare any Secured Obligation due and payable or seeks
or pursues any other relief or remedy available to it under applicable law
or under this Agreement, or any other agreement referred to herein or
relating to such Secured Obligation, all dividends and other distributions
on the Collateral shall be paid directly to and retained by Pledgee as part
of the Collateral, subject to the terms of this Agreement, and, if Pledgee
shall so request in writing, Pledgor agrees to execute and deliver to
Pledgee appropriate additional dividend, distribution and other orders and
documents to that end, provided, however, that if such Event of Default is
-------- -------
cured, any such dividend or distribution theretofore paid to Pledgee shall,
upon request of Pledgor (except to the extent theretofore applied to the
Secured Obligations), be returned by Pledgee to Pledgor.
4.04 Events of Default, Etc. During the period during which an Event
----------------------
of Default shall have occurred and be continuing:
(a) Pledgee shall have all of the rights and remedies with respect to
the Collateral of a secured party under the Uniform Commercial Code
(whether or not said Code is in effect in the jurisdiction where the rights
and remedies are asserted) and such additional rights and remedies to which
a secured party is entitled under the laws in effect in any jurisdiction
where any rights and remedies hereunder may be asserted, including, without
limitation, the right, to the maximum extent permitted by law, to exercise
all voting, consensual and other powers of ownership pertaining to the
<PAGE>
- 5 -
Collateral as if Pledgee were the sole and absolute owner thereof (and
Pledgor agrees to take all such action as may be appropriate to give effect
to such right);
(b) Pledgee in its sole discretion may, in its name or in the name of
Pledgor or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for
any of the Collateral, but shall be under no obligation to do so; and
(c) Pledgee may, upon ten (10) business days' prior written notice to
Pledgor of the time and place, with respect to the Collateral or any part
thereof that shall then be or shall thereafter come into the possession,
custody or control of Pledgee or any of its agents, sell, lease, assign or
otherwise dispose of all or any part of such Collateral at such place or
places as Pledgee deems best, and for cash or for credit or for future
delivery (without thereby assuming any credit risk), at public or private
sale, without demand of performance or notice of intention to effect any
such disposition or of the time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived), and Pledgee
or anyone else may be the purchaser, lessee, assignee or recipient of any
or all of the Collateral so disposed of at any public sale (or, to the
extent permitted by law, at any private sale) and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise), of Pledgor, any
such demand, notice and right or equity being hereby expressly waived and
released. Pledgee may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
4.04 shall be applied in accordance with Section 4.07 hereof.
Pledgor recognizes that, by reason of certain prohibitions contained
in the Securities Act of 1933, as amended, and applicable state securities laws,
Pledgee may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire the Collateral for their own account, for investment and not with a view
to the distribution or resale thereof. Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable to Pledgee than those
obtainable through a public sale without such restrictions, and, notwithstanding
such circumstances, agree that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that Pledgee shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the issuer thereof to
register it for public sale.
4.05 Deficiency. If the proceeds of sale, collection or other
----------
realization of or upon the Collateral pursuant to Section 4.04 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, Pledgor shall remain liable for any
deficiency.
<PAGE>
- 6 -
4.06 Private Sale. Pledgee shall incur no liability as a result of
------------
the sale of the Collateral or any part thereof, at any private sale pursuant to
Section 4.04 hereof conducted in a commercially reasonable manner. Pledgor
hereby waives any claims against Pledgee arising by reason of the fact that the
price at which the Collateral may have been sold at such a private sale was less
than the price that might have been obtained at a public sale or was less than
the aggregate amount of the Secured Obligations, even if Pledgee accepts the
first offer received and does not offer the Collateral to more than one offeree.
4.07 Application of Proceeds. Except as otherwise herein expressly
-----------------------
provided and except as provided below in this Section 4.07, the proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by Pledgee under this
Section 4, shall be applied by Pledgee:
First, to the payment of the costs and expenses of such collection,
-----
sale or other realization, including reasonable out-of-pocket costs and
expenses of Pledgee and the fees and expenses of its agents and counsel,
and all expenses incurred and advances made by Pledgee in connection
therewith;
Next, to the payment in full of all amounts owed to Pledgee pursuant
----
to the terms and provisions of the Recourse Note;
Next, to the payment in full of the remaining Secured Obligations; and
----
Finally, to the payment to Pledgor or its respective heirs, executors,
-------
administrators, successors or assigns, or as a court of competent
jurisdiction may direct, of any surplus then remaining.
As used in this Section 4, "proceeds" of Collateral shall mean cash,
--------
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of Pledgor, or any issuer of or obligor on any
of the Collateral.
