<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 7, 1996
REGISTRATION NO. 333-10191
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 2
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. [_]
----------------
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 OCTOBER 7, 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...................................... 2,678 674 570
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.
If the Company is unable to increase its share of existing and international
markets, leverage brands into new product categories, penetrate the U.S.
professional salon market or capitalize on selective acquisition
opportunities, such failure could have a material adverse effect on the
Company's business, results of operations or financial condition.
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
11
<PAGE>
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, destruction of or damage to the
facility, severe weather conditions or other reasons, could have a material
adverse effect on the Company's business, results of operations or financial
condition. For example, hurricanes caused the evacuation of the City of
Savannah for two days during September 1996, resulting in shortfalls in
production at the Company's Savannah facility. 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."
12
<PAGE>
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 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."
13
<PAGE>
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 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.
RISK ASSOCIATED WITH NEW MANAGEMENT
In connection with the Acquisition, most of the senior management and
members of the Board of Directors of Carson Products were replaced. Although
the new team of senior executives has had extensive experience in the ethnic
market and consumer products industry, each such senior executive, other than
Executive Vice President of Sales, Dennis E. Smith, has been with the Company
for approximately 15 months or less. Also in connection with the Acquisition,
Carson Products increased the number of members serving on its Board of
Directors. In addition, since the Acquisition, Carson Products has expanded
its board by adding new members. Included as new members on the Board of
Directors of Carson Products and the Company are Melvyn Estrin and Abbey
Butler, each of whom was a Co-Chief Executive Officer of Foxmeyer Drug Company
when it filed for protection under Chapter 11 of the U.S. Bankruptcy Code on
August 27, 1996. Although Carson Products has experienced improved operating
results since the new senior management and directors were installed, there
can be no assurance that the new senior management and directors will continue
to maintain or improve upon the Company's current level of performance. See
"Management--Executive Officers and Directors."
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
14
<PAGE>
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.
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.
15
<PAGE>
COST OF FUTURE 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. 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 current
costs of environmental compliance to have a material adverse effect on its
business, results of operations or financial condition, however, the potential
costs associated with future environmental compliance obligations could be
substantial. See "Business--Environmental Matters."
16
<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."
17
<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.
18
<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 approximately $37.5 million outstanding 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.
19
<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.
20
<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, 13,000,000 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)
21
<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.
22
<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>
23
<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)
24
<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.
25
<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>
26
<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.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RECENT OPERATING RESULTS
The Company's operating results for the five month period ended August 31,
1996 (prior to any incentive compensation expense) include sales of $32.5
million, operating income of $5.6 million and EBITDA of $6.7 million,
representing an increase of 14.2%, 12.4% and 21.7%, respectively, over such
results for the five month period ended August 31, 1995 (on a combined basis,
before the effect of Acquisition adjustments). The Company does not expect as
great an increase in the operating results for the six month period ended
September 30, 1996 over the six month period ended September 30, 1995 due to
shortfalls in September 1996 production arising from the evacuation of the
City of Savannah and the Company's Savannah manufacturing facility for two
days due to hurricanes.
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:
28
<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.
29
<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.
30
<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 at approximately
$2.17 per share for an aggregate purchase price of $250,000, and members of
senior management purchased 385,818 shares of Common Stock at approximately
$4.15 per share, 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
31
<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
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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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<PAGE>
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.
48
<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 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 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 currently expect the costs of environmental
compliance to have a material adverse effect on its business, results of
operations or financial condition.
49
<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.
50
<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
51
<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 $50,000 or 10% of such officer's total
salary and bonus reported for such fiscal year.
(b) Dr. Keith, Ms. Roche and Mr. Creswell became executive officers of Carson
Products on August 23, 1995 and of the Company on August 14, 1996.
(c) The securities underlying the SARs were shares of the former Class A
common stock of the Company. In August 1996, Ms. Roche surrendered her
SAR, and Mr. Smith surrendered one-half of his SAR, in exchange for the
right to subscribe for 118,713 shares and 59,357 shares of Class C Common
Stock, respectively. See
52
<PAGE>
"Management--Compensation of Executive Officers--Employment Agreements,"
for a discussion of the exercise of such rights and the treatment of Mr.
Smith's remaining SAR.
(d) The employment of Messrs. Young and Cornish was terminated on August 23,
1995 in connection with the Acquisition.
(e) Severance payment made in connection with the Acquisition.
(f) Mr. de la Guardia resigned as President of the Predecessor on August 23,
1995 and retired from Carson Products on December 31, 1995.
Stock Options and Stock Appreciation Rights. No options to purchase stock
were granted during fiscal 1996. The following table sets forth information
concerning the grant of stock appreciation rights ("SARs") to each of the
named executive officers during fiscal 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------------------------------ -------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING SARS GRANTED TO
SARS EMPLOYEES EXERCISE OR EXPIRATION
NAME GRANTED (#)(A) IN FISCAL YEAR BASE PRICE ($/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
53
<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
55
<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
56
<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.
57
<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
Partners(c).... 0 0 0 0 6,617 80.0%
c/o Morningside
Capital L.L.C.
One Morningside
Drive North,
Suite 200
Westport, CT
06880
Banque
Indosuez(d).... 0 0 0 1,860 100% 0
c/o Indosuez
Capital
1211 Avenue of
the Americas
7th Floor
New York, NY
10036-8701
Minis
Family(e)...... 1,706 100% 1,706 0 0 0
c/o Hunter,
Maclean, Exley
& Dunn, P.C.
200 East St.
Julian St.
P.O. Box 9848
Savannah, Geor-
gia 31401
Morgan Guaranty
Trust
Company(f)..... 0 0 0 0 1,187 14.3%
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%
<CAPTION>
(IN THOUSANDS, EXCEPT FOOTNOTES)
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
Partners(c).... 46.1% 75.8%
c/o Morningside
Capital L.L.C.
One Morningside
Drive North,
Suite 200
Westport, CT
06880
Banque
Indosuez(d).... 13.0% 0%
c/o Indosuez
Capital
1211 Avenue of
the Americas
7th Floor
New York, NY
10036-8701
Minis
Family(e)...... 0% 0%
c/o Hunter,
Maclean, Exley
& Dunn, P.C.
200 East St.
Julian St.
P.O. Box 9848
Savannah, Geor-
gia 31401
Morgan Guaranty
Trust
Company(f)..... 8.3% 13.6%
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.
58
<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).
59
<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
60
<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.
61
<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."
62
<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"), 13,000,000 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.
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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 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 has been prepared by Milbank, Tweed,
Hadley & McCloy, special tax counsel to the Company, and all statements of law
and legal conclusions contained in the discussion represent the opinion of
Milbank, Tweed, Hadley & McCloy. 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.
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.
71
<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
72
<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. Price Waterhouse LLP issued reports without adverse opinions,
disclaimers of opinions, or qualifications or modifications as to uncertainty,
audit scope or accounting principles (other than as required by generally
accepted accounting principles), with respect to the consolidated financial
statements of the Predecessor as of and for the years ended March 31, 1994 and
1995. The decision to change accountants was approved by the Company's Board
of Directors.
73
<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.
74
<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
October 4, 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, 13,000,000 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 paid-in capital 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 paid-in capital 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............................................................... 17
Use of Proceeds........................................................... 19
Dividend Policy........................................................... 19
Dilution.................................................................. 20
Capitalization............................................................ 21
Unaudited Pro Forma Financial Data........................................ 23
Selected Consolidated Historical Financial Data........................... 26
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 28
Business.................................................................. 36
Management................................................................ 50
Principal and Selling Stockholders........................................ 58
Certain Relationships and Related Transactions............................ 60
Description of Certain Indebtedness....................................... 62
Description of Capital Stock.............................................. 63
Shares Eligible for Future Sale........................................... 67
Certain United States Federal Tax Considerations for Non-United States
Holders.................................................................. 68
Underwriting.............................................................. 71
Legal Matters............................................................. 73
Experts................................................................... 73
Available Information..................................................... 74
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 OCTOBER 7, 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, 838,000 shares are being offered for sale
initially outside of the United States and Canada by the International Managers
and 3,352,000 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
71
<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
72
<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.
73
<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.
74
<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............................................................... 17
Use of Proceeds........................................................... 19
Dividend Policy........................................................... 19
Dilution.................................................................. 20
Capitalization............................................................ 21
Unaudited Pro Forma Financial Data........................................ 23
Selected Consolidated Historical Financial Data........................... 26
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 28
Business.................................................................. 36
Management................................................................ 50
Principal and Selling Stockholders........................................ 58
Certain Relationships and Related Transactions............................ 60
Description of Certain Indebtedness....................................... 62
Description of Capital Stock.............................................. 63
Shares Eligible for Future Sale........................................... 67
Certain United States Federal Tax Considerations for Non-United States
Holders.................................................................. 68
Underwriting.............................................................. 71
Legal Matters............................................................. 73
Experts................................................................... 73
Available Information..................................................... 74
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
<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. .....................
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
**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 Promissory note between Joyce Roche and the Registrant.......................
**10.23 Promissory note between John P. Brown and the Registrant.....................
**10.24 Promissory note between Dennis Smith and the Registrant......................
**10.25 Promissory note between Donald Cowsar and the Registrant.....................
**10.26 Promissory note between Arthur P. Gnann, III and the Registrant..............
**10.27 Promissory note between Sharon A. Davis and the Registrant...................
**10.28 Pledge Agreement dated August 13, 1996 between Arthur P. Gnann, III and the
Registrant..................................................................
**10.29 Pledge Agreement dated August 13, 1996 between Sharon A. Davis and the
Registrant..................................................................
**10.30 Pledge Agreement dated August 13, 1996 between Dr. Donald Cowsar and the
Registrant..................................................................
**10.31 Pledge Agreement dated August 13, 1996 between John P. Brown Jr. and the
Registrant..................................................................
**10.32 Pledge Agreement dated August 13, 1996 between Miriam Muley and the
Registrant..................................................................
**10.33 Pledge Agreement dated August 13, 1996 between Joyce Roche and the
Registrant..................................................................
**10.34 Pledge Agreement dated August 13, 1996 between Dennis Smith and the
Registrant..................................................................
10.35 Form of New Senior Bank Facility (including exhibits)........................
**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..............................................
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S> <C>
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.
(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 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-5
<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 4TH DAY OF OCTOBER, 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
/s/ Dr. Leroy Keith* Chairman of the
- ------------------------------------- Board and Chief October 4, 1996
DR. LEROY KEITH Executive Officer
(Principal
Executive Officer)
/s/ Bradford N. Creswell Executive Vice
- ------------------------------------- President of October 4, 1996
BRADFORD N. CRESWELL Finance and Chief
Financial Officer
(Principal
Financial Officer)
/s/ Arthur P. Gnann, III* Vice President of
- ------------------------------------- Finance and October 4, 1996
ARTHUR P. GNANN, III Comptroller
(Principal
Accounting Officer)
II-6
<PAGE>
SIGNATURE TITLE DATE
/s/ Lawrence E. Bathgate, II* Director
- ------------------------------------- October 4, 1996
LAWRENCE E. BATHGATE, II
/s/ Abbey J. Butler* Director
- ------------------------------------- October 4, 1996
ABBEY J. BUTLER
/s/ Suzanne de Passe* Director
- ------------------------------------- October 4, 1996
SUZANNE DE PASSE
/s/ Melvyn J. Estrin* Director
- ------------------------------------- October 4, 1996
MELVYN J. ESTRIN
/s/ James L. Hudson* Director
- ------------------------------------- October 4, 1996
JAMES L. HUDSON
/s/ Joyce M. Roche* Director
- ------------------------------------- October 4, 1996
JOYCE M. ROCHE
/s/ John L. Sabre* Director
- ------------------------------------- October 4, 1996
JOHN L. SABRE
/s/ Dennis E. Smith* Director
- ------------------------------------- October 4, 1996
DENNIS E. SMITH
/s/ Vincent A. Wasik Director
- ------------------------------------- October 4, 1996
VINCENT A. WASIK
/s/ Vincent A. Wasik
*By _________________________________
VINCENT A. WASIK
ATTORNEY-IN-FACT
II-7
<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......................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
**10.22 Promissory note between Joyce Roche and the Registrant.......................
**10.23 Promissory note between John P. Brown and the Registrant.....................
**10.24 Promissory note between Dennis Smith and the Registrant......................
**10.25 Promissory note between Donald Cowsar and the Registrant.....................
**10.26 Promissory note between Arthur P. Gnann, III and the Registrant..............
**10.27 Promissory note dated between Sharon A. Davis and the Registrant.............
**10.28 Pledge Agreement dated August 13, 1996 between Arthur P. Gnann, III and the
Registrant..................................................................
**10.29 Pledge Agreement dated August 13, 1996 between Sharon A. Davis and the
Registrant..................................................................
**10.30 Pledge Agreement dated August 13, 1996 between Dr. Donald Cowsar and the
Registrant..................................................................
**10.31 Pledge Agreement dated August 13, 1996 between John P. Brown Jr. and the
Registrant..................................................................
**10.32 Pledge Agreement dated August 13, 1996 between Miriam Muley and the
Registrant..................................................................
**10.33 Pledge Agreement dated August 13, 1996 between Joyce Roche and the
Registrant..................................................................
**10.34 Pledge Agreement dated August 13, 1996 between Dennis Smith and the
Registrant..................................................................
10.35 Form of New Senior Bank Facility (including exhibits)........................
**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 1.2
________________________________________________________________________________
________________________________________________________________________________
CARSON, INC.
(a Delaware corporation)
838,000 Shares of Class A Common Stock
INTERNATIONAL PURCHASE AGREEMENT
Dated: October , 1996
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
----
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.............................. 7
(v) Good Standing of the Company.......... 7
(vi) Good Standing of Subsidiaries......... 8
(vii) Capitalization........................ 8
(viii) Authorization of Agreement............ 9
(ix) Authorization and Description of
Securities............................ 9
(x) Absence of Defaults and
Conflicts............................. 9
(xi) Absence of Labor Dispute.............. 10
(xii) Absence of Proceedings................ 11
(xiii) Accuracy of Exhibits.................. 11
(xiv) Possession of Intellectual
Property.............................. 11
(xv) Absence of Further
Requirements.......................... 12
(xvi) Possession of Licenses and
Permits............................... 12
(xvii) Title to Property..................... 13
(xviii) Compliance with Cuba Act.............. 13
(xix) Investment Company Act................ 13
(xx) Environmental Laws.................... 14
(xxi) Registration Rights................... 14
(xxii) Lock-up Letters....................... 14
(b) Representations and Warranties by the
-------------------------------------
Selling Shareholders....................... 15
--------------------
(i) Authorization of Agreements........... 15
(ii) Security Ownership.................... 16
(iii) Good and Marketable Title............. 16
(iv) Due Execution of Power of
Attorney and Custody Agreement........ 16
(v) Absence of Manipulation............... 17
-i-
<PAGE>
Page
----
(vi) Absence of Further Require-
ments................................. 17
(vii) Enforceability of Note Purchase
Agreement............................. 17
(viii) Certificates Suitable for
Transfer.............................. 17
(ix) No Association with NASD.............. 18
(c) Officer's Certificates...................... 18
SECTION 2. Sale and Delivery to Underwriters;
----------------------------------
Closing..................................... 18
-------
(a) Initial Securities.......................... 18
(b) Option Securities........................... 19
(c) Payment..................................... 19
(d) Denominations; Registration................. 20
SECTION 3. Covenants of the Company.................... 20
------------------------
(a) Compliance with Securities
Regulations and Commission Requests......... 21
(b) Filing of Amendments........................ 21
(c) Delivery of Registration Statement.......... 21
(d) Delivery of Prospectuses.................... 22
(e) Continued Compliance with Securities
Laws........................................ 22
(f) Blue Sky Qualifications..................... 23
(g) Rule 158.................................... 23
(h) Use of Proceeds............................. 24
(i) Listing..................................... 24
(j) Restriction on Sale of Securities........... 24
(k) Reporting Requirements...................... 24
(l) Compliance with Rule 463.................... 25
(m) Compliance with NASD Rules.................. 25
SECTION 4. Payment of Expenses......................... 25
-------------------
(a) Expenses.................................... 25
(b) Termination of Agreement.................... 26
SECTION 5. Conditions of International Managers'
-------------------------------------
Obligations................................. 26
-----------
(a) Effectiveness of Registration
Statement................................... 26
(b) Opinion of Counsel for Company.............. 27
(c) Opinion of Counsel for the Selling
Shareholders................................ 27
(d) Opinion of Counsel for International
Managers.................................... 27
(e) Officers' Certificate....................... 28
-ii-
<PAGE>
Page
----
(f) Certificate of Selling Shareholders......... 29
(g) Accountant's Comfort Letters................ 29
(h) Bring-down Comfort Letters.................. 29
(i) Approval of Listing......................... 29
(j) No Objection................................ 29
(k) Lock-up Agreements.......................... 29
(l) Purchase of Initial U.S. Securities......... 30
(m) New Senior Bank Facility.................... 30
(n) Conditions to Purchase of
International Option Securities............. 30
(i) Officers' Certificate.................. 30
(ii) Opinion of Counsel for Company......... 30
(iii) Opinion of Counsel for
International Managers................. 31
(iv) Bring-down Comfort Letters............. 31
(o) Additional Documents........................ 31
(p) Termination of Agreement.................... 31
SECTION 6. Indemnification............................. 32
(a) Indemnification of International
Managers.................................... 32
(b) Indemnification of Company, Directors
and Officers................................ 34
(c) Actions Against Parties; Notifica-
tion........................................ 34
(d) Settlement without Consent if Failure
to Reimburse................................ 35
(e) Indemnification for Reserved
Securities.................................. 35
SECTION 7. Contribution................................. 35
SECTION 8. Representations, Warranties and
Agreements To Survive Delivery............... 37
SECTION 9. Termination of Agreement..................... 38
(a) Termination; General......................... 38
(b) Liabilities.................................. 38
SECTION 10. Default by One or More of the
International Managers....................... 38
SECTION 11. Default by One or More of the Selling
Shareholders or the Company.................. 40
SECTION 12. Notices...................................... 40
-iii-
<PAGE>
Page
SECTION 13. Parties..................................... 41
SECTION 14. Governing Law and Time...................... 41
SECTION 15. Effect of Headings.......................... 41
-iv-
<PAGE>
CARSON, INC.
(a Delaware corporation)
838,000 Shares of Class A Common Stock
(Par Value $.01 Per Share)
INTERNATIONAL PURCHASE AGREEMENT
October , 1996
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
as Lead Managers of the several
International Managers
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England
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 International ("Merrill Lynch") and each of the
other international underwriters named in Schedule A hereto
(collectively, the "International Managers," 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 "Lead Managers"),
with respect to (i) the sale by the Company and the Selling
Shareholders, acting severally and not jointly, and the
purchase by the International Managers, 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 International Managers, acting
severally and not jointly, of the option described in
Section 2(b) hereof to purchase all or any part of 125,700
additional shares of Common Stock to cover over-allotments, if
any. The aforesaid 838,000 shares of Common Stock (the
"Initial International Securities") to be purchased by the
International Managers and
<PAGE>
-2-
all or any part of the 125,700 shares of Common Stock subject
to the option described in Section 2(b) hereof (the
"International Option Securities") are hereinafter called,
collectively, the "International 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 3,352,000 shares of Common
Stock (the "Initial U.S. Securities") through arrangements with
certain underwriters in the United States and Canada (the "U.S.
Underwriters") for which Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Donaldson, Lufkin & Jenrette Securities
Corporation are acting as representatives (the "U.S.
Representatives") and the grant by the Company to the U.S.
Underwriters, acting severally and not jointly, of an option to
purchase all or any part of the U.S. Underwriters' pro rata
portion of up to 502,800 additional shares of Common Stock
solely to cover overallotments, if any (the "U.S. Option
Securities" and, together with the International Option
Securities, the "Option Securities"). The Initial U.S.
Securities and the U.S. Option Securities are hereinafter
called the "U.S. Securities." It is understood that the
Company and the Selling Shareholders are not obligated to sell,
and the International Managers are not obligated to purchase,
any Initial International Securities unless all of the Initial
U.S. Securities are contemporaneously purchased by the U.S.
Underwriters.
The International Managers and the U.S. Underwriters
are hereinafter collectively called the "Underwriters," the
Initial International Securities and the Initial U.S.
Securities are hereinafter collectively called the "Initial
Securities," and the International Securities and the U.S.
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 & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated (in such capacity, the "Global Coordinator").
The Company and the Selling Shareholders understand
that the International Managers propose to make a public
offering of the International Securities as soon as the Lead
<PAGE>
-3-
Managers deem advisable after this Agreement has been executed
and delivered.
The Company, the Selling Shareholders and the
International Managers agree that up to 400,000 shares of the
Securities to be purchased by the International Managers and
that up to ______ shares of the Initial U.S. Securities to be
purchased by the U.S. Underwriters (collectively, the "Reserved
Securities") shall be reserved for sale by the Underwriters to
directors, officers, employees, business associates and related
persons of the Company, as part of the distribution of the
Securities by the 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 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 para-
graph (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
<PAGE>
-4-
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 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 September 20, 1996
and the preliminary international prospectus dated
September 20, 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 International
Manager 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
International Manager, as follows:
<PAGE>
-5-
(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 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.
<PAGE>
-6-
The representations and warranties in this subsection shall
not apply to statements in or omissions from the
Registration Statement or the International Prospectus
made in reliance upon and in conformity with information
furnished to the Company in writing by any International
Manager through Lead Managers expressly for use in the
Registration Statement or International 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
<PAGE>
-7-
shown therein and have been compiled on a basis
consistent with that of the audited financial statements
included in the Registration Statement, except as
otherwise disclosed therein. The pro forma financial
statements and the related notes 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.
<PAGE>
-8-
(vi) Good Standing of Subsidiaries. Each subsidiary
of the Company (each a "Subsidiary" and, 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
<PAGE>
-9-
paid 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 U.S. 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 International
Managers and U.S. Underwriters from the Company have been
duly authorized for issuance and sale to the International
Manager pursuant to this Agreement and the U.S.
Underwriters pursuant to the U.S. Purchase Agreement and,
when issued and delivered by the Company pursuant to this
Agreement and the U.S. Purchase Agreement, respectively,
against payment of the consideration set forth herein and
in the U.S. 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"), 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,
<PAGE>
-10-
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 U.S.
Purchase Agreement and the consummation of the
transactions contemplated in this Agreement, the U.S.
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 U.S.
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) vio-
late 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.
(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.
<PAGE>
-11-
(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 U.S. 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 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
<PAGE>
-12-
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 U.S. Purchase Agreement or the consummation of the
transactions contemplated by this Agreement and the U.S.
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 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
<PAGE>
-13-
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, 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").
<PAGE>
-14-
(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 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
<PAGE>
-15-
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 International Manager as of the date
hereof and as of the Closing Time, and agrees with each
International Manager, 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 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
<PAGE>
-16-
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 U.S. 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 20, 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 U.S. 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 U.S. 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.
(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 Lead
Managers, the Power of Attorney and the Custody Agreement
with Henry H. Minis and Don L. Waters, or any of them, as
attorney(s)-in-fact (the "Attorney(s)-in-Fact") and
Milbank, Tweed, Hadley & McCloy, 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
<PAGE>
-17-
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 U.S. Purchase Agreement or the
consummation of the transactions contemplated by this
Agreement and the U.S. 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 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. Certifi-
cates 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
<PAGE>
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Securities to the International Managers and U.S.
Underwriters pursuant to this Agreement and the U.S.
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 Lead Managers or to
counsel for the International Managers shall be deemed a
representation and warranty by the Company to each
International Manager 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 Lead Managers or to counsel for the International Managers
shall be deemed a representation and warranty by such Selling
Shareholder to the International Managers 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
Selling Shareholder, severally and not jointly, agree to sell
to each International Manager, severally and not jointly, and
each International Manager, 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 International 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
International Securities set forth in Schedule A opposite the
name of such International Manager, plus any additional number
of Initial International Securities which such International
Manager may become obligated to purchase pursuant to the
provisions of Section 10 hereof, bears to the total number of
Initial International Securities, subject, in each case, to
such adjustments among the International Managers as the Global
<PAGE>
-19-
Coordinator in its 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 International Managers,
severally and not jointly, to purchase up to an additional
125,700 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 International
Securities upon notice by the Lead Managers to the Company
setting forth the number of International Option Securities as
to which the several International Managers are exercising the
option and the time and date of payment and delivery for such
International Option Securities. Any such time and date of
delivery (a "Date of Delivery") shall be determined by the Lead
Managers, 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
International Option Securities, each of the International
Managers, acting severally and not jointly, will purchase that
proportion of the total number of International Option
Securities then being purchased which the number of Initial
International Securities set forth in Schedule A opposite the
name of such International Manager bears to the total number of
Initial International Securities, subject in each case to such
adjustments as the Global Coordinator in its 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 International
Securities shall 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").
<PAGE>
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In addition, in the event that any or all of the
International Option Securities are purchased by the
International Managers, payment of the purchase price for, and
delivery of certificates for, such International 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 Lead
Managers for the respective accounts of the Lead Managers of
certificates for the Securities to be purchased by them. It is
understood that each International Manager has authorized the
Lead Managers, for its account, to accept delivery of, receipt
for, and make payment of the purchase price for, the Initial
International Securities and the International Option
Securities, if any, which it has agreed to purchase. Merrill
Lynch, individually and not as representative of the
International Managers, may (but shall not be obligated to)
make payment of the purchase price for the Initial
International Securities or the International Option
Securities, if any, to be purchased by any International
Manager 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 International Manager from its
obligations hereunder.
(d) Denominations; Registration. Certificates for
the Initial International Securities and the International
Option Securities, if any, shall be in such denominations and
registered in such names as the Lead Managers 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 International Securities and the
International Option Securities, if any, will be made available
for 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 International Manager as follows:
<PAGE>
-21-
(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 International Managers
shall reasonably object.
(c) Delivery of Registration Statement. The Company
has furnished or will deliver to the Lead Managers and
counsel for the International Managers, without charge,
signed copies of the Registration Statement as originally
<PAGE>
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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 Lead Managers, without
charge, a conformed copy of the Registration Statement as
originally filed and of each amendment thereto (without
exhibits) for each of the International Managers. If
applicable, the copies of the Registration Statement and
each amendment thereto furnished to the International
Managers 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 International Manager, without charge,
as many copies of each preliminary prospectus as such
International Manager 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 International Manager, without charge,
during the period when the International Prospectus is
required to be delivered under the 1933 Act or the 1934
Act, such number of copies of the International Prospectus
(as amended or supplemented) as such International Manager
may reasonably request. If applicable, the International
Prospectus and any amendments or supplements thereto
furnished to the International Managers 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 U.S. 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 International
Managers 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
<PAGE>
-23-
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, 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
International Managers such number of copies of such
amendment or supplement as the International Managers
may reasonably request.
(f) Blue Sky Qualifications. The Company will use
its reasonable best efforts, in cooperation with the
International Managers, 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).
<PAGE>
-24-
(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
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 pursuant to
any non-employee director stock plan described in the
Prospectuses or (D) any conversion of Class B or Class C
Common Stock into Class A Common Stock, provided, however,
such conversion may only take place if the Stockholder
requesting such conversion was also the beneficial owner
of such Class B or Class C Common Stock at the Closing
Time.
(k) Reporting Requirements. The Company, during the
period when the Prospectuses are required to be delivered
<PAGE>
-25-
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 International Managers will
notify the Company as to which persons will need to be so
restricted. At the request of the International Managers,
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, the
Company agrees to reimburse the International Managers 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 U.S.
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 reasonable cost of duplicating 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
<PAGE>
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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 Lead Managers in accordance with the
provisions of Section 5, Section 9(a)(i) or Section 11 hereof,
the Company shall reimburse the Underwriters for all of their
out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the International Managers.
SECTION 5. Conditions of International Managers'
Obligations. The obligations of the several International
Managers 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
<PAGE>
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complied with to the reasonable satisfaction of
counsel to the International Managers. 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 Lead Managers 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
International Managers, together with signed or reproduced
copies of such letter for each of the other International
Managers to the effect set forth in Exhibit A hereto and
to such further effect as counsel to the International
Managers 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
International Managers. 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.
(c) Opinion of Counsel for the Selling Shareholders.
At Closing Time, the Lead Managers 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 International Managers and
addressed to the Company and the International Managers,
together with signed or reproduced copies of such letter
for each of the other International Managers to the effect
set forth in Exhibit B hereto and to such further effect
as counsel to the International Managers may reasonably
request.
(d) Opinion of Counsel for International Managers.
At Closing Time, the Lead Managers shall have received the
<PAGE>
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favorable opinion, dated as of Closing Time, of Cahill
Gordon & Reindel, counsel for the International Managers,
together with signed or reproduced copies of such letter
for each of the other International Managers 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 Lead
Managers. 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 Lead Managers 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 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.
<PAGE>
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(f) Certificate of Selling Shareholders. At Closing
Time, the Lead Managers 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 Lead Managers 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 Lead Managers,
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 Lead Managers 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 reasonable-
ness of the underwriting terms and arrangements.
(k) Lock-up Agreements. At the date of this
Agreement, the Lead Managers shall have received an
agreement substantially in the form of Exhibit C hereto
signed by
<PAGE>
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the persons listed on Schedule D hereto and the
Selling Shareholders listed on Schedule B hereto.
(l) Purchase of Initial U.S. Securities.
Contemporaneously with the purchase by the Lead Managers
of the Initial International Securities under this
Agreement, the U.S. Underwriters shall have purchased the
Initial U.S. Securities under the U.S. 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 International Option
Securities. In the event that the International Managers
exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the International 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 Lead Managers 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 Lead
Managers, dated such Date of Delivery, relating to
the International Option Securities to be purchased
on such Date of Delivery and otherwise to the same
<PAGE>
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effect as the opinion required by Section 5(b)
hereof.
(iii) Opinion of Counsel for International
Managers. The favorable opinion of Cahill Gordon &
Reindel, counsel for the International Managers,
dated such Date of Delivery, relating to the
International 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 Lead Managers and dated such Date
of Delivery, substantially in the same form and
substance as the letters furnished to the Lead
Managers 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 International
Managers 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 Lead Managers
and counsel for the International Managers.
(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
International Option Securities on a Date of Delivery
which is after the Closing Time, the obligations of the
several International Managers to purchase the relevant
International Option Securities, may be terminated by the
Lead Managers 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
<PAGE>
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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 International Managers. The
Company and the Selling Shareholders, severally and not
jointly, agree to indemnify and hold harmless each
International Manager and each person, if any, who controls any
International Manager 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;
<PAGE>
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(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 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) and
(ii) such indemnity with respect to any preliminary prospectus
shall not inure to the benefit of any Underwriter (or any
person controlling such Underwriter) from whom the person
asserting any such loss, liability, claim or damage purchased
shares of Common Stock which are the subject thereof if such
person did not receive a copy of the International Prospectus
(as amended or supplemented) at or prior to the confirmation of
the sale of Common Stock to such person in any case where such
delivery is required by the 1933 Act and (A) the untrue
statement or omission of a material fact contained in such
preliminary prospectus was corrected in the International
Prospectus (as amended or supplemented) and (B) such
Underwriter had previously been furnished by or on behalf of
the Company with a sufficient
<PAGE>
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number of copies of the International Prospectus (as
amended or supplemented). The obligations of the Company
and the Selling Shareholders pursuant to this Section 6 are
several and not joint; 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 International Manager 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
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 International
Manager 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
<PAGE>
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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 with Consent if Failure to Reimburse.
If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified 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 indemnified
party in accordance with such request prior to the date of such
settlement.
(e) Indemnification for Reserved Securities. In
connection with the offer and sale of the Reserved Securities,
the Company agrees, promptly upon a request in writing, to
indemnify and hold harmless the International Managers from and
against any and all losses, liabilities, claims, damages and
expenses incurred by them as a result of the failure of
eligible employees and other persons to pay for and accept
delivery of Reserved Securities which, by the end of the first
<PAGE>
-36-
business day following the date of this Agreement, were subject
to a properly confirmed agreement to purchase.
(f) 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 International
Managers 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 International Managers 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 International
Managers 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 International Managers, in each case as set
forth on the cover of the International Prospectus, or, if Rule
434 is used, the 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 International Managers on
the other hand shall be determined by reference to, among other
<PAGE>
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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 International Managers 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
International Managers 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
International Manager 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
International Manager 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 an International Manager 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 International
Manager, and each 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
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15 of the 1933 Act or Section 20 of the 1934 Act shall have the
same rights to contribution as the Company. The International
Managers' respective obligations to contribute pursuant to this
Section 7 are several in proportion to the number of Initial
International 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 International Manager or
controlling person, or by or on behalf of the Company and the
Selling Shareholders, and shall survive delivery of the
Securities to the International Manager.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Lead Managers 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 Lead
Managers, 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 suspended or
limited, or
<PAGE>
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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
International Managers. If one or more of the International
Managers 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
Lead Managers shall have the right, within 24 hours thereafter,
to make arrangements for one or more of the non-defaulting
International Managers, 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 Lead Managers 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 International
Managers 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
International Managers, 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 International Managers to purchase and
of the Company to sell the International Option Securities
to be purchased and sold on such Date of Delivery shall
terminate without liability on the part of any non-
defaulting International Managers.
<PAGE>
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No action taken pursuant to this Section shall
relieve any defaulting Lead Managers from liability in respect
of its default.
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
International Managers to purchase and the Company to sell the
relevant International Option Securities, as the case may be,
either the Lead Managers 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 "International Manager" includes any person
substituted for an International Manager 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 International Managers may, at option of
the Lead Managers, by notice from the Lead Managers 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 Lead Managers
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
<PAGE>
-41-
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
standard form of telecommunication. Notices to the
International Managers shall be directed to the Lead Managers
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 Attorneys-in-Fact at [ ], attention
of Henry H. Minis and Don L. Waters.
SECTION 13. Parties. This Agreement shall inure to
the benefit of and be binding upon the International Managers,
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 International Managers, 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 International Managers, 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 International Manager 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>
-42-
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
International Managers, 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>
-43-
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: MERRILL LYNCH INTERNATIONAL
By_________________________________________
Authorized Signatory
For itself and as Representatives of the other Underwriters
named in Schedule A hereto.
<PAGE>
SCHEDULE A
Number of
Initial
International
Name of International Manager Securities
----------------------------- -------------
Merrill Lynch International ..........................
Donaldson, Lufkin & Jenrette Securities
Corporation ........................................
_______
Total ................................................ 838,000
=======
Sch A - 1
<PAGE>
SCHEDULE B
Number of Initial Maximum Number of
International International Option
Securities To Be Sold Securities To Be Sold
--------------------- ---------------------
CARSON, INC. 838,000 125,700
Vango, LP
Henry H, Minis
Marquerite M. Trethewey
James E. Hungerpiller, as Trustee of The
Edith Hunter Minis Charitable Remainder
Unitrust - 1996 u/a/dtd September 20,
1996
Don L. Waters and Russell W. Carpenter,
as co-Trustees, u/a/w Abram Minis, Jr.,
dated July 15, 1993
James E. Hungerpiller, as Trustee of The
James E. Hungerpiller Charitable
Remainder Unitrust - 1996 u/a/dtd
September 20, 1996
Total ............
Sch B - 1
<PAGE>
SCHEDULE C
CARSON, INC.
838,000 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
International Securities to be paid by the several
International Managers 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
1. DNL Partners
2. Banque Indosuez
3. Morgan Guaranty Trust Company
4. Dr. Leroy Keith
5. Joyce M. Roche
6. Dennis Smith
7. Bradford N. Creswell
8. David A. Young
9. Mario J. de la Guardia
10. H.L. Cornish, Jr.
11. Lawrence E. Bathgate, II
12. Abbey J. Butler
13. Melvyn J. Estrin
14. James L. Hudson
15. John L. Sabre
16. Vincent A. Wasik
17. Miriam Muley
18. Suzanne de Passe
19. Jack Kemp
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 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 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 which have not been waived.
(iv) 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 such Securities is or will be subject to personal liability
by reason of being such a holder.
(v) 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 that have not been
waived other than as described in the Prospectus.
A-1
<PAGE>
(vi) Carson Products Company (the "Delaware
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; except as otherwise disclosed in the Registration
Statement, all of the issued and outstanding capital stock of
the Delaware 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, 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 except for liens pursuant to the
Credit Agreement dated 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.
(vii) Each of the Purchase Agreement and the
International Purchase Agreement has been duly authorized,
executed and delivered by the Company.
(viii) 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.
(ix) 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,
the notes thereto supporting schedules and other financial or
statistical data included therein or omitted therefrom, as to
which we need express no opinion) complied as to form in all
material respects with the requirements of the 1933 Act and the
1933 Act Regulations.
A-2
<PAGE>
(x) 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.
(xi) 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.
(xii) 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.
(xiii) The information in the Prospectus under "Risk
Factors -- Cost of Compliance with Environmental Requirements
May be Material and "Business -- "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.
(xiv) 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.
(xv) 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,
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.
A-3
<PAGE>
(xvi) 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.
(xvii) 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 material 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 or operations (except for such violations
that would not have a Material Adverse Effect).
(xviii) 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
A-4
<PAGE>
securities registered pursuant to the Registration Statement or
otherwise registered by the Company under the 1933 Act.
(xix) 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.
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
A-5
<PAGE>
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
B-1
<PAGE>
contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, license, lease or other instrument or
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
B-2
<PAGE>
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
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
C-1
<PAGE>
of or transfer any shares of the Company's Common Stock or any
securities convertible into or exchangeable or exercisable for
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:
--------------------------
C-2
<PAGE>
EXHIBIT 4
TEMPORARY CERTIFICATE-EXCHANGEABLE FOR DEFINITIVE ENGRAVED CERTIFICATE WHEN
READY FOR DELIVERY
NUMBER (R)CARSON SHARES
C
COMMON STOCK C A R S O N, I N C. CUSIP 145845 10 3
THIS CERTIFICATE IS
TRANSFERABLE IN NEW INCORPORATED UNDER THE LAWS OF SEE REVERSE FOR CERTAIN
YORK, NEW YORK OR THE STATE OF DELAWARE DEFINITIONS
CHARLOTTE, NORTH
CAROLINA
THIS IS TO CERTIFY that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE CLASS A COMMON STOCK WITH THE PAR
VALUE OF ONE CENT ($.01) PER SHARE OF
CARSON, INC.
transferable on the books of the Corporation by the holder hereof in person or
by attorney upon surrender of this Certificate duly endorsed or assigned.
This Certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
CARSON, INC.
CORPORATE
SEAL
/s/ 1995 /s/
DELAWARE
SECRETARY * CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
COUNTERSIGNED AND REGISTERED:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
(CHARLOTTE, N.C.)
TRANSFER AGENT
AND REGISTRAR
By AUTHORIZED SIGNATURE
AMERICAN BANK NOTE COMPANY
<PAGE>
CARSON, INC.
The Corporation will furnish without charge to each stockholder who so
requests, a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by a the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT -- ......................Custodian.........................
(Cust) (Minor)
under Uniform Gifts to Minors
Act..........................................
(State)
Additional abbreviations may also be used though not in the above list.
For value received,___________________________hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
INDENTIFYING NUMBER OF ASSIGNEE
[ ]
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
shares of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- -------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated___________________________
---------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
---------------------------------------
SIGNATURES(S) GUARANTEED: THE SIGNATURE(S) SHOULD BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR
DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO
THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
<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 Initial Public Offering
---------------------------------------
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,
all statements of law and legal conclusions contained in the discussion 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," represent our opinion with
respect to the matters set forth therein.
Very truly yours,
MILBANK, TWEED, HADLEY & MCCLOY
BK/ABP
<PAGE>
Exhibit 10.20
LICENSE AGREEMENT
between
AMINCO INC.
US Federal I.D. Number 51-0325487
("the LICENSOR")
and
CARSON PRODUCTS COMPANY S.A. (PROPRIETARY) LIMITED
Registration No. 93/02698/07
("the LICENSEE"),
<PAGE>
Page -2 -
1. DEFINITIONS
-----------
For the purposes of this agreement and unless the context indicates
otherwise:
1.1 "this Agreement" means this license agreement and all the annexures
hereto:
1.2 "a Contract Quarter" means each 3 (three) month period during the
period of this Agreement, commencing on 1 April, 1 July, 1 October and
1 January in each year and the first Contract Quarter shall commence
on the Effective Date;
1.3 the "Effective Date" means 1 April 1994;
1.4 the "Know-How" means all the undisclosed technical information,
whether patented in the Territory or not, possessed by the LICENSOR
and which may be necessary for the manufacture and sale of the
Licensed Products by the LICENSEE;
1.5 "the LICENSEE" means CARSON PRODUCTS S.A. (PROPRIETARY) LIMITED,
Registration No. 93/02698/07, a company registered and incorporated in
The Republic of South Africa;
1.6 "the LICENSOR" means AMINCO INC. a Delaware Corporation having its
principal place of business at P.O. Box 8841, Wilmington, Delaware,
19899-8841;
1.7 "the Licensed Products" means the range of Products listed in Annexure
"A" hereto, together with such other products as may be added to that
annexure by agreement between the parties from time to time;
1.8 "the Net Sales Price" means, in relation to any of the Licensed
Products manufactured and sold by the LICENSEE in terms of this
agreement, the LICENSEE's gross invoiced selling price of those
Licensed Products less:
1.8.1 any sales and other similar taxes payable by the licensee in
respect of those Licensed Products;
1.8.2 any delivery and insurance costs included and shown separately
in the invoice;
<PAGE>
Page -3 -
1.8.3 any trade discount which the LICENSEE may allow in respect of
those Licensed Products and which is disclosed in the invoice;
1.8.4 the gross invoiced selling price of all Licensed Products sold
by the LICENSEE to the LICENSOR or to any subsidiary or
associated company of the LICENSOR;
1.9 "the Territory" means the Republic of South Africa, as it was
constituted on 31 May 1961;
1.10 "Total Net Sales" means, at any particular date, the Net Sales Price
of all Licensed Products manufactured and sold by the LICENSEE in the
Territory, or outside the Territory provided for in CLAUSE 4 below,
during the period from the Effective Date until the date in question.
2. APPROVALS
---------
2.1 This agreement is subject to the condition that any consent of the
Exchange Control Authorities of the Republic of South Africa which may
be necessary for its validity is obtained in writing within 3 (three)
months from the date on which it is signed by both parties.
2.2 If the consent referred to in Clause 2.1 above is not obtained within
the 3 (three) month period referred to in that clause then this
Agreement shall fall away and be of no further force or effect.
2.3 The LICENSEE shall use its best endeavors to obtain the consent
referred to in CLAUSE 2.1 above and the LICENSOR shall provide any
information (other than the Know-How) which may be reasonably required
by the LICENSEE for that purpose.
3. RECORD
------
The parties record that:
3.1 the LICENSEE is a subsidiary of the LICENSOR, which is the owner of
the Know-How;
3.2 the LICENSEE will, directly or indirectly, be manufacturing the
Licensed Products in the Territory
<PAGE>
Page -4 -
and selling those Licensed Products to customers in the Territory as
well as to customers outside the Territory in the manner provided for
in CLAUSE 4 below;
3.3 in order to manufacture the Licensed Products the LICENSEE requires
access to the Know-How as well as access to certain technical advice
and information from the LICENSOR;
3.4 the LICENSOR has agreed to provide the Know-How as well as the above
technical advice and information to the LICENSEE on the terms and
conditions set out in this agreement.
4. SCOPE
-----
The LICENSOR hereby grants to the LICENSEE the non-exclusive right to:
4.1 use the Know-How to manufacture the Licensed Products in the Territory
and/or to have the Licensed Products manufactured in the Territory;
and
4.2 sell the Licensed Products to customers in the Territory, provided
that the LICENSEE shall be entitled to sell the Licensed Products to
customers outside the Territory where the LICENSOR has not granted an
exclusive license in respect of the Know-How and/or the Licensed
Products to another person in the area in question.
5. PERIOD
------
This Agreement shall, subject to the provisions of CLAUSE 13.1 below:
5.1 commence on the Effective Date and continue for a period of 5 (five)
years thereafter;
5.2 continue thereafter for an indefinite period, provided that either
party shall be entitled to terminate this Agreement by giving the
other party at least each 12 (twelve) months written notice to that
effect.
<PAGE>
Page -5 -
6. THE KNOW-HOW
------------
6.1 The LICENSOR shall, from time to time during the period of this
agreement:
6.1.1 deliver to the LICENSEE such of the Know-How as the LICENSEE
may reasonably require in order to fulfil its obligations to
manufacture the Licensed Products in accordance with the
instructions given to the LICENSEE by the LICENSOR from time to
time:
6.1.2 provide the LICENSEE with such other technical assistance and
advice as the LICENSEE may require in relation to the
manufacture of the Licensed Products during the period of this
agreement.
6.2 The LICENSEE shall:
6.2.1 keep all the Know-How confidential during the period of this
agreement and after its expiration or earlier termination for
any reason;
6.2.2 not disclose any of the Know-How to anyone other than its
directors and those of its employees or sub-contractors to whom
a disclosure is necessary for the purposes of exercising its
rights properly under this Agreement;
6.2.3 in disclosing any part of the Know-How to any such director or
employee or sub-contractor, only do so:
6.2.3.1 to the extent necessary to enable that director or
employee or sub-contractor to carry out the function
required of him to give effect to the LICENSEE's rights
under this Agreement;
6.2.3.2 in the manner provided for in CLAUSE 16 below;
6.2.4 not use any part of the Know-How for any purpose other than the
purposes permitted under this Agreement.
6.3 The LICENSOR shall disclose and make available to the LICENSEE any new
modification, improvement or change in
<PAGE>
Page -6 -
the Know-How which is discovered, tested and decided by the LICENSOR
to be ready for use during the period of this Agreement.
6.4 The LICENSEE shall, if so required by the LICENSOR, use any such new
modification, improvement or change in the manufacture of the Licensed
Products and provide any Know-How that may be required for that
purpose.
7. ROYALTIES
---------
7.1 In consideration for the rights granted to it by the LICENSOR in terms
hereof, the LICENSEE shall pay the LICENSOR a royalty of 4% (four
percentum) of the Net Sales Price of all Licensed Products sold by the
LICENSEE during the period Of this Agreement;
7.2 The royalties on the Licensed Products shall accrue as and when those
products are delivered or invoiced by the LICENSEE, whichever is the
earlier.
7.3 The royalties shall be payable within 30 (thirty) days of the end of
each Contract Quarter and shall be accompanied by a written statement
from the LICENSEE, certified by the LICENSEE's auditors, showing the
quantity of Licensed Products manufactured and sold during the
Contract Quarter in question.
7.4 Within 30 (thirty) days from the end of each Contract Quarter the
LICENSEE shall:
7.4.1 deliver to the LICENSOR a statement showing:
7.4.1.1 the quantity of all Licensed Products manufactured,
sold and delivered or Invoiced during that Contract
Quarter;
7.4.1.2 the Net Sales Price of all the Licensed Products so
sold and delivered or invoiced during that Contract
Quarter;
7.4.1.3 all other information which the LICENSOR may require to
determine the royalty for that Contract Quarter;
7.4.1.4 the royalty due to the LICENSOR for that Contract
Quarter;
<PAGE>
Page -7 -
7.4.2 pay that royalty to the LICENSOR less any taxes which the
LICENSEE may be obliged to deduct therefrom in terms of the
income tax laws in the Territory.
7.5 The LICENSEE shall furnish to the LICENSOR copies of all receipts for
all taxes so deducted and paid by it to the Revenue authorities of the
Territory.
7.6 The LICENSEE shall keep proper books of account and records (including
vouchers) relating to its manufacture and sale of the Licensed
Products and all such other information as may be required for the
purposes of determining the royalties payable by it.
7.7 The LICENSOR shall be entitled to appoint any of its employees or any
public accountant registered as such in the Territory or both to:
7.7.1 Inspect the books of account and records referred to in CLAUSE
7.6;
7.7.2 make copies of or extracts from those books of account and
records, at any reasonable time during the LICENSOR's normal
business hours, for the purpose of verifying the statements
referred to in Clause 7.4.1.
7.8 The LICENSOR shall bear the costs incurred by it in verifying any
statement in terms of Clause 7.4.1, provided that if the royalty
stated in that statement is found to be incorrect and to fall short of
the correct amount by more than 2% (two percentum) thereof, then the
LICENSEE shall refund those costs to the LICENSOR.
8. THE LICENSEE'S OBLIGATIONS
--------------------------
The LICENSEE shall:
8.1 ensure that the Licensed Products manufactured by it from the Know-How
at least conform in all respects to the standard of quality (both in
regard to materials and workmanship) of the Licensed Products
manufactured and sold by the LICENSOR;
8.2 at all reasonable times allow the LICENSOR's representatives to
inspect the LICENSEE's factories, in any processes and raw materials
to enable the LICENSOR
<PAGE>
Page -8 -
to satisfy itself in regard to the standard of Licensed Products being
manufactured and sold by LICENSEE;
8.3 not, without obtaining the LICENSOR's prior written consent:
8.3.1 cede any of its rights under this Agreement;
8.3.2 make any modification, improvement or other change of any
nature to the Licensed Products;
8.4 not dispute or assist anyone else to dispute the validity of any trade
mark, patent, design or copyright used in connection with the Licensed
Products at any time during the period of this Agreement or after its
termination for any reason;
8.5 not at any time during the period of this Agreement or after its
termination for any reason engage in any policy or practice which will
be injurious to the LICENSOR or the Licensed Products;
8.6 furnish the LICENSOR with such written reports as may be required from
time to time to keep the LICENSOR fully informed of all relevant
market conditions affecting the manufacture and sale and the demand
for the Licensed Products in the Territory.
9. TECHNICAL INSTRUCTION
---------------------
9.1 The LICENSOR shall permit the LICENSEE to send one employee at a time
to the LICENSOR's subsidiary's factory in the United States of America
for instruction and training in the use of the Know-How and in the
manufacture of the Licensed Products, for such period as may be
reasonably required for that purpose without unreasonably interfering
with the LICENSOR's routine and current commitments.
9.2 The LICENSEE shall be responsible for and pay all traveling expenses,
salaries, contributions and other remuneration and all other costs of
any nature whatever incurred by or in respect of that employee for
each day he is absent from his home office.
9.3 The LICENSOR shall at the LICENSEE's request, send one employee to the
LICENSEE's factory in for one visit only to impart the Know-How or
instruct or train the
<PAGE>
Page -9 -
LICENSEE's employees in the use of the Know-How and manufacture and
sale of the Licensed Products, provided that:
9.3.1 the employee to be sent shall be selected by the LICENSOR;
9.3.2 the LICENSOR shall only be obliged to send an employee when it
can do so without unreasonably interfering with its routine and
current commitments;
9.3.3 the employee shall not be required to stay at the LICENSEE's
factory for more than 3 (three) working days;
9.3.3 The LICENSEE shall pay all expenses (including all traveling,
hotel and living expenses) reasonably incurred by or in respect
of the employee for each day he is absent from his home office.
9.4 Any employee sent by either party to the other shall at all times
remain the employee of the party which sent him.
10. PATENTS
-------
10.1 Should the LICENSEE or any of its employees or anyone else under its
control or working in association with it, make or discover any
improvement relating to the Licensed Products, then:
10.1.1 the LICENSEE shall immediately make a complete disclosure to
the LICENSOR;
10.1.2 the LICENSOR shall be entitled to the use thereof free of any
charge and without any limitation of time and the LICENSEE
shall assign all the rights, title and interest in such
improvement to the LICENSOR;
10.1.3 if the improvement in question is an invention capable of
being registered as a patent, then:
10.1.3.1 the LICENSOR shall have the right to apply at its cost
for letters patent therefor in each country of the
<PAGE>
Page -10 -
Territory and in all other countries of the world;
10.1.3.2 any letters patent issued in respect of the invention
shall be and remain the LICENSOR's sole property;
10.1.3.3 the LICENSEE undertakes that it and the inventor will
sign all documents and do everything else which the
LICENSOR may require for the purposes of or to give
effect to the provisions of this Clause 10.1.3.
10.2 Should any letters patent registered in the LICENSOR's name in the
Territory for any part of the Know-How during the period of this
agreement be attacked or infringed by any third party, then:
10.2.1 the LICENSEE shall notify the LICENSOR immediately the
LICENSEE becomes aware of the attack or infringement in
question;
10.2.2 if both the LICENSOR and the LICENSEE decide that any
proceedings should be instituted or defended, as the case may
be, each party shall:
10.2.2.1 contribute equally to the costs thereof;
10.2.2.2 be liable for any damages awarded in favor of the third
party or any sum paid on a compromise of the latter's
claim;
10.2.2.3 be entitled to share equally in any damages recovered
from the third party;
10.2.3 if one party only shall decide that any proceedings
shall be instituted or defended, as the case may be,
then:
10.2.3.1 that party shall bear the whole cost thereof including
any damages and costs awarded against it in favor of
the third party and shall be entitled to retain any
damages and other amounts recovered from the third
party; and
10.2.3.2 the other party shall furnish all such evidence and
other assistance and co-
<PAGE>
Page -11 -
operation as may be reasonably required for the
purposes of those proceedings.
11. EXEMPTIONS AND VIS MAJOR
------------------------
11.1 The LICENSOR does not represent or warrant that the rights granted to
the LICENSEE in terms of this Agreement will not infringe any patent,
trade mark or design registered in the Territory, but the LICENSOR
does warrant that it has no knowledge of any such patent, trade mark
or design.
11.2 Therefore if the manufacture, sale or use of the Licensed Products by
the LICENSEE results in any claim against the LICENSEE for an
infringement of any patent, trade mark or design registered in the
Territory, the LICENSEE shall be solely liable therefor.
11.3 The LICENSEE shall be deemed to understand all the Know-How supplied
to it by the LICENSOR in terms of CLAUSE 6.1.
11.4 Notwithstanding any other provision in this Agreement to the
contrary, the LICENSOR shall not be liable for any loss of profit or
other special damages or any indirect or consequential damages
whatever which the LICENSEE may suffer as a result of any breach of
this Agreement by the LICENSOR.
11.5 Neither party shall have any claim of any nature whatever against the
other for any failure to carry out any of its obligations under this
Agreement as a result of vis major, including but without being
limited to, any strike, lock-out, shortage of labor or materials,
delays in transport, accidents of any kind, riot, political or civil
disturbances, the elements, any act of any State or Government or any
other authority or any other cause whatever beyond the control of the
party in question.
12. SUSPENSION
----------
If any amount owed by the LICENSEE in terms of this Agreement is not paid
on due date, then The LICENSOR may, without prejudice to any of its other
rights, immediately suspend the carrying out of any of its then uncompleted
obligations under this Agreement until the payment is made.
<PAGE>
Page -12 -
13. TERMINATION
-----------
13.1 Notwithstanding any other provision in this Agreement, the LICENSOR
may terminate this Agreement by giving the LICENSEE written notice to
that effect if:
13.1.1 the LICENSEE commits a breach of any of its material
obligations under this Agreement and fails to remedy that
breach within 7 (seven) days after it has been given written
notice to do so;
13.1.2 the LICENSEE commits a breach of any of its other obligations
under this Agreement and fails to remedy that breach within 30
(thirty) days after it has been given written notice to do so;
13.1.3 the LICENSEE is provisionally or finally wound up or is placed
under a provisional or final order of judicial management or
liquidation;
13.1.4 the LICENSEE ceases to be a wholly-owned subsidiary of the
LICENSOR.
13.2 Not withstanding any other provision to the contrary in this
Agreement, the LICENSEE shall be entitled to terminate this Agreement
by written notice if:
13.2.1 The LICENSOR commits any breach of any of its obligations
under this Agreement and fails to remedy that breach within 30
(thirty) days after It has been given written notice to do so;
13.2.2 any order for the winding-up or judicial management of the
LICENSOR is granted;
13.2.3 any effective resolution is passed for the winding-up of the
LICENSOR;
13.3 The rights of each party under CLAUSES 13.1 and 13.2 respectively
shall not be exhaustive and shall be in addition and without prejudice
to any other rights they may have whether for damages or otherwise.
13.4 No relaxation which either party may allow to the other in regard to
the carrying out of any of their respective obligations In terms of
this Agreement shall prejudice or be regarded as a waiver of its right
to enforce those obligations at any time thereafter.
<PAGE>
Page -13 -
14. RIGHTS ON TERMINATION
---------------------
On the expiration or earlier Termination for any reason of this Agreement
the LICENSEE shall immediately:
14.1 discontinue the use of the Know-How;
14.2 cease to use or display any of the trade marks or any trade names or
sales or advertising material or anything else that indicates that
the LICENSEE deals in or is entitled to deal in the Licensed
Products;
14.3 sign all such documents as the LICENSOR may require for the purposes
of cancelling the registration of the LICENSEE as the registered user
in the Territory of the trade marks referred to in Clause 14.2;
14.4 return to the LICENSOR all documents containing any of the Know-How.
15. PAYMENTS
--------
15.1 All payments to be made by the LICENSEE under this Agreement shall:
15.1.1 be paid, free of exchange and other charges, to the LICENSOR's
account, Delaware Trust Capital Management, Wilmington,
Delaware, Attention: Barbara Steen, Account No. 683012819, or
at such other address as the LICENSOR may notify the LICENSEE
from time to time;
15.1.2 be paid in (unless otherwise agreed in writing) at the
official rate of exchange ruling at the date on which each
payment is made or, if it is made late, at the date on which it
became payable, as the LICENSOR may elect.
15.1.3 if any amount payable by the LICENSEE in terms of this
Agreement is not paid on the due date thereof then, without
prejudice to any of the LICENSOR's other rights under this
Agreement, that amount shall bear interest at a rate which is
2% (two percentum) per annum above the prime bank rate for
overdrafts charged for the time being by The Standard Bank of
South Africa Limited.
<PAGE>
Page -14 -
16. CONFIDENTIALITY
---------------
The LICENSEE shall, during the period of this Agreement and thereafter -
16.1 keep all the Know-How (whether disclosed to it orally, in written
form or in any other manner) strictly confidential;
16.2 not disclose any of the Know-How to anyone other than to those of its
directors or employees or sub-contractors to whom a disclosure is
necessary to achieve the purposes set out in Clause 3 above;
16.3 in disclosing any part of the Know-How to any -
16.3.1 director or employee, only do so after the director or
employee in question has signed and delivered to the LICENSEE
and the LICENSOR a secrecy undertaking in the form attached as
Annexure "B" hereto;
16.3.2 sub-contractors, only do so after the sub-contractor in
question has signed and delivered to the LICENSEE and the
LICENSOR a secrecy undertaking in the form attached as Annexure
"C" hereto.
17. NON-VARIATION
-------------
No alteration or variation to this Agreement shall be of any force or
effect unless it is recorded in writing and signed by all the parties to
this Agreement.
18. PROPER LAW
----------
The validity of this Agreement, its interpretation, the respective rights
and obligations of the parties and all other matters arising in any way out
of this Agreement or its performance shall be determined in accordance with
the laws of the Republic of South Africa.
19. DOMICILIA AND NOTICES
---------------------
19.1 Each party chooses the address set out below as the address at which
all notices and other communications must be delivered for the
purposes of this Agreement -
<PAGE>
Page -15 -
19.1.1 the LICENSOR at Aminco, Inc., 900 Market Street, Wilmington, DE 19801,
United States of America (marked for the attention of Amanda Foster)
and a copy shall be sent to Mark C Saussy, P.O. Box 22309, Savannah,
GA 31403-2309, United States of America, Telefax No. (912)651-3489;
19.1.2 the LICENSEE at Unit 31, Vintech Park, 45 5th Street, Wynberg,
Sandton, 2090, South Africa, P.O. Box 68 Bergvlei 2012, South
Africa, Telefax No.(011) 786-2172.
19.2 Any notice or communication required or permitted to be given in
terms of this Agreement shall be valid and effective only if in
writing but it shall be competent to give notice by telex or telefax.
19.3 Any notice to a party contained in a correctly addressed envelope
and-
19.3.1 sent by prepaid registered post to it at its chosen address;
or
19.3.2 delivered by hand to a responsible person during ordinary
business hours at its chosen address,
shall be deemed to have been received, in the case of Clause 19.3.1,
on the seventh business day after posting (unless the contrary is
proved) and, in the case of Clause 19.3.2, on the day of delivery.
19.4 Any notice sent by telex or telefax to a party at its telex or
telefax number shall be deemed (unless the contrary is proved) to
have been received -
19.4.1 if it is transmitted during normal business hours, within 2
(two) hours of transmission;
19.4.2 if it is transmitted outside normal business hours, within 2
(two) hours of the commencement of normal business hours on
the first business day after it is transmitted.
19.5 Each party chooses the physical address set out opposite its name in
Clause 19.1 as the address at which legal process must be delivered
for the purpose of this Agreement.
19.6 The parties shall be entitled at any time to change their addresses
for the purposes of this Clause 19 to
<PAGE>
Page -16 -
any other address in the United States of America or the Republic of
South Africa respectively by giving written notice to that affect to
the other.
20. GENERAL
-------
20.1 Any latitude or extension of time which may be allowed by either
party shall not under any circumstances whatsoever act as an estoppel
or be a waiver of that party's rights hereunder.
20.2 The parties to this Agreement undertake to treat all matters relating
to this Agreement and the annexures hereto as being confidential and,
therefore, shall not, without the written approval of the other,
disclose the provisions hereof to any third party.
20.3 This Agreement constitutes the entire contract between the parties
and no other conditions, warranties, guarantees and representations
shell be of any force or effect other than those which are included
herein.
20.4 All the transactions and arrangements contemplated in this Agreement
constitute one indivisible transaction.
21. INTERPRETATION
--------------
21.1 In this Agreement, unless the context requires otherwise:
21.1.1 words importing any one gender shall include the other two
genders;
21.1.2 the singular shall include the plural and vice versa;
21.1.3 a reference to natural persons shall include created entities
(corporate or unincorporate) and vice versa.
21.2 The headings in this Agreement have been inserted for convenience
only and shall not be used for nor assist or affect its
interpretation.
<PAGE>
Page -17 -
22. COSTS
-----
Each party shall bear its own costs of and incidental to the preparation
and drawing of this Agreement and the stamp duty thereon.
<PAGE>
Page -18 -
SIGNED at on 8 April 1994.
For: AMINCO INC.
______________________________________
Mark C. Saussy
Mark C. Saussy
who declares he is authorized to do so
SIGNED at on 8 April 1994.
For: CARSON PRODUCTS COMPANY S.A.
(PROPRIETARY) LIMITED
______________________________________
Director
who declares he is authorized to do so
<PAGE>
Page -19 -
FIRST ADDENDUM
--------------
to license agreement between
CARSON PRODUCTS COMPANY
-----------------------
(formerly AMINCO INC)
and
CARSON PRODUCTS COMPANY S.A. (PROPRIETARY) LIMITED
--------------------------------------------------
(the name of which is in the process of being converted to
CARSON PRODUCTS (PROPRIETARY) LIMITED)
entered into by the parties on 8 April 1994
<PAGE>
Page -20 -
(the "principal agreement") 1. It is recorded that:-
1.1. the parties entered into the principal agreement on 8 April 1994;
1.2. in terms of clause 17 of the principal agreement, the principal
agreement cannot be altered or varied unless the amendment or
variation is recorded in a written document signed by both
parties;
1.3. the parties wish to amend the principal agreement in the manner
contemplated in paragraph 2 below.
2. The principal agreement is hereby amended by the deletion of the clauses
7.1 and 7.2 and the substitution of those clauses with the following new
clauses:-
"7.1 In consideration for the rights granted to it by the LICENSOR in
terms hereof, the LICENSEE shall during those periods stipulated
in column 1 of the table below pay the LICENSOR a royalty equal
to the percentage (reflected in the second column of the table
below) of the Net Sales Price of all Licensed Products sold by
the LICENSEE during the period
<PAGE>
Page -21 -
stipulated in the first column of the table below.
PERIOD PERCENTAGE
1 April 1996 to 31 March 1998 0%
1 April 1998 to 31 March 1999 3%
1 April 1999 to 31 March 2000 3.5%
1 April 2000 - remaining duration of this
agreement 4%
7.2 With effect from 1 April 1998 the royalties on the Licensed Products
shall accrue as and when those products are delivered or invoiced by
the LICENSEE, whichever is the earlier."
3. Save as contemplated in clause 2 above, the remaining terms of the
principal agreement shall remain of full force and effect.
<PAGE>
Page -22 -
SIGNED by the parties and witnessed on the following dates and at the following
places respectively:
DATE PLACE WITNESS SIGNATURE
1.________________ For: CARSON PRODUCTS COMPANY
_________________________________
_______ _______ 2.________________ who warrants that he
is duly authorised hereto
_______ _______ 1.________________ For: CARSON PRODUCTS COMPANY S.A.
(PROPRIETARY) LIMITED
_________________________________
_______ _______ 2.________________ who warrants that he is duly
authorised hereto
<PAGE>
Exhibit 10.21
A G R E E M E N T
-----------------
entered into between
CARSON PRODUCTS COMPANY
-----------------------
(formerly AMINCO INC)
(a company incorporated in the United States of America
having its registered address at Corporation Trust Centre,
1209 Orange Street, Wilmington, DE 19801)
and
CARSON PRODUCTS COMPANY S.A. (PROPRIETARY) LIMITED
--------------------------------------------------
the name of which is in the process of being converted to
CARSON PRODUCTS (PROPRIETARY) LIMITED
(Registration No. 93/02698/07)
WHEREBY IT IS AGREED AS FOLLOWS:
- -------------------------------
1. INTERPRETATION AND PRELIMINARY
------------------------------
Unless a contrary intention clearly appears -
1.1. words importing -
1.1.1. any one gender include the other two genders;
1.1.2. the singular include the plural and vice versa; and
----------
1.1.3. natural persons include created entities (corporate or
unincorporate) and the state and vice versa;
----------
1.2. the following terms shall have the meanings assigned to them
hereunder and cognate expressions shall have corresponding
meanings, namely -
1.2.1. "commencement date" means 1 April 1996;
1.2.2. "the distributor" means CARSON PRODUCTS COMPANY S.A.
(PROPRIETARY) LIMITED;
1.2.3. "the products" means the range of products listed in
Annexure A hereto together with such
other products as may be added to that
annexure by written agreement between
the parties;
<PAGE>
Page - 2 -
1.2.4. "CARSON" means CARSON
PRODUCTS COMPANY
1.2.5. "the territory" means the continent of Africa including
Camores, Seychelles, Reunion,
Madagascar and Mauritius.
<PAGE>
Page - 3 -
2. APPOINTMENT OF THE DISTRIBUTOR
------------------------------
2.1. CARSON appoints the distributor with effect from the commencement
date as its sole and exclusive distributor to sell and distribute
the products in the territory. The distributor accepts the
appointment.
2.2. For so long as this agreement shall endure, CARSON shall not:-
2.2.1. otherwise than as contemplated in this clause 2, itself
sell and/or distribute the products in the territory;
2.2.2. grant any person the right to sell or otherwise deal in the
products in the territory.
2.3. The distributor may, in those instances in which it does not itself
wish to directly sell or distribute the products in any part of the
territory or is not in a position (by reason of insufficient
manufacturing capacity, distribution channels or otherwise) to sell
or distribute the products in the territory, request CARSON, on
receipt of confirmation from the distributor that the full invoiced
value for the products to be supplied by CARSON as herein
contemplated has been received by the distributor, on a "best
efforts basis" to supply the relevant customer with the products.
On delivery of the products by CARSON to the customer as herein
contemplated, the distributor shall pay to CARSON an amount equal
to 75% (seventy five per cent) of the invoiced value of the
products (excluding any taxes and delivery costs) supplied by
CARSON to a customer. The balance of the invoiced amount
(excluding any taxes and delivery costs) received by the
distributor from the relevant customer shall be retained by the
distributor as a "merchanting fee".
2.4. It is recorded that a significant, yet indeterminable, amount of
CARSON's sales to the European market are re-directed and re-
exported into the territory.
2.5. CARSON is entitled to sell the products to customers outside the
territory, even if such customers intend to export the products
into the territory, but may
<PAGE>
Page - 4 -
not actively solicit or otherwise provide such sales to third
parties with the purpose of circumventing the exclusivity in clause
2.1.
2.6. Notwithstanding anything to the contrary contained in this agreement,
CARSON authorises the distributor to supply the European market on
a "best endeavours" basis up to 20% (twenty per cent) of CARSON'S
budgeted sales into Europe so as to compensate the distributor for
the loss of market share within the territory occasioned by the re-
direction of European sales into the territory.
2.7. CARSON undertakes to take all steps reasonably and legally possible,
including the institution of legal proceeds in any appeal, to
protect the sole and exclusive rights granted hereunder to the
distributor.
3. DURATION
--------
This agreement shall commence on the commencement date and shall, unless
terminated by the furnishing of not less than 12 (twelve) months prior
written notice, endure indefinitely, provided that no such notice of
termination may be furnished so as to terminate this agreement prior to the
5th (fifth) anniversary of the commencement date.
4. EXPLOITATION OF THE PRODUCTS
----------------------------
The distributor undertakes to use all reasonable endeavours to ensure that
the products are properly promoted and exploited by it in the territory.
5. RIGHT TO APPOINT SUB-DISTRIBUTORS
---------------------------------
The distributor shall be entitled to appoint sub-distributors to sell or
distribute the products in the territory.
6. THE DISTRIBUTOR NOT AGENT OR PARTNER OF CARSON
----------------------------------------------
Nothing in this agreement shall be construed as -
6.1. constituting the distributor as agent of CARSON or granting any
authority to the distributor to represent CARSON or to give any
warranties or representations of whatsoever nature on behalf of
CARSON;
<PAGE>
Page - 5 -
6.2. constituting a partnership between the distributor and CARSON.
7. CANCELLATION
------------
The agreement may be cancelled -
7.1. by either party in the event of the other party committing a breach
of any of the terms of this agreement and failing to remedy such
breach within a period of 21 (twenty one) days after receipt of
written notice drawing attention to the breach;
7.2. by CARSON if the distributor is at any time wound up or liquidated or
placed in judicial management, whether final or provisional.
8. MUTUAL CO-OPERATION
-------------------
The distributor and CARSON shall consult from time to time with regard to
any assistance or advice which the distributor may require in connection
with -
8.1. the use, sale and commercial exploitation of the products in the
territory;
8.2. the marketing of the products in the territory.
9. GOVERNING LAW
-------------
This agreement shall be governed and interpreted by the substantive laws of
the Republic of South Africa (and if the prescription laws of the Republic
of South Africa are not considered to be substantive laws thereof, by the
prescription laws as well), provided that if the major part of the
agreement is to be performed outside South Africa, no laws of South Africa
which promote competition in South Africa shall govern.
10. DOMICILIUM CITANDI ET EXECUTANDI
--------------------------------
The parties choose as their domicilia citandi et executandi for all
-------------------------------
purposes under this agreement, whether in respect of court process, notices
or other documents or communications of whatsoever nature, the following
addresses:-
10.1. The distributor:
Physical: 427 - 15th Road
RANDJESPARK
Midrand
Postal: Private Bag X103
HALFWAY HOUSE
1685
Telefax: (011) 314-4777
<PAGE>
Page - 6 -
10.2. CARSON:
Physical: Corporation Trust Centre
1209 Orange Street
WILMINGTON, DE 19801
Postal: 64 Ross Road
Savannah, 31405
Telefax: (091) 651-3424
10.3. Any notice or communication required or permitted to be given in
terms of this agreement shall be valid and effective only if in
writing but it shall be competent to give notice by telefax.
11. WHOLE AGREEMENT, NO AMENDMENT
-----------------------------
11.1. This agreement constitutes the whole agreement between the parties
relating to the subject matter hereof.
11.2. No amendment or consensual cancellation of this agreement or any
provision or term thereof and no settlement of any disputes arising
under this agreement and no extension of time, waiver or relaxation
or suspension of or agreement not to enforce or to suspend or
postpone the enforcement of any of the provisions or terms of this
agreement shall be binding unless recorded in a written document
signed by the parties.
11.3. No party shall be bound by any express or implied term,
representation, warranty, promise or the like not recorded herein,
whether it induced the contract and/or whether it was negligent or
not.
SIGNED by the parties and witnessed on the following dates and at the following
places respectively:
<PAGE>
Page - 7 -
DATE PLACE WITNESS SIGNATURE
- ---- ----- ------- ---------
For: CARSON PRODUCTS COMPANY
______ __________ 1._______ ___________________
who warrants that he
2.________ is duly authorised
hereto
For: CARSON PRODUCTS COMPANY
S.A. (PROPRIETARY) LIMITED
______ __________ 1._______ ___________________
who warrants that he
2.________ is duly authorised hereto
<PAGE>
Page - 8 -
ANNEXURE A - THE PRODUCTS
-------------------------
<PAGE>
Page - 9 -
MAINTENANCE PRODUCTS
<TABLE>
<C> <S> <C> <C>
401 Dark & Lovely Corrective Leave-in Therapy 250 ml 9.80
402 Dark & Lovely Pro Therapy Protein Conditioner 250 ml 9.80
403 Dark & Lovely Rich & Natural Hair Dress Cond. 125 gm 9.80
40306 Dark & Lovely Rich & Natural Hair Dress 225 gm 13.00
404 Dark & Lovely Conditioning Set and wrap Lotion 250 ml 9.60
405 Dark & Lovely Quick Freeze Super Shine Spritz 250 ml 9.80
407 Dark & Lovely Extra Light Hair Dress Cond. 125 gm 9.30
411 Dark & Lovely 3-N-1 Plus Detang/Cond. Shampoo 250 ml 9.80
413 Dark & Lovely Restore & Repair Moisturizing Hair Therapy (New) 125 gm 9.80
41308 Dark & Lovely Hair Repair Creme 225 gm 13.00
41408 Dark & Lovely Quick Styling Gel - Regular Hold 250 gm 10.00
416 Dark & Lovely Quick Styling Gel - Super Hold 125 gm 8.00
417 Dark & Lovely Cholesterol Plus Super Strengthening/Cond. 480 gm 14.00
Treatment
418 Dark & Lovely Oil Moisture & Shine Lotion 250 ml 11.25
419 Dark & Lovely Oil Moisturizer Spray 250 ml 11.25
491 Dark & Lovely Ultra Nourish Vitamin, Protein & Lanolin Therapy 200 gm 11.75
492 Dark & Lovely Ultra Strengthener 200 gm 11.75
493 Dark & Lovely Restorer Hot Oil Therapy 250 ml 11.75
498 Dark & Lovely Oil Sheen Spray 300 ml 16.00
499 Dark & Lovely Holding Spray 300 ml 16.00
RELAXER PRODUCTS
420 Dark & Lovely Creme Relaxer - Regular KIT 30.55
422 Dark & Lovely Pure Creme Relaxer - Super KIT 30.55
</TABLE>
<PAGE>
Page - 10 -
CHILDREN'S PRODUCTS
<TABLE>
<C> <S> <C> <C>
424 Beautiful Beginnings Children's Relaxer KIT 29.55
451 Beautiful Beginnings Conditioning Shampoo Plus Detangler 250 ml 8.75
452 Beautiful Beginnings Leave-in Conditioner Plus Detangler 250 ml 9.00
453 Beautiful Beginnings Natural Oil Moisturizer Plus Detangler 250 ml 10.75
454 Beautiful Beginnings Scalp Conditioner and Hair Dress 200 gm 11.75
PROFESSIONAL PRODUCTS
50201 Dark & Lovely Pro Therapy Protein Conditioner 500 ml 16.00
51101 Dark & Lovely 3-N-1 Detangling Conditioning Shampoo 500 ml 16.00
524 Dark & Lovely No-Lye Relaxer Salon Pack KIT 96.00
525 Beautiful Beginnings Salon Relaxer Kit KIT 110.00
624 Dark & Lovely Economy Salon Pack KIT 196.00
40314 Dark & Lovely Rich & Natural Hairdress 400 gm 19.00
41314 Dark & Lovely Hair Repair Creme 400 gm 19.00
41418 Dark & Lovely Quick Styling Gel Regular 450 gm 15.50
41616 Dark & Lovely Quick Styling Gel Super 450 gm 15.50
40416 Dark & Lovely Conditioning Set and Wrap Lotion 500 ml 15.50
41816 Dark & Lovely Oil Moisturizer Lotion 600 ml 18.50
41916 Dark & Lovely Oil Moisturizer Spray 500 ml 16.50
41734 Dark & Lovely Cholesterol Treatment 1 kg 26.00
52183 Dark & Lovely Neutralizing Shampoo 2.5 litre 44.00
39316 Dark & Lovely Reviv Colors Dazz Auburn 450 ml 36.00
39416 Dark & Lovely Reviv Colors Vibrant Plum 450 ml 36.00
</TABLE>
<PAGE>
Page - 11 -
SHAVING PRODUCTS
<TABLE>
<S> <C> <C> <C>
11 Magic Shaving Powder (Depilatory) 125 gm 9.60
Gold Label - Pleasant Smelling Formula
12 Magic Shaving Power (Depilatory) 125 gm 9.80
Platinum Label - Skin Conditioning Formula
16 Magic Shaving Powder (Depilatory) 150 gm 9.60
Red Label - Extra Strength
25 Magic Pre-Shave/After Shave Lotion 100 ml 8.00
<CAPTION>
HAIR CARE PRODUCTS FOR MEN
DARK & NATURAL HAIR COLOUR
<C> <S> <C> <C>
32 Dark & Natural - Natural Black 1 Appl. 17.50
33 Dark & Natural - Darkest Brown 1 Appl. 17.50
DARK & NATURAL TEXTURE ENHANCER
541 Dark & Natural Texturizing Creme 450 gm 18.00
54167 Dark & Natural Texturizing Creme 2 Kg 86.00
641 Dark & Natural Texturizing Creme 4.5 Kg 135.00
DARK & NATURAL MAINTENANCE PRODUCTS
41 Dark & Natural Moisturizing Shampoo 175 gm 9.80
42 Dark & Natural Dry Hair & Scalp Conditioner 125 gm 10.75
44 Dark & Natural Wave & Style Gel 175 gm 10.75
429 Dark & Natural Texturizing Spray 250 ml 10.75
430 Dark & Natural Texturizing Gel 250 ml 10.75
431 Dark & Natural Neutralizing Shampoo 500 ml 15.00
</TABLE>
HAIR COLOUR FOR WOMEN
<TABLE>
DARK & NATURAL PERMANENT HAIR COLOUR
<C> <S> <C> <C>
371 Dark & Lovely Jet Black 1 Appl. 17.50
372 Dark & Lovely Natural Black - formerly Black 1 Appl. 17.50
373 Dark & Lovely Brown Sable - formerly Dark Brown 1 Appl. 17.50
</TABLE>
<PAGE>
Page - 12 -
<TABLE>
<C> <S> <C> <C>
374 Dark & Lovely Rich Auburn - formerly Auburn 1 Appl. 17.50
374 Dark & Lovely Sunset Auburn - formerly Bright Auburn 1 Appl. 17.50
376 Dark & Lovely Autumn Red - formerly Fiery Auburn 1 Appl. 17.50
377 Dark & Lovely Light Brown 1 Appl. 17.50
378 Dark & Lovely Honey Blonde 1 Appl. 17.50
379 Dark & Lovely Golden Bronze 1 Appl. 17.50
380 Dark & Lovely Chestnut Blonde 1 Appl. 17.50
381 Dark & Lovely Spicy Cinnamon 1 Appl. 17.50
382 Dark & Lovely Midnight Blue 1 Appl. 17.50
383 Dark & Lovely Black Ruby 1 Appl. 17.50
384 Dark & Lovely Light Golden Blonde 1 Appl. 17.50
REVIVING COLORS SEMI-PERMANENT HAIR COLOUR
391 Radiant Black 1 Appl. 16.00
393 Spiced Auburn - formerly Dazzling Auburn 1 Appl. 16.00
394 Passion Plum - formerly Vibrant Plum 1 Appl. 16.00
</TABLE>
<PAGE>
EXHIBIT 10.35
CREDIT AGREEMENT
among
CARSON PRODUCTS COMPANY
and
BANQUE INDOSUEZ, NEW YORK BRANCH,
AS AGENT,
and
THE LENDING INSTITUTIONS LISTED HEREIN
____________________
Dated as of October [ ], 1996
____________________
$40,000,000
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Amount and Terms of Credit..........................
1.01 Commitments ........................................
1.02 Minimum Amount of Each Borrowing;
Maximum Number of Borrowings .....................
1.03 Notice of Borrowings ...............................
1.04 Disbursement of Funds ..............................
1.05 Notes ..............................................
1.06 Conversions; Continuations .........................
1.07 Pro Rata Borrowings ................................
1.08 Interest ...........................................
1.09 Interest Periods ...................................
1.10 Special Provisions Governing Reserve
Adjusted Eurodollar Loans ........................
1.11 Capital Requirements ...............................
1.12 Total Loan Commitments; Limitations
on Outstanding Loan Amounts ......................
1.13 Letters of Credit ..................................
SECTION 2. Commitments ........................................
2.01 Voluntary Reduction of Commitments .................
2.02 Mandatory Adjustments of Commitments,
etc. .............................................
2.03 Commitment Commission ..............................
SECTION 3. Payments ...........................................
3.01 Voluntary Prepayments ..............................
3.02 Mandatory Prepayments ..............................
3.03 Method and Place of Payment ........................
3.04 Net Payments .......................................
SECTION 4. Conditions Precedent ...............................
4.01 Conditions Precedent to Initial
Loans ............................................
4.02 Conditions Precedent to All Loans ..................
4.03 Conditions Precedent to All Letters
of Credit ........................................
-i-
<PAGE>
SECTION 5. Representations, Warranties and
Agreements .......................................
5.01 Corporate Status ...................................
5.02 Corporate Power and Authority;
Business .........................................
5.03 No Violation .......................................
5.04 Litigation .........................................
5.05 Use of Proceeds ....................................
5.06 Governmental Approvals, etc. .......................
5.07 Investment Company Act .............................
5.08 Public Utility Holding Company Act .................
5.09 True and Complete Disclosure .......................
5.10 Holdings IPO; Repayment of
Subordinated Debt ................................
5.11 Financial Condition; Financial
Statements; Projections ..........................
5.12 Security Interests .................................
5.13 Tax Returns and Payments ...........................
5.14 ERISA ..............................................
5.15 Subsidiaries .......................................
5.16 Patents, etc. ......................................
5.17 Compliance with Laws, etc. .........................
5.18 Properties .........................................
5.19 Securities .........................................
5.20 Collective Bargaining Agreements ...................
5.21 Indebtedness Outstanding ...........................
5.22 Environmental Matters ..............................
5.23 Environmental Investigations .......................
5.24 Fine Products Company ..............................
SECTION 6. Affirmative Covenants ..............................
6.01 Information Covenants ..............................
6.02 Books, Records and Inspections .....................
6.03 Maintenance of Property; Insurance .................
6.04 Payment of Taxes ...................................
6.05 Corporate Franchises ...............................
6.06 Compliance with Statutes, etc. .....................
6.07 ERISA ..............................................
6.08 Performance of Obligations .........................
6.09 End of Fiscal Years; Fiscal Quarters ...............
6.10 Use of Proceeds ....................................
6.11 Equal Security for Loans and Notes;
No Further Negative Pledges ......................
6.12 Lender Meeting .....................................
6.13 Pledge of Additional Collateral ....................
-ii-
<PAGE>
6.14 Security Interests .................................
6.15 Environmental Events ...............................
6.16 New Subsidiaries ...................................
6.17 Repayment of Existing Subordinated
Debt .............................................
SECTION 7. Negative Covenants .................................
7.01 Changes in Business ................................
7.02 Amendments or Waivers of Certain
Documents ........................................
7.03 Liens ..............................................
7.04 Indebtedness .......................................
7.05 Advances, Investments and Loans ....................
7.06 Prepayments of Indebtedness; Amend-
ments ............................................
7.07 Dividends, etc. ....................................
7.08 Transactions with Affiliates .......................
7.09 Total Interest Coverage Ratio ......................
7.10 Fixed Charge Coverage Ratio ........................
7.11 Leverage Ratio .....................................
7.12 Issuance of Subsidiary Stock .......................
7.13 Disposition of Assets ..............................
7.14 Contingent Obligations .............................
7.15 ERISA ..............................................
7.16 Merger and Consolidations ..........................
7.17 Sale and Lease-Backs ...............................
7.18 Sale or Discount of Receivables ....................
7.19 Fine Products Company ..............................
SECTION 8. Events of Default ..................................
8.01 Payments ...........................................
8.02 Representations, etc. ..............................
8.03 Covenants ..........................................
8.04 Default Under Other Agreements .....................
8.05 Bankruptcy, etc. ...................................
8.06 ERISA ..............................................
8.07 Security Documents .................................
8.08 Guarantees .........................................
8.09 Judgments ..........................................
8.10 Ownership ..........................................
SECTION 9. Definitions ........................................
-iii-
<PAGE>
SECTION 10. The Agent ..........................................
10.01 Appointment ........................................
10.02 Delegation of Duties ...............................
10.03 Exculpatory Provisions .............................
10.04 Reliance by the Agent ..............................
10.05 Notice of Default ..................................
10.06 Non-Reliance on Agent and Other
Banks ...........................................
10.07 Indemnification ....................................
10.08 The Agent in Its Individual Capacity ...............
10.09 Successor Agent ....................................
10.10 Resignation by Agent ...............................
SECTION 11. Miscellaneous ......................................
11.01 Payment of Expenses, etc. ..........................
11.02 Right of Setoff ....................................
11.03 Notices ............................................
11.04 Benefit of Agreement ...............................
11.05 No Waiver; Remedies Cumulative .....................
11.06 Payments Pro Rata ..................................
11.07 Calculations; Computations .........................
11.08 Governing Law; Submission to
Jurisdiction; Venue ..............................
11.09 Counterparts .......................................
11.10 Effectiveness ......................................
11.11 Headings Descriptive ...............................
11.12 Amendment or Waiver ................................
11.13 Survival ...........................................
11.14 Domicile of Loans ..................................
11.15 Waiver of Jury Trial ...............................
11.16 Independence of Covenants ..........................
Schedule 1 - Amounts of A Term Loans
Schedule 2 - Amounts of B Term Loans
Schedule 3 - Amounts of Revolving Loans
ANNEX I - List of Banks
ANNEX II - Bank Addresses
ANNEX III - Schedule of Existing Debt
ANNEX IV - Schedule of Subsidiaries
ANNEX V - Schedule of Collective Bargaining Agreements
ANNEX VI - Summary of Corporate Insurance Policies
ANNEX VII - Schedule of Liens
ANNEX VIII - List of Mortgaged Real Property
ANNEX IX - Schedule of Litigation
-iv-
<PAGE>
ANNEX X - Schedule of Consents
ANNEX XI - Schedule of Restrictions
ANNEX XII - Environmental Matters
ANNEX XIII - Taxes
ANNEX XIV - Schedule of Intellectual Property
ANNEX XV - Schedule of Existing Leases
ANNEX XVI - Compliance with Laws
Exhibit A - Form of Revolving Note
Exhibit B-1 - Form of A Term Note
Exhibit B-2 - Form of B Term Note
Exhibit C-1 - Form of Opinion of Milbank, Tweed, Hadley &
McCloy
Exhibit C-2 - Form of Opinion of Hunter, Maclean, Exley &
Dunn, P.C.
Exhibit C-3 - Form of Local Counsel Opinion
Exhibit D - Form of Mortgage
Exhibit E - Form of Holdings Guarantee
Exhibit F-1 - Form of Borrower Securities Pledge Agreement
Exhibit F-2 - Form of Holdings Securities Pledge Agreement
Exhibit G - Form of Borrower Intellectual Property Security
Agreement
Exhibit H - Form of Borrower General Security Agreement
Exhibit I-1 - Form of Notice of Assignment
Exhibit I-2 - Form of Assignment and Assumption Agreement
Exhibit J - Form of Notice of Borrowing
Exhibit K - Form of Notice of Conversion/Continuation
Exhibit L - Form of Officer's Solvency Certificate
Exhibit M - Form of Borrowing Base Certificate
Exhibit N - Form of Officer's Certificate Regarding
Environmental Review
Exhibit O - Form of Landlord Lien Assurance Agreement
Exhibit P - Form of Consolidated Financial Plan
Exhibit Q - Form of Non-U.S. Lender Certificate
Exhibit R - Form of Subsidiary Guarantee
-v-
<PAGE>
CREDIT AGREEMENT, dated as of October [ ], 1996 (the
"Agreement"), among CARSON PRODUCTS COMPANY, a Delaware
corporation (subsequent to its merger with DNL Savannah
Acquisition Corp., the "Borrower"), the lending institutions
listed in Annex I (each a "Bank" and, collectively, the
"Banks") and the New York branch of BANQUE INDOSUEZ
("Indosuez") as the agent and collateral agent for the Banks
(in such capacity, the "Agent"). Unless otherwise defined
herein, all capitalized terms used herein and defined in
Section 9 are used herein as so defined.