4.08 Attorney-in-Fact. Without limiting any rights or powers granted
----------------
by this Agreement to Pledgee while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default Pledgee is hereby appointed the attorney-in-fact of Pledgor for the
purpose of carrying out the provisions of this Section 4 and taking any action
and executing any instruments that Pledgee may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, so long as Pledgee shall be entitled under this Section 4 to make
collections in respect of the Collateral, Pledgee shall have the right and power
to receive, endorse and collect all checks made payable to the order of Pledgor
representing any dividend, payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the same.
4.09 Perfection. Prior to or concurrently with the execution and
----------
delivery of this Agreement, Pledgor shall deliver to Pledgee all certificates
identified in Exhibit II hereto,
----------
<PAGE>
- 7 -
accompanied by undated stock powers duly executed in blank and requisite stock
transfer tax stamps, if any.
4.10 Termination. When all Secured Obligations shall have been paid
-----------
in full, this Agreement shall terminate, and Pledgee shall forthwith cause to be
assigned, transferred and delivered, against receipt but without any recourse,
warranty or representation whatsoever, any remaining Collateral and money
received in respect thereof, to or on the order of Pledgor.
4.11 Further Assurances. Pledgor agrees that, from time to time upon
------------------
the written request of Pledgee, it will execute and deliver such further
documents and do such other acts and things as Pledgee may reasonably request in
order fully to effect the purposes of this Agreement.
4.12 Release of Pledged Class A Stock. Upon the payment in full of
--------------------------------
the Secured Obligations, the Pledgee shall release its lien on, and security
interest in, all such shares of Pledged Class A Stock, and shall execute in
favor of the Pledgor, such releases, endorsements or assignments, without
recourse or warranty, as shall be necessary to evidence the Pledgee's release of
such Collateral.
Section 5. Miscellaneous.
-------------
5.01 No Waiver. No failure on the part of Pledgee to exercise, and
---------
no course of dealing with respect to, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by Pledgee of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies herein are cumulative and are not
exclusive of any remedies provided by law.
5.02 Notices. All notices, requests, consents and demands hereunder
-------
shall be in writing and telecopied or delivered to the intended recipient at the
"Address for Notices" specified beneath its name on the signature pages hereof
or, as to any party, at such other address as shall be designated by such party
in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
5.03 Expenses. Pledgor agrees to reimburse Pledgee for all
--------
reasonable costs and expenses of Pledgee (including, without limitation, the
reasonable fees and expenses of legal counsel) in connection with (a) any
default and any enforcement or collection proceeding resulting therefrom,
including, without limitation, all manner of participation in or other
involvement with (i) performance by Pledgee of any obligations of Pledgor in
respect of the Collateral that it has failed or refused to perform, (ii)
bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement in respect of any of the Collateral, and
for the care of the Collateral, and defending or asserting rights and claims of
<PAGE>
- 8 -
Pledgee in respect thereof, by litigation or otherwise, (iii) judicial or
regulatory proceedings and (iv) workout, restructuring or other negotiations or
proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (b) the enforcement of this Section
5.03, and all such costs and expenses shall be Secured Obligations entitled to
the benefits of the collateral security provided pursuant to Section 3 hereof.
5.04 Amendments, Etc. The terms of this Agreement may be waived,
---------------
altered or amended only by an instrument in writing duly executed by the parties
hereto. Any such amendment or waiver shall be binding upon Pledgee, each holder
of any of the Secured Obligations and Pledgor.
5.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the respective heirs, executors, administrators,
successors and assigns of Pledgor, Pledgee and each holder of any of the Secured
Obligations (provided, however, that Pledgor shall not assign or transfer its
-------- -------
rights hereunder without the prior written consent of Pledgee).
5.06 Captions. The captions and section headings appearing herein
--------
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
5.07 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
5.08 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
5.09 Consent to Jurisdiction and Service of Process. Each party
----------------------------------------------
hereby irrevocably submits to the non-exclusive jurisdiction of the United
States District Court for the Southern District of Georgia or any court of the
State of Georgia located in the County of Chatham in any such action, suit or
proceeding, and agrees that any such action, suit or proceeding shall be brought
only in such court (and waives any objection based on forum non conveniens or
----- --- ----------
any other objection to venue therein); provided, however, that such consent to
-------- -------
jurisdiction is solely for the purpose referred to in this Section and shall not
be deemed to be a general submission to the jurisdiction of said courts or in
the State of Georgia other than for such purpose. EACH OF PLEDGEE AND PLEDGOR
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
5.10 Severability. If any provision hereof is invalid and
------------
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of Pledgee in order to
carry out the intentions of the parties hereto as nearly as may be possible
<PAGE>
- 9 -
and (b) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
PLEDGOR
-------
_______________________________________
Name: Dennis Smith
Address for Notices:
24 Cardiff Road
Savannah, Georgia 31419
PLEDGEE
-------
CARSON, INC.