WITNESSETH:
WHEREAS, Carson, Inc. (formerly known as DNL Savannah
Holding Corp.), a Delaware corporation ("Holdings") shall
consummate, on the Closing Date, an initial public offering of
its common stock (the "Holdings IPO");
WHEREAS, in conjunction with the Holdings IPO,
Holdings and the Borrower wish to refinance the existing
indebtedness of the Borrower (the Holdings IPO and the use of
proceeds therefrom, and the Borrowings and the Notes hereunder
are, collectively, the "Refinancing");
WHEREAS, Holdings will execute a Guarantee, secured
by a pledge of the shares of capital stock of the Borrower,
guaranteeing the Borrower's obligations hereunder;
WHEREAS, the Borrower desires to incur Loans from the
Banks, the proceeds of which will be applied, to the extent
necessary, to consummate the Refinancing, to provide working
capital to the Borrower, to pay certain fees and expenses
incurred in connection with the Refinancing and for general
corporate purposes; and
WHEREAS, the Banks are willing to make available the
credit facilities provided for herein.
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 Commitments. Subject to and upon the terms and
conditions herein set forth, each Bank severally agrees, in the
case of any Borrowing under the A Term Loan Facility or the B
Term Loan Facility, in each case, on the Closing Date and, in
the case of any Borrowing under the Revolving Portion, at any
<PAGE>
-2-
time and from time to time on and after the Closing Date and
prior to the Revolving Loan Commitment Termination Date, to
make a Loan or Loans to the Borrower, which Loans shall be
drawn under the Loan Facility (including the Revolving Portion
and Term Portion thereof), as set forth below.
(a) Loans under the Term Portion of the Loan
Facility (each a "Term Loan" and, collectively, the "Term
Loans") may be made to the Borrower under the A Term Loan
Facility (each an "A Term Loan" and, collectively, the "A
Term Loans") or the B Term Loan Facility (each a "B Term
Loan" and, collectively, the "B Term Loans").
(i) Each A Term Loan under the A Term Loan
Facility (A) shall be made to the Borrower as a
single drawing on the Closing Date, (B) except as
hereinafter provided, shall initially be made as a
Base Rate Loan and, 60 days after the Closing Date or
such earlier time as the Agent may agree, shall, at
the option of the Borrower, be Base Rate Loans or
Reserve Adjusted Eurodollar Loans; provided that all
Term Loans made by all Banks pursuant to the same
Borrowing shall, unless otherwise specifically
provided herein, consist entirely of Loans of the
same Type and (C) shall not exceed for any Bank at
any time outstanding the aggregate principal amount
which equals the A Term Loan Commitment of such Bank.
(ii) Each B Term Loan under the B Term Loan
Facility (A) shall be made to the Borrower as a
single drawing on the Closing Date, (B) except as
hereinafter provided, shall initially be made as a
Base Rate Loan and, 60 days after the Closing Date or
such earlier time as the Agent may agree, shall, at
the option of the Borrower, be Base Rate Loans or
Reserve Adjusted Eurodollar Loans; provided that all
Term Loans made by all Banks pursuant to the same
Borrowing shall, unless otherwise specifically
provided herein, consist entirely of Loans of the
same Type and (C) shall not exceed for any Bank at
any time outstanding the aggregate principal amount
which equals the B Term Loan Commitment of such Bank.
(b) Loans under the Revolving Portion of the Loan
Facility (each a "Revolving Loan" and, collectively, the
"Revolving Loans") (i) shall be made at any time and from
time to time on and after the Closing Date (including up
<PAGE>
-3-
to $5,000,000 on the Closing Date for purposes of
financing the Refinancing and paying related fees and
expenses; provided that the Borrower has utilized the full
amount of the Total Term Loan Commitment for financing the
Refinancing and paying related fees and expenses) and
prior to the Revolving Loan Commitment Termination Date,
(ii) except as hereinafter provided, shall initially be
Base Rate Loans and, 60 days after the Closing Date or
such earlier time as the Agent may agree, shall, at the
option of the Borrower, be Base Rate Loans or Reserve
Adjusted Eurodollar Loans; provided that all Revolving
Loans made by all Banks pursuant to the same Borrowing
shall, unless otherwise specifically provided herein,
consist entirely of Loans of the same Type, (iii) may be
repaid and reborrowed in accordance with the provisions
hereof, (iv) shall not exceed for any Bank at any time
outstanding the Revolving Loan Commitment of such Bank at
such time and (v) shall not be made pursuant to a
particular Notice of Borrowing if the aggregate principal
amount of Revolving Loans then outstanding, after giving
effect to the Revolving Loan requested by such Notice of
Borrowing, plus the then outstanding Letters of Credit
Usage, after giving effect to the issuance of all Letters
of Credit subject to outstanding requests for issuance,
would exceed the lesser of the Borrower's Borrowing Base
as shown in the Borrowing Base Certificate that was last
required to be delivered pursuant to Section 6.01 or the
Total Revolving Loan Commitment.
1.02 Minimum Amount of Each Borrowing; Maximum
Number of Borrowings. The minimum aggregate principal amount
of a Borrowing of Term Loans consisting of Reserve Adjusted
Eurodollar Loans or Base Rate Loans shall be the Minimum
Borrowing Amount and, if greater, shall be in integral
multiples of $100,000; provided, however, that the Banks' Term
Loan Commitments shall terminate, on a pro rata basis, with
respect to any portion of the Total Term Loan Commitments not
utilized by the Borrower on the Closing Date. The minimum
aggregate principal amount of a Borrowing of Revolving Loans
consisting of Reserve Adjusted Eurodollar Loans or Base Rate
Loans shall be the Minimum Borrowing Amount (other than a
Borrowing of Base Rate Loans such that the total amount of
Revolving Loans and Letters of Credit Usage to be outstanding
after giving effect to such Borrowing shall be equal to the
Total Revolving Commitment) and, if greater, shall be in
integral multiples of $100,000. More than one Borrowing may be
incurred on any date; provided that
<PAGE>
-4-
at no time shall there be outstanding more than 6 Borrowings
of Reserve Adjusted Eurodollar Loans.
1.03 Notice of Borrowings. Whenever the Borrower
desires that the Banks make Reserve Adjusted Eurodollar Loans
under the Revolving Loan Facility it shall give the Agent at
the Agent's Office prior to 10:00 A.M. (New York time) at least
three Business Days' prior written notice (or telephonic notice
promptly confirmed in writing) of each such Borrowing of
Reserve Adjusted Eurodollar Loans. Whenever the Borrower
desires that the Banks make Base Rate Revolving Loans on a
same-day basis under the Revolving Loan Facility it shall give
the Agent at the Agent's office prior to 10:00 A.M. (New York
time) written notice (or telephonic notice promptly confirmed
in writing) of each such Borrowing of Base Rate Loans. Each
such notice, which shall be substantially in the form of
Exhibit J hereto (each a "Notice of Borrowing"), shall be
irrevocable, shall be deemed a representation by the Borrower
that all conditions precedent to such Borrowing set forth in
Section 4.02 have been satisfied and shall specify (i) the
aggregate principal amount in U.S. dollars of the Loans to be
made pursuant to such Borrowing, all of which shall be
specified in such manner as is necessary to comply with all
limitations on Revolving Loans outstanding hereunder, including
without limitation, availability under the Borrowing Base,
(ii) the date of Borrowing (which shall be a Business Day) and
(iii) whether the respective Borrowing shall consist of Base
Rate Loans or Reserve Adjusted Eurodollar Loans and, if Reserve
Adjusted Eurodollar Loans, the Interest Period to be initially
applicable thereto. The Agent shall as promptly as practicable
give each Bank written notice (or telephonic notice promptly
confirmed in writing) of each proposed Borrowing, of such
Bank's proportionate share thereof and of the other matters
covered by the Notice of Borrowing.
1.04 Disbursement of Funds. (a) No later than 1:00
P.M. (New York time) on the date specified in each Notice of
Borrowing, each Bank will make available to the Agent in New
York its pro rata portion of each Borrowing requested to be
made on such date in the manner provided below.
(b) Each Bank shall make available all amounts it is
to fund under any Borrowing on or after the Closing Date in
immediately available funds to the Agent to the account
specified therefor by the Agent or if no account is so
specified at the Agent's Office and the Agent will make such
funds available to the Borrower, no later than 4:00 P.M. (New
York time) on the
<PAGE>
-5-
date specified in each Notice of Borrowing, by depositing to
the account specified therefor by the Borrower or if no account
is so specified to its account at the Agent's Office the
aggregate of the amounts so made available in the type of funds
received. Unless the Agent shall have been notified by any Bank
prior to the date of any such Borrowing that such Bank does not
intend to make available to the Agent its portion of the
Borrowing or Borrowings to be made on such date, the Agent may
assume that such Bank has made such amount available to the
Agent on such date of Borrowing, and the Agent, in reliance
upon such assumption, may (in its sole discretion and without
any obligation to do so) make available to the Borrower a
corresponding amount. If such corresponding amount is not in
fact made available to the Agent by such Bank and the Agent
has made available same to the Borrower, the Agent shall be
entitled to recover such corresponding amount from such Bank.
If such Bank does not pay such corresponding amount forthwith
upon the Agent's demand therefor, the Agent shall promptly
notify the Borrower, and the Borrower shall upon the Agent's
request immediately pay such corresponding amount to the
Agent. The Agent shall also be entitled to recover from such
Bank or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to the
Borrower to the date such corresponding amount is recovered by
the Agent, at a rate per annum equal to (x) if paid by such
Bank, the Federal Funds Rate or (y) if paid by the Borrower
(and/or one or more other Credit Parties), the then applicable
rate of interest, calculated in accordance with Section 1.08,
for the respective Loans. The Agent shall also be entitled to
recover from any Bank an amount equal to any other losses
incurred by the Agent as a result of the failure of such Bank
to provide such amount as provided in this Agreement.
(c) Nothing herein shall be deemed to relieve any
Bank from its obligation to fulfill its Commitments hereunder
or to prejudice any rights which the Borrower or any other
Credit Party may have against any Bank as a result of any
default by such Bank hereunder.
1.05 Notes. (a) The Borrower's obligation to pay
the principal of and interest on all the Loans made to it by
each Bank shall be evidenced (i) if Revolving Loans, by a
promissory note (each, a "Revolving Note" and, collectively,
the "Revolving Notes") duly executed and delivered by the
Borrower substantially in the form of Exhibit A hereto, with
blanks appropriately completed in conformity herewith, and (ii) if
<PAGE>
-6-
Term Loans, by a promissory note (an "A Term Note" or a "B
Term Note," respectively, as the case may be, and,
collectively, the "Term Notes") duly executed and delivered by
the Borrower, substantially in the form of Exhibits B-1 and B-2
hereto, respectively, each with blanks appropriately completed
in conformity herewith.
(b) The Revolving Note of the Borrower issued to
each Bank shall (i) be executed by the Borrower, (ii) be
payable to the order of such Bank and be dated the Closing
Date, (iii) be in a stated principal amount equal to the
Revolving Loan Commitment of such Bank and be payable in the
aggregate principal amount of the outstanding Revolving Loans
evidenced thereby, (iv) mature, with respect to each Loan
evidenced thereby, on the Final Revolving Loan Maturity Date,
(v) be subject to mandatory prepayment as provided in
Section 3.02, (vi) bear interest as provided in the appropriate
clause of Section 1.08 in respect of the Base Rate Loans and
Reserve Adjusted Eurodollar Loans, as the case may be,
evidenced thereby and (vii) be entitled to the benefits of this
Agreement and the other applicable Credit Documents.
(c) Each of the Term Notes of the Borrower issued to
each Bank shall (i) be executed by the Borrower, (ii) be
payable to the order of such Bank and be dated the Closing
Date, (iii) be in a stated principal amount equal to the A Term
Loan Commitment of such Bank or the B Term Loan Commitment of
such Bank, as the case may be, and be payable in the aggregate
principal amount of the A Term Loans or the B Term Loans
evidenced thereby, (iv) mature, with respect to each Loan
evidenced thereby, on the Final A Term Loan Maturity Date with
respect to the A Term Loans and the Final B Term Loan Maturity
Date with respect to the B Term Loans represented thereby, as
the case may be, (v) be subject to mandatory prepayment as
provided in Section 3.02, (vi) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate
Loans and Reserve Adjusted Eurodollar Loans, as the case may
be, evidenced thereby and (vii) be entitled to the benefits of
this Agreement and the other applicable Credit Documents.
(d) Each Bank will note on its internal records the
amount of each Loan made by it and each payment in respect
thereof and will, prior to any transfer of any of its Notes,
endorse on the reverse side thereof the outstanding principal
amount of Loans evidenced thereby. Failure to make any such
notation shall not affect the Borrower's or any Credit Party's
<PAGE>
-7-
obligations hereunder or under the other applicable Credit
Documents in respect of such Loans.
1.06 Conversions; Continuations. The Borrower shall
have the option to convert on any Business Day commencing on
the earlier of receipt of the Agent's approval or 60 days after
the Closing Date all or a portion (which portion shall not be
less than the Minimum Borrowing Amount) of the outstanding
principal amount of the Loans owing by the Borrower pursuant to
a single Portion of the Loan Facility into a Borrowing or
Borrowings pursuant to such Portion of another Type of Loan, or
to continue all or a portion of such Borrowings as the same
Type of Loan; provided that (i) except as otherwise provided in
Section 1.10(b), Reserve Adjusted Eurodollar Loans may be
converted into Base Rate Loans or continued as Reserve Adjusted
Eurodollar Loans only on the last day of an Interest Period
applicable to such Reserve Adjusted Eurodollar Loans, (ii) no
such partial conversion of Reserve Adjusted Eurodollar Loans
shall reduce the outstanding principal amount of Reserve
Adjusted Eurodollar Loans under the Loan Facility (or Portion
thereof) made pursuant to a single Borrowing to less than the
Minimum Borrowing Amount, (iii) one Type of Loan may only be
continued as or converted into Reserve Adjusted Eurodollar
Loans if no Default or Event of Default is in existence on the
date of the conversion, (iv) Borrowings resulting from
conversions or continuations pursuant to this Section 1.06
shall be limited in amount and number as provided in Sec-
tion 1.02 and (v) all or a portion of the outstanding principal
amount of Base Rate Loans may not be converted into Reserve
Adjusted Eurodollar Loans if such Base Rate Loans or portions
thereof will mature within 30 days of such proposed conversion.
Each such conversion (or continuation) shall be effected by the
Borrower by giving the Agent at the Agent's Office prior to
10:00 A.M. (New York time) at least three Business Days' (or
one Business Day in the case of a conversion into Base Rate
Loans) prior written notice (or telephonic notice promptly
confirmed in writing) (each a "Notice of
Conversion/Continuation") specifying the Loans to be so
converted or continued, the Type of Loans to be converted into
or continued and, if to be converted into or continued as
Reserve Adjusted Eurodollar Loans, the Interest Period to be
initially applicable thereto. The Agent shall give each Bank
notice as promptly as practicable of any such proposed
conversion or continuation affecting any of its Loans.
Notwithstanding the foregoing or the provisions of Sec-
tion 1.09, if a Default or Event of Default is in existence on
the last day of any Interest Period in respect of any Borrowing
of Reserve Adjusted Eurodollar Loans, such Loans may not
<PAGE>
-8-
be continued as Reserve Adjusted Eurodollar Loans but instead
shall be automatically converted on the last day of such
Interest Period into Base Rate Loans. If no Notice of
Conversion/Continuation has been duly delivered with respect to
a Reserve Adjusted Eurodollar Loan on or before the third
Business Day prior to the last day of the Interest Period
applicable thereto, such Reserve Adjusted Eurodollar Loan shall
be automatically converted into a Base Rate Loan.
1.07 Pro Rata Borrowings. All Borrowings under this
Agreement shall be loaned by the Banks pro rata on the basis of
their A Term Loan Commitments, B Term Loan Commitments or
Revolving Loan Commitments, as the case may be. No Bank shall
be responsible for any default by any other Bank in its
obligation to make Loans hereunder and each Bank shall be
obligated to make the Loans provided to be made by it
hereunder, regardless of the failure of any other Bank to
fulfill its commitments hereunder.
1.08 Interest. (a) The unpaid principal amount of
each Base Rate Loan shall bear interest from the date of the
Borrowing thereof until maturity (whether by acceleration or
otherwise) (or unless sooner converted into a Reserve Adjusted
Eurodollar Loan) at a rate per annum equal to the sum of (i)
the Base Rate in effect from time to time and (ii) the
applicable Interest Margin.
(b) The unpaid principal amount of each Reserve
Adjusted Eurodollar Loan shall bear interest from the date of
the Borrowing thereof until maturity (whether by acceleration
or otherwise) (or unless sooner converted to a Base Rate Loan)
at a rate per annum equal to the sum of (i) the relevant
Eurodollar Rate and (ii) the applicable Interest Margin.
(c) Overdue principal and, to the extent permitted
by law, overdue interest in respect of each Loan shall bear
interest at a rate per annum equal to the sum of (i) the rate
of interest applicable to such Loan and (ii) 2%; provided that
the amount of the overdue principal of each Reserve Adjusted
Eurodollar Loan shall bear interest at the rate of interest
applicable thereto plus 2% for the balance of the then current
Interest Period.
(d) Interest shall accrue from and including the
date of any Borrowing to but excluding the date of any
repayment thereof and shall be payable (i) in respect of each
Base Rate Loan, quarterly in arrears on the last Business Day
of
<PAGE>
-9-
each March, June, September and December beginning December
1996; (ii) in respect of each Reserve Adjusted Eurodollar Loan,
in arrears on the last day of each Interest Period applicable
thereto and, in the case of an Interest Period in excess of
three months, on each date occurring at three-month intervals
after the first date of such Interest Period; and (iii) in
respect of each Loan, on any prepayment (on the amount
prepaid), at maturity (whether by acceleration or otherwise)
and, after such maturity, on demand.
(e) All computations of interest hereunder shall be
made in accordance with Section 11.07(b).
(f) The Agent, upon determining the interest rate
for any Borrowing of Reserve Adjusted Eurodollar Loans for any
Interest Period, shall promptly notify the Borrower and the
Banks thereof. Such determination shall, absent manifest
error, be final, conclusive and binding upon all parties
hereto.
1.09 Interest Periods. At the time the Borrower
gives a Notice of Borrowing or Notice of Conversion/
Continuation in respect of the making of, or conversion into or
continuation of, a Borrowing of Reserve Adjusted Eurodollar
Loans, it shall have the right to elect, by giving the Agent
written notice (or telephonic notice promptly confirmed in
writing), the Interest Period applicable to such Borrowing,
which Interest Period shall, at the option of such Borrower, be
a one, two, three or six month period. Notwithstanding
anything to the contrary contained above:
(a) the initial Interest Period for any Borrowing of
Reserve Adjusted Eurodollar Loans shall commence on the
date of such Borrowing (including the date of any
conversion from a Borrowing of Base Rate Loans) and each
Interest Period occurring thereafter in respect of such
Borrowing shall commence on the date on which the next
preceding Interest Period expires;
(b) if any Interest Period relating to a Borrowing
of Reserve Adjusted Eurodollar Loans begins on a date for
which there is no numerically corresponding date in the
calendar month in which such Interest Period ends, such
Interest Period shall end on the last Business Day of such
calendar month;
<PAGE>
-10-
(c) if any Interest Period would otherwise expire on
a day which is not a Business Day, such Interest Period
shall expire on the next succeeding Business Day; provided
that if any Interest Period in respect of a Reserve
Adjusted Eurodollar Loan would otherwise expire on a day
which is not a Business Day but is a day of the month
after which no further Business Day occurs in such month,
such Interest Period shall expire on the next preceding
Business Day;
(d) no Interest Period shall extend beyond the Final
Revolving Loan Maturity Date (in the case of Revolving
Loans) or the Final A Term Loan Maturity Date (in the case
of A Term Loans) or the Final B Term Loan Maturity Date
(in the case of B Term Loans); and
(e) no Interest Period with respect to any Borrowing
of Reserve Adjusted Eurodollar Loans shall extend beyond
any date upon which the Borrower thereof is required to
make a scheduled payment of principal with respect to the
Term Loans if, after giving effect to the selection of
such Interest Period, the aggregate principal amount of A
Term Loans and B Term Loans maintained as Reserve Adjusted
Eurodollar Loans with Interest Periods ending after such
date of scheduled payment of principal would exceed the
amount of A Term Loans and B Term Loans, respectively,
permitted to be outstanding after such scheduled payment
of principal.
1.10 Special Provisions Governing Reserve Adjusted
Eurodollar Loans. Notwithstanding any other provisions of this
Agreement, the following provisions shall govern with respect
to Reserve Adjusted Eurodollar Loans as to the matters covered:
(a) On an Interest Rate Determination Date, the
Agent shall determine (which determination shall, absent
demonstrable error, be final, conclusive and binding upon
all parties hereto) the interest rate which shall apply to
the Reserve Adjusted Eurodollar Loans for which an
interest rate is then being determined for the applicable
Interest Period and shall promptly give notice thereof (in
writing or by telephone confirmed in writing) to the
Borrower thereof and to each Bank.
(b) In the event that (x) in the case of clause (i)
below, the Agent or (y) in the case of clause (ii) or
(iii) below, any Bank shall have determined (which
<PAGE>
-11-
determination shall, absent demonstrable error, be final,
conclusive and binding upon all parties hereto):
(i) on any date for determining the Eurodollar
Rate for any Interest Period that, by reason of any
changes arising on or after the Effective Date
affecting the interbank eurodollar market, adequate
and fair means do not exist for ascertaining the
applicable interest rate on the basis provided for in
the definition of Eurodollar Rate;
(ii) at any time that such Bank shall incur
increased costs or reductions in the amounts received
or receivable hereunder with respect to any Reserve
Adjusted Eurodollar Loans or its obligation to make
Reserve Adjusted Eurodollar Loans because of (x) any
change since the Effective Date (including changes
proposed or published prior to the Effective Date) in
any applicable law, governmental rule, regulation,
guideline or order (or in the interpretation or
administration thereof and including the introduction
of any new law or governmental rule, regulation,
guideline or order) (such as, for example, but not
limited to, a change in official reserve
requirements, but, in all events, excluding reserves
required under Regulation D to the extent included in
the computation of the Eurodollar Rate), including a
change in the basis of taxation of payments to any
Bank of the principal of or interest on the Notes or
any other amounts payable hereunder (except for
changes in the rate of tax on, or determined by
reference to, the net income or profits of such Bank
pursuant to the laws of the jurisdiction in which it
is organized or in which its principal office or
applicable lending office is located or any
subdivision thereof or therein) and/or (y) other
circumstances affecting such Bank, the interbank
eurodollar market, or the position of such Bank in
such market; or
(iii) at any time that the making or continuance
of any Reserve Adjusted Eurodollar Loan has become
unlawful by compliance by such Bank in good faith
with any law, governmental rule, regulation,
guideline or order (or would conflict with any such
governmental rule, regulation, guideline or order not
having the force of law even though the failure to
<PAGE>
-12-
comply therewith would not be unlawful), or has
become impracticable as a result of a contingency
occurring after the Effective Date which materially
and adversely affects the interbank eurodollar
market;
then, and in any such event, the Agent in the case of
clause (i) above or such Bank in the case of clause (ii)
or (iii) above shall promptly give notice (by telephone
confirmed in writing) in accordance with Section 1.10(h)
hereof to the Borrower of the Loan affected and, in the
case of clause (ii) or (iii) to the Agent, of such
determination (which notice the Agent shall promptly
transmit to each of the other Banks). Thereafter (x) in
the case of clause (i) above, Reserve Adjusted Eurodollar
Loans shall no longer be available until such time as the
Agent notifies the Borrower and the Banks that the
circumstances giving rise to such notice by the Agent no
longer exist, and any Notice of Borrowing or Notice of
Conversion/Continuation given by the Borrower with respect
to the borrowing of or conversion into (or continuation
of) Reserve Adjusted Eurodollar Loans which have not yet
been incurred shall be deemed rescinded by the Borrower,
(y) in the case of clause (ii) above, the Borrower shall
pay to such Bank, within 10 Business Days after a written
demand therefor, such additional amounts (in the form of
an increased rate of, or a different method of
calculating, interest or otherwise as such Bank in its
reasonable discretion shall determine) as shall be
required to compensate such Bank for such increased costs
or reductions in amounts receivable hereunder (a written
notice pursuant to Section 1.10(h) hereof as to the
additional amounts owed to such Bank, setting forth in
reasonable detail the basis for the calculation thereof,
submitted to the Borrower shall, absent demonstrable
error, be final, conclusive and binding upon all parties
hereto) and (z) in the case of clause (iii) above, the
Borrower shall take one of the actions specified in
Section 1.10(c) as promptly as possible and, in any event,
within the time period required by law.
(c) At any time that any Reserve Adjusted Eurodollar
Loan is affected by the circumstances described in
Section 1.10(b)(ii) or (iii), the Borrower may (and in the
case of a Reserve Adjusted Eurodollar Loan affected
pursuant to Section 1.10(b)(iii) shall) either (i) if a
Notice of Borrowing or Notice of Conversion/Continuation
has been given with respect to the affected Reserve Adjusted
<PAGE>
-13-
Eurodollar Loan, cancel said Notice of Borrowing
or Notice of Conversion/Continuation by giving the Agent
telephonic notice (confirmed promptly in writing) thereof
on the same date (if the Borrower has been notified by not
later than 3:00 P.M., New York time, or the next Business
Day if otherwise) that the Borrower was notified by a Bank
pursuant to Section 1.10(b)(ii) or (iii), or (ii) if the
affected Reserve Adjusted Eurodollar Loan is then
outstanding, upon at least three Business Days' notice to
the Agent, require the affected Bank to convert each such
Reserve Adjusted Eurodollar Loan into a Base Rate Loan, or
prepay such Reserve Adjusted Eurodollar Loan; provided
that if more than one Bank is affected at any time, then
all affected Banks must be treated the same pursuant to
this Section 1.10(c); and provided, further, that the
Borrower shall compensate any such affected Banks as set
forth in Section 1.10(f).
(d) Anything herein to the contrary notwithstanding,
if on any Interest Rate Determination Date no Eurodollar
Rate is available by reason of the inability of the Agent
to determine such interest rate in accordance with the
definition thereof, the Agent shall give the Borrower and
each Bank prompt notice thereof and the Loans requested to
be made as Reserve Adjusted Eurodollar Loans shall,
subject to the applicable notice requirements, be made as
Base Rate Loans.
(e) Each Bank agrees that, as promptly as
practicable after it becomes aware of the occurrence of
any event or the existence of a condition that would cause
it to be an affected Bank under Section 1.10(b) (ii) or
(iii), it will, to the extent not inconsistent with such
Bank's internal policies or any legal or regulatory
restrictions, use reasonable efforts to make, fund or
maintain the affected Reserve Adjusted Eurodollar Loans of
such Bank through another lending office of such Bank if
as a result thereof the additional moneys which would
otherwise be required to be paid in respect of such Loans
pursuant to Section 1.10(b)(ii) would be materially
reduced or the illegality or other adverse circumstances
which would otherwise require conversion or prepayment of
such Loans pursuant to Section 1.10(b)(iii) would cease to
exist, and if, as determined by such Bank, in its
reasonable discretion, the making, funding or maintaining
of such Loans through such other lending office would not
otherwise materially adversely affect such Loans or such
<PAGE>
-14-
Bank. The Borrower hereby agrees to pay all reasonable
expenses incurred by any Bank in utilizing another lending
office of such Bank pursuant to this Section 1.10(e).
(f) The Borrower shall compensate each Bank, within
10 Business Days after a written request by that Bank
(which request shall be accompanied by a written notice
pursuant to Section 1.10(h) setting forth in reasonable
detail the basis for the calculation of such amounts), for
all reasonable losses, expenses and liabilities
(including, without limitation, such factors as any
interest paid by that Bank to lenders of funds borrowed by
it to make or carry its Reserve Adjusted Eurodollar Loans
and any loss sustained by that Bank in connection with re-
employment of such funds (based upon the difference
between the amount earned in connection with re-employment
of such funds and the amount payable by the Borrower if
such funds had been borrowed or remained outstanding))
which that Bank may sustain with respect to the Borrower's
Reserve Adjusted Eurodollar Loans: (i) if for any reason
(other than a default or error by that Bank) a Borrowing
of any such Reserve Adjusted Eurodollar Loan does not
occur on a date specified therefor in a Notice of
Borrowing or a Notice of Conversion/Continuation or in a
telephonic request for borrowing or conversion or
continuation, or a successive Interest Period in respect
of any such Reserve Adjusted Eurodollar Loan does not
commence after notice therefor is given pursuant to
Section 1.06, (ii) if any prepayment or conversion (as
required by Sections 3.01 and 3.02, by acceleration or
otherwise) of any of such Bank's Reserve Adjusted
Eurodollar Loans to the Borrower occurs on a date which is
not the last day of the Interest Period applicable to that
Loan, (iii) if any prepayment of any such Bank's Reserve
Adjusted Eurodollar Loans to the Borrower is not made on
any date specified in a notice of prepayment given by the
Borrower, or (iv) as a consequence of any other failure by
the Borrower to repay such Bank's Reserve Adjusted
Eurodollar Loans to the Borrower when required by the
terms of this Agreement.
(g) Any Bank claiming any additional amounts payable
pursuant to this Section 1.10 agrees to use reasonable
efforts (consistent with such Bank's internal policies,
legal and regulatory restrictions and commercial
considerations) to designate a different lending office if
the making of such a designation would avoid the need for,
or reduce the amount of, any such additional amounts and
<PAGE>
-15-
would not, in the reasonable judgment of such Bank, be in
any way otherwise disadvantageous to such Bank.
(h) Each Bank shall notify the Borrower of any event
occurring after the date hereof entitling such Bank to
compensation under the foregoing paragraphs of this
Section 1.10 as promptly as practicable, but in any event
within 90 days, after such Bank obtains actual knowledge
thereof; provided that if any Bank fails to give such
notice within 90 days after it obtains actual knowledge of
such an event, such Bank shall, with respect to
compensation payable pursuant to this Section 1.10 in
respect of any costs or other amounts resulting from or
relating to such event, only be entitled to payment under
this Section 1.10 for such costs or other amounts from and
after the date 90 days prior to the date that such Bank
does give such notice. Each Bank will furnish to the
Borrower a certificate setting forth in reasonable detail
the basis and amount of each request by such Bank for
compensation under this Section 1.10. Determinations by
any Bank for purposes of this Section 1.10, including of
the effect of any regulatory change pursuant to Section
1.10(b)(ii) on its costs of maintaining Loans or its
obligation to make Loans, or on amounts receivable by it
in respect of Loans, and of the amounts required to
compensate such Bank under this Section 1.10, shall be
made on a reasonable basis.
1.11 Capital Requirements. If any Bank shall have
determined that the adoption or effectiveness after the
Effective Date of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by such Bank or such Bank's parent with any request
or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or
comparable agency (including in each case any such change
proposed or published prior to the date hereof), has or would
have the effect of reducing the rate of return on such Bank's
or such Bank's parent's capital or assets as a consequence of
such Bank's obligations hereunder to a level below that which
such Bank or such Bank's parent could have achieved but for
such adoption, effectiveness or change or as a consequence of
an increase in the amount of capital required to be maintained
by such Bank as a consequence of such Bank's obligations
hereunder (including in each case, without limitation, with
respect to any Bank's
<PAGE>
-16-
Commitment or any Loan), then from time to time,
within 15 Business Days after demand by such Bank (with a
copy to the Agent), the Borrower shall pay to such Bank
such additional amount or amounts as will compensate such Bank
or such Bank's parent, as the case may be, for such reduction.
Each Bank, upon determining in good faith that any additional
amounts will be payable pursuant to this Section 1.11, will
give prompt written notice thereof to the Borrower, which
notice shall set forth in reasonable detail the basis of the
calculation of such additional amounts, although any delay in
giving any notice shall not release or diminish any of the
Borrower's obligations to pay additional amounts pursuant to
this Section 1.11.
1.12 Total Loan Commitments; Limitations on Out-
standing Loan Amounts. The original amount of the (i) Total
Commitments is $40,000,000, (ii) Total A Term Loan Commitments
is $15,000,000, (iii) Total B Term Loan Commitments is
$10,000,000 and (iv) Total Revolving Loan Commitments is
$15,000,000, including up to $3,000,000 of Letters of Credit.
Anything contained in this Agreement to the contrary
notwithstanding, (a) in no event shall the sum of the aggregate
principal amount of all outstanding Term Loans and Revolving
Loans of any Bank at any time exceed such Bank's portion of the
Total Commitments, (b) in no event shall the sum of the
aggregate principal amount of all Term Loans and Revolving
Loans from all Banks at any time exceed the Total Commitments
and (c) in no event shall the Total Utilization of Revolving
Loan Commitments and Letters of Credit Usage exceed the Total
Revolving Loan Commitments.
1.13 Letters of Credit.
(A) Letters of Credit. Subject to the terms and
conditions of this Agreement and in reliance upon the
representations and warranties of the Borrower set forth herein
and in the other Credit Documents, in addition to requesting
that the Banks make Revolving Loans pursuant to Section 1.03,
the Borrower may request, in accordance with the provisions of
this Section 1.13, that one or more Issuing Banks issue Letters
of Credit for the account of the Borrower; provided that (i)
the Borrower shall not request that any Bank issue any Letter
of Credit and a Bank shall not be required to issue any Letter
of Credit, if after giving effect to such issuance the sum of
(a) the Letters of Credit Usage on the date of such issuance,
after giving effect to the issuance of all Letters of Credit
subject to outstanding requests for issuance of a Letter of
Credit, plus (b) the aggregate principal amount of Revolving
<PAGE>
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Loans then outstanding, after giving effect to the making of
all Revolving Loans then requested by all outstanding but
unfunded Notices of Borrowing, would exceed the lesser of the
Borrower's Borrowing Base as would be shown in the Borrowing
Base Certificate that was last required to be delivered
pursuant to Section 6.01 or the Total Revolving Loan Commitment
then in effect, (ii) in no event shall any Issuing Bank issue
(w) any Letter of Credit having an expiration date later than
ten (10) Business Days prior to the Final Revolving Loan
Maturity Date, after giving effect to any possible renewal of
such Letter of Credit pursuant to the proviso to the following
clause (ii)(x), (x) subject to the foregoing clause (ii)(w),
any Letter of Credit having an expiration date more than one
year after its date of issuance; provided that, subject to the
foregoing clause (ii)(w), this clause (x) shall not prevent any
Issuing Bank from issuing a Letter of Credit containing a
provision to the effect that such Letter of Credit will
automatically be renewed annually for a period not to exceed
one year, so long as such renewable Letter of Credit provides
that it shall not at any time be renewed for an additional year
if (I) the Borrower notifies the Issuing Bank in writing one
Business Day prior to the applicable renewal date that the
Borrower elects to allow the Letter of Credit to expire without
being renewed, or (II) the Issuing Bank or the Required Banks
notify the Borrower in writing, prior to the date set forth in
such Letter of Credit as the date by which the beneficiary
thereof is to be notified whether such Letter of Credit is to
be renewed, that such Letter of Credit shall not be so renewed,
in which case such Letter of Credit shall not be so renewed,
(y) any Letter of Credit, the initial stated amount of which is
less than $5,000, or (z) any Letter of Credit (I) which is
governed by laws other than the laws of the State of New York,
without regard to the principles of conflicts of laws, or
(II) as to which the beneficiary is not required, by acceptance
of the Letter of Credit, to be subject to the exclusive
jurisdiction of any competent state or federal court in the
State of New York with regard to such Letter of Credit and
(iii) the Borrower shall not request that any Issuing Bank
issue and no Issuing Bank shall issue any Letter of Credit if,
after giving effect to such issuance and the issuance of all
other requested Letters of Credit, the then outstanding Letters
of Credit Usage in respect of all Letters of Credit would
exceed $3,000,000. The issuance of any Letter of Credit in
accordance with the provisions of this Section 1.13 shall be
given effect in the calculation of the aggregate principal
amount of Revolving Loans outstanding and the Letters of Credit
Usage and shall
<PAGE>
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require the satisfaction of each condition set forth in
Sections 4.02 and 4.03.
Immediately upon the issuance of each Letter of
Credit, each Bank other than the Issuing Bank or Banks shall be
deemed to, and hereby agrees to, be irrevocably obligated to
reimburse the Issuing Bank (such reimbursement obligation of
each Bank in each Letter of Credit being hereinafter referred
to as its "Letter of Credit Participation") under such Letter
of Credit and each drawing thereunder in an amount equal to
such Bank's pro rata share (determined on the basis of such
Bank's Revolving Loan Commitment) of the maximum amount which
is or at any time may become available to be drawn thereunder.
Each Letter of Credit may provide that the Issuing
Bank may (but shall not be required to) pay the beneficiary
thereof upon the occurrence of an Event of Default and the
acceleration of the maturity of the Revolving Loans or, if
payment is not then due to the beneficiary, provide for the
deposit of funds in an account to secure payment to the
beneficiary and that any funds so deposited shall be paid to
the beneficiary of the Letter of Credit if conditions to such
payment are satisfied or returned to the Issuing Bank for
distribution to the Banks (or, if all Obligations shall have
been indefeasibly paid in full, to the Borrower) if no payment
to the beneficiary has been made and the final date available
for drawings under the Letter of Credit has passed. Each
payment or deposit of funds by an Issuing Bank as provided in
this paragraph shall be treated for all purposes of this
Agreement as a drawing duly honored by such Issuing Bank under
the related Letter of Credit.
(B) Request for Issuance. Whenever the Borrower
desires the issuance of a Letter of Credit, it shall deliver to
the Agent a request for issuance of a Letter of Credit no later
than 1:00 P.M. (New York time) at least three Business Days, or
such shorter period as may be agreed to by any Issuing Bank in
any particular instance, in advance of the proposed date of
issuance. The request for issuance with respect to any Letter
of Credit shall specify (i) the proposed date of issuance
(which shall be a business day under the laws of the
jurisdiction of the Issuing Bank) of such Letter of Credit,
(ii) the face amount of such Letter of Credit, (iii) the
expiration date of such Letter of Credit and (iv) the name and
address of the beneficiary of such Letter of Credit. As soon
as practicable after delivery of such request for issuance of a
Letter of Credit, the Issuing Bank for such Letter of Credit
shall be
<PAGE>
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determined as provided in Section 1.13(C). Prior to
the date of issuance, the Borrower shall specify a precise
description of the documents and the verbatim text of any
certificate to be presented by the beneficiary of such Letter
of Credit which, if presented by such beneficiary prior to the
expiration date of the Letter of Credit, would require the
Issuing Bank to make payment under the Letter of Credit;
provided that the Issuing Bank, in its sole judgment, may
require changes in any such documents and certificates; and
provided, further, that no Letter of Credit shall require
payment against a conforming draft to be made thereunder
earlier than 1:00 P.M. in the time zone of the Issuing Bank on
the Business Day (which shall be a business day under the laws
of the jurisdiction of the Issuing Bank) next succeeding the
Business Day (which shall be a business day under the laws of
the jurisdiction of the Issuing Bank) that such draft is
presented. In determining whether to pay under any Letter of
Credit, the Issuing Bank shall be responsible only to determine
that the documents and certificates required to be delivered
under that Letter of Credit have been delivered and that they
comply on their face with the requirements of that Letter of
Credit. Promptly after receipt of a request for issuance of a
Letter of Credit and the determination of the Issuing Bank
thereof, the Agent shall notify each Bank of the proposed
issuance, the identity of the Issuing Bank and the amount of
each other Bank's respective participation therein, determined
in accordance with Section 1.13(A).
(C) Determination of Issuing Bank.
(1) Upon receipt by the Agent of a request for
issuance pursuant to Section 1.13(B) with respect to a Letter
of Credit, in the event the Agent elects to issue such Letter
of Credit, the Agent shall so notify the Borrower, and the
Agent shall be the Issuing Bank with respect thereto. In the
event that the Agent, in its sole discretion, elects not to
issue such Letter of Credit, the Agent shall promptly so notify
the Borrower, and the Borrower may request any other Bank to
issue such Letter of Credit. Each such Bank so requested to
issue such Letter of Credit shall promptly notify the Borrower
and the Agent whether or not, in its sole discretion, it has
elected to issue such Letter of Credit, and any such Bank that
so elects to issue such Letter of Credit shall be the Issuing
<PAGE>
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Bank with respect thereto. In the event that all other Banks
shall have declined to issue such Letter of Credit,
notwithstanding the prior election of the Agent not to issue
such Letter of Credit, the Agent shall be obligated to issue
the Letter of Credit requested by the Borrower and shall be the
Issuing Bank with respect to such Letter of Credit. In no
event shall any Bank be an Issuing Bank if such Bank would
incur increased costs pursuant to Section 1.13(H) as a result
of being the Issuing Bank, unless consented to by the Borrower.
No Issuing Bank shall issue any Letter of Credit denominated in
a currency other than Dollars.
(2) Each Issuing Bank that elects to issue a Letter
of Credit shall promptly give written notice to the Agent and
each other Bank of the information required under Sections
1.13(B)(i)-(iv) relating to the Letter of Credit.
(D) Payment of Amounts Drawn Under Letters of
Credit. In the event of any request for drawing under any
Letter of Credit by the beneficiary thereof, the Issuing Bank
shall notify the Borrower and the Agent on or before the date
on which such Issuing Bank intends to honor such drawing, and
the Borrower shall reimburse such Issuing Bank on the day on
which such drawing is honored in an amount in same day funds
equal to the amount of such drawing; provided that, anything
contained in this Agreement to the contrary notwithstanding,
(i) unless the Borrower shall have notified the Agent and such
Issuing Bank prior to 10:00 A.M. (New York time) on the
Business Day of the date of such drawing that the Borrower
intends to reimburse such Issuing Bank for the amount of such
drawing with funds other than the proceeds of Revolving Loans,
the Borrower shall be deemed to have timely given a Notice of
Borrowing to the Agent requesting the Banks to make Revolving
Loans that are Base Rate Loans on the date on which such
drawing is honored in an amount equal to the amount of such
drawing, and (ii) subject to satisfaction or waiver of the
conditions specified in Section 4.02, the Banks shall, on the
date of such drawing, make Revolving Loans that are Base Rate
Loans in the amount of such drawing, the proceeds of which
shall be applied directly by the Agent to reimburse such
Issuing Bank for the amount of such drawing; and provided
further that if, for any reason, proceeds of Revolving Loans
are not received by such Issuing Bank on such date in an amount
equal to the amount of such drawing, the Borrower shall
reimburse such Issuing Bank, on the Business Day (which shall
be a business day under the laws of the jurisdiction of such
Issuing Bank) immediately following the date of such drawing,
in an amount in same day funds equal to the excess of the
amount of such drawing over the amount of such Revolving Loans,
if any, that are so received, plus accrued interest on such
amount at the rate set forth in Section 1.13(F)(1)(i).
<PAGE>
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(E) Payment by Banks. In the event that the
Borrower shall fail to reimburse an Issuing Bank as provided in
Section 1.13(D) in an amount equal to the amount of any drawing
honored by such Issuing Bank under a Letter of Credit issued by
it, such Issuing Bank shall promptly notify each Bank of the
unreimbursed amount of such drawing and of such Bank's
respective participation therein. Each Bank shall make
available to such Issuing Bank an amount equal to its
respective participation in same day funds, at the office of
such Issuing Bank specified in such notice, not later than 1:00
P.M. (New York time) on the Business Day (which shall be a
business day under the laws of the jurisdiction of such Issuing
Bank) after the date notified by such Issuing Bank. In the
event that any Bank fails to make available to such Issuing
Bank the amount of such Bank's participation in such Letter of
Credit as provided in this Section 1.13(E), such Issuing Bank
shall be entitled to recover such amount on demand from such
Bank together with interest at the customary rate set by the
Agent for the correction of errors among banks for three
Business Days and thereafter at the Base Rate. Each Issuing
Bank shall distribute to each other Bank which has paid all
amounts payable by it under this Section 1.13(E) with respect
to any Letter of Credit issued by such Issuing Bank such other
Bank's pro rata share of all payments received by such Issuing
Bank from the Borrower in reimbursement of drawings honored by
such Issuing Bank under such Letter of Credit when such
payments are received. Nothing in this Section 1.13(E) shall
be deemed to relieve any Bank from its obligation to pay all
amounts payable by it under this Section 1.13(E) with respect
to any Letter of Credit issued by an Issuing Bank or to
prejudice any rights that the Borrower or any other Bank may
have against a Bank as a result of any default by such Bank
hereunder and no Bank shall be responsible for the failure of
any other Bank to pay its pro rata share payable under this
Section 1.13(E).
(F) Compensation.
(1) The Borrower agrees to pay the following amount
with respect to all Letters of Credit:
(i) with respect to drawings made under any Letter
of Credit, interest, payable on demand, on the amount paid
by such Issuing Bank in respect of each such drawing from
and including the date of the drawing through the date
such amount is reimbursed by the Borrower (including any
such reimbursement out of the proceeds of Revolving Loans
pursuant to Section 1.13(D)) at a rate which is equal to
<PAGE>
-22-
the interest rate then applicable to Base Rate Loans for
the period from the date of such drawing to and including
the first Business Day after the date of such drawing and
thereafter at a rate equal to 2% per annum in excess of
the rate of interest otherwise payable under this
Agreement for Base Rate Loans during such period; provided
that if the Banks make a Revolving Loan on any day the
proceeds of which are to be applied to payment of the
amount paid by such Issuing Bank, the Borrower shall not
be obligated to pay interest on such amount for such day
pursuant to this clause (i); and
(ii) with respect to the amendment or transfer of
each Letter of Credit and each drawing made thereunder,
documentary and processing charges in accordance with such
Issuing Bank's standard schedule for such charges in
effect at the time of such amendment, transfer or drawing,
as the case may be.
(2) The Borrower agrees to pay to the Agent for
distribution to each Bank in respect of all Letters of Credit
outstanding such Bank's pro rata share of a commission equal to
2% per annum of the maximum amount available from time to time
to be drawn under such outstanding Letters of Credit, payable
in arrears on and through the last day of each fiscal quarter
of the Borrower and calculated on the basis of a 365-day year
and the actual number of days elapsed. Upon the happening and
during the continuance of an Event of Default described in
Section 8.01, the commission referred to in the preceding
sentence shall be 4% per annum.
(3) The Borrower agrees to pay to each Issuing Bank
in respect of each Letter of Credit issued by each such Issuing
Bank on the date of issuance an amount equal to the greater of
(A) 1/4% of the maximum amount available at any time to be
drawn under such Letter of Credit or (B) $2,500.
Amounts payable under clauses (1)(i) and (2) of this
Section 1.13(F) shall be paid to the Agent on behalf of the
Banks. The Agent shall promptly distribute to each Bank its
pro rata share of such amount. Amounts payable under clauses
(1)(ii) and (3) of this Section 1.13(F) shall be paid directly
to the Issuing Bank.
(G) Obligations Absolute. The obligation of the
Borrower to reimburse each Issuing Bank for drawings made under
the Letters of Credit issued by it and the obligations of the
<PAGE>
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Banks under Section 1.13(E) shall be unconditional and
irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances including,
without limitation, the following circumstances:
(1) any lack of validity or enforceability of any
Letter of Credit;
(2) the existence of any claim, setoff, defense or
other right that the Borrower or any Affiliate of the
Borrower or any other Person may have at any time against
a beneficiary or any transferee of any Letter of Credit
(or any persons or entities for whom any such beneficiary
or transferee may be acting), such Issuing Bank, any Bank
or any other Person, whether in connection with this
Agreement, the transactions contemplated herein or any
unrelated transaction;
(3) any draft, demand, certificate or any other
document presented under any Letter of Credit proving to
be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or
inaccurate in any respect, if not apparent from the
documents presented;
(4) payment by such Issuing Bank under any Letter of
Credit against presentation of a demand, draft or
certificate or other document that does not comply with
the terms of such Letter of Credit unless such Issuing
Bank shall have acted in bad faith or with willful
misconduct or gross negligence in issuing such payment;
(5) any other circumstance or happening whatsoever
that is similar to any of the foregoing; or
(6) the fact that a Default or Event of Default
shall have occurred and be continuing.
(H) Additional Payments. If by reason of (a) any
change after the Effective Date in applicable law, regulation,
rule, decree or regulatory requirement or any change in the
interpretation or application by any judicial or regulatory
authority of any law, regulation, rule, decree or regulatory
requirement or (b) compliance by any Issuing Bank or any Bank
with any direction, request or requirement (whether or not
having the force of law) of any governmental or monetary
authority including, without limitation, Regulation D:
<PAGE>
-24-
(i) such Issuing Bank or any Bank shall be subject
to any tax, levy, charge or withholding of any nature or
to any variation thereof or to any penalty with respect to
the maintenance or fulfillment of its obligations under
this Section 1.13, whether directly or by such being
imposed on or suffered by such Issuing Bank or any Bank;
provided, however, that no payment shall be required to be
made by the Borrower pursuant to this clause (i) with
respect to changes in the rate of any tax on or measured
by the net income of a Bank (including any franchise or
similar tax so measured) pursuant to the income tax laws
of the United States or of the jurisdiction in which it is
incorporated or organized or the jurisdiction where such
Bank's lending office is located;
(ii) any reserve, deposit or similar requirement is
or shall be applicable, imposed or modified in respect of
any Letter of Credit issued by such Issuing Bank or
participations therein purchased by any Bank; or
(iii) there shall be imposed on such Issuing Bank or
any Bank any other condition regarding this Section 1.13,
any Letter of Credit or any participation therein;
and the result of the foregoing is to directly or indirectly
increase the cost to such Issuing Bank or any Bank of issuing,
making or maintaining any Letter of Credit or of purchasing or
maintaining any participation therein, or to reduce the amount
receivable in respect thereof by such Issuing Bank or any Bank,
then and in any such case such Issuing Bank or such Bank shall,
after the additional cost is incurred or the amount received is
reduced, notify the Borrower and the Borrower shall pay within
10 Business Days after demand such amounts as such Issuing Bank
or such Bank may specify to be necessary to compensate such
Issuing Bank or such Bank for such additional cost or reduced
receipt, together with interest on such amount from the date
demanded until payment in full thereof at a rate per annum
equal at all times to the rate applicable to Base Rate Loans
then in effect; provided that if any Bank fails to give such
notice within 90 days after it obtains actual knowledge of such
an event, such Bank shall, with respect to compensation payable
pursuant to this Section 1.13(H) in respect of any costs or
other amounts resulting from or relating to such event, only be
entitled to payment under this Section 1.13(H) for such costs
or other amounts from and after the date 90 days prior to the
date that such Bank does give such notice; and provided,
further, that each Bank agrees that, as promptly as practicable
<PAGE>
-25-
after it becomes aware of the existence of the foregoing
conditions, it will, to the extent not inconsistent with such
Bank's internal policies or any legal or regulatory
restrictions, use reasonable efforts to issue, make or maintain
the affected Letter of Credit or purchase or maintain any
participation therein through another lending office of such
Bank if as a result thereof the additional moneys which would
otherwise be required to be paid to compensate for such
additional cost or reduced receipt with respect to such Letter
of Credit pursuant to this Section 1.13(H) would be reduced and
if, as determined by such Bank, in its reasonable discretion,
the issuance, making or maintaining of such Letter of Credit or
the purchasing or maintaining of any participation therein
through such other lending office would not otherwise
materially adversely affect such Letter of Credit or such Bank.
Each Bank will furnish to the Borrower a certificate setting
forth in reasonable detail the basis and amount of each request
by such Bank for compensation under this Section 1.13(H).
Determinations by any Bank for purposes of this Section
1.13(H), including of the effect of any regulatory change
pursuant to Section 1.13(H) on its costs of making or
maintaining Letters of Credit (or purchasing or maintaining
participations therein), or on amounts receivable by it in
respect of Letters of Credit, and of the amounts required to
compensate such Bank under this Section 1.13(H), shall be made
on a reasonable basis. A certificate in reasonable detail as
to the amount of such increased cost or reduced receipt,
submitted to the Borrower and the Agent by that Issuing Bank or
any Bank, as the case may be, shall, except for demonstrable
error, be final, conclusive and binding for all purposes.
If any Bank shall be entitled to payments under this
Section 1.13, such Bank, within a reasonable time after
becoming entitled to such payments, shall (unless otherwise
required by a governmental authority or as a result of any law,
rule, regulation, order or similar directive applicable to such
Bank) designate a different lending office from that initially
selected by such Bank to which payments are to be made under
this Agreement or under any Credit Document, if such
designation would avoid the need for (or materially reduce the
amount of) such payments and would not, in the reasonable
opinion of the Bank, be otherwise disadvantageous to such Bank.
(I) Indemnification; Nature of Issuing Bank's
Duties. In addition to amounts payable as elsewhere provided
in this Section 1.13, without duplication, the Borrower hereby
agrees to protect, indemnify, pay and save each Issuing Bank
<PAGE>
-26-
harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys' fees and allocated costs of
internal counsel) which such Issuing Bank may incur or be
subject to as a consequence, direct or indirect, of (i) the
issuance of the Letters of Credit or (ii) the failure of such
Issuing Bank to honor a drawing under any Letter of Credit, in
each case as a result of any act or omission, whether rightful
or wrongful, of any present or future de jure or de facto
government or Governmental Authority (all such acts or
omissions herein called "Government Acts").
As between the Borrower and each Issuing Bank, the
Borrower assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit issued by such Issuing Bank by,
the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, such
Issuing Bank shall not be responsible: (i) for the form,
validity, sufficiency, accuracy, genuineness or legal effects
of any document submitted by any party in connection with the
application for and issuance of any such Letter of Credit, even
if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(ii) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign
any such Letter of Credit or the rights or benefits thereunder
or proceeds thereof, in whole or in part, that may prove to be
invalid or ineffective for any reason; (iii) for failure of the
beneficiary of any such Letter of Credit to comply fully with
conditions required in order to draw upon such Letter of
Credit; (iv) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they are in
cipher; (v) for errors in interpretation of technical terms;
(vi) for any loss or delay in the transmission or otherwise of
any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) for the
misapplication by the beneficiary of any such Letter of Credit
of the proceeds of any drawing under such Letter of Credit; and
(viii) for any consequences arising from causes beyond the
control of such Issuing Bank, including, without limitation,
any Government Acts. None of the above shall affect, impair,
or prevent the vesting of any of such Issuing Bank's rights or
powers hereunder.
In furtherance and extension and not in limitation of
the specific provisions hereinabove set forth, any action taken
<PAGE>
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or omitted by any Issuing Bank in connection with the Letters
of Credit issued by it or the related certificates, if taken or
omitted in good faith, shall not put such Issuing Bank under
any resulting liability to the Borrower.
Notwithstanding anything to the contrary contained in
this Section 1.13(I), the Borrower shall have no obligation to
indemnify any Issuing Bank or any Bank in respect of any
liability incurred by such Issuing Bank or such Bank arising
solely out of the gross negligence, bad faith or willful
misconduct of such Issuing Bank or such Bank or out of the
wrongful dishonor by such Issuing Bank or such Bank of a proper
demand for payment under the Letters of Credit issued by it.
SECTION 2. Commitments.
2.01 Voluntary Reduction of Commitments. Upon at
least one Business Day's prior written notice (or telephonic
notice promptly confirmed in writing) to the Agent at the
Agent's Office (which notice the Agent shall promptly transmit
to each of the Banks), the Borrower shall have the right,
without premium or penalty, to terminate the unutilized portion
of the Total Revolving Loan Commitments, in part or in whole;
provided that (x) any such termination shall apply to propor-
tionately and permanently reduce the Revolving Loan Commitment
of each of the Banks and (y) any partial reduction pursuant to
this Section 2.01 shall be in the amount of at least $500,000
and integral multiples of $100,000 in excess of that amount;
provided, further, that the Total Revolving Loan Commitments
shall not be reduced to an amount less than the aggregate
Revolving Loans and Letters of Credit Usage then outstanding.
2.02 Mandatory Adjustments of Commitments, etc.
(a) The Total Revolving Loan Commitments shall terminate on
the Revolving Loan Commitment Termination Date.
(b) The Total A Term Loan Commitments shall
terminate as to the amount of any portion of the Total A Term
Loan Commitments not utilized by the Borrower on the Closing
Date.
(c) The Total B Term Loan Commitments shall
terminate as to the amount of any portion of the Total B Term
Loan Commitments not utilized by the Borrower on the Closing
Date.
(d) The Total Term Loan Commitments shall
automatically be reduced, on a pro rata basis, between the
Total A Term Loan Commitments and the Total B Term Loan
Commitments, by the
<PAGE>
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amount of any reduction of the funding necessary for the
Refinancing.
(e) The Total Term Loan Commitments shall be reduced
on the date on which any payments of principal on the Term
Loans are made (other than pursuant to Section 3.02(A)(a)) in
an aggregate amount equal to such payments.
(f) Each reduction to the Total A Term Loan
Commitments or the Total B Term Loan Commitments or termination
of the Total Revolving Loan Commitments pursuant to this
Section 2.02 shall apply proportionately to the A Term Loan
Commitment, the B Term Loan Commitment or the Revolving Loan
Commitment, as the case may be, of each Bank.
(g) The Total Revolving Loan Commitments shall be
permanently reduced in the amount and at the time of any
payment on the Loans required to be applied to the Revolving
Loans or the Revolving Loan Commitment pursuant to Section
3.02(B)(a).
2.03 Commitment Commission. The Borrower agrees to
pay the Agent a commitment commission ("Commitment Commission")
for the account of each Bank for the period from and including
the Closing Date to but not including the date the Total
Revolving Loan Commitments have been terminated, computed at a
rate equal to 1/2% per annum on the daily average Unutilized
Commitment of such Bank. Accrued Commitment Commission shall
be due and payable in arrears on the last Business Day of each
March, June, September and December commencing December 1996
and on the Revolving Loan Commitment Termination Date, based on
the actual number of days elapsed over a year of 360 days.
SECTION 3. Payments.
3.01 Voluntary Prepayments. The Borrower shall have
the right to prepay Term Loans and Revolving Loans in whole or
in part from time to time, without premium or penalty, on the
following terms and conditions: (i) the Borrower shall give
the Agent at the Agent's Office written notice (or telephonic
notice promptly confirmed in writing) of its intent to prepay
the Loans, the amount of such prepayment and, in the case of
Reserve Adjusted Eurodollar Loans, the specific Borrowing or
Borrowings pursuant to which made, which notice shall be given
by the Borrower at least one Business Day prior to the date of
such prepayment and which notice shall promptly be transmitted
by the Agent to each of the Banks; (ii) each partial prepayment
<PAGE>
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of any Borrowing shall be in an aggregate principal amount of
at least $500,000 and integral multiples of $100,000 in excess
of that amount; provided that no partial prepayment of Reserve
Adjusted Eurodollar Loans made pursuant to a single Borrowing
under the Loan Facility (or Portion thereof) shall reduce the
outstanding Loans made pursuant to such Borrowing to an amount
less than the Minimum Borrowing Amount; and (iii) Reserve
Adjusted Eurodollar Loans may only be prepaid pursuant to this
Section 3.01 on the last day of an Interest Period applicable
thereto. Voluntary prepayments of Term Loans shall be applied
to the prepayment of the outstanding principal amount of Term
Loans pro rata between the A Term Loans and the B Term Loans.
Voluntary prepayments of Loans under the A Term Loan Facility
shall be applied to the prepayment of the outstanding principal
amount of A Term Loans pro rata to all remaining Scheduled A
Term Loans Principal Payments such that each Scheduled A Term
Loans Principal Payment then remaining shall be reduced by an
amount equal to the product of (A) such payment and (B) a
fraction of which the numerator is equal to the amount of such
Scheduled A Term Loans Principal Payment then remaining and the
denominator is equal to the amount of all Scheduled A Term
Loans Principal Payments remaining. Voluntary prepayments of
Loans under the B Term Loan Facility shall be applied to the
prepayment of the outstanding principal amount of B Term Loans
pro rata to all remaining Scheduled B Term Loans Principal
Payments such that each Scheduled B Term Loans Principal
Payment then remaining shall be reduced by an amount equal to
the product of (A) such payment and (B) a fraction of which the
numerator is equal to the amount of such Scheduled B Term Loans
Principal Payment then remaining and the denominator is equal
to the amount of all Scheduled B Term Loans Principal Payments
remaining.
3.02 Mandatory Prepayments.
(A) Requirements:
(a) The Borrower shall prepay the outstanding
principal amount of the A Term Loans, the B Term Loans or
the Revolving Loans, as the case may be, on any date on
which the aggregate outstanding principal amount of such
Loans (after giving effect to any other repayments or
prepayments on such day together with, in the case of
Revolving Loans, the outstanding principal amount of
Letters of Credit Usage) exceeds the Total A Term Loan
Commitments, the Total B Term Loan Commitments or the
Total Revolving
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Loan Commitments, as the case may be, in the amount of such excess.
(b) If the aggregate principal amount of outstanding
Revolving Loans and Letters of Credit Usage exceeds the
Borrowing Base as set forth in the Borrower's most recent
Borrowing Base Certificate required to be delivered
pursuant to Section 6.01 of this Agreement (such amount is
hereinafter referred to as the "Excess"), then the
Borrower shall prepay its Revolving Loans in a principal
amount equal to such Excess no later than two Business
Days after the Borrower has delivered, or was required to
deliver, such Borrowing Base Certificate to the Agent and
the Banks.
(c) The Borrower shall cause to be paid each
Scheduled A Term Loans Principal Payment on the A Term
Loans until the A Term Loans are paid in full in the
amounts and at the times specified in the definition of
Scheduled A Term Loans Principal Payments to the extent
that prepayments have not previously been applied to such
Scheduled A Term Loans Principal Payments (and such
Scheduled A Term Loans Principal Payments have not
otherwise been reduced) pursuant to the terms hereof.
(d) The Borrower shall cause to be paid each
Scheduled B Term Loans Principal Payment on the B Term
Loans until all B Term Loans are paid in full, in the
amounts and at the time specified in the definition of
Scheduled B Term Loans Principal Payments to the extent
that prepayments have not previously been applied to such
Scheduled B Term Loans Principal Payments (and such
Scheduled B Term Loans Principal Payments have not
otherwise been reduced) pursuant to the terms hereof.
(e) As promptly as practicable, but in any event
within five Business Days of the date of receipt by
Holdings, the Borrower and/or any of the Borrower's
Subsidiaries, as the case may be, of Net Cash Proceeds or
Net Financing Proceeds, an amount equal to such Net Cash
Proceeds or Net Financing Proceeds shall be applied as
provided in Section 3.02(B)(a); provided that with respect
to any Net Cash Proceeds of the sale of equity securities
of Holdings, the Borrower or any of its Subsidiaries,
clause (g) of this Section 3.02(A) will govern and that
with respect to any Net Cash Proceeds from any Destruction
or Taking, clause (i) of this Section 3.02(A) will govern.
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(f) As promptly as practicable, but in any event
within 90 days after the last day of each fiscal year of
the Borrower, commencing with fiscal year 1996, an amount
equal to 50% of Excess Cash Flow for such fiscal year
shall be applied as provided in Section 3.02(B)(a).
(g) As promptly as practicable, but in any event
within five Business Days of the date of the receipt
thereof by Holdings, the Borrower and/or any of its
Subsidiaries, an amount equal to 100% of the proceeds
received by the Borrower or Holdings (including capital
contributions, other than those referred to in clauses
(i), (ii) and (iii) of this paragraph (g), received by the
Borrower or any of its Subsidiaries) or such Subsidiary
(net of underwriting discounts and commissions and other
costs and expenses directly associated therewith) of the
sale after the Closing Date of equity securities (other
than proceeds from the issuance of capital stock (i) of
Holdings, the Borrower or any of its Subsidiaries pursuant
to any pension, stock option, profit sharing or other
employee benefit plan or agreement of Holdings, the
Borrower or any of its Subsidiaries in the ordinary course
of business, (ii) by a Subsidiary to another Subsidiary or
to the Borrower or (iii) pursuant to the Holdings IPO,
except to the extent necessary in connection with the
Refinancing as contemplated by this Agreement) shall be
applied as provided in Section 3.02(B)(a); provided that
the proceeds of the Carson Holdings Limited IPO shall not
be subject to mandatory prepayment pursuant to this
Section 3.02(A)(g) unless any proceeds of the Carson
Holdings Limited IPO are transferred to the Borrower in
the United States, in which case such proceeds shall,
notwithstanding the provisions of Section 3.02(B)(a), be
applied as promptly as practicable, but in any event
within five Business Days of the date of the Borrower's
receipt thereof, to repay outstanding Revolving Loans.
(h) As promptly as practicable, but in any event
within five Business Days of the date of the receipt
thereof by the Borrower or any of its Subsidiaries, an
amount equal to 100% of any surplus net assets of any
Pension Plan returned to the Borrower or any of its
Subsidiaries shall be applied as provided in
Section 3.02(B)(a).
(i) At the Agent's discretion, on the date of
receipt thereof by Holdings, the Borrower and/or any of
its Subsidiaries, an amount equal to 100% of any proceeds
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received due to loss, damage, destruction or condemnation
of or to Assets (collectively, "Loss Proceeds"), less any
portion of such proceeds not in excess of $500,000, in the
aggregate, per fiscal year to be used for rebuilding,
repairing or replacing productive assets of a kind then
used or usable in the business of the Borrower and its
Subsidiaries (in each case to the extent permitted by the
Mortgages and the Security Documents) within 180 days of
receipt of such Loss Proceeds (or such longer periods as
may be consented to by the Agent, which consent shall not
be unreasonably withheld) shall be delivered by Holdings,
the Borrower and/or its Subsidiaries to the Agent to be
held by the Agent in a cash collateral account bearing
interest payable to the Borrower at a rate per annum
(meaning 360 days) equal to the Federal Funds Rate. Upon
the Borrower's request, Agent shall release such proceeds
to the Borrower for reinvestment, rebuilding, repair or
replacement as described above. To the extent the
Borrower fails to use any or all of such released proceeds
for such rebuilding, repair or replacement of assets
within 180 days (or such longer periods as may be
consented to by the Agent, which consent shall not be
unreasonably withheld) of such release, the Borrower
shall, at the Agent's discretion, return the unused
portion of such released funds to the Agent and authorize
and direct the Agent to apply such proceeds as provided in
Section 3.02(B)(a).
(j) As promptly as practicable, but in any event
within five Business Days of the date of receipt by
Holdings, the Borrower and/or its Subsidiaries of any tax
refund, an amount equal to 100% of such refund paid to
Holdings, the Borrower and/or any of its Subsidiaries
shall be applied as provided in Section 3.02(B)(a);
provided that such refund or refunds are not promptly
applied by Holdings, the Borrower and/or any of its
Subsidiaries to the payment of future tax liabilities.
(B) Application:
(a) Prepayments to be applied pursuant to this
Section 3.02(B)(a) shall be applied without penalty or
premium (other than Reserve Adjusted Eurodollar Rate
breakage costs, if any) as follows: (i) first, to the
Term Portion, pro rata between the Scheduled A Term Loans
Principal Payments and the Scheduled B Term Loans
Principal Payments, in pro rata order of maturity; and
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(ii) second, to repay Revolving Loans; provided that
prepayments required by Section 3.02(A)(b) hereof shall be
applied first to repay Revolving Loans.
(b) With respect to each prepayment of Loans
required by Section 3.02(A), the Borrower shall give the
Agent two Business Days notice and may designate the Types
of Loans and the specific Borrowing or Borrowings which
are to be prepaid; provided that (i)(x) Reserve Adjusted
Eurodollar Loans may be designated for prepayment pursuant
to this Section 3.02 only on the last day of an Interest
Period applicable thereto unless all Reserve Adjusted
Eurodollar Loans with Interest Periods ending on such date
of required prepayment and all Base Rate Loans have been
or are concurrently being paid in full and (y) if any
prepayment of Reserve Adjusted Eurodollar Loans made
pursuant to a single Borrowing shall reduce the
outstanding Loans made pursuant to such Borrowing to an
amount less than the Minimum Borrowing Amount, such
Borrowing shall immediately be converted into Base Rate
Loans; and (ii) each prepayment of any Loans made pursuant
to a single Borrowing shall be applied pro rata among such
Loans. In the absence of a designation by the Borrower,
the Agent shall, subject to the above, make such
designation in its sole discretion. All prepayments shall
include payment of accrued interest on the principal
amount so prepaid, shall be applied to the payment of
interest before application to principal and shall include
amounts payable, if any, under Section 1.10(f).
3.03 Method and Place of Payment. (a) Except as
otherwise specifically provided herein, all payments under this
Agreement shall be made to the Agent, for the ratable account
of the Banks entitled thereto, not later than 1:00 P.M. (New
York time) on the date when due and shall be made in
immediately available funds in lawful money of the United
States of America to the account specified therefor by the
Agent or if no account has been so specified at the Agent's
Office, it being understood that written notice by the Borrower
to the Agent to make a payment from the funds in the Borrower's
account at the Agent's Office shall constitute the making of
such payment to the extent of such funds held in such account.
The Agent will thereafter cause to be distributed on the same
day (if payment is actually received by the Agent in New York
prior to 1:00 P.M. (New York time) on such day) funds relating
to the payment of principal or interest or fees ratably to the
Banks entitled to receive any such payment in accordance with
the terms of
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this Agreement. If and to the extent that any such distribution
shall not be so made by the Agent in full on the same day
(if payment is actually received by the Agent prior to
1:00 P.M. (New York time) on such day), the Agent shall pay
to each Bank its ratable amount thereof and each such Bank
shall be entitled to receive from the Agent, upon demand,
interest on such amount at the Federal Funds Rate for each day
from the date such amount is paid to the Agent until the date
the Agent pays such amount to such Bank.
(b) Any payments under this Agreement which are made
by the Borrower later than 1:00 P.M. (New York time) shall be
deemed to have been made on the next succeeding Business Day.
Whenever any payment to be made hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest shall be payable
during such extension at the applicable rate in effect
immediately prior to such extension, except that with respect
to Reserve Adjusted Eurodollar Loans, if such next succeeding
applicable Business Day is not in the same month as the date on
which such payment would otherwise be due hereunder or under
any Note, the due date with respect thereto shall be the next
preceding applicable Business Day.
3.04 Net Payments. (a) Except as provided in
Section 3.04(d) hereof, all payments by the Borrower under this
Agreement or under any Credit Document shall be made without
set-off or counterclaim and in such amounts as may be necessary
in order that all such payments (after deduction or withholding
for or on account of any present or future taxes, levies,
imposts, duties or other charges of whatsoever nature imposed
by any government or any political subdivision or taxing
authority thereof, other than any tax on or measured by the net
income of a Bank (including without limitation franchise taxes
and branch profits taxes) pursuant to the laws of the United
States or any political subdivision thereof or of the
jurisdiction in which it is incorporated or the jurisdiction
where such Bank's lending office is located or in which it has
any other contacts or connection that would subject it to
taxation therein (collectively, "Taxes")) shall not be less
than the amounts otherwise specified to be paid under this
Agreement and/or any Credit Document. A certificate as to the
calculation of any additional amounts payable to a Bank under
this Section 3.04 submitted to the Borrower by such Bank shall,
absent demonstrable error, be final, conclusive and binding for
all purposes upon all parties hereto. With respect to each
<PAGE>
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deduction or withholding for or on account of any Taxes, the
Borrower shall within 30 days after it is required by law to
remit such deduction or withholding to any relevant taxing
authority furnish to each Bank such certificates, receipts and
other documents as may be required (in the reasonable judgment
of such Bank) to establish any tax credit to which such Bank
may be entitled.
(b) Without prejudice to the provisions of
clause (a) of this Section 3.04, and except as provided in
Section 3.04(d) hereof, if any Bank, or the Agent on its
behalf, is required by law to make any payment on account of
Taxes on or in relation to any sum received or receivable under
this Agreement and/or the other Credit Documents by such Bank,
or the Agent on its behalf, or any liability for Tax in respect
of any such payment is imposed, levied or assessed against any
Bank, or the Agent on its behalf, the Borrower will promptly
indemnify such person against such Tax payment or liability,
together with any interest, penalties and reasonable expenses
(including counsel fees and expenses) payable or incurred in
connection therewith, including any Taxes of any Bank arising
by virtue of payments under this clause (b), computed in a
manner consistent with clause (a) of this Section 3.04. A
certificate by such Bank, or the Agent on its behalf, as to the
calculation and amount of such payments shall, absent
demonstrable error, be final, conclusive and binding upon all
parties hereto for all purposes.
(c) (i) Each Bank that is organized under the laws
of any jurisdiction other than the United States or any State
thereof (including the District of Columbia) (a "Foreign Bank")
agrees to furnish to the Borrower and the Agent, prior to the
date it receives any payment under this Agreement or other
Credit Documents, two signed copies of either U.S. Internal
Revenue Service Form 4224 or U.S. Internal Revenue Service
Form 1001 or any successor form thereto (wherein such Foreign
Bank claims entitlement to a complete exemption from U.S.
federal withholding tax on interest paid by the Borrower
hereunder). Each Foreign Bank that is not a bank described in
Section 881(c)(3)(A) of the Code and cannot deliver U.S.
Internal Revenue Service Form 1001 entitling it to a complete
exemption from withholding tax or U.S. Internal Revenue Service
Form 4224 pursuant to this Section 3.04(c)(i) agrees to furnish
to the Borrower and the Agent (x) a certificate substantially
in the form of Exhibit Q hereto and (y) two copies of U.S.
Internal Revenue Service Form W-8, or successor form (wherein
such Foreign Bank makes the certifications necessary to entitle
it to a
<PAGE>
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complete exemption from United States withholding tax
on interest paid by the Borrower hereunder).
(ii) In addition, each Foreign Bank that delivers
forms pursuant to Section 3.04(c)(i) hereof agrees to provide
subsequently to the Borrower and the Agent additional signed
copies of such forms, or any successor forms thereto (wherein
such Bank claims entitlement to a complete exemption from or
reduced rate of U.S. federal withholding tax on interest paid
by the Borrower hereunder), as may be reasonably requested in
writing by the Borrower or the Agent. A Foreign Bank shall be
required to furnish a form under this Section 3.04(c)(ii) only
if it is entitled to claim an exemption from or a reduced rate
of withholding tax under applicable law. A Bank that is not
entitled to claim an exemption from or a reduced rate of
withholding under applicable law at the time that a request to
provide forms is received from the Borrower or the Agent, shall
so inform the Borrower and the Agent in writing.
(d) The Borrower shall not be required to pay any
increased amount on account of Taxes pursuant to
Section 3.04(a) or (b) to any Bank or Agent (i) to the extent
that such Taxes would not have been payable if the Bank had
furnished a form (properly and accurately completed in all
material respects) which it was otherwise required to furnish
in accordance with Section 3.04(c) hereof, (ii) if the Bank was
not able to furnish a form (properly and accurately completed
in all material respects) which it was required to furnish in
accordance with Section 3.04(c)(i) hereof, or (iii) if the Bank
failed to comply with applicable certification, information,
documentation or other reporting requirements concerning the
nationality, residence, identity or connections with the United
States of such Bank if such compliance is required by statute
or regulation of the United States as a precondition to relief
or exemption from such Taxes.
(e) With respect to any Taxes imposed on a Bank
which are paid or reimbursed by the Borrower in accordance with
the provisions of this Section 3.04, each Bank receiving the
benefit of such payments of Taxes hereby agrees to pay to the
Borrower any amounts refunded to such Bank (including any
interest thereon) which such Bank reasonably determines to be a
refund in respect of such Taxes.
(f) If any Bank shall be entitled to payments under
this Section 3.04, such Bank, within a reasonable time after
becoming entitled to such payments, shall (unless otherwise
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required by a governmental authority or as a result of any law,
rule, regulation, order or similar directive applicable to such
Bank) designate a different lending office from that initially
selected by such Bank to which payments are to be made under
this Agreement or under any Credit Document, if such
designation would avoid the need for (or materially reduce the
amount of) such payments and would not, in the reasonable
opinion of such Bank, be otherwise disadvantageous to such
Bank.
SECTION 4. Conditions Precedent.
4.01 Conditions Precedent to Initial Loans. The
obligations of the Banks to make the Initial Loans to the
Borrower hereunder are subject, at the time of the making of
each such Initial Loan (except as otherwise hereinafter
indicated), to the satisfaction of the following conditions:
(A) Credit Agreement. The Borrower shall have duly
executed and delivered this Agreement.
(B) Officer's Certificates. On the Closing Date,
the Agent shall have received (i) a certificate dated such date
signed by an appropriate officer of the Borrower stating that
all of the applicable conditions set forth in Sections 4.01(D),
(E), (F), (I), (K), (L), (N), (P), (Q), (R), (S), (T) and (U)
(in each case disregarding any reference therein that such
condition be deemed satisfactory by the Agent and/or the
Required Banks) have been satisfied in all material respects
(without giving effect to any materiality or similar exceptions
contained therein) or waived as of such date and (ii) a
certificate with respect to environmental matters,
substantially in the form set forth on Exhibit N hereto.
(C) Opinions of Counsel. On the Closing Date, the
Agent shall have received an opinion or opinions addressed to
each of the Banks and dated the Closing Date, each in form and
substance satisfactory to the Agent, from (i) Milbank, Tweed,
Hadley & McCloy, counsel to the Borrower and Holdings, which
opinion shall address the matters contained in Exhibit C-1
hereto, (ii) Hunter, Maclean, Exley & Dunn, P.C., special
Georgia counsel to the Borrower and Holdings, which opinion
shall address the matters contained in Exhibit C-2 hereto and
(iii) local counsel to the Borrower in each jurisdiction in
which Mortgaged Real Property is located, which opinions shall
address the matters contained in Exhibit C-3 hereto.
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(D) Corporate Proceedings. All corporate and legal
proceedings and all instruments and agreements in connection
with the transactions contemplated by the Credit Documents
shall be satisfactory in form and substance to the Agent, and
the Agent shall have received all information and copies of all
certificates, documents and papers, including records of
corporate proceedings and governmental approvals, if any, which
the Agent reasonably may have requested from Holdings, the
Borrower and any Affiliate of any thereof in connection
therewith, such documents and papers where appropriate to be
certified by proper corporate or governmental authorities.
Without limiting the foregoing, the Agent shall have received
(i) evidence satisfactory to it that the Board of Directors of
each of Holdings and the Borrower shall have approved and
recommended the Refinancing, (ii) resolutions of the Board of
Directors of Holdings, the Borrower or any Affiliate thereof
approving and authorizing such documents and actions as are
contemplated hereby in form and substance satisfactory to the
Agent including without limitation the execution and delivery
of all Credit Documents, certified by its corporate secretary
or an assistant secretary as being in full force and effect
without modification or amendment, and (iii) signature and
incumbency certificates of officers of Holdings, the Borrower
or any Affiliate thereof executing instruments, documents or
agreements required to be executed in connection with the
Refinancing.
(E) Holdings IPO. On the Closing Date, the Holdings
IPO shall be consummated concurrently with the making of the
Initial Loans hereunder. As a result of the Holdings IPO,
Holdings shall have received not less than $[ ], and
the net proceeds of the Holdings IPO shall have been
contributed to the Borrower.
(F) Repayment of Existing Subordinated Debt. On the
Closing Date, the Borrower shall have purchased and cancelled
each of the Senior Subordinated Notes, the Subordinated Notes
and the Junior Subordinated Notes concurrently with the making
of the Initial Loans hereunder.
(G) Organizational Documentation, etc. On or prior
to the Closing Date, the Agent shall have received copies of a
true and complete certified copy of the following documents of
each of Holdings and the Borrower, the provisions of which
shall be reasonably satisfactory to the Agent:
(1) Its respective Certificate of Incorporation,
which shall be certified and be accompanied by a good
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standing certificate from the Secretary of State of the
State of Delaware or its respective jurisdiction of
incorporation and good standing certificates from the
jurisdictions in which it is qualified to do business as a
foreign corporation, each to be dated a recent date prior
to the Closing Date;
(2) Its respective By-laws, certified as of the
Closing Date by its corporate secretary.
(H) Solvency. On the Closing Date, the Banks shall
have received the Officers' Solvency Certificate, substantially
in the form of Exhibit L annexed hereto, in form and substance
satisfactory to the Agent, supporting the conclusions that,
after giving effect to the Refinancing and the contemplated
borrowings in connection herewith, the Borrower and its
Subsidiaries will not be insolvent, will not be rendered
insolvent by the indebtedness incurred in connection herewith,
will not be left with unreasonably small capital with which to
engage in their respective businesses and will not have
incurred debts, including Contingent Obligations, beyond their
respective abilities to pay such debts as they mature.
(I) Options and Warrants. There shall be no
outstanding capital stock (or right, option, warrant or other
arrangement to acquire such capital stock) of the Borrower,
other than that owned by Holdings.
(J) Notes. There shall have been delivered to the
Agent for the account of each of the Banks the Term Notes and
the Revolving Notes executed by the Borrower in the amount and
maturity and as otherwise provided herein.
(K) Certain Fees. All reasonable costs, fees and
expenses (including, without limitation, reasonable legal fees
and expenses) payable to Indosuez by the Borrower pursuant to
the letter agreement between Holdings and Indosuez dated
August 12, 1996 shall have been paid in full and the Borrower
shall have paid or have caused to be paid the commitment and
other fees and expenses (including, without limitation,
reasonable legal fees and expenses) contemplated hereby and/or
in connection with the other Credit Documents.
(L) Conditions Relating to Mortgaged Real Property
and Real Property. On or prior to the Closing Date, the
Borrower shall have caused to be delivered to the Agent, on
behalf of the Banks, the following documents and instruments:
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(i) a Mortgage encumbering each Mortgaged Real
Property in favor of the Agent, as Collateral Agent for
the benefit of the Banks, duly executed and acknowledged
by the Credit Party that is the owner of or holder of an
interest in such Mortgaged Real Property, and otherwise in
form for recording in the recording office of each
political subdivision where each such Mortgaged Real
Property is situated, together with such certificates,
affidavits, questionnaires or returns as shall be required
in connection with the recording or filing thereof to
create a lien under applicable law, and such UCC-1
financing statements and other similar statements as are
contemplated by the counsel opinions described in Section
4.01(C)(ii) in respect of such Mortgage, all of which
shall be in form and substance reasonably satisfactory to
the Agent, and any other instruments necessary to grant a
mortgage lien under the laws of any applicable
jurisdiction, which Mortgage and financing statements and
other instruments shall be effective to create a first
priority Lien on such Mortgaged Real Property subject to
no Liens other than Prior Liens;
(ii) with respect to each Mortgaged Real Property,
such consents, approvals, amendments, supplements,
estoppels, tenant subordination agreements or other
instruments as necessary or required to consummate the
transactions contemplated hereby or as shall reasonably be
deemed necessary by the Agent in order for the owner or
holder of the fee or leasehold interest constituting such
Mortgaged Real Property to grant the Lien contemplated by
the Mortgage with respect to such Mortgaged Real Property;
(iii) with respect to each Mortgage, a policy (or
commitment to issue a policy) of title insurance insuring
(or committing to insure) the Lien of such Mortgage as a
valid first mortgage Lien on the real property described
therein in an amount not less than 115% of the fair market
value thereof as determined by appraisal reports, which
policies (or commitment) shall (a) be issued by the Title
Company, (b) include such reinsurance arrangements (with
provisions for direct access) as shall be reasonably
acceptable to the Agent, (c) contain a "tie-in" or
"cluster" endorsement (if applicable and if available
under applicable law) (i.e., policies which insure against
losses regardless of location or allocated value of the
insured property up to a stated maximum coverage amount)
and have been supplemented by such endorsements (or where
such endorsements
<PAGE>
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are not available, opinions of special counsel reasonably
acceptable to the Agent to the extent that such opinions
can be obtained at a cost which is reasonable with respect
to the value of the Real Property subject to such
Mortgage) as shall be reasonably requested by the Agent
(including, without limitation, endorsements on matters
relating to usury, first loss, last dollar, contiguity
(as applicable), revolving credit, doing business,
zoning, variable rate and so-called comprehensive
coverage over covenants and restrictions) and (d)
contain only such exceptions to title as shall be Prior
Liens or are otherwise agreed to by the Agent on or
prior to the Closing Date with respect to such
Mortgaged Real Property;
(iv) with respect to each Mortgaged Real Property, a
Survey;
(v) with respect to each Mortgaged Real Property,
policies or certificates of insurance as required by the
Mortgage relating thereto, which policies or certificates
shall comply with the insurance requirements contained in
such Mortgage;
(vi) with respect to each Mortgaged Real Property,
UCC, judgment and tax lien searches confirming that the
personal property comprising a part of such Mortgaged Real
Property is subject to no Liens other than Prior Liens;
(vii) with respect to each Mortgaged Real Property,
such affidavits, certificates, information (including
financial data) and instruments of indemnification
(including, without limitation, a so-called "gap"
indemnification) as shall be required to induce the Title
Company to issue the policy or policies (or commitment)
and endorsements contemplated in subparagraph (iii) above;
(viii) evidence reasonably acceptable to the Agent of
payment by the Borrower of all title insurance premiums,
search and examination charges, survey costs and related
charges, mortgage recording taxes, fees, charges, costs
and expenses required for the recording of the Mortgages
and issuance of the title insurance policies referred to
in subparagraph (iii) above;
(ix) with respect to each Real Property or Mortgaged
Real Property, copies of all Leases in which a Credit
Party holds the landlord's, tenant's or other interest and
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any other agreements relating to possessory interests in
such Real Property or Mortgaged Real Property. To the
extent any of the foregoing affect any Mortgaged Real
Property, such Leases shall be reasonably acceptable to
the Agent; and
(x) with respect to each Mortgaged Real Property, an
Officers' Certificate or other evidence reasonably
satisfactory to the Agent that as of the date thereof, to
the best of such officer's knowledge, there (a) have been
issued and are in effect valid and proper certificates of
occupancy or other local equivalents for the use then
being made of such Mortgaged Real Property to the extent
currently required by law in the jurisdiction in which
such Mortgaged Real Property is located which certificates
if not obtained or maintained would have a material
adverse effect upon the value of the Mortgaged Real
Property and that there is not outstanding any citation,
violation or similar notice indicating that such Mortgaged
Real Property contains conditions which are not in
compliance in all material respects with local codes or
ordinances relating to building or fire safety or
structural soundness, (b) has not occurred any Taking or
Destruction of any Mortgaged Real Property that has not
been repaired or restored except as set forth therein and
(c) is no litigation regarding boundary lines,
encroachment or possession of any Mortgaged Real Property
and no state of facts known to any Credit Party which
could give rise to any such claim, except as set forth
therein.
(M) Financial Statements, etc. Prior to the Closing
Date, the Agent shall have received audited financial
statements including a balance sheet and statements of income
and shareholders' equity and cash flows of Holdings and its
consolidated Subsidiaries for the fiscal year ended March 31,
1996, which audited financial statements shall reflect no
material changes from the unaudited financial statements
previously delivered to the Agent. The Borrower shall have
delivered to the Agent pro forma financial statements for the
Borrower and its consolidated Subsidiaries for the fiscal year
ended March 31, 1996, after giving effect to the Refinancing,
and interim financial statements for the Borrower and its
consolidated Subsidiaries through August 31, 1996. The
Borrower shall have delivered to the Agent financial
projections with respect to the Borrower for the fiscal years
ending December 31, 1996 through December 31, 2001, inclusive,
accompanied by a statement by the Borrower that such
projections are based on
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estimates and assumptions believed by the Borrower in good
faith to be reasonable in light of the conditions which existed
at the time of their preparation as to the future financial
performance of the Borrower, reasonably satisfactory to the
Agent; provided, however, that in addition to the financial
projections referred to above, the Borrower shall also have
delivered to the Agent financial projections on a monthly basis
for each of the monthly periods from the Closing Date through
December 31, 1996. Since the time of the preparation of such
financial projections, no fact or facts have come to the
attention of the Borrower to cause the
Borrower to believe that any of the estimates and assumptions
on which such projections are based are not reasonable.
(N) Insurance. Set forth on Annex VI is a summary
of all insurance policies maintained by the Borrower and its
Subsidiaries, and the insurance coverage provided for the
Borrower and its Subsidiaries by such insurance policies shall
be reasonably satisfactory to the Agent.
(O) Performance Bonds. On the Closing Date, the
Agent shall be reasonably satisfied that the Borrower will be
able to service and maintain any performance bonds that may be
required in the ordinary course of business on reasonable terms
and conditions.
(P) Indebtedness, etc. On or prior to the Closing
Date and except as set forth on Annex X, the Borrower and its
Subsidiaries shall have received all necessary consents or
waivers or amended, supplemented or otherwise modified, repaid
or defeased their outstanding Indebtedness in a manner and on
terms reasonably satisfactory to the Agent such that there
exists no default or potential default with respect to such
Indebtedness or under any note, evidence of indebtedness,
mortgage, deed of trust, security document or other agreement
relating to such Indebtedness and such indentures, notes,
evidences of indebtedness, mortgages, deeds of trust or other
agreements relating to such Indebtedness shall not, other than
as set forth on Annex XI, contain any restriction on the
ability of the Borrower or any of its Subsidiaries to enter
into the Mortgages, Pledge Agreements or the granting of any
Lien in favor of the Banks in connection therewith, or contain
any financial covenants, agreements or tests applicable to the
Borrower or any of its Subsidiaries. Annex VII sets forth a
true list of all Liens other than Permitted Encumbrances on the
property of the Borrower and its Subsidiaries as of the Closing
Date.
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(Q) Management Agreement and Employment Agreements.
Each of the Management Agreement and the Employment Agreements
shall remain in full force and effect and shall be reasonably
satisfactory to the Agent.