By:_____________________________________
Name: Dr. Leroy Keith
Title: Chairman and Chief Executive Officer
Address for Notices:
Carson, Inc.
64 Ross Road
Savannah, Georgia 31405
Facsimile No.: (912) 651-3424
Attn: Dr. Leroy Keith
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Facsimile No.: 212-530-5219
Attn: Arnold B. Peinado III, Esq.
<PAGE>
Exhibit II
----------
Pledged Class A Stock
---------------------
Certificate No(s). Number of Shares
- ------------------ ----------------
5.2205 shares of Class A Common Stock, par
value $.01 per share, of Carson, Inc.
<PAGE>
Exhibit 11
Carson, Inc.
Computation of Earnings Per Share
(In thousands, except per share data)
Period from Three months
August 23, 1995 ended
to March 31, 1996 June 30, 1996
----------------- -------------
Net income $1,206 $308
Weighted average common
shares outstanding(a) 11,871 11,871
Net income per share $ .10 $ .03
_______________
(a) Includes 501,191 shares purchased by several members of management and
outside directors in August 1996 as if such shares were issued at the time
of Company's formation.
<PAGE>
EXHIBIT 16
September 20, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
Carson, Inc.
------------
We have read paragraph three under the heading "Experts" in Carson, Inc.'s
Prospectus constituting part of the Registration Statement on Form S-1, as
amended, and are in agreement with the statements contained therein.
Sincerely,
PRICE WATERHOUSE LLP
<PAGE>
EXHIBIT 23.1
When the events referred to in Note 14 of the Notes to the Carson, Inc.
financial statements have been consummated, we will be in a position to render
the following report.
Deloitte & Touche LLP
September 20, 1996
INDEPENDENT AUDITORS' CONSENT
AND REPORT ON SCHEDULE
Board of Directors
Carson, Inc.
Savannah, Georgia
We consent to the use in this Registration Statement of Carson, Inc. (the
"Company") on Form S-1 of our report with respect to Carson, Inc. dated June 21,
1996 appearing in the Prospectus, which is a part of this Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.
Our audit of the consolidated financial statements for the period from August
23, 1995 to March 31, 1996 referred to in our aforementioned report also
included the financial statement schedule of the Company for the period from
August 23, 1995 to March 31, 1996, listed in Item 16. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audit. In our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
,1996
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
AND REPORT ON SCHEDULE
Board of Directors
Carson, Inc.
Savannah, Georgia
We consent to the use in this Registration Statement of Carson, Inc. (the
"Company") on Form S-1 of our report with respect to Aminco, Inc. dated August
2, 1996 appearing in the Prospectus, which is a part of this Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.
Our audit of the consolidated financial statements of Aminco, Inc. for the
period from April 1, 1995 to August 22, 1995 referred to in our aforementioned
report also included the financial statement schedule of Aminco, Inc. for the
period from April 1, 1995 to August 22, 1995, listed in Item 16. This financial
statement schedule is the responsiblity of the Company's management. Our
responsibility is to express an opinion based on our audit. In our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
September 20, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated May 8, 1995 relating to
the financial statements of Aminco, Inc., and subsidiaries, which appears in
such Prospectus. We also consent to the application of such report to the
Financial Statement Schedule for the two years ended March 31, 1995 listed under
Item 16(b) of this Registration Statement when such schedule is read in
conjunction with the financial statements referred to in our report. The audits
referred to in such report also included the schedule. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Atlanta, Georgia
September 20, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 7-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-1996 MAR-31-1997
<PERIOD-START> AUG-23-1995 MAR-31-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996
<CASH> 1,553 867
<SECURITIES> 0 0
<RECEIVABLES> 13,142 14,810
<ALLOWANCES> 531 641
<INVENTORY> 8,663 10,177
<CURRENT-ASSETS> 25,921 27,303
<PP&E> 12,337 12,877
<DEPRECIATION> 351 540
<TOTAL-ASSETS> 88,082 92,246
<CURRENT-LIABILITIES> 11,964 12,443
<BONDS> 63,778 67,219
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 9,877 10,091
<TOTAL-LIABILITY-AND-EQUITY> 88,082 92,246
<SALES> 41,465 18,799
<TOTAL-REVENUES> 41,465 18,799
<CGS> 18,629 8,135
<TOTAL-COSTS> 33,271 14,808
<OTHER-EXPENSES> 1,331 1,429
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,487 1,826
<INCOME-PRETAX> 2,558 773
<INCOME-TAX> 1,352 465
<INCOME-CONTINUING> 1,206 308
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,206 308
<EPS-PRIMARY> .10 .03
<EPS-DILUTED> 0 0
</TABLE>