(R) Security Documents and Guarantees. The Security
Documents and Guarantees shall have been duly executed and
delivered by the respective parties thereto and there shall
have been delivered to the Agent (i) certificates representing
all Pledged Securities, together with executed and undated
stock powers and/or assignments in blank, (ii) evidence of the
filing and due execution of appropriate financing statements
under the provisions of the UCC, applicable domestic or local
laws, rules or regulations in each of the offices where such
filing is necessary or appropriate to grant to the Agent a
perfected first priority Lien in such Collateral superior to
and prior to the rights of all third persons and subject to no
other Liens other than Prior Liens, (iii) certified copies of
Requests for Information (Form UCC-11 or the equivalent), or
equivalent reports or lien search reports listing all effective
financing statements which name Holdings, the Borrower or any
domestic Subsidiary of the Borrower as debtor and which are
filed in those jurisdictions in which any of the Collateral is
located and the jurisdictions in which Holdings', the
Borrower's and each such Subsidiary's principal place of
business is located, none of which, except as set forth in the
applicable Security Documents, shall encumber the Collateral
covered or intended or purported to be covered by the Security
Documents, and (iv) evidence that arrangements have been made
for the prompt completion of all recordings and filings of each
Security Document related to Mortgaged Real Property and
delivery to the Agent of such other security and other
documents as may be necessary or, in the reasonable opinion of
Agent, desirable to perfect the Liens created, or purported or
intended to be created, by the Security Documents.
(S) Consents, Etc. All material governmental and
third party approvals and consents (including, without
limitation, all material approvals and consents required in
connection with any environmental statutes, rules or
regulations), if any, in connection with the transactions
contemplated by the Credit Documents and otherwise referred to
herein or therein to be completed on or before the Closing Date
shall have been obtained and remain in effect, and all
applicable waiting periods shall have expired without any
action being taken by any competent authority which restrains,
prevents or imposes, in the judgment of the Agent or the
Required Banks, materially
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adverse conditions upon the consummation of the
Refinancing. There shall not exist any adverse judgment,
order, injunction or other restraint issued or filed with
respect to the making of the Loans hereunder or the
consummation of the Refinancing.
(T) Borrowing Base Certificate. Prior to the
initial Revolving Loan, the Agent and the Banks shall have
received and the Agent and the Required Banks shall be
satisfied (both as to form and substance) with a pro forma
Borrowing Base Certificate which shall be prepared as of a date
prior to the Closing Date and which shall indicate that the
Borrowing Base on the Closing Date will exceed the initial
Borrowings under the Revolving Portion by not less than
$5,000,000.
(U) Leases. All Capital Leases and Operating Leases
of the Borrower outstanding immediately prior to the
Refinancing shall remain outstanding after giving effect to the
Refinancing, on terms satisfactory to the Agent.
The acceptance of the proceeds of each Borrowing of
Initial Loans shall constitute a representation and warranty by
each Credit Party to each of the Banks that all of the
applicable conditions specified above (in each case
disregarding any reference therein that such condition be
deemed satisfactory by the Agent and/or the Required Banks)
have been satisfied or waived as of that time. All of the
certificates, legal opinions and other documents and papers
referred to in this Section 4.01, unless otherwise specified,
shall be delivered to the Agent at the Agent's Office (or such
other location as may be specified by the Agent) for the
account of each of the Banks and in sufficient counterparts for
each of the Banks and shall be satisfactory in form and
substance to the Agent.
4.02 Conditions Precedent to All Loans. The
obligation of the Banks to make all Loans (which term shall not
include a conversion or continuation of a Loan) is subject, at
the time of each such Loan, to the satisfaction of the
following conditions:
(A) Effectiveness. This Agreement shall have become
effective as provided in Section 11.10.
(B) No Default; Representations and Warranties. At
the time of the making of each Loan and also after giving
effect thereto (i) there shall exist no Default or Event
of Default and (ii) all representations and warranties
made by any Credit Party contained herein or in the other
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Credit Documents in effect at such time shall be true and
correct in all material respects with the same effect as
though such representations and warranties had been made
on and as of the date of the making of such Loan, unless
such representation and warranty expressly indicates that
it is being made as of any other specific date in which
case on and as of such other date.
(C) Documentation and Opinions of Counsel. The
Agent shall have received such documentation and opinion
or opinions, addressed to each of the Banks, from counsel
to each Credit Party as may be reasonably required, with
reasonable notice under the circumstances, by, and shall
be reasonably satisfactory to the Agent, from (i) such
counsel to each Credit Party as reasonably requested by
the Agent and (ii) appropriate local counsel, which
opinions shall cover such matters as reasonably requested
by, and be in form and substance reasonably satisfactory
to, the Agent.
(D) Margin Rules. On the date of each Borrowing of
Loans, neither the making of any Loan nor the use of the
proceeds thereof will violate the provisions of
Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System.
(E) Borrowing Base Certificate. The Agent and the
Required Banks shall have received and shall be reasonably
satisfied (both as to form and substance) with the
Borrowing Base Certificate last delivered to the Banks.
The acceptance of the proceeds of each Borrowing of
Loans shall constitute a representation and warranty by each
Credit Party to each of the Banks that all of the applicable
conditions specified in Section 4.02 (in each case disregarding
any reference therein that such condition be deemed
satisfactory by the Agent and/or the Required Banks) have been
satisfied or waived.
All of the certificates, legal opinions and other
documents and papers referred to in this Section 4.02, unless
otherwise specified, shall be delivered to the Agent at the
Agent's Office (or such other location as may be specified by
the Agent) for the account of each of the Banks and in
sufficient counterparts for each of the Banks and shall be
satisfactory in form and substance to the Agent.
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4.03 Conditions Precedent to All Letters of Credit.
The right of the Borrower to obtain the issuance of any Letter
of Credit that the relevant Issuing Bank determines to issue in
its sole discretion hereunder is subject to prior or concurrent
satisfaction of all of the following conditions:
(A) Required Documentation. On or prior to the date
of issuance of a Letter of Credit, the Agent shall have
received, in accordance with the provisions of Sec-
tion 1.13(B), a request for issuance with respect to such
Letter of Credit (the furnishing by the Borrower of each
such request for issuance shall be deemed to constitute a
representation and warranty of the Borrower to the effect
that the conditions set forth in Section 4.02 (in each
case disregarding any reference therein that such
condition be deemed satisfactory by the Agent and/or the
Required Banks) are satisfied as of the date of delivery
and will be satisfied on the relevant date of issuance),
all other information specified in Section 1.13(B), and
such other documents as the Issuing Bank may reasonably
require in connection with the issuance of such Letter of
Credit.
(B) Conditions. On the date of issuance of each
such Letter of Credit, all conditions precedent described
in Section 4.02 shall be satisfied to the same extent as
though the issuance of such Letter of Credit were the
making of a Revolving Loan.
SECTION 5. Representations, Warranties and
Agreements. In order to induce the Banks to enter into this
Agreement and to make the Loans provided for herein, each of
Holdings and the Borrower makes the following representations
and warranties to, and agreements with, the Banks, all of which
shall survive the execution and delivery of this Agreement and
the making of the Loans (with the execution and delivery of
this Agreement and the making of each Loan thereafter being
deemed to constitute a representation and warranty that the
matters specified in this Section 5 are true and correct in all
material respects both before and after giving effect to the
Refinancing and the related transactions and as of the date of
each such Loan unless such representation and warranty
expressly indicates that it is being made as of any specific
date):
5.01 Corporate Status. Each Credit Party (i) is a
duly organized and validly existing corporation in good stand-
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ing under the laws of the jurisdiction of its organization;
(ii) has the corporate or other organizational power and
authority and, other than as set forth on Annex X, has obtained
all requisite governmental licenses, authorizations, consents
and approvals to own and operate its property and assets and to
transact the business in which it is engaged and presently
proposes to engage including, without limitation, those in
compliance with or required by the Environmental Laws except as
described in Annex XII hereto and except for those governmental
licenses, authorizations, consents or approvals the failure of
which to be so obtained would not have a Materially Adverse
Effect and (iii) is duly qualified and is authorized to do
business and is in good standing in all jurisdictions where it
is required to be so qualified and where the failure to be so
qualified would have a Materially Adverse Effect.
5.02 Corporate Power and Authority; Business.
(a) Each Credit Party has the corporate power and authority to
execute, deliver and carry out the terms and provisions of the
Credit Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery
and performance of the Credit Documents to which it is a party.
Each Credit Party has duly executed and delivered each Credit
Document to which it is a party and each such Credit Document
constitutes the legal, valid and binding obligation of such
Person enforceable against such Person in accordance with its
terms except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or
affecting creditors' rights generally and except as such
enforceability may be limited by the application of general
principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
(b) Holdings was incorporated on May 10, 1995 and
the Borrower was incorporated as Aminco, Inc. in Delaware on
March 20, 1990. Prior to the Closing Date, Holdings will not
have engaged in any business or incurred any liabilities except
for activities, expenses and liabilities incident to its
organization and to the carrying out of the transactions
contemplated by the Credit Documents and the Holdings IPO.
5.03 No Violation. Neither the execution, delivery
or performance by any Credit Party of the Credit Documents to
which it is a party nor compliance with the terms and
provisions thereof, nor the consummation of the transactions
contemplated therein (i) will contravene any applicable
provision of any law, statute, rule, regulation, order, writ,
injunction or
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decree of any court or governmental instrumentality,
(ii) will conflict or be inconsistent with or result in
any breach of any of the terms, covenants, conditions or
provisions of, or constitute a default under, or (other than
pursuant to the Security Documents) result in the creation or
imposition of (or the obligation to create or impose) any Lien
upon any of the property or assets of any Credit Party or its
Subsidiaries pursuant to the terms of any indenture, mortgage,
deed of trust, material agreement or other material instrument
to which any Credit Party or its Subsidiaries is a party or by
which it or any of its property or assets is bound or to which
it may be subject or (iii) will violate any provision of the
charter or by-laws of any Credit Party or its Subsidiaries,
except, in each such case, where such contravention, conflict,
inconsistency, breach, default, creation, imposition, obliga-
tion or violation does not have a Materially Adverse Effect.
The consummation of the Refinancing and the terms of the
financing in connection therewith will not conflict or be
inconsistent with or result in any breach of any of the terms,
covenants, conditions or provisions of, or constitute a default
under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien (except pursuant to
the Security Documents) upon any of the property or assets of
Holdings or the Borrower or any of their respective
Subsidiaries pursuant to the terms of, any indenture, mortgage,
deed of trust, material instrument or material agreement
relating to Indebtedness for borrowed money or the equivalent
thereof or other material agreement to which Holdings or the
Borrower or any of their respective Subsidiaries is a party or
by which it or any of its property or assets is bound or to
which it may be subject, except, in each such case, where such
conflict, inconsistency, breach, default, creation, imposition
or obligation does not have a Materially Adverse Effect.
5.04 Litigation. Except as set forth on Annex IX,
there are no actions, judgments, suits or proceedings pending
or, to Holdings' or the Borrower's knowledge, threatened in any
court of competent jurisdiction with respect to any Credit
Party or its Subsidiaries that are, individually or in the
aggregate, likely to have a Materially Adverse Effect.
5.05 Use of Proceeds. (a) All the proceeds of all
Term Loans to be made hereunder shall be utilized to provide a
portion of the financing required to consummate the Refinancing
and to pay related fees and expenses.
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(b) Up to $5,000,000 of the proceeds of Revolving
Loans may be used by the Borrower on the Closing Date to
provide a portion of the financing required to consummate the
Refinancing and to pay related fees and expenses and the
remaining proceeds of Revolving Loans may be utilized to
finance the ongoing working capital requirements of the
Borrower and its Subsidiaries and for general corporate
purposes.
(c) Neither the making of any Loan hereunder, nor
the use of the proceeds thereof, will violate or be
inconsistent with the provisions of Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System.
5.06 Governmental Approvals, etc. No order,
consent, approval, license, authorization, or validation of, or
filing, recording or registration with, or exemption by, any
third party or any foreign or domestic Governmental Authority
(other than those orders, consents, approvals, licenses,
authorizations or validations which, if not obtained or made,
would not have a Materially Adverse Effect or which have
previously been obtained or made and except for filings to
perfect security interests granted pursuant to the Security
Documents) is required to authorize or is required in
connection with (i) the execution, delivery and performance of
any Credit Document or the transactions contemplated therein or
(ii) the legality, validity, binding effect or enforceability
of any Credit Document. At the time of the making of the
Initial Loans, there does not exist any judgment, order,
injunction or other restraint issued or filed with respect to
the consummation of the Refinancing or the making of Loans or
the performance by the Credit Parties of their obligations
under the Credit Documents.
5.07 Investment Company Act. None of Holdings, the
Borrower or their respective Subsidiaries is, or will be after
giving effect to the transactions contemplated hereby, an
"investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment
Company Act of 1940, as amended.
5.08 Public Utility Holding Company Act. None of
Holdings, the Borrower or their respective Subsidiaries is, or
will be after giving effect to the transactions contemplated
hereby, a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or
of a "subsidiary company" of a "holding company," within the
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meaning of the Public Utility Holding Company Act of 1935, as
amended.
5.09 True and Complete Disclosure. All factual
information (taken as a whole) heretofore or contemporaneously
furnished by or on behalf of Holdings, the Borrower or any of
their Subsidiaries in writing to any Bank (including, without
limitation, all information contained in the Credit Documents)
for purposes of or in connection with this Agreement or any
transaction contemplated herein is (or was, on the date of
making the Initial Loans), and all other such factual
information (taken as a whole) hereafter furnished by or on
behalf of any such Person in writing to any Bank will be, true
and accurate in all material respects on the date as of which
such information is dated or certified and not incomplete by
omitting to state any material fact necessary to make such
information not misleading at such time in light of the
circumstances under which such information was provided. The
projections and pro forma financial information contained in
such materials are based on good faith estimates and
assumptions believed by such Persons to be reasonable at the
time made. There is no fact known to any Credit Party which
has a Materially Adverse Effect which has not been disclosed
herein or in such other documents, certificates and written
statements furnished to the Banks for use in connection with
the transactions contemplated hereby.
5.10 Holdings IPO; Repayment of Subordinated Debt.
At the time of making the Initial Loans, the Holdings IPO shall
concurrently be consummated, and the Senior Subordinated Notes,
the Subordinated Notes and the Junior Subordinated Notes shall
have concurrently been purchased and cancelled.
5.11 Financial Condition; Financial Statements;
Projections. (a) No Credit Party is entering into the
arrangements contemplated hereby and by the other Credit
Documents, or intends to make any transfer or incur any
obligations hereunder or thereunder with actual intent to
hinder, delay or defraud either present or future creditors.
On and as of the Closing Date, on a pro forma basis after
giving effect to the Refinancing and to all Indebtedness
incurred and Liens and Guarantees created, or to be created, by
each Credit Party in connection with the Refinancing, (w) the
Borrower does not expect that final judgments against any
Credit Party in actions for money damages with respect to
pending or threatened litigation will be rendered at a time
when, or in an amount such that, such Credit Party will be
unable to satisfy any such judgments promptly in accordance
with their terms (taking into account
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the maximum reasonable amount of such judgments in any
such actions and the earliest reasonable time at which
such judgments might be rendered and the cash available
to each Credit Party, after taking into account all
other anticipated uses of the cash of such Credit Party
(including the payments on or in respect of debts
(including their Contingent Obligations)); (x) no
Credit Party will have incurred or intends to, or
believes that it will, incur debts beyond its ability
to pay such debts as such debts mature (taking into
account the timing and amounts of cash to be received
by such Credit Party from any source, and amounts to be
payable on or in respect of debts of such Credit Party
and the amounts referred to in the preceding clause
(w)); (y) each Credit Party, after taking into account
all other anticipated uses of the cash of such Credit
Party, anticipates being able to pay all amounts on or
in respect of debts of such Credit Party when such
amounts are required to be paid; and (z) each Credit
Party will have sufficient capital with which to
conduct its present and proposed business and the
property of such Credit Party does not constitute
unreasonably small capital with which to conduct its
present or proposed business. For purposes of this
Section 5.11, "debt" means any liability on a claim,
and "claim" means a (i) right to payment whether or not
such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or
unsecured; or (ii) right to an equitable remedy for
breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or
unsecured. On the date of each Borrowing (and after
giving effect to all Borrowings as of such date), the
representations set forth in this Section 5.11(a) shall
be true and correct with respect to each Credit Party
on such date.
(b) The Borrower has heretofore delivered to the
Banks the consolidated audited financial statements including a
balance sheet as at March 31, 1996 and statements of income and
shareholders' equity and cash flows of the Borrower and its
consolidated Subsidiaries for the fiscal year ended March 31,
1996. All the financial statements referred to in the
preceding sentence were prepared in accordance with GAAP
consistently applied. Such financial statements present
fairly, in all material respects, the consolidated financial
position of the Borrower and its consolidated Subsidiaries for
each of the periods covered thereby. There has also been
delivered the pro forma (after giving effect to the
Refinancing) consolidated balance sheet of the Borrower and its
consolidated Subsidiaries
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as at March 31, 1996, which presents a good faith estimate
of the consolidated pro forma financial condition of the
Borrower and its consolidated Subsidiaries at
the date thereof, and interim financial statements for the
Borrower and its consolidated Subsidiaries through August 31,
1996. Except as contemplated hereby, since March 31, 1996 (on
a pro forma basis after giving effect to the Refinancing) no
event or events have occurred that are likely to have a
Materially Adverse Effect.
(c) There have heretofore been delivered to the
Banks pro forma consolidated income projections for the
Borrower and its Subsidiaries, pro forma consolidated balance
sheet projections for the Borrower and its Subsidiaries and pro
forma consolidated cash flow projections for the Borrower and
its Subsidiaries, all for the fiscal years ending December 31,
1996 through December 31, 2001, inclusive, as well as such
financial projections on a monthly basis for each of the
monthly periods from the Closing Date through December 31, 1996
(the "Projected Financial Statements"), which give effect to
the Refinancing and all Indebtedness and Liens incurred or
created in connection with the Refinancing. The Projected
Financial Statements are based on estimates and assumptions
which are believed by the Borrower in good faith to be
reasonable in light of the conditions which existed at the time
of their preparation as to the future financial performance of
the Borrower.
(d) As of the Closing Date, except as adequately
reflected or reserved against in the financial statements and
the notes thereto described in Section 5.11(b) or as set forth
in Annexes IX, XII and XVI, there were no liabilities or
obligations with respect to Holdings, the Borrower or any of
their respective Subsidiaries of any nature whatsoever (whether
absolute, accrued, contingent or otherwise and whether or not
due) which, either individually or in the aggregate, would be
material to Holdings, the Borrower or any of their respective
Subsidiaries, except as incurred by any Credit Party in
connection with the Refinancing. As of the Closing Date, the
Borrower knows of no basis for the assertion against Holdings,
the Borrower or any of their respective Subsidiaries of any
liability or obligation of any nature whatsoever that is not
adequately reflected in the financial statements described in
Section 5.11(b) or (c) or otherwise disclosed herein, except as
incurred by any Credit Party in connection with the
Refinancing, which, either individually or in the aggregate,
could reasonably be expected to be material to Holdings, the
Borrower or any of their respective Subsidiaries.
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5.12 Security Interests. At all times after the
execution of the Security Documents, the Security Documents
create, in favor of the Collateral Agent for the benefit of the
Banks, as security for the obligations purported to be secured
thereby, a valid and enforceable perfected first priority
security interest in and Lien upon all of the Collateral,
superior to and prior to the rights of all third persons and
subject to no Liens, except Prior Liens applicable to such
Collateral. The mortgagor under each Mortgage has good and
marketable title to the Mortgaged Real Property free and clear
of all Liens other than Prior Liens and Liens expressly
permitted by the applicable Mortgage. The respective pledgor
or assignor, as the case may be, has (or on and after the time
it executes the respective Security Document, will have) good
and marketable title to all items of Collateral (other than the
Mortgaged Real Property) covered by such Security Document free
and clear of all Liens except Prior Liens and Liens expressly
permitted by the applicable Security Document. No filings or
recordings are required in order to perfect the security
interests created under any Security Document except for
filings or recordings required in connection with any such
Security Document which shall have been made prior to or
contemporaneously with the execution and delivery thereof.
5.13 Tax Returns and Payments. Except as set forth
on Annex XIII hereto, each Credit Party has filed all material
tax returns required to be filed by it and has paid all mater-
ial taxes and assessments payable by it which have become due,
other than those not yet delinquent and except for those
contested in good faith and for which adequate reserves have
been established. Except as set forth on Annex XIII hereto,
each Credit Party has paid, or has provided adequate reserves
(in accordance with GAAP) for the payment of, all material
federal, state, local and foreign income taxes (including,
without limitation, franchise taxes based upon income) applic-
able for all prior fiscal years and for the current fiscal year
to the date hereof. The Borrower knows of no proposed tax
assessment against the Borrower or any of its Subsidiaries that
could reasonably be expected to have a Materially Adverse
Effect which is not being actively contested in good faith by
such Person to the extent affected thereby in good faith and by
appropriate proceedings; provided that such reserves or other
appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made or provided therefor.
5.14 ERISA. (A) Each Credit Party and its ERISA
Affiliates are in compliance with all applicable provisions of
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ERISA and the regulations and published interpretations
thereunder with respect to all employee benefit plans, Pension
Plans and Multiemployer Plans except for any failures to comply
which, individually or in the aggregate, would not have a
Materially Adverse Effect.
(B) No Termination Event has occurred or is
reasonably expected to occur with respect to any Pension Plan
which resulted or would result in a liability to any Credit
Party or any ERISA Affiliate.
(C) The sum of the amount of unfunded benefit
liabilities (determined in accordance with Statement of
Financial Accounting Standards No. 87) under all Title IV Plans
(excluding each Title IV Plan with an amount of unfunded
benefit liabilities of zero or less) is not more than
$2,500,000. As of the Closing Date, there are no unfunded
benefit liabilities (within the meaning of Section 4001(a)(18)
of ERISA) under any Title IV Plans.
(D) As of the Closing Date, no Credit Party nor any
ERISA Affiliate has any obligation to contribute to or any
liability or potential liability (including, but not limited
to, actual or potential withdrawal liability) with respect to
any employee benefit plan of the type described in Sections
4063 and 4064 of ERISA or in Section 413(c) of the Code. Each
Credit Party and their ERISA Affiliates have complied in all
material respects with the requirements of ERISA Section 515
with respect to each Multiemployer Plan. The aggregate
potential withdrawal payments, as determined in accordance with
Title IV of ERISA, of each Credit Party and their ERISA
Affiliates with respect to all Multiemployer Plans does not
exceed $2,500,000. No Credit Party nor any ERISA Affiliate has
incurred or reasonably expects to incur any withdrawal
liability under Section 4201 et seq. of ERISA to any
Multiemployer Plan or any employee benefit plan of the type
described in Sections 4063 and 4064 of ERISA or in Section
413(c) of the Code.
(E) No Credit Party nor any ERISA Affiliate has
incurred any accumulated funding deficiency (whether or not
waived) with respect to any Pension Plan.
(F) No Credit Party nor any ERISA Affiliate has or
reasonably expects to become subject to a Lien in favor of any
Pension Plan under Section 302(f) or 307 of ERISA or
Section 401(a)(29) or 412(n) of the Code.
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(G) Assuming that no portion of the Loans to be
advanced hereunder is attributable, directly or indirectly, to
the assets of any employee benefit plan, the execution,
performance and delivery of the Credit Documents by any party
thereto will not involve any prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Code for
which an exemption therefrom is not available.
As used in this Section 5.14, the term "accumulated
funding deficiency" has the meaning specified in Section 302 of
ERISA and Section 412 of the Code, and the term "employee
benefit plan" has the meaning specified in Section 3(3) of
ERISA.
5.15 Subsidiaries. Annex IV hereto lists each
direct and indirect Subsidiary of Holdings existing on the
Closing Date.
5.16 Patents, etc. Each Credit Party owns or
possesses adequate licenses or other rights to use all patents,
patent applications, trademarks, trademark applications,
servicemarks, servicemark applications, trade names,
copyrights, trade secrets and know how (collectively, the
"Intellectual Property"), that are necessary for the operation
of their respective businesses as presently conducted and as
proposed to be conducted. No claim is pending or, to the best
of the Borrower's knowledge, threatened to the effect that the
Borrower or any of its Subsidiaries infringes upon the asserted
rights of any other person under any Intellectual Property, and
to the best of the Borrower's knowledge there is no basis for
any such claim (whether or not pending or threatened), in each
case where such claim could reasonably be expected to have a
Materially Adverse Effect. No claim is pending or, to the best
of the Borrower's knowledge, threatened to the effect that any
such Intellectual Property owned or licensed by the Borrower or
any of its Subsidiaries or which the Borrower or any of its
Subsidiaries otherwise has the right to use is invalid or
unenforceable by the Borrower or such Subsidiary, and, to the
best of the Borrower's knowledge, there is no basis for any
such claim (whether or not pending or threatened), in each case
where such claim could reasonably be expected to have a
Materially Adverse Effect.
5.17 Compliance with Laws, etc. Except as set forth
in Annex XVI hereto, each Credit Party is in material
compliance with all material laws and regulations, including
without limitation those relating to equal employment
opportunity and employee safety but excluding Environmental
Laws (as to which
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Section 5.22 is applicable), in all jurisdictions in which it
is presently doing business, and each Credit Party will comply
and cause each of its Subsidiaries to comply with all such laws
and regulations which may be imposed in the future in
jurisdictions in which it or such Subsidiary may then be doing
business in each such case other than those the non-compliance
with which would not have a Materially Adverse Effect.
5.18 Properties. The Borrower and each of its
Subsidiaries have good and marketable title to and beneficial
ownership of all their respective properties owned by them,
including after the Closing Date all property reflected in the
most recent balance sheet referred to in Section 5.11(b) and
except as sold or otherwise disposed of since the date of such
balance sheet in the ordinary course of business, free and
clear of all Liens, other than Prior Liens and Permitted
Encumbrances. The Borrower and each Subsidiary thereof hold
all material licenses, certificates of occupancy or operation
and similar certificates and clearances of municipal and other
authorities necessary to own and operate the Mortgaged Real
Property in the manner and for the purposes currently operated
by such party which if not obtained or maintained would have a
material adverse effect upon the value of the Mortgaged Real
Property. There are no actual defaults or defaults alleged in
writing or, to the best knowledge of the Borrower, threatened
defaults, in each case of a material nature with respect to any
leases of real property under which the Borrower or any of its
Subsidiaries is lessor or lessee.
5.19 Securities. On the Closing Date, the common
stock of the Borrower will be duly authorized, issued and
delivered and will be fully paid, nonassessable and free of
preemptive rights. There are not, as of the Closing Date and
thereafter, any existing options, warrants, calls,
subscriptions, convertible or exchangeable securities, rights,
agreements, commitments or arrangements for any person to
acquire any capital stock of the Borrower or any other
securities convertible into, exchangeable for or evidencing the
right to subscribe for any such capital stock.
5.20 Collective Bargaining Agreements. Set forth on
Annex V hereto is a list and description (including dates of
termination) of all collective bargaining or similar agreements
between or applicable to the Borrower and its Subsidiaries as
of the date hereof and any union, labor organization or other
bargaining agent in respect of the employees of the Borrower
and its Subsidiaries on the date indicated in Annex V hereto.
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5.21 Indebtedness Outstanding. Set forth on Annex
III hereto is a complete list and description of all Indebted-
ness of Holdings, the Borrower and their Subsidiaries (other
than the Loans) that will be outstanding immediately after the
Closing Date and set forth on Annex III hereto is a complete
list and description of all Indebtedness of Holdings, the
Borrower and their Subsidiaries that will be repaid, defeased,
transferred or otherwise terminated on or prior to the Closing
Date.
5.22 Environmental Matters.
(A) Except as set forth in Annex XII hereto, each of
the Borrower and its Subsidiaries and the properties and assets
used in its businesses (including the Real Properties) is in
compliance in all material respects with all applicable
Environmental Laws, which compliance includes, without
limitation, the possession of all material licenses, permits,
registrations and other governmental authorizations
(collectively, "Environmental Authorizations") required under
applicable Environmental Laws, and compliance in all material
respects with the terms and conditions thereof, and there are
no circumstances of a nature which may materially prevent or
interfere with such compliance in the future. Except as set
forth in Annex XII hereto, neither the Borrower nor any of its
Subsidiaries has been notified by any Governmental Authority
or, has any basis to believe, that any such Environmental
Authorizations will be modified, suspended or revoked or cannot
be renewed or otherwise maintained in the ordinary course of
business. Except as set forth in Annex XII hereto, in the last
five years, neither the Borrower nor any of its Subsidiaries
has received any communication, whether from a Governmental
Authority, citizen group, employee or otherwise, that alleges
that the Borrower or any of its Subsidiaries or any of the
properties or assets used in their respective businesses
(including the Real Properties) is not in compliance with
Environmental Laws.
(B) Except as set forth in Annex XII hereto, there
is no Environmental Notice that (i) is pending or, to the best
knowledge of the Borrower or any of its Subsidiaries,
threatened against the Borrower and its Subsidiaries or (ii) is
pending or, to the best knowledge of the Borrower or any of its
Subsidiaries, threatened against any Person whose liability for
such Environmental Notice may have been retained or assumed by
or could reasonably be imputed or attributed by law or contract
to the Borrower or any of its Subsidiaries.
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(C) Except as set forth in Annex XII hereto, to the
best knowledge of the Borrower and its Subsidiaries, there are
no past or present actions, activities, circumstances,
conditions, events or incidents arising out of, based upon,
resulting from or relating to the operation, ownership or use
of any properties or assets (including the Real Properties)
currently or formerly owned, operated, leased or used by the
Borrower or any of its Subsidiaries (or any predecessor in
interest of any of them), including, without limitation, the
emission, discharge, disposal or other release of any Hazardous
Materials in or into the Environment, that (i) could reasonably
be expected to result in the incurrence of costs in excess of
$50,000, individually, under Environmental Laws or (ii) could
reasonably be expected to form the basis of any Environmental
Notice against or with respect to the Borrower or any of its
Subsidiaries, or against any person or entity whose liability
for any Environmental Notice may have been retained or assumed
by or could be imputed or attributed by law or contract to the
Borrower or any of its Subsidiaries.
(D) Except as set forth in Annex XII hereto, without
in any way limiting the generality of the foregoing, (i) there
are, and to the best knowledge of the Borrower and its
Subsidiaries, have been, no underground storage tanks, or
related piping, located on, at or under property (including the
Real Properties) owned, operated, leased or used by the
Borrower or any of its Subsidiaries (or any predecessor in
interest of any of them), (ii) there are, and, to the best
knowledge of the Borrower and its Subsidiaries, have been no
polychlorinated biphenyls used or stored by the Borrower or any
of its Subsidiaries, located on, at or under property
(including the Real Properties) owned, operated, leased or used
by the Borrower or any of its Subsidiaries, (iii) there are and
have been no properties (including the Real Properties)
currently or formerly owned, operated, managed, leased or used
by the Borrower or any of its Subsidiaries (or any predecessor
in interest of any of them) at which Hazardous Materials
generated, used, owned, managed, stored or controlled by the
Borrower or any of its Subsidiaries (or any predecessor in
interest of any of them) may have been disposed of or otherwise
released into the Environment except such disposals or other
releases which were both (a) in compliance with Environmental
Laws and Environmental Authorizations and (b) could not result
in costs in excess of $50,000, individually, under
Environmental Laws and (iv) there is no friable asbestos
contained in or forming part of any building, building
component, structure or office space owned,
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operated, leased or used by the Borrower or any of its Subsidiaries.
(E) No Lien has been recorded under Environmental
Laws with respect to any properties, assets or facilities
(including the Real Properties) owned, operated, managed,
leased or used by the Borrower or any of its Subsidiaries.
(F) Prior to the Closing Date, the Borrower and each
of its Subsidiaries shall have made all notifications,
registrations and filings in accordance with all applicable
State and Local Real Property Disclosure Requirements,
including, without limitation, the use of forms provided by
state or local agencies, where such forms exist, whether to the
Agent or to, or with, the state or local agency, provided, that
where such notification, registration or filing was made to, or
with, a state or local agency, a copy of such notification,
registration or filing shall be provided to the Agent prior to
the Closing Date.
5.23 Environmental Investigations. All material
environmental investigations, studies, audits, assessments or
reviews conducted of which the Borrower is in possession in
relation to the current or prior business of the Borrower or
any Subsidiary or any Real Property or facility now or
previously owned, operated, leased, used or controlled by the
Borrower or any Subsidiary, including, without limitation those
relating to compliance with or liability under any
Environmental Law, have been delivered to the Agent through its
attorneys, Cahill Gordon & Reindel.
5.24 Fine Products Company. As of the date of this
Agreement and as of the Closing Date, Fine Products Company, a
Georgia corporation ("Fine Products"), has capital of $113,000
and has no other assets or, to the best of the Borrower's
knowledge, liabilities of any kind (other than its rights and
obligations under the Purchase Agreement dated as of February
1, 1994 between Fine Products, Aminco Delaware and Gilliam
Candy Co., Inc., and certain tax attributes). There are no
actions, claims, judgments, suits or proceedings pending or, to
the Borrower's knowledge, threatened in any court of competent
jurisdiction with respect to Fine Products and the Borrower is
not aware of any facts or circumstances which would provide the
basis for the assertion against Fine Products of any such
actions, claims, suits or proceedings.
<PAGE>
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SECTION 6. Affirmative Covenants. The Borrower
covenants and agrees that on the Closing Date and thereafter
for so long as this Agreement is in effect and until the
Commitments have terminated and the Loans together with
interest, fees and all other Obligations incurred hereunder are
paid in full (except as otherwise agreed or consented to or
waived, in writing, by the Required Banks):
6.01 Information Covenants. The Borrower will
furnish or cause to be furnished to the Agent, who will
distribute copies to each Bank:
(a) As soon as available and in any event within 90
days after the close of each fiscal year of the Borrower,
the consolidated balance sheet of the Borrower 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 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 or as to the status of the Borrower
and its Subsidiaries as a going concern and shall state
that such consolidated financial statements present
fairly, in all material respects, the consolidated
financial position of the Borrower 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 the
examination by such accountants was conducted in
accordance with generally accepted auditing standards.
(b) As soon as available and in any event within 45
days after the close of each of the first three quarterly
accounting periods in each fiscal year of the Borrower,
the consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such quarterly accounting
period and the related consolidated statements of income,
of shareholders' equity and of cash flows for such
quarterly accounting period and for the elapsed portion of
the fiscal year ended with the last day of such quarterly
accounting period, setting forth in comparative form the
same information for the corresponding periods of the
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prior fiscal year, together with a brief narrative
discussion and analysis prepared by management describing
the Borrower's results of operations for such fiscal
quarter.
(c) As soon as practicable and in any event within
30 days after the end of the first full month ending after
the Closing Date and each month thereafter, (i) the
consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such period and (ii) the
related consolidated statements of income and cash flows
of the Borrower each in the form customarily prepared by
management, in each case for such fiscal month and for the
period from the beginning of the then current fiscal year
to the end of such fiscal month, setting forth in
comparative form the same information for the
corresponding periods of the prior fiscal year (including
a comparison of such monthly financial results against the
budgets required to be submitted pursuant to sub-
section (e) hereof, together with a brief narrative
discussion and analysis prepared by management describing
the Borrower's results of operations for such fiscal
month.
(d) Together with each delivery of financial
statements of the Borrower and its Subsidiaries pursuant
to subsection (a) above, a written statement by the
independent public accountants giving the report thereon
(i) stating that their audit examination has included a
review of the terms of Sections 7.04, 7.05, 7.07 (as to
the Borrower only) and 7.09 through 7.11 (inclusive) of
this Agreement as they relate to accounting matters but
without having conducted any special auditing procedures
in connection therewith, (ii) stating whether, in
connection with their audit examination, any condition or
event which constitutes a Default or Event of Default has
come to their attention, and if such a condition or event
has come to their attention, specifying the nature and
period of existence thereof; provided that such
accountants shall not be liable by reason of any failure
to obtain knowledge of any such Default or Event of
Default that would not be disclosed in the course of their
audit examination, and (iii) stating that based on their
audit examination nothing has come to their attention
which causes them to believe that as of the end of such
fiscal year of the Borrower there existed a Default or an
Event of Default related to the breach of any covenant set
forth in Sections 7.04, 7.05, 7.07 (as to the Borrower
only) and 7.09 through 7.11 (inclusive), as they relate to
accounting
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matters, and if such a condition or event has
come to their attention, specifying the nature and period
of existence thereof and what action the Borrower has
taken, is taking and proposes to take with respect
thereto.
(e) Prior to the commencement of each fiscal year,
annual budgets of the Borrower and its Subsidiaries in
reasonable detail for each month of such fiscal year, as
customarily prepared by management for its internal use,
setting forth, with appropriate discussion, the principal
assumptions upon which such budgets are based. Together
with each delivery of financial statements pursuant to
Section 6.01(c), a comparison of the current year to date
financial results against the budgets required to be
submitted pursuant to this subsection (e) shall be
presented.
(f) At the time of the delivery of the financial
statements provided for in Sections 6.01(a), (b) and (c),
a certificate of the chief executive officer, chief
financial officer, controller, chief accounting officer or
other Authorized Officer of the Borrower to the effect
that such financial statements are true and complete in
all material respects and that no Default or Event of
Default exists, or, if any Default or Event of Default
does exist, specifying the nature and extent thereof,
which certificate shall, with respect to the financial
statements provided for in Section 6.01(c), at the time of
delivery of such statements for the months ended
September 30, December 31, March 31 and June 30, beginning
with the month ended December 31, 1996, be accompanied by
a Compliance Certificate in a form reasonably acceptable
to the Agent setting forth the calculations required to
establish whether the Borrower and its Subsidiaries were
in compliance with the covenants in this Agreement
(including without limitation the covenants set forth in
Sections 7.09 through 7.11 (inclusive)) as at the end of
such fiscal period or year, as the case may be.
(g) Promptly upon receipt thereof, a copy of each
annual "management letter" submitted to the Borrower by
its independent accountants in connection with any annual
audit made by them of the books of the Borrower or any of
its Subsidiaries.
(h) Promptly upon their becoming available, copies
of all consolidated financial statements, reports, notices
and proxy statements sent or made available generally by
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the Borrower or any Subsidiary of the Borrower to its
security holders (other than to the Borrower or another
Subsidiary), of all regular and periodic reports and all
registration statements and prospectuses, if any, filed by
the Borrower or any of its Subsidiaries with any
securities exchange or with the SEC and of all press
releases and other statements made available generally by
the Borrower or any Subsidiary of the Borrower to the
public concerning material developments in the business of
the Borrower and its Subsidiaries.
(i) Promptly upon any Senior Officer obtaining
knowledge (w) of any condition or event which constitutes
a Default or Event of Default, or becoming aware that any
Bank has given any written notice or taken any other
action with respect to a claimed Default or Event of
Default under this Agreement, (x) that any Person has
given any written notice to the Borrower or any Subsidiary
of the Borrower or taken any other action with respect to
a claimed default or event or condition of the type
referred to in Section 8.04, or (y) of a material adverse
change in the business, operations, properties, assets,
nature of assets, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a
whole, an Officers' Certificate specifying the nature and
period of existence of any such condition or event, or
specifying the notice given or action taken by such holder
or Person and the nature of such claimed Default, Event of
Default, event or condition, or material adverse change,
and what action the Borrower has taken, is taking and
proposes to take with respect thereto.
(j) (i) Promptly upon any Senior Officer obtaining
knowledge of the institution of, or written threat of, any
action, suit, proceeding, governmental investigation or
arbitration against or affecting Holdings, the Borrower or
any of its Subsidiaries or any property of Holdings, the
Borrower or any of its Subsidiaries not previously
disclosed to the Banks, which action, suit, proceeding,
governmental investigation or arbitration seeks (or in the
case of multiple actions, suits, proceedings, governmental
investigations or arbitrations arising out of the same
general allegations or circumstances which seek) recovery
from Holdings, the Borrower or any of its Subsidiaries
aggregating $500,000 or more (exclusive of claims covered
by insurance policies of Holdings, the Borrower or any of
its Subsidiaries unless the insurers of such claims have
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disclaimed coverage or reserved the right to disclaim
coverage on such claims), the Borrower shall give notice
thereof to the Banks and provide such other information as
may be reasonably available to enable the Banks and their
counsel to evaluate such matters; (ii) as soon as
practicable and in any event within 45 days after the end
of each fiscal quarter, the Borrower shall provide a
report to the Banks covering any institution of, or
written threat of, any action, suit, proceeding,
governmental investigation or arbitration (not previously
reported) against or affecting Holdings, the Borrower or
any of its Subsidiaries or any property of Holdings, the
Borrower or any of its Subsidiaries not previously
disclosed to the Banks, which action, suit, proceeding,
governmental investigation or arbitration seeks (or in the
case of multiple actions, suits, proceedings, governmental
investigations or arbitrations arising out of the same
general allegations or circumstances which seek) recovery
from Holdings, the Borrower or any of its Subsidiaries
aggregating $250,000 or more (exclusive of claims covered
by insurance policies of Holdings, the Borrower or any of
its Subsidiaries unless the insurers of such claims have
disclaimed coverage or reserved the right to disclaim
coverage on such claims), and shall provide such other
information at such time as may be reasonably available to
enable the Banks and their counsel to evaluate such
matters; (iii) in addition to the requirements set forth
in clauses (i) and (ii) of this Section 6.01(j), the
Borrower upon request shall promptly give notice of the
status of any action, suit, proceeding, governmental
investigation or arbitration covered by a report delivered
to the Banks pursuant to clause (i) or (ii) above to the
Banks and provide such other information as may be
reasonably available to it to enable the Banks and their
counsel to evaluate such matters and (iv) promptly upon
any Senior Officer obtaining knowledge of any material
dispute in respect of or the institution of, or written
threat of, any action, suit, proceeding, governmental
investigation or arbitration in respect of any material
contract of the Borrower or any of its Subsidiaries, the
Borrower shall give notice thereof to the Banks and shall
provide such other information as may be reasonably
available to enable the Banks and their counsel to
evaluate such matters.
(k) Within 90 days of the last day of each fiscal
year of the Borrower, a summary report, substantially in
the form of Annex VI hereto, outlining all material
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insurance coverage maintained as of the date of such
report by the Borrower and its Subsidiaries and outlining
all material insurance coverage planned to be maintained
by the Borrower and its Subsidiaries in the subsequent
fiscal year.
(l) To the extent reasonably requested by the Agent,
as soon as practicable and in any event within ten
Business Days of the later of such request and the making
of any such amendment or waiver, copies of amendments or
waivers with respect to Indebtedness of the Borrower or
any of its Subsidiaries.
(m) The Borrower shall provide to the Agent prior to
the Closing Date a consolidated plan, substantially in the
form of Exhibit P hereto, for the remainder of the fiscal
year ending December 31, 1996, and the Borrower shall
provide to the Agent on or prior to December 31, 1996 and
each December 31 thereafter a consolidated plan,
substantially in the form of Exhibit P hereto, for each
month in the current fiscal year and a consolidated plan,
substantially in the form of Exhibit P hereto, for the
next succeeding five fiscal years, in each case prepared
in accordance with the Borrower's normal accounting
procedures (and which will represent management's
reasonable estimate of the Borrower's projected
performance during such periods) applied on a consistent
basis, including, without limitation, (i) forecasted
consolidated balance sheets, consolidated statements of
operations, of stockholders' equity and of cash flows of
the Borrower and its Subsidiaries on a consolidated basis
for such periods, (ii) the amount of forecasted capital
expenditures for such fiscal periods, and (iii) forecasted
compliance with Sections 7.09-7.11; provided that if any
such forecast indicates that the Borrower may not be in
compliance with any provision of this Agreement at some
future date, such forecast shall not constitute a Default
or an Event of Default or anticipatory or other breach
thereof.
(n) Within fifteen (15) days after the last Business
Day of each month, the Borrower shall deliver to Agent for
distribution to each Bank a borrowing base certificate in
the form of Exhibit M hereto (the "Borrowing Base
Certificate") detailing the Borrower's Eligible Accounts
Receivable and Eligible Inventory as of the last day of
such month, certified as complete and correct on behalf of
the Borrower by a Senior Officer or any other Authorized
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Officer. In addition, each Borrowing Base Certificate
shall have attached to it such additional schedules and/or
other information as the Agent may reasonably request. If
the Borrower fails to deliver any such Borrowing Base
Certificate within twenty-five (25) days after the end of
any such month, then the Borrower's Borrowing Base shall
be deemed to be $0 until such time as the Borrower shall
deliver such required Borrowing Base Certificate.
(o) (i) On or prior to the Closing Date and within
90 days after the commencement of each fiscal year, a
complete and accurate list of the officers and directors
of the Borrower and (ii) within 30 days of any change in
personnel affecting the accuracy of such list, a notice
specifying such change in personnel.
(p) With reasonable promptness, such other
information and data with respect to the Borrower or any
of its Subsidiaries or any other similar entity in which
the Borrower or any Subsidiary has an investment, as from
time to time may be reasonably requested by any Bank and
may be reasonably available to the Borrower.
(q) The Borrower shall deliver to the Agent, within
15 days after filing with the SEC, copies of Holdings'
annual report and of the information, documents and other
reports (or copies of such portions of any of the
foregoing as the SEC may by rules and regulations
prescribe) which is filed by Holdings with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act within
the time periods prescribed under such rules and
regulations. In addition, the Borrower shall cause
Holdings' annual reports to shareholders and any quarterly
or other financial reports furnished by Holdings to
shareholders generally to be filed with the Agent.
6.02 Books, Records and Inspections. The Borrower
will, and will cause each of its Subsidiaries to, keep true
books of records and accounts in which full and correct entries
will be made of all their business transactions, and will
reflect in its financial statements adequate accruals and
appropriations to reserves, all in accordance with GAAP. The
Borrower will, and will cause each of its Subsidiaries to,
permit, upon reasonable prior notice to the chief financial
officer, controller, chief accounting officer or any other
Authorized Officer of the Borrower, officers and designated
representatives of the Agent or any Bank to visit and inspect
any of
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the properties or assets of the Borrower and any of its
Subsidiaries in whomsoever's possession, and to examine the
books of account of the Borrower and any of its Subsidiaries
and discuss the affairs, finances and accounts of the Borrower
and of any of its Subsidiaries with, and be advised as to the
same by, its and their officers and independent accountants (in
the presence of such officers), all at such reasonable times
during regular business hours and intervals and to such
reasonable extent as the Agent or any Bank may reasonably
request.
6.03 Maintenance of Property; Insurance. (a) The
Borrower will, and will cause each of its Subsidiaries to,
exercise commercially reasonable efforts to maintain or cause
to be maintained in good repair, working order and condition
(subject to normal wear and tear) all properties used in its
businesses and from time to time will make or cause to be made
all repairs, renewals and replacements thereof which the
Borrower deems appropriate in its commercially reasonable
judgment and will maintain and renew as necessary all licenses,
permits and other clearances necessary in its commercially
reasonable judgment to use and occupy such properties of the
Borrower and each Subsidiary, as the case may be.
(b) The Borrower will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained, with
financially sound and reputable insurers, insurance with
respect to its properties and business against loss or damage
of the kinds customarily insured against by corporations of
established reputation engaged in the same or similar
businesses and similarly situated, of such types and in such
amounts as are customarily carried under similar circumstances
by such other corporations to the extent that such types and
such amounts of insurance are available at commercially
reasonable rates. The Borrower will, and will cause each of
its Subsidiaries to, furnish to each Bank, upon reasonable
request, information as to the insurance carried, and will not
cancel any such insurance without the consent of the Required
Banks.
(c) Without limiting subsection 6.03(b) above, the
Borrower will, and will cause each of its Subsidiaries to,
maintain in full force the insurance coverages specified in the
Mortgages and the other Security Documents.
6.04 Payment of Taxes. The Borrower will pay and
discharge, and will cause each of its Subsidiaries to pay and
discharge, all material taxes, assessments and governmental
charges or levies imposed upon it or upon its income or
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profits, or upon any properties belonging to it, prior to the
date on which material penalties attach thereto, and all lawful
claims which, if unpaid, might become a Lien or charge upon any
properties of the Borrower or any of its Subsidiaries or cause
a failure or forfeiture of title thereto; provided that neither
the Borrower nor any Subsidiary shall be required to pay any
such tax, assessment, charge, levy or claim that is being
contested in good faith and by proper proceedings timely
instituted and diligently conducted if it has maintained
adequate reserves with respect thereto in accordance with GAAP.
6.05 Corporate Franchises. The Borrower will do,
and will cause each Subsidiary to do, or cause to be done, all
things necessary to preserve and keep in full force and effect
its existence, rights and authority, except where such failure
to keep in full force and effect such rights and authority
would not have a Materially Adverse Effect.
6.06 Compliance with Statutes, etc. The Borrower
will, and will cause each Subsidiary to, comply with all
applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all Governmental
Authorities, in respect of the conduct of its business and the
ownership of its property, other than non-compliance which
would not have a Materially Adverse Effect; provided that with
respect to non-compliance with Environmental Laws which is
disclosed in Annex XII hereto, the Borrower will, and will
cause each Subsidiary to, comply with such Environmental Laws
as soon as practicable.
6.07 ERISA. The Borrower will furnish to the Agent,
who will distribute to each of the Banks:
(a) promptly upon the Borrower's knowing or having
reason to know of the occurrence of any (i) Termination
Event, or (ii) "prohibited transaction," within the
meaning of Section 406 of ERISA or Section 4975 of the
Code, in connection with any Pension Plan or any trust
created thereunder, which in the case of all such events
described in clause (i) or (ii) results or could
reasonably be expected to result in a liability of a
Credit Party or its ERISA Affiliates in the aggregate in
excess of $200,000, a written notice specifying the nature
thereof, what action the Credit Party or its ERISA
Affiliates have taken, are taking or propose to take with
respect thereto, and, when known, any action taken or
threatened by the Internal Revenue Service, Department of
Labor, PBGC or Multiemployer Plan with respect thereto.
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(b) with reasonable promptness, copies of (i) all
notices received by a Credit Party or any of its ERISA
Affiliates of PBGC's intent to terminate any Title IV Plan
or to have a trustee appointed to administer any Title IV
Plan, the notice of which event is required pursuant to
the preceding paragraph (a); (ii) upon the request of the
Agent each Schedule B (Actuarial Information) to the
annual report (Form 5500 Series) filed by a Credit Party
or any of its ERISA Affiliates with the Internal Revenue
Service with respect to each Pension Plan for which
Schedule B is required; (iii) upon the request of the
Agent, the most recent actuarial valuation report for each
Title IV Plan; and (iv) all notices received by the Credit
Parties or any of their ERISA Affiliates from a
Multiemployer Plan concerning the imposition or amount of
withdrawal liability pursuant to Section 4202 of ERISA,
the notice of which event is required pursuant to the
preceding paragraph (a).
6.08 Performance of Obligations. The Borrower will,
and will cause each of its Subsidiaries to, perform in all
material respects all of its obligations under the terms of
each mortgage, indenture, security agreement, other debt
instrument and material contract by which it is bound or to
which it is a party, except where such nonperformance would not
have a Materially Adverse Effect.
6.09 End of Fiscal Years; Fiscal Quarters. As of
December 31, 1996, the Borrower will, for financial reporting
purposes, and will cause each of its Subsidiaries to, have its
(i) fiscal years end on December 31, and (ii) fiscal quarters
end on or about March 31, June 30, September 30 and Decem-
ber 31.
6.10 Use of Proceeds. All proceeds of the Term
Loans and Revolving Loans shall be used as provided in Sec-
tion 5.05.
6.11 Equal Security for Loans and Notes; No Further
Negative Pledges. (a) If the Borrower or any of its
Subsidiaries shall create or assume any Lien upon any of its
property or assets, whether now owned or hereafter acquired and
whether or not such property or assets constitutes Collateral,
other than Permitted Encumbrances (unless prior written consent
to the creation or assumption thereof shall have been obtained
from the Agent and the Required Banks), it shall make or cause
to be made effective provisions whereby the Obligations will be
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secured by such Lien equally and ratably with any and all other
Indebtedness thereby secured as long as any such Indebtedness
shall be secured; provided that this covenant shall not be
construed as consent by the Agent and the Required Banks to any
violation by the Borrower of the provisions of Section 7.03.
(b) Except with respect to prohibitions against
other encumbrances on specific property encumbered to secure
payment of particular Indebtedness permitted hereunder (which
Indebtedness relates solely to the acquisition or improvement
of such specific property) neither the Borrower nor any of its
Subsidiaries shall enter into any agreement prohibiting the
creation or assumption of any Lien upon its properties or
assets, whether now owned or hereafter acquired.
6.12 Lender Meeting. The Borrower will participate
in a meeting of the Banks once during each fiscal year
(commencing with the fiscal year ending March 31, 1997) to be
held at a location and a time selected by the Borrower and
reasonably acceptable to the Agent unless the Required Banks
determine in their sole discretion that such meeting is
unnecessary and so inform the Borrower.
6.13 Pledge of Additional Collateral. Concurrently
with the execution and delivery by any Subsidiary of a
Subsidiary Guarantee, the Borrower will cause such Subsidiary
to take all necessary action to grant the Collateral Agent a
perfected first Lien in all of the real and personal property
of such Subsidiary (to the extent permitted by applicable law)
to secure the payment and performance of the Obligations and
such Subsidiary's obligations and liabilities under its
Subsidiary Guarantee; and promptly, and in any event within 30
days after the acquisition of assets of a type that, but for
the fact that such assets shall have been acquired after the
Closing Date, would have constituted Collateral, the Borrower
will, and will cause each of its Subsidiaries to, take all
necessary action to grant the Collateral Agent a perfected
first Lien in such newly acquired assets (such personal
property and assets of a Subsidiary executing a Subsidiary
Guarantee and such newly acquired assets are referred to herein
collectively as the "Additional Collateral"). Such action to
be taken by the Borrower and the Subsidiaries shall include,
without limitation, the execution and delivery of security
agreements, and/or supplements thereto, and other instruments
and documents, all in form and substance reasonably
satisfactory to the Collateral Agent, the filing of appropriate
financing statements under the provisions of the UCC,
applicable domestic or local laws, rules or
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regulations in each of the offices where such filing
is necessary or appropriate, and the delivery of
such opinions of counsel with respect to the
foregoing as the Collateral Agent shall reasonably
require; provided this Section 6.13 shall not apply
to any assets subject to Liens permitted under
Section 7.03(i). Furthermore, promptly, and in any
event within 30 days, after the acquisition of an
interest in Real Property within the United States
not held as of the Closing Date (the "Additional
Real Property"), the Borrower will, and will cause
such of its Subsidiaries acquiring such an interest
to, take such actions and execute such documents as
the Agent shall reasonably require to confirm the
Lien of a Mortgage (including, without limitation,
satisfaction of the conditions set forth in Sections
4.01(C)(ii) and (L)), or execute a new Mortgage,
with respect to such Additional Real Property. All
costs and expenses arising from any action taken by
the Agent or any Bank in connection with the pledge
of Additional Collateral or Additional Real Property
pursuant to this Section 6.13, including, without
limitation, reasonable costs of counsel for the
Agent, shall be payable by the Borrower to the Agent
or the Bank incurring such cost or expense within 10
Business Days after demand therefor. All agreements,
instruments and documents executed or delivered
pursuant to or in furtherance of this Section 6.13,
and all amendments, modifications and supplements
thereto from time to time entered into, are and
shall be within the definition of "Security
Documents."
6.14 Security Interests. The Borrower will, and
will cause each of its Subsidiaries to, perform any and all
acts and execute any and all documents (including, without
limitation, the execution, amendment or supplementation of any
financing statement and continuation statement) for filing in
any appropriate jurisdiction under the provisions of the UCC,
local law or any statute, rule or regulation of any applicable
domestic jurisdiction which are necessary in order to maintain
or confirm in favor of the Collateral Agent for the benefit of
the Banks a valid and perfected Lien on the Collateral and any
Additional Collateral, subject to no Liens except for Prior
Liens and Liens permitted by the applicable Security Documents.
The Borrower shall, as promptly as practicable after the filing
of any financing statements, deliver to the Agent
acknowledgment copies of, or copies of lien search reports
confirming the filing of, financing statements duly filed under
the UCC of all jurisdictions as may be necessary or, in the
reasonable judgment of the Agent, desirable to perfect the Lien
created, or purported or intended to be created, by each
Security Document.
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6.15 Environmental Events. (i) The Borrower will,
and will cause each of its Subsidiaries to, comply with any and
all Environmental Laws, other than non-compliance which could
not reasonably be expected to result in liability under
Environmental Laws in excess of $250,000 individually or in the
aggregate with any other liability under Environmental Laws;
provided that with respect to non-compliance with Environmental
Laws which is disclosed in Annex XII hereto, the Borrower will,
and will cause each of its Subsidiaries to, comply with such
Environmental Laws as soon as practicable.
(ii) The Borrower will promptly give notice to the
Agent upon determining the existence of (a) any violation of
any Environmental Laws, (b) any Environmental Notice or (c) any
release or threatened release of Hazardous Materials at, on,
upon, under or from any of the Real Properties or any facility
or equipment thereat in excess of a reportable quantity or
allowable standard or level under any Environmental Laws, or in
a manner and/or amount which could reasonably be expected to
result in liability under any Environmental Laws, in each case
in excess of $250,000 individually or in the aggregate with any
other liability under any Environmental Laws (other than any
such events disclosed in Annex XII).
(iii) In the event of the presence of Hazardous
Materials on any of the Real Properties which is in violation
of, or which could reasonably be expected to result in
liability under, any Environmental Laws, in each case in excess
of $250,000 individually or in the aggregate with any other
liability under any Environmental Laws, the Borrower or any of
its Subsidiaries, upon discovery thereof, shall take
appropriate steps to initiate and expeditiously complete all
response, corrective and other action required under any
Environmental Laws to mitigate and eliminate any such
liability.
(iv) Accompanying each quarterly Compliance
Certificate required under Section 6.01(f) hereof, the Company
shall include a statement of the status of each matter
identified in Annex XII and each matter for which notice has
been given under Section 6.15(ii) hereof indicating the action
that has been taken, additional action required, and, to the
extent practicable, an estimate of the completion date and
future cost for each matter until each matter has been
completely addressed.
6.16 New Subsidiaries. In addition to its
obligations with respect to Section 6.13, if, after the date
hereof, the Borrower or any Subsidiary shall create or acquire
any
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Subsidiary, the Borrower shall, concurrently with the
creation or acquisition of such Subsidiary, (i) cause such
Subsidiary to execute and deliver to the Agent a Subsidiary
Guarantee, substantially in the form of Exhibit R annexed
hereto, guaranteeing the Borrower's Obligations hereunder and
(ii) take all necessary actions and execute such agreements,
instruments and documents, including, without limitation, stock
powers executed in blank, and deliver such opinions of counsel
with respect thereto, as the Agent may reasonably require to
cause all of the capital stock of such Subsidiary owned or
controlled by the Borrower to be pledged to the Collateral
Agent to secure the Borrower's Obligations hereunder such that
the Collateral Agent has a valid and perfected first-priority
security interest in such pledged capital stock.
6.17 Repayment of Existing Subordinated Debt.
Holdings and the Borrower hereby covenant and agree that
concurrently with the closing of the Holdings IPO and the
Refinancing, Holdings and the Borrower shall purchase, or cause
to be purchased, each of the Senior Subordinated Notes, the
Subordinated Notes and the Junior Subordinated Notes. Upon
such purchase, each of such notes shall be cancelled.
SECTION 7. Negative Covenants. The Borrower hereby
covenants and agrees that as of the Closing Date and thereafter
for so long as this Agreement is in effect and until the
Commitments have terminated and the Loans together with
interest, fees and all other Obligations incurred hereunder are
paid in full (except as otherwise agreed or consented to or
waived, in writing, by the Required Banks):
7.01 Changes in Business. Other than asset
dispositions permitted under Section 7.13, the Borrower will
not, and will not permit any of its Subsidiaries to, materially
alter its businesses from that conducted by the Borrower or
such Subsidiary at the Closing Date and the business generally
described in the prospectus relating to the Holdings IPO, and
lines of business reasonably related thereto.
7.02 Amendments or Waivers of Certain Documents.
The Borrower will not, and will not permit any of its
Subsidiaries to, amend or otherwise change the terms of any
Existing Debt.
7.03 Liens. The Borrower will not, and will not
permit any Subsidiary to, directly or indirectly, create,
incur, assume or permit or suffer to exist any Lien upon or
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with respect to any item constituting Collateral, whether now
owned or hereafter acquired, except for the Lien of the
Security Document relating thereto, Prior Liens applicable
thereto and other Liens expressly permitted by such Security
Document. The Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist
any Lien upon or with respect to any property or assets of the
Borrower or any Subsidiary which does not constitute Collateral
whether now owned or hereafter acquired, or sell any such
property or assets subject to an understanding or agreement,
contingent or otherwise, to repurchase such property or assets
or assign any right to receive income, or file or permit the
filing of any financing statement under the UCC or any other
similar notice of Lien under any similar recording or notice
statute, except the following, which are herein collectively
referred to as "Permitted Encumbrances":
(a) Liens for taxes, assessments or governmental
charges or claims not yet delinquent or Liens for taxes,
assessments or governmental charges or claims being
contested in good faith and by appropriate proceedings for
which adequate reserves, as may be required by GAAP, have
been established;
(b) Liens in respect of property or assets of the
Borrower or any of its Subsidiaries imposed by law
(i) which were incurred in the ordinary course of
business, such as carriers', warehousemen's and mechanics'
Liens and other similar Liens arising in the ordinary
course of business, and (x) which do not in the aggregate
materially detract from the value of such property or
assets or materially impair the use thereof in the
operation of the business of the Borrower or any of its
Subsidiaries or (y) which are being contested in good
faith by appropriate proceedings, which proceedings have
the effect of preventing the forfeiture or sale of the
property or asset subject to such Lien or (ii) which do
not relate to material liabilities of the Borrower and its
Subsidiaries and do not in the aggregate materially
detract from the value of the property and assets of the
Borrower and its Subsidiaries taken as a whole;
(c) Liens in connection with any attachment or
judgment (including judgment or appeal bonds) for amounts
of less than $500,000 individually or less than $1,000,000
in the aggregate (exclusive of any amount adequately
covered by insurance as to which the insurance company has
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acknowledged coverage) unless the judgment it secures
shall, within 60 days after the entry thereof, not have
been discharged or execution thereof not been stayed
pending appeal, or shall not have been discharged within
30 days after the expiration of any such stay;
(d) Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of
business in connection with workers' compensation,
unemployment insurance and other types of social security,
or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money
bonds and other similar obligations incurred in the
ordinary course of business (exclusive of obligations in
respect of the payment for borrowed money or the
equivalent);
(e) subject to the provisions of Section 7.17 and,
with respect to any Mortgaged Real Property, to the
provisions of any applicable Mortgage, (i) Leases with
respect to the assets or properties of the Borrower
entered into in the ordinary course of the Borrower's
business and subordinate in all respects to the Liens
granted and evidenced by the Security Documents,
(ii) foreign Leases and (iii) Existing Leases and any
extensions, renewals or replacements thereof;
(f) easements, rights of way, restrictions, minor
defects or irregularities in title not interfering in any
material respect with the business of the Borrower or any
of its respective Subsidiaries, in each case incurred in
the ordinary course of business and which do not
materially impair for its intended purposes the Real
Property to which it relates;
(g) zoning and building by-laws and ordinances,
municipal bylaws and regulations, and restrictive
covenants, which do not materially interfere with the use
of the subject property by the Borrower or any of its
Subsidiaries as such property is used as of the Closing
Date;
(h) Liens securing Indebtedness of a Subsidiary
owing to the Borrower or a Wholly Owned Subsidiary of the
Borrower;
(i) Liens upon real or tangible or intangible
personal property acquired or constructed by the Borrower or
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its Subsidiaries after the date hereof or on such
property or equity securities of a Person at the time such
Person becomes a Subsidiary of the Borrower or any of its
Subsidiaries; provided that (i) any such Lien is created
solely for the purpose of securing Indebtedness
representing, or incurred to finance, the cost of the item
of property subject thereto or such Liens existed on the
date such property or securities were acquired and were
not incurred as a result of or in anticipation of such
acquisition, (ii) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of the fair
value (as determined in good faith by the board of
directors of the Borrower) of the respective property at
the time it was so acquired or constructed, (iii) the
Indebtedness secured by the Lien is not created more than
180 days after the later of the acquisition, completion of
construction, repair, improvement, addition or
commencement of full operation of the property subject to
the Lien, (iv) such Lien does not extend to or cover any
other property other than such item of property and
(v) the incurrence of such Indebtedness secured by such
Lien is permitted by Section 7.04;
(j) Liens on any property existing as of the date
hereof securing Existing Debt and any refinancing,
extension, renewal or rearrangement thereof provided that
such Lien does not extend to or cover any other property
other than items of property encumbered as of the date
hereof; and
(k) Liens pursuant to Section 6.13 of this
Agreement.
7.04 Indebtedness. The Borrower will not, and will
not permit any of its Subsidiaries to, contract, create, incur,
assume or suffer to exist any Indebtedness, except:
(a) Indebtedness incurred pursuant to the Credit
Documents;
(b) Existing Debt and any refinancing, extension,
renewal, rearrangement or replacement thereof; provided
that any such refinancing, extension, renewal,
rearrangement or replacement of Existing Debt shall be on
terms which, both taken as a whole and specifically as
such terms relate to the identity of the obligors,
repayments of principal, covenants, events of default and
security in property of the debtor, are in each event no
less
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favorable to the Borrower than the correlative terms
of the Existing Debt;
(c) Interest Rate Agreements, if any;
(d) $1,000,000 of Indebtedness outstanding at any
time to finance the cost of the acquisition or
construction of real or personal tangible or intangible
property (including Capital Leases), and any refinancing,
extension, renewal, rearrangement or replacement thereof;
provided that such Indebtedness (or the refinancing
thereof) shall not exceed 100% of the fair value of such
property; and provided, further, that such Indebtedness
(or the refinancing thereof) is not secured by any Lien
other than a Lien referred to in clause (i) of
Section 7.03;
(e) other unsecured Indebtedness not exceeding
$1,000,000 in the aggregate at any time outstanding;
(f) Indebtedness owed to Morningside under the
Management Agreement;
(g) Indebtedness of the Borrower to any of its
Wholly Owned Subsidiaries or of any Subsidiary to the
Borrower or another Wholly Owned Subsidiary of the
Borrower (but only so long as such Indebtedness is held by
the Borrower or its Wholly Owned Subsidiary);
(h) Indebtedness in respect of performance bonds,
return-of-money bonds, surety and appeal bonds and other
similar obligations incurred by the Borrower or any of its
Subsidiaries in the ordinary course of business, provided
such Indebtedness does not exceed $100,000 at any time
outstanding; and
(i) Indebtedness of any Subsidiary incurred pursuant
to the issuance of a Guarantee by such Subsidiary as
required by Section 6.16 of this Agreement.
7.05 Advances, Investments and Loans. The Borrower
will not, and will not permit any of its Subsidiaries to, lend
money or credit or make advances to any Person, or purchase or
acquire any stock, obligations or securities of, or any other
interest in, or make any capital contribution to any Person,
except:
(a) investments in Cash and Cash Equivalents;
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(b) receivables owing to them and advances to
customers and suppliers, in each case if created, acquired
or made in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms;
(c) investments (including debt obligations)
received in connection with the bankruptcy or
reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other
disputes with, customers and suppliers arising in the
ordinary course of business;
(d) investments in and advances to Credit Parties;
(e) investments in any Wholly Owned Subsidiary of
the Borrower or another Subsidiary, or any Person which,
as a result of such investment, becomes a Wholly Owned
Subsidiary of the Borrower or another Subsidiary; provided
that such Wholly Owned Subsidiary is engaged in a business
related to that of the Borrower and its Subsidiaries in
compliance with Section 7.01;
(f) transactions between the Borrower and any of its
Wholly Owned Subsidiaries and between Wholly Owned
Subsidiaries permitted under Sections 7.04(g) and 7.08(i);
(g) loans or advances made by the Borrower to its
officers, directors and employees in the ordinary course
of business not to exceed $500,000 in the aggregate
outstanding at any time;
(h) investments made as a result of the receipt of
non-cash proceeds from any Asset Sale made pursuant to and
in compliance with Section 7.13;
(i) investments in Interest Rate Agreements
permitted under Section 7.04(c); and
(j) other investments, loans or advances not to
exceed $500,000 in the aggregate outstanding at any time.
7.06 Prepayments of Indebtedness; Amendments.
(i) The Borrower will not, and will not permit any of its
Subsidiaries to make (or give any notice in respect of) any
voluntary or optional payment or prepayment or redemption or
acquisition for value of Indebtedness (including, without
limitation, by way of depositing with any trustee with respect
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thereto money or securities before such Indebtedness is due for
the purpose of paying such Indebtedness when due) or exchange
of any such Indebtedness or preferred stock, as the case may
be, in each case until all Obligations under this Agreement
have been satisfied in full; provided that the Borrower and any
of its Subsidiaries may make such a payment, prepayment,
redemption, acquisition or exchange using the proceeds of
Indebtedness permitted to be incurred by Section 7.04 to
refinance or replace such Indebtedness.
(ii) The Borrower will not, and will not permit any
of its Subsidiaries to: amend, modify or change any of the
Management Agreement, Employment Agreements, the Certificate of
Incorporation (including, without limitation, by the filing of
any certificate of designation) or By-laws of the Borrower (or
of Holdings to the extent such amendment, modification or
change is adverse to the Banks as Banks), or any agreement
entered into by the Borrower (or by Holdings to the extent such
amendment, modification or change is adverse to the Banks as
Banks) with respect to its capital stock, or enter into any new
agreement with respect to the capital stock of the Borrower (or
of Holdings to the extent such new agreement is adverse to the
Banks as Banks), in each case without the prior consent of the
Agent.
7.07 Dividends, etc. The Borrower will not, and
will not permit any of its Subsidiaries to, declare or pay any
dividends (other than dividends or distributions payable in
shares of capital stock of the Borrower or any of its
Subsidiaries, other than redeemable stock) or return any
capital to, its stockholders or authorize or make any other
distribution, payment or delivery of property or cash to its
stockholders as such, or redeem, retire, purchase or otherwise
acquire, directly or indirectly, for any consideration, any
shares of any class of its capital stock now or hereafter
outstanding (or any warrants for or options or stock
appreciation rights in respect of any of such shares), or make
any loans or advances to Affiliates, or set aside any funds for
any of the foregoing purposes, or permit any of its
Subsidiaries to purchase or otherwise acquire for consideration
any shares of any class of the capital stock of the Borrower or
any other Subsidiary, as the case may be, now or hereafter
outstanding (or any options or warrants or stock appreciation
rights issued by such Person with respect to its capital stock)
(all of the foregoing, "Dividends"), except that (i) any direct
or indirect Subsidiary of the Borrower may pay Dividends to its
parent corporation if such parent corporation is the Borrower
or a Wholly Owned
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Subsidiary of the Borrower, (ii) the Borrower or any
Subsidiary of the Borrower may pay to Holdings any amounts
required (x) for the payment of any taxes payable
(A) by Holdings or (B) by Holdings, the Borrower and/or its
Subsidiaries on a consolidated, combined or unitary basis or
(y) with respect to the Refinancing and related transactions,
(iii) the Borrower or any of its Subsidiaries may purchase
capital stock held by employees of the Borrower or any of its
Subsidiaries pursuant to any employee stock option or other
benefit plan thereof upon the termination, retirement or death
of any such employee in accordance with the provisions of any
such plan in an amount not greater than $250,000 in any
calendar year; provided that the Borrower may purchase capital
stock pursuant to the Employment Agreement with Dr. Leroy Keith
without regard to such limitation; and (iv) the Borrower or any
of its Subsidiaries may make payments to Affiliates pursuant to
and in compliance with Section 7.08 hereof.
7.08 Transactions with Affiliates. The Borrower
will not, and will not permit any Subsidiary to, enter into any
transaction or series of transactions, whether or not in the
ordinary course of business, with any holder of 5% or more of
any class of equity securities of the Borrower or with any
Affiliate of the Borrower other than on terms and conditions
substantially as favorable to the Borrower or such Subsidiary
as would be obtainable by the Borrower 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 the Borrower or an Affiliate; provided that the
foregoing restrictions shall not apply to (i) transactions
between the Borrower and any of its Wholly Owned Subsidiaries
and between Wholly Owned Subsidiaries, (ii) transactions
between Holdings and the Borrower to the extent otherwise
expressly permitted under this Agreement, (iii) payments to
Morningside pursuant to the Management Agreement for management
services not to exceed $350,000 in any fiscal year, plus
reimbursement of reasonable out-of-pocket expenses, (iv) 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, (v) loans and other
advances made by the Borrower to its officers, directors and
employees permitted under Section 7.05(g), (vi) the payment of
customary outside directors' fees, customary indemnification
arrangements and customary director and officer liability
insurance and (vii) the issuance of capital stock of the
Borrower or any of its Subsidiaries, pursuant to any pension,
stock option, profit sharing
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or other employee benefit plan or agreement of the Borrower
or any of its Subsidiaries in the ordinary course of business.
7.09 Total Interest Coverage Ratio. The Borrower
will not permit the ratio of (i) Consolidated EBITDA of the
Borrower to (ii) Consolidated Interest Expense (which, for
purposes of this Section 7.09 only, shall include only Cash
interest expense) of the Borrower for any Test Period ending
during any period listed below to be less than the ratio set
forth opposite such period below:
Period Ratio
------ -----
July 1, 1996 through and
including December 31, 1996................... to 1.00
January 1, 1997 through and
including December 31, 1997................... to 1.00
January 1, 1998 through and
including December 31, 1998................... to 1.00
January 1, 1999 and thereafter................ to 1.00
7.10 Fixed Charge Coverage Ratio. The Borrower will
not permit the ratio of (i) Consolidated EBITDAC of the
Borrower minus cash taxes paid by the Borrower to (ii) the sum
of (A) Consolidated Interest Expense (which, for purposes of
this Section 7.10 only, shall include only Cash interest
expense) of the Borrower and (B) the amount of scheduled
mandatory payments on account of principal of Indebtedness made
by the Borrower for any Test Period ending on or after
January 1, 1996 and on or before December 31, 1996 to be less
than to 1.00, for any Test Period ending on or after
January 1, 1997 and on or before December 31, 1999 to be less
than to 1.00 or less than to 1.00 for any Test Period
ending on or after January 1, 1999.
7.11 Leverage Ratio. The Borrower will not permit
the ratio of (i) Indebtedness of the Borrower and its
Subsidiaries to (ii) Consolidated EBITDA of the Borrower (as of
the end of the most recent fiscal quarter of the Borrower) to
be more than the ratio set forth below as of the last day of
each of the fiscal years set forth below and as of the last day
of each of the three fiscal quarters immediately following such
fiscal years:
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Fiscal Year Ratio
----------- -----
1997.......................................... to 1.00
1998.......................................... to 1.00
1999.......................................... to 1.00
2000 and thereafter........................... to 1.00
7.12 Issuance of Subsidiary Stock. The Borrower
will not and will not permit any of its Subsidiaries directly
or indirectly to issue, sell, assign, pledge or otherwise
encumber or dispose of any shares of such Subsidiaries' capital
stock or other equity securities (or warrants, rights or
options to acquire capital stock or convertible securities or
other equity securities) of such Subsidiary, except to the
Borrower or any other Wholly Owned Subsidiary of the Borrower
(in each case other than directors' or nominees' qualifying
shares or shares of capital stock required to be owned by
foreign nationals under applicable law); provided, however,
that nothing contained in this Section 7.12 shall prohibit the
issuance of capital stock of Carson Holdings Limited in
accordance with the terms of the Carson Holdings Limited Share
Incentive Trust, as in effect on the date hereof.
7.13 Disposition of Assets. A. The Borrower will
not, and will not permit any of its Subsidiaries to, dispose of
all or any part of its interest in any asset, except that the
Borrower and its Subsidiaries may sell or otherwise dispose of
assets so long as either (i) such sales are approved by the
Required Banks; (ii) such sales are for at least the fair
market value of such assets and the aggregate amount of such
asset sales is less than $500,000 in any 12-month period and,
in any such case, the Borrower or such Subsidiary complies with
the mandatory prepayment and Commitment reduction provisions
herein and, in the case of Collateral, so long as the
conditions to the release of Collateral described herein and in
the applicable Security Documents are met; (iii) such sales are
of inventory and in the ordinary course of business; (iv) such
sales or other dispositions are (A) of equipment that has
become worn out, obsolete or damaged or otherwise unsuitable or
no longer needed for use in connection with the business of the
Borrower or any of its Subsidiaries or should be replaced, as
the case may be, in each case as determined in good faith by
the board of directors of the Borrower or its Subsidiary, as
the case may be, (B) for at least the fair market value of such
equipment, (C) not in excess of $100,000 individually or
$250,000 per year in the aggregate for sales of such equipment
and (D) the proceeds of the sales of such equipment are used
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within 90 days of such sales to (1) purchase equipment used in
substantially similar lines of business or (2) repay
Indebtedness under this Credit Agreement pursuant to
Section 3.01; (v) such sales or other dispositions do not
exceed $50,000 individually and are for at least the fair
market value of such assets or as to such other dispositions,
the likely amount of net sales proceeds that would be realized
upon a sale of such assets is such that a sale of such assets
is not, in the reasonable judgment of the Borrower,
economically practicable but such other disposition is
otherwise of commercial value to the Borrower; provided that in
no case shall sales pursuant to this clause (v) exceed an
aggregate of $100,000 in any fiscal year, and in the case of
Collateral, so long as the conditions to the release of
Collateral described herein and in the applicable Security
Documents are met; (vi) such sales consist of the licensing or
sublicensing of the Borrower's or any of its Subsidiaries'
Intellectual Property in the ordinary course of business; or
(vii) such sales are of equity securities under any stock
option or other benefit plan available to the employees or
directors of the Borrower or any of its Subsidiaries.
The consideration received by the Borrower and its
Subsidiaries from each sale of assets permitted by subsections
(i) and (ii) above, other than with respect to such sales
involving consideration of not more than $100,000 in the
aggregate in any fiscal year, shall be payable by the purchaser
in whole within 15 days of such sale and at least 70% of the
consideration from each sale shall consist of Cash or Cash
Equivalents. Any non-cash proceeds received from the sale of
assets constituting Collateral shall be pledged pursuant to and
in accordance with the applicable Security Documents and shall
constitute Collateral.
B. Upon compliance with the conditions in subsec-
tion A of this Section 7.13, the Release Conditions and the
Partial Release Conditions (each as hereinafter defined), the
Borrower shall be entitled to receive from Collateral Agent an
instrument in form and substance reasonably satisfactory to the
Borrower (each, a "Release"), releasing the Lien of the
Mortgage with respect to all or any portion of a Mortgaged Real
Property (each, a "Released Real Property"). The Borrower
shall exercise its rights under this Section by delivering to
Collateral Agent a notice (each, a "Release Notice"), which
shall refer to this Section, describe with particularity the
proposed Released Real Property and be accompanied by (i) four
counterparts of the Release fully executed and acknowledged by
all necessary parties other than Collateral Agent,
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(ii) executed counterparts of UCC termination statements
necessary to terminate the Lien of the applicable Mortgage and
(iii) an Officer's Certificate certifying that no Default or
Event of Default shall have occurred and the parties executing
any and all documents in connection with the Release (other
than Collateral Agent) were duly authorized to do so
(collectively, the "Release Conditions"). In the event the
proposed Released Property consists of less than all of the
Mortgaged Real Property subject to a single Mortgage, the
Partial Release Conditions must be satisfied in order for the
Borrower to receive the Release.
C. Collateral Agent's obligation to deliver a
Release in respect of less than all of the Mortgaged Real
Property subject to a single Mortgage shall be contingent upon
the satisfaction of the conditions in subsection A of this Sec-
tion 7.13 and the Release Conditions as well as the following
conditions (collectively, the "Partial Release Conditions"):
(i) following the sale, transfer or other
disposition of and release of the Lien of the applicable
Mortgage with respect to the proposed Released Real
Property, the remaining Mortgaged Real Property shall have
utility services and access to public roads, rail spurs
and other transportation structures sufficient and
necessary in the reasonable opinion of the Borrower for
the continued use of such Mortgaged Real Property in the
manner utilized prior to the Release;
(ii) following the sale, transfer or other
disposition of the proposed Released Real Property, the
remaining Mortgaged Real Property shall comply in all
material respects with applicable laws, rules, regulations
and ordinances relating to environmental protection,
zoning, land use, configuration and building and workplace
safety (except for such non-compliance which has been
previously consented to by the Collateral Agent);
(iii) following the sale, transfer or other
disposition of the proposed Released Real Property, the
value of the remaining Mortgaged Real Property shall not
be less than the value of such remaining Mortgaged Real
Property prior to the Release due to such sale, transfer
or other disposition;
(iv) the Title Company shall be prepared to issue an
endorsement to the Banks' title insurance policy relating
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to the Mortgaged Real Property confirming that after the
proposed release, the Lien of the applicable Mortgage
continues unimpaired as a first priority Lien upon the
remaining Mortgaged Real Property subject only to Prior
Liens, those Liens permitted by the Mortgage or previously
consented to by the Collateral Agent;
(v) the Borrower shall cause to have been delivered
to Collateral Agent a Survey reasonably acceptable to the
Agent of the Mortgaged Real Property remaining after the
proposed Released Real Property has been released; and
(vi) the Borrower shall cause to have been delivered
to Collateral Agent an Officer's Certificate certifying
that the conditions set forth in subsections (i)
through (v) have been satisfied.
D. Collateral Agent shall execute, acknowledge (if
applicable) and deliver to the Borrower counterparts of the
documents described in subsection B(i) and (ii) within 10
Business Days after receipt by Collateral Agent of a Release
Notice provided that the Release Conditions and the Partial
Release Conditions (if applicable) have been satisfied. The
Borrower shall (i) execute, deliver, obtain and record such
instruments as Collateral Agent may require, including, without
limitation, amendments to the Security Documents or this
Agreement and, (ii) deliver to Collateral Agent such evidence
of the satisfaction of the Release Conditions and the Partial
Release Conditions as Collateral Agent may require and
(iii) cause the Title Company to issue the endorsement referred
to in subsection C(iv). The Borrower shall reimburse
Collateral Agent, Agent and the Banks upon demand for all
reasonable costs or expenses incurred in connection with any
actions taken pursuant to this Section 7.13.
7.14 Contingent Obligations. The Borrower will not,
and will not permit any of its Subsidiaries to, directly or
indirectly, create or become or be liable with respect to any
Contingent Obligation except:
(i) guarantees resulting from endorsement of
instruments for deposit or collection in the ordinary
course of business;
(ii) Interest Rate Agreements, if any;
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(iii) obligations arising as a direct consequence of
the Refinancing;
(iv) obligations with respect to the Indebtedness
permitted to be incurred under Section 7.04; and
(v) other Contingent Obligations not to exceed
$250,000 outstanding at any one time.
7.15 ERISA. The Credit Parties will not, and will
not permit any of their ERISA Affiliates to:
(i) engage in any transaction in connection with
which the Borrower or any of its ERISA Affiliates could be
subject to either a tax imposed by Section 4975(a) of the
Code or the corresponding civil penalty assessed pursuant
to Section 502(i) of ERISA, which penalties and taxes for
all such transactions could reasonably be expected to be
in an aggregate amount in excess of $500,000;
(ii) permit to exist any accumulated funding
deficiency, for which a waiver has not been obtained from
the Internal Revenue Service, with respect to any Pension
Plan;
(iii) permit to exist any failure to make
contributions or any unfunded benefits liability which
creates, or with the passage of time would create, a
statutory lien or requirement to provide security under
ERISA or the Code in favor of the PBGC or any Pension
Plan, Multiemployer Plan or other entity;
(iv) permit the sum of the amount of unfunded benefit
liabilities (determined in accordance with Statement of
Financial Accounting Standards No. 87) under all Title IV
Plans (excluding each Title IV Plan with an amount of
unfunded benefit liabilities of zero or less) to exceed
$2,500,000 for a period in excess of twelve months; or
(v) fail to make any payment to any Multiemployer
Plan that it or any of its ERISA Affiliates may be
required to make under such Multiemployer Plan, any
agreement relating to such Multiemployer Plan, or any law
pertaining thereto.
As used in this Section 7.15, the term "accumulated
funding deficiency" has the meaning specified in Section 302 of
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ERISA and Section 412 of the Code, and the term "amount of
unfunded benefit liabilities" has the meaning specified in
Section 4001(a)(18) of ERISA.
7.16 Merger and Consolidations. No Credit Party
will merge or consolidate with or into any other entity;
provided that any Subsidiary of the Borrower may be merged or
consolidated with or into (i) the Borrower, if the Borrower is
the continuing or surviving corporation or (ii) any other such
Subsidiary, if the continuing or surviving corporation is a
Wholly Owned Subsidiary of the Borrower.
7.17 Sale and Lease-Backs. The Borrower will not,
and will not permit any of its Subsidiaries to, directly or
indirectly, become or thereafter remain liable as lessee or as
guarantor or other surety with respect to the lessee's
obligations under any lease, whether an Operating Lease or a
Capital Lease, of any property (whether real or personal or
mixed) whether now owned or hereafter acquired, (i) which the
Borrower or any of its Subsidiaries has sold or transferred or
is to sell or transfer to any other Person (other than in
connection with the Refinancing) or (ii) which the Borrower or
any such Subsidiary intends to use for substantially the same
purpose as any other property which has been or is to be sold
or transferred by the Borrower or any such Subsidiary to any
Person in connection with such lease, if in the case of clause
(i) or (ii) above, such sale and such lease are part of the
same transaction or a series of related transactions or such
sale and such lease occur with one year of each other or are
with the same other Person.
7.18 Sale or Discount of Receivables. The Borrower
will not, nor will it permit any of its Subsidiaries to, sell,
with or without recourse, or discount (other than in connection
with trade discounts or arrangements necessitated by the
creditworthiness of the other party, in each case in the
ordinary course of business consistent with past practice) or
otherwise sell for less than the face value thereof, notes
receivable or accounts receivable owed to it by its third party
customers or suppliers.
7.19 Fine Products Company. The Borrower will not,
and will not permit any Subsidiary to, transfer any cash or
other property to Fine Products, other than transfers of cash
in amounts needed to enable Fine Products to pay amounts not to
exceed $25,000 in the aggregate then required to be paid by
Fine Products to Persons that are not Affiliates of the
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Borrower. The Borrower will not permit Fine Products to engage
in any business activity.
SECTION 8. Events of Default. Upon the occurrence
and during the continuance of any of the following specified
events (each an "Event of Default"):
8.01 Payments. The Borrower shall (i) default in
the payment when due of any principal of the Loans, (ii) de-
fault, and such default shall continue for two or more Business
Days, in the payment when due of any interest on the Loans or
under any other Credit Document or (iii) fail to pay any other
amounts owing hereunder for five Business Days after receiving
notice thereof; or
8.02 Representations, etc. Any representation,
warranty or statement made or deemed made by operation of Sec-
tion 4.01, 4.02 or 4.03 by any Credit Party herein or in any
other Credit Document or in any written statement or
certificate delivered or required to be delivered pursuant
hereto or thereto shall prove to be untrue in any material
respect on the date as of which made or deemed made by
operation of Section 4.01, 4.02 or 4.03; or
8.03 Covenants. Any Credit Party shall (a) default
in the due performance or observance by it of any term,
covenant or agreement contained in Section 6.11, 6.13, 6.14 or
Section 7 hereof or Section 1.1 of any Mortgage or (b) default
in the due performance or observance by it of any other term,
covenant or agreement contained in this Agreement or any
Security Document and such default shall continue unremedied
for a period of at least thirty days (or, in the case of
Section 6.15(iii), five Business Days) after the date of such
default; or
8.04 Default Under Other Agreements. (a) Any Credit
Party shall (i) default in any payment with respect to any
Indebtedness (other than Obligations) having a principal amount
of $500,000 or more individually or $1,000,000 or more in the
aggregate, for all Credit Parties and their Subsidiaries,
beyond the period of grace, if any, provided in the instrument
or agreement under which such Indebtedness was created or
(ii) default in the observance or performance of any agreement
or condition relating to any such Indebtedness or contained in
any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the
effect of which default or other event or condition is to
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cause, or to permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to
cause any such Indebtedness to become due prior to its stated
maturity; or (b) any such Indebtedness of any Credit Party or
any of its respective Subsidiaries shall be declared to be due
and payable, or required to be prepaid other than by a
regularly scheduled required prepayment, prior to the stated
maturity thereof; or
8.05 Bankruptcy, etc. Any Credit Party shall
commence a voluntary case concerning itself under Title 11 of
the United States Code entitled "Bankruptcy," as now or
hereafter in effect, or any successor thereto (the "Bankruptcy
Code"); or an involuntary case is commenced against any Credit
Party or any of its Subsidiaries and the petition is not
controverted within 20 days, or is not dismissed for a period
of 60 consecutive days, after commencement of the case; or a
custodian (as defined in the Bankruptcy Code) is appointed for,
or takes charge of, all or substantially all of the property of
any Credit Party or any of its Subsidiaries; or any Credit
Party or any of its Subsidiaries commences any other proceeding
under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction whether now or hereafter in
effect relating to any Credit Party or any of its Subsidiaries;
or there is commenced against any Credit Party or any of its
Subsidiaries any such proceeding which remains undismissed for
a period of 60 consecutive days; or any Credit Party or any of
its Subsidiaries is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or
proceeding is entered and continues unstayed for a period of
60 consecutive days; or any Credit Party or any of its
Subsidiaries suffers any appointment of any custodian or the
like for it or any substantial part of its property to continue
undischarged or unstayed for a period of 60 consecutive days;
or any Credit Party or any of its Subsidiaries makes a general
assignment for the benefit of creditors; or any corporate
action is taken by any Credit Party or any of its Subsidiaries
for the purpose of effecting any of the foregoing; or
8.06 ERISA.
(i) Any "reportable event" as described in Section
4043 of ERISA or the regulations thereunder (excluding those
events for which the requirement for notice has been waived by
regulation by the PBGC), or any other event or condition, which
the Required Banks determine constitutes reasonable grounds
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under Section 4042 of ERISA for the termination of any Title IV
Plan by the PBGC or for the appointment by the appropriate
United States District Court of a trustee to administer or
liquidate any Title IV Plan shall have occurred; or
(ii) A trustee shall be appointed by a United States
District Court to administer any Title IV Plan; or
(iii) The PBGC shall institute proceedings to
terminate any Title IV Plan or to appoint a trustee to
administer any Title IV Plan; or
(iv) A Credit Party or any of its ERISA Affiliates
shall become liable to the PBGC or any other party under
Section 4062, 4063, 4064 or 4069 of ERISA with respect to any
Title IV Plan; or
(v) A Credit Party or any of its ERISA Affiliates
shall become liable to any Multiemployer Plan under
Section 4201 et seq. of ERISA;
if the sum of each of such Credit Party's and its ERISA
Affiliates' various liabilities (such liabilities to include,
without limitation, any liability to the PBGC or to any other
party under Section 4062, 4063, 4064 or 4069 of ERISA with
respect to any Title IV Plan, or to any Multiemployer Plan
under Section 4201 et seq. of ERISA) which the Required Banks
determine could reasonably be expected to be incurred as a
result of such events listed in subclauses (i) through (v)
above exceeds $1,000,000; or
8.07 Security Documents. Any Security Document
shall cease to be in full force and effect, or shall cease to
give the Collateral Agent the Liens, rights, powers and
privileges purported to be created thereby, in favor of the
Collateral Agent, superior to and prior to the rights of all
third Persons and subject to no Liens other than Prior Liens
and Liens expressly permitted by the applicable Security
Document or any judgment creditor having a Lien against any
item of Collateral shall commence legal action to foreclose
such Lien or otherwise exercise its remedies against any item
of Collateral; or
8.08 Guarantees. Any Guarantee or any provisions
thereof shall cease to be in full force or effect in all
material respects, or the Guarantor thereunder or Person acting
by or on behalf of such Guarantor shall deny or disaffirm such
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Guarantor's obligations under such Guarantee or the Guarantor
shall default in the due performance or observance of any term,
covenant or agreement on its part to be performed or observed
pursuant to such Guarantee; or
8.09 Judgments. One or more judgments or decrees
shall be entered against any Credit Party or any of its
Subsidiaries involving a liability of $500,000 or more in the
case of any one such judgment or decree or $1,000,000 or more
in the aggregate for all such judgments and decrees for all
Credit Parties and their Subsidiaries (in either case in excess
of the amount covered by insurance as to which the insurance
company has acknowledged coverage) and any such judgments or
decrees shall not have been vacated, discharged, stayed or
bonded pending appeal for a period of 60 consecutive days from
the entry thereof; or
8.10 Ownership.
(i) Any person or group (as defined in Section 13(d)
of the Exchange Act) owns or controls more than 30% (on a fully
diluted basis) of the capital stock of any class or classes of
Holdings entitled to vote for the election of the Board of
Directors of Holdings, in any case at any time that DNL
Partners, Limited Partnership, together with its Affiliates
(which, for purposes of this definition in the case of DNL
Partners, Limited Partnership includes any trust for the voting
of shares held by officers and employees of the Borrower),
ceases to own or control at least 40% (on a fully diluted
basis) of the capital stock of any class or classes of Holdings
entitled to vote for the election of the Board of Directors of
Holdings; or
(ii) at any time when DNL Partners, Limited
Partnership, together with its Affiliates, owns or controls at
least 40% (on a fully diluted basis) of the capital stock of
any class or classes of Holdings entitled to vote for the
election of the Board of Directors of Holdings and any person
or group (as defined in Section 13(d) of the Exchange Act) owns
or controls more than such amount owned or controlled by DNL
Partners, Limited Partnership, together with its Affiliates; or
(iii) Holdings shall own less than 100% (on a fully
diluted basis) of the issued and outstanding capital stock of
the Borrower, other than securities issued in the ordinary
course of business under any stock option or other benefit plan
available to the employees or directors of the Borrower or any
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of its Subsidiaries (each of clauses (i), (ii) and (iii) of
this Section 8.10 a "Change of Control Event");
provided, however, that there shall be no Change of Control
Event if DNL Partners, Limited Partnership, together with its
Affiliates cease to own or control at least 40% (on a fully
diluted basis) of the capital stock of any class or classes of
Holdings entitled to vote for the election of the Board of
Directors of Holdings as a result of a public offering of any
such shares and, after such offering, DNL Partners, Limited
Partnership, and its Affiliates own or control at least 20% of
such shares and no other person or group (as defined in Section
13(d) of the Exchange Act) owns or controls a greater number of
such shares.
then, and in any such event, and at any time
thereafter, if any Event of Default shall then be continuing,
the Agent shall, upon the written request of the Required
Banks, by written notice to the Borrower, take any or all of
the following actions, without prejudice to the rights of the
Agent or any Bank to enforce its claims against the Borrower,
except as otherwise specifically provided for in this Agreement
(provided that if an Event of Default specified in Section 8.05
shall occur, with respect to any Credit Party, the result which
would occur upon the giving of written notice by the Agent as
specified in clauses (i) and (ii) below shall occur
automatically without the giving of any such notice):
(i) declare the Total Commitments terminated, whereupon the
Commitment of each Bank shall forthwith terminate immediately
and any accrued and unpaid Commitment Commission shall
forthwith become due and payable without any other notice of
any kind; (ii) declare the principal of and accrued interest in
respect of all Loans and all Obligations owing hereunder and
thereunder to be, whereupon the same shall become, forthwith
due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by each
Credit Party; and/or (iii) enforce, as Collateral Agent (or
direct the Collateral Agent to enforce), any or all of the
remedies created pursuant to the Security Documents. If an
Event of Default is cured or waived in accordance with the
terms of the Agreement, it ceases (or is waived, pursuant to
the terms, and to the extent, of such waiver).
SECTION 9. Definitions. As used herein, the
following terms shall have the meanings herein specified unless
the context otherwise requires. Defined terms in this
Agreement
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shall include in the singular number the plural and in the plural
the singular:
"A Term Loan" has the meaning provided in Section
1.01(a).
"A Term Loan Commitment" means, with respect to each
Bank, the amount set forth below such Bank's name on the
signature pages hereto directly opposite the column entitled "A
Term Loan Commitment," as the same may be reduced from time to
time pursuant to Sections 2.01, 2.02, 3.02 and/or 8.
"A Term Loan Facility" means the Loan Facility
evidenced by the Total A Term Loan Commitments.
"A Term Note" has the meaning provided in Section
1.05(a).
"Account" means all of the "accounts" of the Borrower
and its Subsidiaries (as that term is defined in Section 9-106
of the Uniform Commercial Code as in effect in the State of New
York) whether or not such Account has been earned by
performance, whether now existing or existing in the future,
including, without limitation, all (i) accounts receivable,
including, without limitation, all accounts created by or
arising from all of the Borrower's and its Subsidiaries' sales
of goods or rendition of services or licensing or subleasing of
any of the Borrower's and its Subsidiaries' Intellectual
Property; (ii) unpaid seller's rights (including rescission,
replevin, reclamation and stopping in transit) relating to the
foregoing or arising therefrom; (iii) rights to any goods
represented by any of the foregoing, including returned or
repossessed goods; (iv) reserves and credit balances held by
the Borrower and its Subsidiaries with respect to any such
accounts receivable or any account debtor; (v) guarantees or
collateral for any of the foregoing; and (vi) insurance
policies or rights relating to any of the foregoing.
"Acquisition Corp." means DNL Savannah Acquisition
Corp., a Delaware corporation and a Wholly Owned Subsidiary of
Holdings (now known as Carson Products Company).
"Additional Collateral" has the meaning provided in
Section 6.13.
"Additional Real Property" has the meaning provided
in Section 6.13.
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"Affiliate" means with respect to any Person, any
other Person directly or indirectly controlling (including but
not limited to all directors and executive officers of such
Person), controlled by, or under direct or indirect common
control with such Person; provided that neither Indosuez nor
any Affiliate of Indosuez shall be deemed to be an Affiliate of
any Credit Party. A Person shall be deemed to control a
corporation for the purposes of this definition if such Person
possesses, directly or indirectly, the power (i) to vote 10% or
more of the securities having ordinary voting power for the
election of directors of such corporation or (ii) to direct or
cause the direction of the management and policies of such
corporation, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" means Indosuez, or any successor thereto
appointed in accordance herewith, in its capacity as agent and
collateral agent for the Banks.
"Agent's Office" means the office of the Agent
located at 1211 Avenue of the Americas, 7th Floor, New York,
New York 10036, or such other office in New York as the Agent
may hereafter designate in writing as such to the other parties
hereto.
"Agreement" means this Credit Agreement, as the same
may after its execution be amended, supplemented or otherwise
modified from time to time in accordance with the terms hereof.
"Asset Sale" means the sale, transfer or other
disposition, to the extent consummated after the Closing Date,
(x) by Holdings of the Securities of the Borrower held by it to
any Person or (y) by the Borrower or any Subsidiary of the
Borrower to any Person other than the Borrower or any Wholly
Owned Subsidiary of the Borrower of any asset of the Borrower
or such Subsidiary (other than, in each such case, (i) transac-
tions included in the definition of Net Financing Proceeds,
(ii) the issuance of equity securities under any stock option
or other benefit plan available to the employees or directors
of the Borrower or any of its Subsidiaries, (iii) sales,
transfers or other dispositions of inventory in the ordinary
course of business and/or of equipment that has become worn
out, obsolete or damaged or otherwise unsuitable or no longer
needed for use in connection with the business of the Borrower
or any of its Subsidiaries or should be replaced, as the case
may be, in each case as determined in good faith by the board
of directors of the Borrower or its Subsidiary, as the case may
be, effected in
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compliance with Section 7.13A(iv) or (v), and (iv) sales or other
dispositions pursuant to Section 7.13A(v), (vi) or (vii).
"Authorized Officer" means any senior officer of the
Borrower or Holdings, as the case may be, designated as such in
writing to the Agent by the Borrower or Holdings, as the case
may be, to the extent reasonably acceptable to the Agent.
"B Term Loan" has the meaning provided in Section
1.01(a).
"B Term Loan Commitment" means, with respect to each
Bank, the amount set forth below such Bank's name on the
signature pages hereto directly opposite the column entitled "B
Term Loan Commitment," as the same may be reduced from time to
time pursuant to Sections 2.01, 2.02, 3.02 and/or 8.
"B Term Loan Facility" means the Loan Facility
evidenced by the Total B Term Loan Commitments.
"B Term Note" has the meaning provided in Section
1.05(a).
"Bank" has the meaning provided in the first
paragraph of this Agreement and in Section 11.04.
"Bankruptcy Code" has the meaning provided in
Section 8.05.
"Base Rate" means the higher of (x) 1/2% per annum in
excess of the Federal Funds Rate and (y) the rate which the
Agent announces from time to time as its prime lending rate, as
in effect from time to time. The rate the Agent announces as
its prime lending rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged
to any customer. The Agent may make commercial loans or other
loans at rates of interest at, above or below the rate it
announces as its prime lending rate.
"Base Rate Loan" means each Loan bearing interest
based on the Base Rate as provided in Section 1.08(a).
"Borrower" means Carson Products Company, a Delaware
corporation.
"Borrower General Security Agreement" means the
Borrower General Security Agreement substantially in the form
of
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Exhibit H hereto, except for such changes therein as shall
have been approved by the Agent and the Required Banks, as the
same may after its execution be amended, supplemented or
otherwise modified from time to time in accordance with the
terms thereof and hereof.
"Borrower Intellectual Property Security Agreement"
means the Borrower Intellectual Property Security Agreement
substantially in the form of Exhibit G hereto, except for such
changes therein as shall have been approved by the Agent and
the Required Banks, as the same may after its execution be
amended, supplemented or otherwise modified from time to time
in accordance with the terms thereof and hereof.
"Borrower Pledge Agreement" means the Borrower
Securities Pledge Agreement substantially in the form of
Exhibit F-1 hereto, except for such changes therein as shall
have been approved by the Agent and the Required Banks, as the
same may after its execution be amended, supplemented or
otherwise modified from time to time in accordance with the
terms thereof and hereof.
"Borrowing" means the incurrence pursuant to a Notice
of Borrowing and the Loan Facility of one Type of Loan by a
Borrower from all of the Banks on a pro rata basis on a given
date (or resulting from conversions on a given date), having in
the case of Reserve Adjusted Eurodollar Loans the same Interest
Periods.
"Borrowing Base" means an amount equal to the sum of
(i) 80% of the Eligible Accounts Receivable and (ii) 50% of the
Eligible Inventory.
"Borrowing Base Certificate" has the meaning assigned
to that term in Section 6.01.
"Business Day" means (i) for all purposes other than
as covered by clause (ii) below, any day excluding Saturday,
Sunday and any day which shall be in The City of New York or
Savannah, Georgia a legal holiday or a day on which banking
institutions are authorized by law or other governmental
actions to close and (ii) with respect to all notices and
determinations in connection with, and payments of principal
and interest on, Reserve Adjusted Eurodollar Loans, any day
which is a Business Day described in clause (i) and which is
also a day for trading by and between banks in Dollar deposits
in the interbank eurodollar market.
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"Capital Lease" of any Person means any lease of any property
(whether real, personal or mixed) by that Person as lessee which, in conformity
with GAAP, is, or is required to be, accounted for as a capital lease on the
balance sheet of that Person, together with any renewals of such leases (or
entry into new leases) on substantially similar terms.
"Capitalized Lease Obligations" of any Person means
all obligations under Capital Leases of such Person or any of
its Subsidiaries in each case taken at the amount thereof
accounted for as liabilities in accordance with GAAP.
"Carson Holdings Limited" means a South African
subsidiary of the Borrower.
"Carson Holdings Limited IPO" means the initial
public offering in South Africa of 11 million shares of common
stock, R.01 par value per share, of Carson Holdings Limited.
"Carson Holdings Limited Share Incentive Trust" means
the trust pursuant to which certain additional shares of common
stock of Carson Holdings Limited may be issued from time to
time.
"Cash" means money, currency or a credit balance in a
Deposit Account.
"Cash Equivalents" means (i) securities issued or
directly and fully guaranteed or insured by the United States
of America or any agency or instrumentality thereof (provided
that the full faith and credit of the United States of America
is pledged in support thereof) having maturities of not more
than one year from the date of acquisition, (ii) marketable
direct obligations issued by any State of the United States of
America or any local government or other political subdivision
thereof rated (at the time of acquisition of such security) at
least AA by Standard & Poor's Ratings Group ("S&P") or the
equivalent thereof by Moody's Investors Service, Inc.
("Moody's") having maturities of not more than one year from
the date of acquisition, (iii) U.S. dollar denominated time
deposits, certificates of deposit and bankers' acceptances of
(x) any Bank, (y) any domestic commercial bank of recognized
standing having capital and surplus in excess of $250,000,000
or (z) any bank whose short-term commercial paper rating (at
the time of acquisition of such security) by S&P is at least
A-1 or the equivalent thereof or by Moody's is at least P-1 or
the equivalent thereof (any such bank, an "Approved Bank"), in
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each case with maturities of not more than six months from the
date of acquisition, (iv) commercial paper and variable or
fixed rate notes issued by any Bank or Approved Bank or by the
parent company of any Bank or Approved Bank and commercial
paper and variable rate notes issued by, or guaranteed by, any
industrial or financial company with a short-term commercial
paper rating (at the time of acquisition of such security) of
at least A-1 or the equivalent thereof by S&P or at least P-1
or the equivalent thereof by Moody's, or guaranteed by any
industrial company with a long-term unsecured debt rating (at
the time of acquisition of such security) of at least AA or the
equivalent thereof by S&P or the equivalent thereof by Moody's
and in each case maturing within one year after the date of
acquisition, (v) repurchase agreements with any Bank or any
primary dealer in U.S. government securities maturing within
one year from the date of acquisition that are fully
collateralized by investment instruments that would otherwise
be Cash Equivalents; provided that the terms of such repurchase
agreements comply with the guidelines set forth in the Federal
Financial Institutions Examination Council Supervisory Policy
- -- Repurchase Agreements of Depository Institutions With
Securities Dealers and Others, as adopted by the Comptroller of
the Currency on October 31, 1985, and (vi) investments in money
market mutual funds, all of the assets of which are invested in
securities and instruments of the types set forth in clauses
(i) through (iv) above.
"Certificate of Incorporation" means the respective
certificates of incorporation of Holdings or the Borrower.
"Change of Control" has the meaning assigned to that
term in Section 8.10.
"Closing Date" means the date on or before
October [ ], 1996 on which the Initial Loans are made and the
consummation of the Holdings IPO occurs.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" means all of the Pledged Collateral,
Pledged Securities and Mortgaged Real Property and all
Additional Collateral and Additional Real Property to the
extent not otherwise included in any of the foregoing.
"Collateral Agent" means Indosuez in its capacity as
collateral agent for the Banks.
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"Collective Bargaining Agreement" means the
Collective Bargaining Agreement set forth in Annex V.
"Commercial Letter of Credit" means any letter of
credit or similar instrument issued for the account of the
Borrower for the purpose of providing the primary payment
mechanism in connection with the purchase of any materials,
goods or services by the Borrower or any of its Subsidiaries in
the ordinary course of business of the Borrower or such
Subsidiaries.
"Commitment" means, with respect to each Bank, such
Bank's A Term Loan Commitment, B Term Loan Commitment and
Revolving Loan Commitment.
"Commitment Commission" has the meaning provided in
Section 2.03.
"Compliance Certificate" means a certificate issued
pursuant to Section 6.01(f) signed by a chief financial
officer, controller, chief accounting officer or other
Authorized Officer of the Borrower.
"Consolidated Amortization Expense" for any Person
means, for any period, the consolidated amortization expense of
such Person for such period (including amortization of any
step-up in value of Inventory or other assets as may be
required by purchase accounting), determined on a consolidated
basis for such Person and its Subsidiaries in conformity with
GAAP.
"Consolidated Capital Expenditures" of any Person
means, for any period, the aggregate gross increase during that
period, in the property, plant or equipment reflected in the
consolidated balance sheet of such Person and its consolidated
Subsidiaries, in conformity with GAAP, but excluding
expenditures made in connection with the replacement,
substitution or restoration of assets (i) to the extent
financed from insurance proceeds paid on account of the loss of
or damage to the assets being replaced or restored, (ii) with
awards of compensation arising from the taking by eminent
domain or condemnation of the assets being replaced or
(iii) with regard to equipment that is purchased simultaneously
with the trade-in of existing equipment, fixed assets or
improvements, the credit granted by the seller of such
equipment for the trade-in of such equipment, fixed assets or
improvements; provided that Consolidated Capital Expenditures
shall in any event include the purchase
<PAGE>
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price paid in connection with the acquisition of any other Person (including
through the purchase of all of the capital stock or other ownership interests of
such Person or through merger or consolidation) to the extent allocable to
property, plant and equipment.
"Consolidated Current Assets" means, with respect to
any Person as at any date of determination, the total assets of
such Person and its consolidated Subsidiaries which may
properly be classified as current assets on a consolidated
balance sheet of such Person and its Subsidiaries (provided
that with respect to the Borrower, there shall be added to such
amount the amount of LIFO reserve as reflected in the then most
recent consolidated financial statements of the Borrower
delivered by the Borrower pursuant to Section 6.01(a), (b) and
(c)), all as determined on a consolidated basis for such Person
and its consolidated Subsidiaries in accordance with GAAP.
"Consolidated Current Liabilities" means, with
respect to any Person as at any date of determination, the
total liabilities of such Person and its consolidated
Subsidiaries which may properly be classified as current
liabilities (other than the current portion of any Loans and of
any Existing Indebtedness) on a consolidated balance sheet of
such Person and its consolidated Subsidiaries in accordance
with GAAP.
"Consolidated Depreciation Expense" for any Person
means, for any period, the consolidated depreciation expense of
such Person for such period, determined on a consolidated basis
for such Person and its consolidated Subsidiaries in conformity
with GAAP.
"Consolidated EBITDA" for any Person means, for any
period, the difference between (A) the sum of the amounts for
such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) Consolidated Tax Expense, (iv) Consoli-
dated Depreciation Expense and (v) Consolidated Amortization
Expense less (B) the sum of the amounts for such period of
(i) interest income, (ii) net gains on sales of assets to the
extent included in Consolidated Net Income, whether or not
extraordinary (excluding sales in the ordinary course of
business) and other extraordinary gains, as adjusted for the
impact of the application of the last-in, first-out (LIFO)
method of valuing inventory (to the extent such adjustments are
non-Cash), which adjustment is made by (x) adding to the sum in
clause (A) above the amount of LIFO provision for such period,
if any, which had the effect of decreasing the Consolidated Net
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Income of the Borrower and its Subsidiaries for such period or
(y) adding to the sum in clause (B) above the amount of LIFO
recovery for such period, if any, which had the effect of
increasing the Consolidated Net Income of the Borrower and its
Subsidiaries for such period, and (iii) for the Borrower only,
non-cash compensation expense related to and in connection with
the chief executive officer's Employment Agreement, all as
determined on a consolidated basis for such Person and its
consolidated Subsidiaries in accordance with GAAP.
"Consolidated EBITDAC" for any Person means, for any
period, Consolidated EBITDA for such period minus Consolidated
Capital Expenditures for such period.
"Consolidated Interest Expense" for any Person means,
for any period, the sum of (x) total interest expense
(including that attributable to Capital Leases in accordance
with GAAP) and (y) total cash dividends paid on any preferred
stock, in each case of such Person and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness
and preferred stock of such Person and its Subsidiaries,
including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit
and bankers' acceptance financing, but excluding, however, any
amortization of deferred financing costs, all as determined on
a consolidated basis for such Person and its consolidated
Subsidiaries in accordance with GAAP. For purposes of clause
(y) above, dividend requirements shall be increased to an
amount representing the pretax earnings that would be required
to cover such dividend requirements; accordingly, the increased
amount shall be equal to such dividend requirements multiplied
by a fraction, the numerator of which is such dividend
requirement and the denominator of which is 1 minus the
applicable actual combined Federal, state, local and foreign
income tax rate of such Person and its subsidiaries (expressed
as a decimal), on a consolidated basis, for the fiscal year
immediately preceding the date of the transaction giving rise
to the need to calculate Consolidated Interest Expense.
"Consolidated Net Income" for any Person means, for
any period, the net income (or loss) of such Person and its
Subsidiaries on a consolidated basis for such period taken as a
single accounting period determined on a consolidated basis for
such Person and its consolidated Subsidiaries in conformity
with GAAP; provided that there shall be excluded (i) the income
(or loss) of any other Person (other than consolidated Subsidiaries
of such Person) in which any third Person (other than
<PAGE>
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such Person or any of its consolidated Subsidiaries) has a
joint interest, except to the extent of the amount of
dividends or other distributions actually paid to such
Person or any of its Subsidiaries by such other Person
during such period, (ii) the income (or loss) of any other
Person accrued prior to the date it becomes a consolidated
Subsidiary of such Person or is merged into or
consolidated with such Person or any of its consolidated
Subsidiaries or such other Person's assets are acquired by
such Person or any of its consolidated Subsidiaries, and
(iii) the income of any consolidated Subsidiary of such
Person to the extent that the declaration or payment of
dividends or similar distributions by that consolidated
Subsidiary of that income is not at the time permitted by
operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that consolidated
Subsidiary.
"Consolidated Tax Expense" for any Person means, for
any period, the consolidated tax expense of such Person for
such period, determined on a consolidated basis for such Person
and its consolidated Subsidiaries in conformity with GAAP.
"Contingent Obligations" means, as to any Person,
without duplication, any obligation of such Person guaranteeing
or intended to guarantee any Indebtedness, leases, dividends or
other obligations ("primary obligations") of any other Person
(the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of
such Person, whether or not contingent, (a) to purchase any
such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds
(i) for the purchase or payment of any such primary obligation
or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or
(d) otherwise to assure or hold harmless the owner of such
primary obligation against loss in respect thereof; provided,
however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the
ordinary course of business and amounts that are permitted by
Section 7.14. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the maximum amount that such
Person may be obligated to expend pursuant to the terms of such
Contingent Obligation or, if such Contingent Obligation is not
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so limited, the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is
made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person
is required to perform thereunder) as determined by such Person
in good faith.
"Credit Documents" means (i) this Agreement,
(ii) each Note, (iii) each Guarantee and (iv) each Security
Document.
"Credit Party" means at all times Holdings and the
Borrower and each Subsidiary of the Borrower that pledges any
stock, grants any Lien or issues any Guarantee pursuant to any
Credit Document.
"Default" means any event, act or condition which
with notice or lapse of time, or both, would constitute an
Event of Default.
"Destruction" has the meaning assigned to that term
in each Mortgage.
"Dividends" has the meaning provided in Section 7.07.
"Dollars" means United States Dollars.
"Effective Date" has the meaning provided in
Section 11.10.
"Eligible Accounts Receivable" means, as at any
applicable date of determination, the aggregate face amount of
the Borrower's and its Subsidiaries' Accounts included in
clause (i) of the definition of Account hereunder (excluding
any Accounts set forth in clauses (ii) through (vi) of such
definition), without duplication, in each case less (without
duplication) the aggregate amount of all reserves, limits and
deductions with respect to such Accounts set forth below and
less the aggregate amount of all returns, discounts, claims,
rebates, offsets, credits, charges (including warehouseman's
charges) and allowances of any nature with respect to such
Accounts (whether issued, owing, granted or outstanding).
Unless otherwise approved in writing by the Agent in its sole
discretion, no individual Account shall be deemed to be an
Eligible Account Receivable if:
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(a) the Borrower or its Subsidiary does not have
legal and valid title to the Account; or
(b) the Account is not the valid, binding and
legally enforceable obligation of the account debtor
subject, as to enforceability, only to (i) applicable
bankruptcy, insolvency, reorganization, moratorium or
similar laws at the time in effect affecting the
enforceability of creditors' rights generally and
(ii) judicial discretion in connection with the remedy of
specific performance and other equitable remedies; or
(c) the Account arises out of a sale made by the
Borrower to an Affiliate of the Borrower; or
(d) the Account or any portion thereof is unpaid
more than 90 days after the original invoice date, with
respect to Accounts the invoice for which provides that
payment is due in 60 days or less from the date of such
invoice; or
(e) the Account is unpaid more than 30 days after
the original payment due date, with respect to Accounts
the invoice for which provides that payment is due more
than 60 days from the date of such invoice; provided,
however, that the aggregate amount of all invoices
providing for payment more than 60 days from the date of
the invoice that may constitute Eligible Accounts
Receivable shall not exceed 7>% in face value of all
Accounts of the Borrower and its Subsidiaries then
outstanding at any one time; or
(f) such Account, when aggregated with all other
Accounts of the same account debtor (or any Affiliate
thereof), exceeds twenty percent in face value of all
Accounts of the Borrower and its Subsidiaries then
outstanding, to the extent of such excess; or
(g) (i) the account debtor for such Account is also
a creditor of the Borrower, to the extent of the amount
owed by the Borrower to the account debtor, (ii) the
Account is subject to any claim on the part of the account
debtor disputing liability under such Account in whole or
in part, to the extent of the amount of such dispute or
(iii) the Account otherwise is or is reasonably likely to
become subject to any right of setoff or any counterclaim,
claim or defense by the account debtor, to the extent of
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the amount of such setoff or counterclaim, claim or
defense; or
(h) the account debtor for such Account has
commenced a voluntary case under the federal bankruptcy
laws, as now constituted or hereafter amended, or made an
assignment for the benefit of creditors or if a decree or
order for relief has been entered by a court having
jurisdiction in the premises in respect of the account
debtor in an involuntary case under the federal bankruptcy
laws, as now constituted or hereafter amended, or if any
other petition or other application for relief under the
federal bankruptcy laws has been filed by or against the
account debtor, or if the account debtor has failed,
suspended business, ceased to be solvent, or consented to
or suffered a receiver, trustee, liquidator or custodian
to be appointed for it or for all or a significant portion
of its assets or affairs; or
(i) the Agent does not have a valid and perfected
first priority security interest in such Account (subject
only to a tax lien being contested in good faith and by
appropriate proceedings and permitted by Section 7.03(a));
or
(j) the sale to the account debtor for such Account
is on a consignment, sale on approval, guaranteed sale or
sale-and-return basis or pursuant to any written agreement
requiring repurchase or return (other than return
arrangements in the ordinary course of business consistent
with the past business practices of the Borrower); or
(k) such Account is from an account debtor (or any
Affiliate thereof) and fifty percent (50%) or more, in
face amount, of other Accounts from either such account
debtor or any Affiliate thereof are due or unpaid for more
than 90 days after the original invoice date; or
(l) fifty percent (50%) or more, in face amount, of
other Accounts from the same account debtor for such
Account are not deemed Eligible Accounts Receivable
hereunder; or
(m) the account debtor for such Account is a foreign
Governmental Authority; or
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(n) such Account is an Account a security interest
in which would be subject to the Federal Assignment of
Claims Act of 1940, as amended (31 U.S.C. { 3727 et seq.),
unless (i) such Account, together with all other Eligible
Accounts a security interest in which would be subject to
such Act, does not exceed 7>% in face value of all
Eligible Accounts of the Borrower and its Subsidiaries
then outstanding, or (ii) the Borrower has assigned the
Account to the Agent in compliance with the provisions of
such Act; or
(o) the account debtor for such Account is outside
the United States or Canada or incorporated in or
conducting substantially all of its business in any
jurisdiction located outside the United States, unless the
sale is (i) on letter of credit or sight draft, guaranty
or acceptance terms, consistent with past business
practices of the Borrower, not to exceed 5% in face value
of all Eligible Accounts of the Borrower and its
Subsidiaries then outstanding or (ii) such Account is
otherwise approved by and reasonably acceptable to the
Agent; or
(p) the Agent determines in good faith in accordance
with its internal credit policies that such Account may
not be paid by reason of the account debtor's financial
inability to pay; provided, however, that any Account
referred to in this clause (p) shall not become ineligible
until the Agent shall have given the Borrower five
Business Days' advance notice of such determination; or
(q) the goods giving rise to such Account have not
been shipped or the services giving rise to such Account
have not been performed by the Borrower or the Account
otherwise does not represent a final sale; or
(r) such Account does not comply in all material
respects with all applicable legal requirements,
including, where applicable, the Federal Consumer Credit
Protection Act, the Federal Truth in Lending Act and
Regulation Z of the Board of Governors of the Federal
Reserve System, in each case as amended.
In addition to the foregoing, Eligible Accounts
Receivable includes such Accounts as the Borrower requests and
that the Agent approves in advance, in writing and in its sole
discretion (or if the aggregate face amount to be approved
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exceeds $750,000 at any one time, the approval of the Required
Banks has been obtained in writing).
"Eligible Assignee" means (i) a commercial bank
organized under the laws of the United States, or any State
thereof, and having total assets in excess of $500,000,000;
(ii) a savings and loan association or savings bank organized
under the laws of the United States, or any State thereof, and
having total assets in excess of $250,000,000; (iii) a finance
company, insurance company or other financial institution
organized under the laws of the United States, or any State
thereof, that is engaged in purchasing or otherwise investing
in commercial loans in the ordinary course of business, having
total assets in excess of $100,000,000; or (iv) an entity
managed by a Bank or Affiliate of a Bank; provided that the
Commitment held by such entity is less than $20,000,000; and,
in each such case, which is otherwise reasonably acceptable to
the Borrower.
"Eligible Inventory" means (A) the gross amount of
Inventory of the Borrower and its Subsidiaries, valued at the
lower of cost (on a FIFO basis) or market, which (i) is owned
solely by the Borrower or its Subsidiary and with respect to
which the Borrower or its Subsidiary has good, valid and
marketable title; (ii) is stored on property that is either (a)
owned or leased by the Borrower or its Subsidiary or (b) owned
or leased by a warehouseman that has contracted with the
Borrower or its Subsidiary to store Inventory on such
warehouseman's property (provided that, with respect to
Inventory contracted to be stored on property leased by the
Borrower or its Subsidiary, the Borrower or its Subsidiary
shall deliver to the Agent immediately following the execution
of such storage contract Landlord Lien Assurance and, with
respect to the Inventory stored on property owned or leased by
a warehouseman, the Borrower or its Subsidiary shall deliver to
the Agent acknowledgment agreements executed by such
warehouseman); (iii) is subject to a valid, enforceable and
first priority Lien in favor of the Agent subject to a tax lien
being contested in good faith and by appropriate proceedings
and permitted by Section 7.03(a), except with respect to
Eligible Inventory stored at sites described in clause (ii)(b)
above, for Liens for normal and customary warehouseman charges;
(iv) is located in the United States; and (v) is not, in the
reasonable judgment of the Agent, obsolete or slow moving in
relation to customary industry practice, and which otherwise
conforms to the requirements for eligibility contained in
clauses (i) - (iv) hereof; (B) less the amount of any goods
returned or rejected
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by the Borrower's or its Subsidiaries' customers and goods in transit to third
parties (other than to the Borrower's or its Subsidiaries' agents or
warehousemen that comply with clause (A)(ii)(b) above); and (C) less the amount
of any reserves for special order goods and market value declines in accordance
with GAAP. In addition to the foregoing, Eligible Inventory shall include such
items of the Borrower's and its Subsidiaries' Inventory as the Borrower shall
request and that the Agent approves in advance, in writing and in its sole
discretion (or if the aggregate amount to be approved exceeds $500,000 at any
one time, the approval of the Required Banks has been obtained).
"Employment Agreements" means the employment
agreements between the Borrower and (i) Joyce Roche, dated as
of June 7, 1995, as amended, (ii) Dennis E. Smith, dated as of
June 7, 1995, as amended, and (iii) Dr. Leroy Keith dated as of
August 23, 1995.
"Environment" shall mean any surface water, ground
water, drinking water supply, land surface or subsurface strata
or ambient air and includes, without limitation, any indoor
location.
"Environmental Authorizations" has the meaning
provided in Section 5.22.
"Environmental Laws" shall mean all federal, state,
local and foreign laws, codes, regulations, ordinances,
requirements, directives, orders, common law, and
administrative or judicial interpretations thereof that may be
enforced by any Governmental Authority or court, relating to
pollution, the protection of human health, the protection of
the Environment, or the emission, discharge, disposal or other
release or threatened release of Hazardous Materials in or into
the Environment.
"Environmental Notice" shall mean any written notice
or claim by any Governmental Authority or other third party
alleging liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, governmental
costs, compliance costs or harm, injuries or damages to any
person, property or natural resources, or any fines or
penalties) arising out of, based upon, resulting from or
relating to any Environmental Law.
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"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time. Section references
to ERISA are to ERISA, as in effect at the date of this
Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" means any entity, whether or not
incorporated, which is under common control or would be
considered a single employer with a Credit Party within the
meaning of Section 414(b), (c) or (m) of the Code and
regulations promulgated under those sections or within the
meaning of section 4001(b) of ERISA and regulations promulgated
under that section.
"Eurodollar Rate" means with respect to each Interest
Period for a Reserve Adjusted Eurodollar Loan, (i) the
arithmetic average (rounded to the nearest 1/100 of 1%) of the
offered quotation to leading banks in the interbank Eurodollar
market by each of the Reference Banks for dollar deposits in
such Reference Bank of amounts in same day funds comparable to
the outstanding principal amount of the Reserve Adjusted
Eurodollar Loan for which an interest rate is then being
determined with maturities comparable to the Interest Period to
be applicable to such Eurodollar Loan, determined as of
10:00 A.M. (New York time) on the date which is two Business
Days prior to the commencement of such Interest Period divided
(and rounded upward to the next whole multiple of 1/16 of 1%)
by (ii) a percentage equal to 100% minus the then stated
maximum rate of all reserve requirements (including, without
limitation, any marginal, emergency, supplemental, special or
other reserves) applicable to any member bank of the Federal
Reserve System in respect of Eurocurrency liabilities as
defined in Regulation D (or any successor category of
liabilities under Regulation D); provided that if any Reference
Bank fails to provide the Agent with its aforesaid rate, then
the Eurodollar Rate shall be determined based on the rate or
rates provided to the Agent by a bank designated by the
Required Banks and reasonably approved by the Borrower.
"Event of Default" has the meaning provided in
Section 8.
"Excess Cash Flow" means, without duplication, for
any Person for any period for which such amount is being
determined, (i) Consolidated Net Income, minus (ii) any amount
which is both (x) included in Consolidated Net Income and
(y) required to be applied to the prepayment of the Loans
pursuant to
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Section 3.02(A), plus (minus) (iii) the amount of
depreciation, depletion, amortization of intangibles, deferred
taxes and other non-cash expenses (revenues) which, pursuant to
GAAP, were deducted (added) in determining such Consolidated
Net Income of such Person minus (plus) (iv) additions
(reductions) to working capital for such period (i.e., the
increase or decrease in Consolidated Current Assets (excluding
Cash or Cash Equivalents which are either Net Cash Proceeds or
Net Financing Proceeds required to be applied to the prepayment
of the Loans pursuant to Section 3.02(A)(e) of such Person from
the beginning to the end of such period) of such Person minus
the increase or decrease in Consolidated Current Liabilities)
minus (v) the amount of Consolidated Capital Expenditures that
are paid other than from the proceeds of borrowings in such
period minus (vi) Scheduled A Term Loans Principal Payments,
Scheduled B Term Loans Principal Payments and voluntary
prepayments of Loans not subject to reborrowing made during
such period. For purposes of the foregoing and without
duplication, Consolidated Net Income will exclude (x) all net
losses on the sale of capital assets or out of the ordinary
course of business and (y) all write-downs of capital assets.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Existing Debt" means the Indebtedness of the
Borrower and its Subsidiaries set forth on Annex III.
"Existing Leases" means the Leases of the Borrower
and its Subsidiaries set forth on Annex XV.
"Federal Funds Rate" means on any one day the
weighted average of the rate on overnight Federal funds
transactions with members of the Federal Reserve System only
arranged by Federal funds brokers as published as of such day
by the Federal Reserve Bank of New York, or if not so
published, the rate then used by leading banks in extending
overnight loans to other leading banks.
"Final A Term Loan Maturity Date" means the last
Business Day of October , 2002.
"Final B Term Loan Maturity Date" means the last
Business Day of October , 2003.
"Final Revolving Loan Maturity Date" means the last
Business Day of October , 2002.
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"Financing Proceeds" means the cash (other than Net
Cash Proceeds or proceeds of any sale, transfer or other
disposition of assets excluded from the definition of "Asset
Sale" by the exceptions contained therein) received by the
Borrower and/or any of its Subsidiaries, directly or
indirectly, from any financing transaction of whatever kind or
nature, including without limitation from any incurrence of
Indebtedness, any mortgage or pledge of an asset or interest
therein (including a transaction which is the substantial
equivalent of a mortgage or pledge), from the sale of tax
benefits, from a lease to a third party and a pledge of the
lease payments due thereunder to secure Indebtedness, from a
joint venture arrangement, from an exchange of assets and a
sale of the assets received in such exchange, or any other
similar arrangement or technique whereby the Borrower or any of
its Subsidiaries obtains Cash in respect of an asset, net of
direct costs associated therewith. Financing Proceeds shall
not include any amounts with respect to (i) the incurrence or
refinancing of the Total Revolving Loan Commitment, (ii) the
incurrence or refinancing of Indebtedness permitted by Sections
7.04(a), (b), (c) and (d) effected in accordance with the
applicable provisions of such Sections, or (iii) transactions
between any of the Borrower, Holdings and any Wholly Owned
Subsidiaries of the Borrower.
"Fine Products" has the meaning set forth in Section
5.24 hereof.
"FIRREA" means the Financial Institutions Reform,
Recovery & Enforcement Act of 1989, as amended from time to
time, and any successor statute.
"Foreign Bank" has the meaning provided in Section
3.04(c).
"GAAP" means generally accepted accounting principles
in the United States of America as in effect on the Effective
Date, it being understood and agreed that determinations in
accordance with GAAP for purposes of Sections 5, 6, 7 and 8 and
all defined terms as used in this Agreement, are subject (to
the extent provided therein) to Section 11.07(a).
"General Security Agreements" means and includes the
Borrower General Security Agreement and any other general
security agreements delivered pursuant to Section 6.13 or 6.14.
"Government Acts" has the meaning provided in Section
1.13(I).
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"Governmental Authority" means any federal, state,
local, foreign or other governmental or administrative
(including self-regulatory) body, instrumentality, department
or agency or any court, tribunal, administrative hearing body,
arbitration panel, commission, or other similar dispute-
resolving panel or body including, without limitation, those
governing the regulation and protection of the Environment,
whether now or hereafter in existence, or any officer or
official thereof.
"Guarantee" means and includes, once executed and
delivered, each of the Holdings Guarantee and each Subsidiary
Guarantee.
"Guarantor" for purposes of this Agreement means,
individually, each of Holdings and each Subsidiary which
executes a Subsidiary Guarantee.
"Hazardous Materials" means all pollutants,
contaminants, or chemical, industrial, hazardous or toxic
materials, substances, constituents or wastes, including,
without limitation, asbestos or asbestos-containing materials,
polychlorinated biphenyls and petroleum, oil, or petroleum or
oil products, derivatives or constituents, including, without
limitation, crude oil or any fraction thereof.
"Holdings" means Carson, Inc., a Delaware corporation
(formerly known as DNL Savannah Holding Corp.).
"Holdings Guarantee" means the Holdings Guarantee
substantially in the form of Exhibit E hereto, except for such
changes as shall have been approved by the Agent and the
Required Banks, as the same may after its execution be amended,
supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
"Holdings IPO" has the meaning set forth in the
recitals hereto.
"Holdings Pledge Agreement" means the Holdings
Securities Pledge Agreement substantially in the form of
Exhibit F-2 hereto, except for such changes therein as shall
have been approved by the Agent and the Required Banks, as the
same may after its execution be amended, supplemented or
otherwise modified from time to time in accordance with the
terms thereof and hereof.
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"Indebtedness" of any Person means, without
duplication, (i) all indebtedness of such Person for borrowed
money, (ii) the deferred purchase price of assets or services
which in accordance with GAAP would be shown on the liability
side of the balance sheet of such Person, other than current
liabilities in respect of the foregoing, liabilities for
accumulated postretirement benefit obligations and liabilities
for deferred compensation, (iii) the face amount of all letters
of credit issued for the account of such Person and, without
duplication, all drafts drawn and unpaid thereunder, (iv) all
Indebtedness of a second Person secured by any Lien on any
property owned by such first Person, whether or not such
Indebtedness has been assumed by such first Person, (v) all
Capitalized Lease Obligations of such Person, (vi) all
obligations of such Person to pay a specified purchase price
for goods or services whether or not delivered or accepted,
i.e., take-or-pay and similar obligations, (vii) all
obligations of such Person under Interest Rate Agreements and
(viii) all Contingent Obligations of such Person; provided that
Indebtedness shall not include trade payables, accrued
expenses, accrued dividends and accrued income taxes, in each
case arising in the ordinary course of business.
"Indosuez" means Banque Indosuez, New York Branch.
"Initial Bank" means a Bank that was an original
signatory to this Agreement.
"Initial Loans" means the initial Loans made under
this Agreement on the Closing Date.
"Intellectual Property" has the meaning provided in
Section 5.16.
"Intellectual Property Security Agreements" means and
includes the Borrower Intellectual Property Security Agreement
and any other intellectual property security agreements
delivered pursuant to Section 6.13 or 6.14.
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"Interest Margin" means, for the Portion and Type of
Loan, the following:
Base Rate Reserve Adjusted
Loans Eurodollar Loans
--------- ----------------
A Term Loan 0.50% 2.00%
B Term Loan 1.00% 2.50%
Revolving Loans 0.50% 2.00%
"Interest Period" means, with respect to any Reserve
Adjusted Eurodollar Loan, the interest period applicable
thereto, as determined pursuant to Section 1.09.
"Interest Rate Agreement" means any interest rate
swap agreement, interest rate cap agreement, interest rate
collar agreement, interest rate futures contract, interest rate
option contract or other similar agreement or arrangement to
which the Borrower is a party, designed to protect the Borrower
or any of its Subsidiaries against fluctuations in interest
rates.
"Interest Rate Determination Date" means each date
for calculating the Eurodollar Rate for purposes of determining
the interest rate in respect of an Interest Period. The
Interest Rate Determination Date shall be the second Business
Day prior to the first day of the related Interest Period for a
Reserve Adjusted Eurodollar Loan.
"Inventory" means all of the inventory of the
Borrower and its Subsidiaries (on a consolidated basis)
including without limitation: (i) all raw materials, work in
process, parts, components, assemblies, supplies and materials
used or consumed in the business of the Borrower and its
Subsidiaries; (ii) all goods, wares and merchandise, finished
or unfinished, held for sale or lease or leased or furnished or
to be furnished under contracts of service; and (iii) all goods
returned or repossessed by the Borrower or any of its
Subsidiaries.
"Issuing Bank" means the Bank that agrees or is
otherwise obligated to issue a Letter of Credit, determined as
provided in Section 1.13(C).
"Junior Subordinated Notes" means, collectively, the
$11,753,000 aggregate original principal amount of Junior
Subordinated Promissory Notes issued by Acquisition Corp. on
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August 23, 1995 as such notes may have been extended pursuant
to the terms of the Junior Subordinated Note Agreement.
"Junior Subordinated Note Agreement" means the Junior
Subordinated Note Agreement by and between Acquisition Corp.
and Abram Minis, Jr., Henry A. Minis, Marguerite M. Trethewey
and the Minis Family Trustees, dated August 23, 1995.
"Landlord Lien Assurance" means, with respect to any
Real Property leased by the Borrower or any of its Subsidiaries
for use as a retail facility or for the storage of Inventory,
either (i) an agreement executed by the landlord of such Real
Property substantially in the form of Exhibit O hereto or
(ii) a legal opinion or other evidence, in each case reasonably
satisfactory to the Agent, that the laws of the jurisdiction or
jurisdictions applicable to the lease and the retail or storage
facility do not give rise to any statutory Lien in favor of the
landlord with respect to Inventory located at such facility.
"Lease" means any lease, sublease, franchise
agreement, license, occupancy or concession agreement.
"Letter of Credit" or "Letters of Credit" means (i)
Standby Letter or Letters of Credit and (ii) Commercial Letter
or Letters of Credit, in each case, issued or to be issued by
Issuing Banks for the account of the Borrower pursuant to
Section 1.13.
"Letter of Credit Participation" has the meaning
assigned to that term in Section 1.13(A).
"Letters of Credit Usage" means, as at any date of
determination, the sum of (i) the maximum aggregate amount that
is or at any time thereafter may become available under all
Letters of Credit then issued and outstanding plus (ii) the
aggregate amount of all drawings under Letters of Credit
honored by all Issuing Banks and not theretofore reimbursed by
the Borrower; provided, however, the Letters of Credit Usage of
an Issuing Bank shall be deemed to be only such portion of the
Letters of Credit Usage of such Issuing Bank which other Banks
have not bought by participation pursuant to Section 1.13(A).
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien, claim, hypothecation, assignment for
security or charge of any kind (including any agreement to give
any of the foregoing, any conditional sale or other title
retention agreement or any lease in the nature thereof).
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"Loan" means each and every Term Loan or Revolving
Loan.
"Loan Facility" means the credit facility evidenced
by the Total Term Loan Commitments and the Total Revolving Loan
Commitments.
"Loss Proceeds" has the meaning set forth in Section
3.02(A)(i) hereof.
"Management Agreement" means the management
assistance agreement between Morningside and the Borrower dated
as of August 23, 1995.
"Materially Adverse Effect" means, (i) with respect
to Holdings and the Borrower and its Subsidiaries, any
materially adverse effect (both before and after giving effect
to the Refinancing and the financing thereof and the other
transactions contemplated hereby) with respect to the
operations, business, properties, assets, liabilities
(contingent or otherwise) or financial condition or prospects
of Holdings and the Borrower and its Subsidiaries, taken as a
whole, or (ii) any fact or circumstance (whether or not the
result thereof would be covered by insurance) as to which
singly or in the aggregate there is a reasonable likelihood of
(w) a materially adverse change described in clause (i) with
respect to Holdings and the Borrower and its Subsidiaries,
taken as a whole, (x) the inability of any Credit Party to
perform in any material respect its Obligations hereunder or
the inability of the Banks to enforce in any material respect
their rights purported to be granted hereunder or the
Obligations (including realizing on the Collateral), or (y) a
materially adverse effect on the ability to effect (including
hindering or unduly delaying) the Refinancing and the other
transactions contemplated hereby on the terms contemplated
hereby and thereby.
"Minimum Borrowing Amount" means $100,000.
"Morningside" means Morningside Capital Group, LLC, a
Connecticut limited liability company.
"Mortgage" means a term loan and revolving credit
mortgage (or deed of trust or deed to secure debt, as the case
may be), assignment of rents, security agreement and fixture
filing creating and evidencing a Lien on a Mortgaged Real
Property, which shall be substantially in the form of Exhibit D
hereto, containing such schedules and including such additional
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provisions and other deviations from such Exhibit as shall be
necessary to conform such document to applicable or local law
or as shall be customary under applicable or local law and
which shall be dated the date of delivery thereof and made by
the owner (fee or leasehold, as the case may be) of the
Mortgaged Real Property described therein for the benefit of
the Collateral Agent, as mortgagee (or beneficiary, as the case
may be), assignee and secured party, as the same may after its
execution be amended, supplemented or otherwise modified from
time to time in accordance with the terms thereof and hereof.
"Mortgaged Real Property" means each Real Property
designated on Annex VIII which shall be subject to a Mortgage.
"Multiemployer Plan" means a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA with respect to which
any Credit Party or any of their respective ERISA Affiliates is
or has been required to contribute or otherwise may have
liability.
"Net Award" has the meaning assigned to that term in
each Mortgage.
"Net Cash Proceeds" means:
(a) with respect to any Asset Sale, the aggregate
cash payments received by Holdings, the Borrower and/or
any of the Borrower's Subsidiaries, as the case may be,
from such Asset Sale, net of direct expenses of sale, net
of taxes (including income taxes and transfer taxes) and
net of repayment of Indebtedness or Capitalized Leases in
each case secured by a Lien on the asset subject to such
Asset Sale; provided that, with respect to taxes, expenses
shall only include taxes to the extent that taxes are
payable in cash in the current year or in the next
succeeding year with respect to the current year as a
result of such Asset Sale; and
(b) with respect to any Taking or Destruction, the
Net Award or Net Proceeds, as applicable, resulting
therefrom, to be applied as Net Cash Proceeds under this
Agreement pursuant to the provisions of Sections 1.13.3
and 1.13.4 of the Mortgages;
provided, further, that Net Cash Proceeds shall not include any
amounts or items included in the definition of Financing
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Proceeds or Net Financing Proceeds (including in any proviso appearing therein).
"Net Financing Proceeds" means Financing Proceeds,
net of direct expenses of the transaction and net of taxes
(including income taxes) currently paid or payable in cash as a
result thereof in the current year or in the next succeeding
year with respect to the current year as a result of the
transaction generating Net Financing Proceeds.
"Net Proceeds" has the meaning assigned to that term
in each Mortgage.
"Note" means any Revolving Note or Term Note.
"Notice of Borrowing" has the meaning provided in
Section 1.03.
"Notice of Conversion/Continuation" has the meaning
provided in Section 1.06.
"Obligations" means all amounts, direct or indirect,
contingent or absolute, of every type or description, and at
any time existing, owing to the Agent or any Bank pursuant to
the terms of this Agreement or any other Credit Document or
secured by any of the Security Documents.
"Officers' Certificate" means, as applied to any
corporation, a certificate executed on behalf of such
corporation by its Chairman of the Board (if an officer) or its
President or one of its Vice Presidents and by its Chief
Financial Officer or its Treasurer or any Assistant Treasurer;
provided that every Officers' Certificate with respect to
compliance with a condition precedent to the making of any Loan
hereunder shall include (i) a statement that the officers
making or giving such Officers' Certificate have read such
condition and any definitions or other provisions contained in
this Agreement relating thereto, (ii) a statement that, in the
opinion of the signers, they have made or have caused to be
made such examination or investigation as is necessary to
enable them to express an informed opinion as to whether or not
such condition has been complied with, and (iii) a statement as
to whether, in the opinion of the signers, such condition has
been complied with.
"Officers' Solvency Certificate" means the Officers'
Solvency Certificate in the form set forth as Exhibit L hereto.
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"Operating Lease" of any Person, shall mean any lease
(including, without limitation, leases which may be terminated
by the lessee at any time) of any property (whether real,
personal or mixed) by such Person as Lessee which is not a
Capital Lease.
"Partial Release Conditions" has the meaning provided
in Section 7.13(C).
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor
thereto.
"Pension Plan" means any pension plan as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) which
is or has been maintained by or to which contributions are or
have been made by any Credit Party or their respective ERISA
Affiliates or as to which any Credit Party or their respective
ERISA Affiliates may have liability.
"Permitted Encumbrances" has the meaning provided in
Section 7.03.
"Person" means any individual, partnership, joint
venture, firm, corporation, association, trust or other
enterprise or any Governmental Authority.
"Pledge Agreements" means and includes the Holdings
Pledge Agreement, the Borrower Pledge Agreement, and any
securities pledge agreements (including, without limitation,
any supplements or amendments to any of the foregoing)
delivered pursuant to Section 6.13, 6.14 or 6.16.
"Pledged Collateral" means all the Pledged Collateral
as defined in each of the General Security Agreements and in
the Intellectual Property Security Agreements.
"Pledged Securities" means all the securities and
other collateral in which a security interest is purported to
be granted to the Agent for the benefit of the Banks by each of
the Pledge Agreements, including, without limitation, all
Pledged Collateral as defined therein.
"Portion" means the Term Portion or the Revolving
Portion.
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"Prior Liens" means Liens which, pursuant to the
provisions of any Security Document, are or may be superior to
the Lien of such Security Document.
"Projected Financial Statements" has the meaning set
forth in Section 5.11(c).
"Real Property" means all right, title and interest
of the Borrower or any of its Subsidiaries (including, without
limitation, any leasehold estate) in and to a parcel of real
property owned, leased or operated by the Borrower or any of
its Subsidiaries together with, in each case, all of the
Borrower's or such Subsidiaries' right, title and interest in
and to all improvements and appurtenant fixtures, equipment,
personal property, easements and other property and rights
incidental to the ownership, lease or operation thereof.
"Release" has the meaning set forth in Section
7.13(B).
"Release Conditions" has the meaning set forth in
Section 7.13(B).
"Release Notice" has the meaning set forth in Section
7.13(B).
"Released Real Property" has the meaning set forth in
Section 7.13(B).
"Reference Banks" means Indosuez, Chase Bank and
Citibank, N.A.
"Regulation D" means Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in
effect and any successor to all or a portion thereof
establishing reserve requirements.
"Regulation G" means Regulation G of the Board of
Governors of the Federal Reserve System as from time to time in
effect and any successor to all or a portion thereof
establishing margin requirements.
"Regulation T" means Regulation T of the Board of
Governors of the Federal Reserve System as from time to time in
effect and any successor to all or a portion thereof
establishing margin requirements.
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"Regulation U" means Regulation U of the Board of
Governors of the Federal Reserve System as from time to time in
effect and any successor to all or a portion thereof
establishing margin requirements.
"Regulation X" means Regulation X of the Board of
Governors of the Federal Reserve System as from time to time in
effect and any successor to all or a portion thereof
establishing margin requirements.
"Required Banks" means at any time (i) Banks holding
at least 51% of the Total Commitments held by Banks (or, if the
Total Commitments shall have been terminated, Banks holding at
least 51% of the outstanding Loans) or (ii) two Banks if there
are only two Banks holding 100% of the Total Commitments and at
least one of such Banks holds an aggregate Commitment of at
least $5,000,000; provided that for the purposes of Section 4,
the requirement that any document, agreement, certificate or
other writing is to be satisfactory to the Required Banks shall
be satisfied if (x) such document, agreement, certificate or
other writing was delivered in its final form to the Banks
prior to the Effective Date (or if amended or modified
thereafter, the Agent has reasonably determined such amendment
or modification not to be material), (y) such document,
agreement, certificate or other writing is satisfactory to the
Agent and (z) Banks holding more than 33-1/3% of the Total
Commitments held by Banks have not objected in writing to such
document, agreement, certificate or other writing to the Agent
prior to the Closing Date.
"Reserve Adjusted Eurodollar Loan" means each Loan
bearing interest based on the Eurodollar Rate as provided in
Section 1.08(b).
"Restoration" has the meaning assigned to that term
in each Mortgage.
"Revolving Loan Commitment" means, with respect to
each Bank, the amount set forth below such Bank's name on the
signature pages hereto directly below the column entitled
"Revolving Loan Commitment," as same may be reduced from time
to time pursuant to Sections 2.01, 3.02 and/or 8.
"Revolving Loan Commitment Termination Date" means
the Business Day immediately preceding the Final Revolving Loan
Maturity Date.
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"Revolving Loans" has the meaning provided in Sec-
tion 1.01(b).
"Revolving Note" has the meaning provided in
Section 1.05(a).
"Revolving Portion" means, at any time, the portion
of the Loan Facility evidenced by the Total Revolving Loan
Commitments.
"Scheduled A Term Loans Principal Payments" means,
with respect to the principal payments on the A Term Loans on
the last Business Day of each month set forth below, the U.S.
dollar amount set forth opposite thereto:
Scheduled A Term Loan
Date Principal Payment
---- ----------------------
December 1996 $625,000
March 1997 625,000
June 1997 625,000
September 1997 625,000
December 1997 625,000
March 1998 625,000
June 1998 625,000
September 1998 625,000
December 1998 625,000
March 1999 625,000
June 1999 625,000
September 1999 625,000
December 1999 625,000
March 2000 625,000
June 2000 625,000
September 2000 625,000
December 2000 625,000
March 2001 625,000
June 2001 625,000
September 2001 625,000
December 2001 625,000
March 2002 625,000
June 2002 625,000
September 2002 625,000
"Scheduled B Term Loans Principal Payments" means,
with respect to the principal payments on the B Term Loans on
the last Business Day of each month set forth below, the U.S.
dollar amount set forth opposite thereto:
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Scheduled B Term Loan
Date Principal Payment
---- ---------------------
December 1996 $ 25,000
March 1997 25,000
June 1997 25,000
September 1997 25,000
December 1997 25,000
March 1998 25,000
June 1998 25,000
September 1998 25,000
December 1998 25,000
March 1999 25,000
June 1999 25,000
September 1999 25,000
December 1999 25,000
March 2000 25,000
June 2000 25,000
September 2000 25,000
December 2000 25,000
March 2001 25,000
June 2001 25,000
September 2001 25,000
December 2001 25,000
March 2002 25,000
June 2002 25,000
September 2002 25,000
December 2002 2,350,000
March 2003 2,350,000
June 2003 2,350,000
September 2003 2,350,000
"SEC" means the Securities and Exchange Commission or
any successor thereto.
"SEC Regulation D" means Regulation D as promulgated
under the Securities Act, as the same may be in effect from
time to time.
"Securities" means any stock, shares, voting trust
certificates, bonds, debentures, options, warrants, notes, or
other evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates
of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right
to subscribe to, purchase or acquire, any of the foregoing.
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"Securities Act" means the Securities Act of 1933, as
amended.
"Security Documents" means each of the Mortgage, the
Pledge Agreements, the Borrower General Security Agreement, the
Intellectual Property Security Agreement and any other
documents utilized to pledge as Collateral for the Obligations
any property or assets of whatever kind or nature.
"Senior Officer" means any of the chief executive
officer, chief financial officer, controller, chief accounting
officer, chief operating officer, treasurer or any executive
vice president of the Borrower.
"Senior Subordinated Notes" means, collectively, the
$18,000,000 aggregate original principal amount of Senior
Subordinated Notes issued by Acquisition Corp. on August 23,
1995.
"Senior Subordinated Note Purchase Agreement" means
the Note Purchase Agreement, dated as of August 23, 1995,
between Acquisition Corp. and the Purchasers listed therein.
"Standby Letter of Credit" means any standby letter
of credit or similar instrument issued for the purpose of
supporting (i) workers' compensation liabilities of the
Borrower or any of its Subsidiaries, (ii) the obligations of
third-party insurers of the Borrower or any of its Subsidiaries
arising by virtue of the laws of any jurisdiction requiring
third-party insurers to obtain such letters of credit, or
(iii) performance, payment, deposit or surety obligations of
the Borrower or any of its Subsidiaries if required by law or
governmental rule or regulation or in accordance with custom
and practice in the industry.
"State and Local Real Property Disclosure
Requirements" means any state or local laws requiring
notification of the buyer of real property, or notification,
registration, or filing to or with any state or local agency,
prior to, concurrent with or following the sale of any real
property or transfer of control of an establishment, of the
actual or threatened presence or release into the environment,
or the use, disposal, or handling of Hazardous Materials on,
at, under, or near the real property to be sold or the
establishment for which control is to be transferred.
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"Subordinated Note Purchase Agreement" means the
Subordinated Note Purchase Agreement, dated as of August 23,
1995, between Acquisition Corp. and the Purchasers listed
therein.
"Subordinated Notes" means, collectively, the
$3,000,000 aggregate original principal amount of Subordinated
Notes issued by Acquisition Corp. on August 23, 1995.
"Subsidiary" of any Person means and includes (i) any
corporation more than 50% of whose stock of any class or
classes having by the terms thereof ordinary voting power to
elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class
or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the
time owned by such Person directly or indirectly through
Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person directly or
indirectly through Subsidiaries has more than a 50% equity
interest at the time.
"Subsidiary Guarantee" means each guarantee
substantially in the form of Exhibit R hereto, executed and
delivered by a Subsidiary in accordance with the terms hereof,
except for such changes as shall have been approved by the
Agent, as the same may after its execution be amended,
supplemented or otherwise modified from time to time in
accordance with the terms hereof and thereof.
"Survey" means a survey of any Mortgaged Real
Property (and all improvements thereon): (i) prepared by a
surveyor or engineer licensed to perform surveys in the state
where such Mortgaged Real Property is located, (ii) dated (or
redated) not earlier than six months prior to the date of
delivery thereof unless there shall have occurred within six
months prior to such date of delivery any exterior construction
on the site of such Mortgaged Real Property, in which event
such survey shall be dated (or redated) after the completion of
such construction or if such construction shall not have been
completed as of such date of delivery, not earlier than 20 days
prior to such date of delivery, (iii) certified by the surveyor
(in a manner reasonably acceptable to the Agent) to the Agent
and the Title Company and (iv) complying in all respects with
the minimum detail requirements of the American Land Title
Association as such requirements are in effect on the date of
preparation of such survey.
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"Taking" has the meaning assigned to that term in
each Mortgage.
"Taxes" has the meaning set forth in Section 3.04.
"Term Loans" has the meaning set forth in Section
1.01(a).
"Term Note" has the meaning set forth in Section
1.05(a).
"Term Portion" means, at any time, the portion of the
Loan Facility evidenced by the Total Term Loan Commitments.
"Termination Event" means (i) a "reportable event"
described in Section 4043 of ERISA or in the regulations
thereunder (excluding events for which the requirement for
notice of such reportable event has been waived by the PBGC)
with respect to a Title IV Plan, or (ii) the withdrawal of any
Credit Party or any of their respective ERISA Affiliates from a
Title IV Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, or
(iii) the filing of a notice of intent to terminate a Title IV
Plan or the treatment of a Title IV Plan amendment as a
termination under Section 4041 of ERISA, or (iv) the
institution of proceedings by the PBGC to terminate a Title IV
Plan or to appoint a trustee to administer a Title IV Plan, or
(v) any other event or condition which might constitute
reasonable grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer,
any Title IV Plan, or (vi) the complete or partial withdrawal
(within the meaning of Sections 4203 and 4205, respectively, of
ERISA) of any Credit Party or any of their respective ERISA
Affiliates from a Multiemployer Plan, or (vii) the insolvency
or reorganization (within the meaning of Sections 4245 and
4241, respectively, of ERISA) or termination of any
Multiemployer Plan, or (viii) the failure to make any payment
or contribution to any Pension Plan or Multiemployer Plan or
the making of any amendment to any Pension Plan which could
result in the imposition of a lien or the posting of a bond or
other security.
"Test Period" means the shorter of (i) the four
consecutive complete fiscal quarters of the Borrower then last
ended or (ii) the period of all complete fiscal quarters of the
Borrower since the Closing Date.
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"Title Company" means Ticor Title Insurance or such
other title insurance or abstract company as shall be selected
by the Borrower and reasonably acceptable to the Required
Banks.
"Title IV Plan" means any Pension Plan described in
Section 4021(a) of ERISA, and not excluded under
Section 4021(b) of ERISA.
"Total A Term Loan Commitments" means the sum of the
A Term Loan Commitments of each of the Banks.
"Total B Term Loan Commitments" means the sum of the
B Term Loan Commitments of each of the Banks.
"Total Commitments" means the sum of the Total Term
Loan Commitments and the Total Revolving Loan Commitments.
"Total Revolving Loan Commitments" means the sum of
the Revolving Loan Commitments of each of the Banks.
"Total Term Loan Commitments" means the sum of the
A Term Loan Commitments and the B Term Loan Commitments of each
of the Banks.
"Total Utilization of Revolving Loan Commitments"
means, at any date of determination, the sum of the aggregate
principal amount of all Revolving Loans then outstanding.
"Type" of Loan means either a Base Rate Loan or a
Reserve Adjusted Eurodollar Loan.
"UCC" means the Uniform Commercial Code as in effect
in the State of New York or any other applicable jurisdiction
in the United States.
"Unutilized Commitment" for any Bank at any time
means, on and after the Closing Date, the unutilized Revolving
Loan Commitment of such Bank, after taking into effect the
Letters of Credit Usage.
"Wholly Owned Subsidiary" of any Person means any
Subsidiary of such Person to the extent all of the capital
stock or other ownership interests in such Subsidiary, other
than directors' or nominees' qualifying shares or shares of
capital stock required to be owned by foreign nationals under
applicable law, is owned directly or indirectly by such Person.
<PAGE>
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"Written" or "in writing" means any form of written
communication or a communication by means of telex, telecopier
device, telegraph or cable.
SECTION 10. The Agent.
10.01 Appointment. Each Bank hereby irrevocably
designates and appoints Indosuez as Agent (such term to include
the Agent acting as Collateral Agent or in any other
representative capacity under any other Credit Document) of
such Bank to act as specified herein and in the other Credit
Documents and each such Bank hereby irrevocably authorizes the
Agent to take such action on its behalf under the provisions of
this Agreement and the other Credit Documents and to exercise
such powers and perform such duties as are expressly delegated
to the Agent by the terms of this Agreement and the other
Credit Documents, together with such other powers as are
reasonably incidental thereto. The Agent agrees to act as such
upon the express conditions contained in this Section 10.
Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein or in
the other Credit Documents, or any fiduciary relationship with
any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be
read into this Agreement or otherwise exist against the Agent.
The provisions of this Section 10 are solely for the benefit of
the Agent and the Banks, and no Credit Party shall have any
rights as a third party beneficiary of any of the provisions
hereof. In performing its functions and duties under this
Agreement, the Agent shall act solely as agent of the Banks and
does not assume and shall not be deemed to have assumed any
obligation or relationship of agency or trust with or for any
Credit Party.
10.02 Delegation of Duties. The Agent may execute
any of its duties under this Agreement or any other Credit
Document by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining
to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care except to the extent
otherwise required by Section 10.03.
10.03 Exculpatory Provisions. Neither the Agent nor
any of its officers, directors, employees, agents, attorneys-
in-fact or affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by it or such Person
under
<PAGE>
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or in connection with this Agreement (except for its or
such Person's own gross negligence or willful misconduct) or
(ii) responsible in any manner to any of the Banks for any
recitals, statements, representations or warranties by the
Borrower, any Subsidiary of the Borrower or any of their
respective officers contained in this Agreement, any other
Document or in any certificate, report, statement or other
document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other
Document or for any failure of the Borrower or any Subsidiary
of the Borrower or any of their respective officers to perform
its obligations hereunder or thereunder. The Agent shall not
be under any obligation to any Bank to ascertain or to inquire
as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement, or to inspect
the properties, books or records of the Borrower or any
Subsidiary of the Borrower. The Agent shall not be responsible
to any Bank for the effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement
or any Credit Document or for any representations, warranties,
recitals or statements made herein or therein or made in any
written or oral statement or in any financial or other
statements, instruments, reports, certificates or any other
documents in connection herewith or therewith furnished or made
by the Agent to the Banks or by or on behalf of the Borrower to
the Agent or any Bank or be required to ascertain or inquire as
to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained
herein or therein or as to the use of the proceeds of the Loans
or of the existence or possible existence of any Default or
Event of Default.
10.04 Reliance by the Agent. The Agent shall be
entitled to rely, and shall be fully protected in relying, upon
any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or
conversation believed by it to be genuine and to have been
signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without
limitation, counsel to the Credit Parties), independent
accountants and other experts selected by the Agent. The Agent
shall be fully justified in failing or refusing to take any
action under this Agreement or any other Credit Document unless
it shall first receive such advice or concurrence of the
Required Banks as it deems appropriate or it shall first be
indemnified to its satisfaction by the Banks against any and
all liability and expense which may be incurred by it by reason
of taking or
<PAGE>
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continuing to take any such action. The Agent
shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other
Credit Documents in accordance with a request of the Required
Banks (or to the extent specifically provided in Section 11.12,
all the Banks), and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the
Banks.
10.05 Notice of Default. The Agent shall not be
deemed to have knowledge of the occurrence of any Default or
Event of Default, other than a default in the payment of
principal or interest on the Loans hereunder unless it has
received notice from a Bank or the Borrower or any other Credit
Party referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of
default". In the event that the Agent receives such a notice,
the Agent shall give prompt notice thereof to the Banks. The
Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the
Required Banks; provided that, unless and until the Agent shall
have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Banks.
10.06 Non-Reliance on Agent and Other Banks. Each
Bank expressly acknowledges that neither the Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact
or affiliates have made any representations or warranties to it
and that no act by the Agent hereinafter taken, including any
review of the affairs of the Borrower or any Subsidiary of the
Borrower, shall be deemed to constitute any representation or
warranty by the Agent to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon the
Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own apprai-
sal of and investigation into the business, assets, operations,
property, financial and other conditions, prospects and
creditworthiness of the Borrower and its Subsidiaries and made
its own decision to make its Loans hereunder and enter into
this Agreement and the other agreements contemplated hereby.
Each Bank also represents that it will, independently and
without reliance upon the Agent or any other Bank, and based on
such documents and information as it shall deem appropriate at
the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this
Agreement, and to make such investigation as it deems necessary
to inform
<PAGE>
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itself as to the business, assets, operations,
property, financial and other conditions, prospects and
creditworthiness of the Borrower and its Subsidiaries. Except
for notices, reports and other documents expressly required to
be furnished to the Banks by the Agent hereunder, the Agent
shall not have any duty or responsibility to provide any Bank
with any credit or other information concerning the business,
operations, assets, property, financial and other conditions,
prospects or creditworthiness of the Borrower or any of its
Subsidiaries which may come into the possession of the Agent or
any of its officers, directors, employees, agents, attorneys-
in-fact or affiliates.
10.07 Indemnification. The Banks agree to indemnify
the Agent in its capacity as such or in any other representa-
tive capacity under any other Credit Document ratably according
to their aggregate Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, reasonable expenses or disbursements
of any kind whatsoever which may at any time (including,
without limitation, at any time following the payment of the
Obligations) be imposed on, incurred by or asserted against the
Agent in its capacity as such in any way relating to or arising
out of this Agreement or any other Credit Document, or any
documents contemplated by or referred to herein or the
transactions contemplated hereby or any action taken or omitted
to be taken by the Agent under or in connection with any of the
foregoing, but only to the extent that any of the foregoing is
not paid by the Borrower or any of its Subsidiaries; provided
that no Bank shall be liable to the Agent for the payment of
any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the Agent's gross
negligence or willful misconduct. If any indemnity furnished
to the Agent for any purpose shall, in the opinion of the
Agent, be insufficient or become impaired, the Agent may call
for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is
furnished. The agreements in this Section 10.07 shall survive
the payment of all Obligations.
10.08 The Agent in Its Individual Capacity. The
Agent and its Affiliates may make loans to, accept deposits
from and generally engage in any kind of business with the
Borrower, its Subsidiaries and other Affiliates of the Borrower
as though the Agent were not the Agent hereunder. With respect
to the Loans made by it and all Obligations owing to it, the
Agent shall have the same rights and powers under this
Agreement as
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any Bank and may exercise the same as though it
were not the Agent, and the terms "Bank" and "Banks" shall
include the Agent in its individual capacity.
10.09 Successor Agent. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, the term
"Agent" shall include such successor agent effective upon its
appointment, and the resigning Agent's rights, powers and
duties as Agent shall be terminated, without any other or
further act or deed on the part of such former Agent or any of
the parties to this Agreement. After the retiring Agent's
resignation hereunder as Agent, the provisions of this
Section 10 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this
Agreement.
10.10 Resignation by Agent. A. The Agent may
resign from the performance of all its functions and duties
hereunder at any time by giving 30 Business Days' prior written
notice to the Borrower and the Banks. Such resignation shall
take effect upon the acceptance by a successor Agent of
appointment pursuant to subsections B and C below or as
otherwise provided below.
B. Upon any such notice of resignation of the
Agent, the Required Banks shall appoint a successor Agent
acceptable to the Borrower and which shall be an incorporated
bank or trust company or other qualified financial institution
with operations in the United States and total assets of at
least $1 billion.
C. If a successor Agent shall not have been so
appointed within said 30 Business Day period, the resigning
Agent with the consent of the Borrower shall then appoint a
successor Agent (which shall be an incorporated bank or trust
company or other qualified financial institution with
operations in the United States and total assets of at least $1
billion) who shall serve as Agent until such time, if any, as
the Required Banks appoint a successor Agent as provided above.
D. If no successor Agent has been appointed
pursuant to subsection B or C by the 30th Business Day after
the date such notice of resignation was given by the resigning
Agent, such Agent's resignation shall become effective and the
Required Banks shall thereafter perform all the duties of Agent
hereunder until such time, if any, as the Required Banks
appoint a successor Agent as provided above.
<PAGE>
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SECTION 11. Miscellaneous.
11.01 Payment of Expenses, etc. The Borrower agrees
to: (i) whether or not the transactions herein contemplated
are consummated, pay all reasonable out-of-pocket costs and
expenses of the Agent in connection with the negotiation,
preparation, execution and delivery of the Credit Documents and
the documents and instruments referred to therein (subject to
the terms of the letter agreement dated August 12, 1996) and
any amendment, waiver or consent relating thereto (including,
without limitation, the reasonable fees and disbursements of
Cahill Gordon & Reindel and local counsel issuing opinions
pursuant to Section 4.01(C)) with prior notice to the Borrower
of the engagement of any counsel and of each of the Banks in
connection with the enforcement of the Credit Documents and the
documents and instruments referred to therein (including,
without limitation, the reasonable fees and disbursements of
counsel for each of the Banks) with prior notice to the
Borrower of the engagement of any counsel; (ii) pay and hold
each of the Banks harmless from and against any and all present
and future stamp and other similar taxes with respect to the
foregoing matters and save each of the Banks harmless from and
against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent
attributable to such Bank) to pay such taxes; and (iii) in-
demnify Agent, Collateral Agent and each Bank, its officers,
directors, employees, representatives and agents from and hold
each of them harmless against any and all losses, liabilities,
claims, damages or expenses (including, without limitation, any
and all losses, liabilities, claims, damages or expenses
arising under Environmental Laws except with regard to any
losses, costs, damages or expenses under Environmental Laws
arising from or relating to acts or omissions occurring after
the Agent or any Bank takes possession of, uses, operates,
manages, controls or sells the Mortgaged Property provided,
however, that such exception shall apply only to the extent
such losses, costs, damages or expenses arise solely from the
gross negligence, bad faith or willful misconduct of the Agent
or any Bank or of the agents of the Agent or any Bank) incurred
by any of them as a result of, or arising out of, or in any way
related to, or by reason of, any investigation, litigation or
other proceeding (whether or not any Bank is a party thereto)
related to the entering into and/or performance of any Credit
Document or the use of the proceeds of any Loans hereunder or
the Refinancing or the consummation of any other transactions
contemplated in any Credit Document, including, without
limitation, the reasonable fees and disbursements of counsel
incurred in connection with any
<PAGE>
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such investigation, litigation or other proceeding (but excluding any such
losses, liabilities, claims, damages or expenses to the extent incurred by
reason of the gross negligence, bad faith or willful misconduct of the Person to
be indemnified).
11.02 Right of Setoff. In addition to any rights
now or hereafter granted under applicable law or otherwise, and
not by way of limitation of any such rights, upon the
occurrence and during the continuance of an Event of Default,
each Bank is hereby authorized at any time or from time to
time, without presentment, demand, protest or other notice of
any kind to any Credit Party or to any other Person, any such
notice being hereby expressly waived, to set off and to
appropriate and apply any and all deposits (general or special)
and any other Indebtedness at any time held or owing by such
Bank (including, without limitation, by branches and agencies
of such Bank wherever located) to or for the credit or the
account of any Credit Party against and on account of the
Obligations and liabilities of such Credit Party to such Bank
under this Agreement or under any of the other Credit
Documents, including, without limitation, all interests in
Obligations of such Credit Party purchased by such Bank
pursuant to Section 11.06(b), and all other claims of any
nature or description arising out of or connected with this
Agreement or any other Credit Document, irrespective of whether
or not such Bank shall have made any demand hereunder.
11.03 Notices. Except as otherwise expressly
provided herein, all notices and other communications provided
for hereunder shall be in writing (including telegraphic,
telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to
the Borrower, Carson Products Company, 64 Ross Road, Savannah,
GA 31405, Attention: Chief Financial Officer, with a copy to
Morningside Capital Group, LLC, 1 Morningside Drive, North,
Suite 200, Westport, CT 06880, Attention: President, or if to
another Credit Party, to its address specified in the other
relevant Credit Documents, as the case may be; if to the Agent
or any Bank, at its address specified for the Agent or such
Bank on Annex II hereto; or, at such other address as shall be
designated by any party in a written notice to the other
parties hereto. All such notices and communications shall,
when mailed, telegraphed, telexed, telecopied, or cabled or
sent by overnight courier, be effective two days after being
deposited in the mails, when delivered to the telegraph
company, cable company or overnight courier, as the case may
be, or when sent by telex or telecopier, except that notices
and communications
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to the Agent shall not be effective until received by the Agent.
11.04 Benefit of Agreement. (a) This Agreement
shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto, all future holders of the
Notes, and their respective successors and assigns; provided
that no Credit Party may assign or transfer any of its
interests hereunder without the prior written consent of the
Banks; and provided, further, that the rights of each Bank to
transfer, assign or grant participations in its rights and/or
obligations hereunder shall be limited as set forth below in
this Section 11.04; provided that nothing in this Section 11.04
shall prevent or prohibit any Bank from (i) pledging its Loans
hereunder to a Federal Reserve Bank in support of borrowings
made by such Bank from such Federal Reserve Bank and
(ii) granting participations in or assignments of such Bank's
Loans, Notes and/or Commitments hereunder to its parent company
and/or to any Affiliate of such Bank that is at least 50% owned
by such Bank or its parent company; provided, however, that any
such assignment or participation shall not result in the
Borrower paying additional amounts as of the time of such
assignment pursuant to Section 1.10(e), 1.11, 1.13 or 3.04.
(b) Each Bank shall have the right to transfer,
assign or grant participations in all or any part of its
remaining Loans, Notes and/or Commitments hereunder on the
basis set forth below in this clause (b). Subject to
Section 11.04(c) hereof, each Bank may furnish any information
concerning the Borrower in the possession of such Bank from
time to time to assignees and participants (including
prospective assignees and participants).
(A) Assignments. Each Bank, with the written
consent of the Agent and the Borrower, which consent shall
not be unreasonably withheld, which shall be evidenced on
the notice in the form of Exhibit I-1 hereto, may assign
pursuant to an Assignment Agreement substantially in the
form of Exhibit I-2 hereto all or a portion of its Loans,
Notes and/or Commitments hereunder pursuant to this clause
(b)(A) to one or more Eligible Assignees; provided that
any such assignment pursuant to this clause (b)(A) shall
not result in the Borrower paying additional amounts as of
the time of such assignment pursuant to Section 1.10(e),
1.11, 1.13 or 3.04. Any assignment pursuant to this
clause (b)(A) will become effective five Business Days
after the Agent's receipt of (i) a written notice in the
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form of Exhibit I-1 hereto from the assigning Bank and the
Eligible Assignee and (ii) a processing and recordation
fee of $2,500 from the assigning Bank in connection with
the Agent's recording of such sale, assignment, transfer
or negotiation; provided that such fee shall only be
payable if the assignment is between a Bank and an
Eligible Assignee that is not a Bank prior to the
assignment. The Borrower shall issue new Notes to the
Eligible Assignee in conformity with Section 1.05 and the
assignor shall return the old Notes to the Borrower. Upon
the effectiveness of any assignment in accordance with
this clause (b)(A), the Eligible Assignee will become a
"Bank" for all purposes of this Agreement and the other
Credit Documents and, to the extent of such assignment,
the assigning Bank shall be relieved of its obligations
hereunder with respect to the Commitments being assigned.
The Agent shall maintain at its address specified in
Annex II hereto a copy of each Assignment Agreement
delivered to and accepted by it and a register in which it
shall record the names and addresses of the Banks and the
Commitment of, and principal amount of the Loans owning
to, each Bank from time to time (the "Register"). The
entries in the Register shall be conclusive and binding
for all purposes, absent demonstrable error, and the
Borrower, the Agent and the Banks may treat each Person
whose name is recorded in the Register as a Bank hereunder
for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower, the Agent or any
Bank at any reasonable time and from time to time upon
reasonable prior notice.
(B) Participations. Each Bank may transfer, grant
or assign participations in all or any part of such Bank's
Loans, Notes and/or Commitments hereunder pursuant to this
clause (b)(B) to any Person; provided that (i) such Bank
shall remain a "Bank" for all purposes of this Agreement
and the transferee of such participation shall not
constitute a Bank hereunder and (ii) no participant under
any such participation shall have rights to approve any
amendment to or waiver of this Agreement or any other
Credit Document except to the extent such amendment or
waiver would (x) change the scheduled final maturity date
of any of the Loans, Notes or Commitments in which such
participant is participating or (y) reduce the principal
amount, interest rate or fees applicable to any of the
Loans, Notes or Commitments in which such participant is
participating or postpone the payment of any interest or
fees or (z) release all or substantially all of the
Collateral;
<PAGE>
-138-
and provided, further that any participation pursuant
to this Section 11.04(b)(B) shall not result in
the Borrower paying additional amounts as of the time of
such participation pursuant to Section 1.10(e), 1.11, 1.13
or 3.04. In the case of any such participation, the
participant shall not have any rights under this Agreement
or any of the other Credit Documents (the participant's
rights against the granting Bank in respect of such
participation to be those set forth in the agreement with
such Bank creating such participation) and all amounts
payable by the Borrower hereunder shall be determined as
if such Bank had not sold such participation; provided
that such participant shall be considered to be a "Bank"
for purposes of Sections 11.02 and 11.06(b).
(c) The Agent and the Banks agree to keep
confidential (and to cause their respective officers,
directors, employees, agents and representatives to keep
confidential) all information, materials and documents
furnished to the Agent or any Bank (the "Information").
Notwithstanding the foregoing, the Agent and each Bank shall be
permitted to disclose Information (i) to such of its officers,
directors, employees, agents and representatives as need to
know such Information in connection with its participation in
any of the transactions contemplated hereby or the
administration of this Agreement; (ii) to the extent required
by applicable laws and regulations or by any subpoena or
similar legal process, or requested by any governmental agency
or authority; (iii) to the extent such Information (A) becomes
publicly available other than as a result of a breach of this
Agreement or any other confidentiality agreement with respect
thereto, (B) becomes available to the Agent or such Bank on a
non-confidential basis from a source other than Holdings, the
Borrower, or any of their respective subsidiaries, officers,
directors, employees, agents or representatives or (C) was
available to the Agent or such Bank on a non-confidential basis
prior to its disclosure to the Agent or such Bank by the
Borrower, Holdings or any of their respective subsidiaries;
(iv) to the extent the Borrower, Holdings or any of their
respective subsidiaries shall have consented to such disclosure
in writing; (v) in connection with the sale of any Collateral
pursuant to the provisions of any of the Security Documents; or
(vi) pursuant to Section 11.04(b) hereof; provided that prior
to any such disclosure under Section 11.04(b), each prospective
Eligible Assignee or participant shall enter into a written
agreement with the assigning or selling Bank to preserve the
confidentiality of any Information to the extent set forth in
this Section 11.04(c).
<PAGE>
-139-
11.05 No Waiver; Remedies Cumulative. No failure or
delay on the part of the Agent or any Bank in exercising any
right, power or privilege hereunder or under any other Credit
Document and no course of dealing between any Credit Party and
the Agent or any Bank shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power, or
privilege hereunder or under any other Credit Document preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder. The
rights and remedies herein expressly provided are cumulative
and not exclusive of any rights or remedies which the Agent or
any Bank would otherwise have. No notice to or demand on any
Credit Party in any case shall entitle any Credit Party to any
other or further notice or demand in similar or other circum-
stances or constitute a waiver of the rights of the Agent or
the Banks to any other or further action in any circumstances
without notice or demand.
11.06 Payments Pro Rata. (a) The Agent agrees that
promptly after its receipt of each payment from or on behalf of
any Credit Party in respect of any Obligations of such Credit
Party, it shall distribute such payment to the Banks pro rata
based upon their respective shares, if any, of the Obligations
with respect to which such payment was received.
(b) Each of the Banks agrees that, if it should
receive any amount hereunder (whether by voluntary payment, by
realization upon security, by the exercise of the right of
setoff or banker's lien, by counterclaim or cross action, by
the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal
of, or interest on, the Loans, of a sum which with respect to
the related sum or sums received by other Banks is in a greater
proportion than the total of such Obligations then owed and due
to such Bank bears to the total of such Obligations then owed
and due to all of the Banks immediately prior to such receipt,
then such Bank receiving such excess payment shall purchase for
cash without recourse or warranty from the other Banks an
interest in the Obligations of the respective Credit Party to
such Banks in such amount as shall result in a proportional
participation by all of the Banks in such amount; provided that
if all or any portion of such excess amount is thereafter
recovered from such Bank, such purchase shall be rescinded and
the purchase price restored to the extent of such recovery, but
without interest.
<PAGE>
-140-
11.07 Calculations; Computations. (a) The
financial statements to be furnished to the Banks pursuant
hereto shall be made and prepared in accordance with GAAP
consistently applied throughout the periods involved (except as
set forth in the notes thereto or as otherwise disclosed in
writing by the Borrower to the Banks); provided that, except as
otherwise specifically provided herein, all computations
determining compliance with Sections 5, 6, 7 and 8 and all
definitions used in this Agreement for any purpose shall
utilize accounting principles and policies in effect at the
time of the preparation of, and in conformity with those used
to prepare, the historical financial statements delivered to
the Banks pursuant to Section 4.01(M).
(b) All computations of interest and fees hereunder
shall be made on the actual number of days elapsed over a year
of 365 days; provided, however, that all computations of
interest on Reserve Adjusted Eurodollar Loans and Commitment
Commission shall be made on the actual number of days elapsed
over a year of 360 days.
11.08 Governing Law; Submission to Jurisdiction;
Venue. (a) This Agreement and the rights and obligations of
the parties hereunder shall be construed and enforced in
accordance with and be governed by the laws of the State of New
York applicable to contracts made and to be performed wholly
therein. Any legal action or proceeding with respect to this
Agreement or any other Credit Document may be brought in the
courts of the State of New York or of the United States for the
Southern District of New York, and, by execution and delivery
of this Agreement, each Credit Party hereby irrevocably accepts
for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the
aforesaid courts. Each Credit Party further irrevocably
consents to the service of process out of any of the aforemen-
tioned courts in any such action or proceeding by the mailing
of copies thereof by registered or certified mail, postage
prepaid, to the respective Credit Party at its address for
notices pursuant to Section 11.03, such service to become
effective 15 days after such mailing. Each Credit Party hereby
irrevocably appoints the Borrower and such other persons as may
hereafter be selected by the Borrower irrevocably agreeing in
writing to serve as its agent for service of process in respect
of any such action or proceeding. Nothing herein shall affect
the right of the Agent or any Bank to serve process in any
other manner permitted by law or to commence legal proceedings
or
<PAGE>
-141-
otherwise proceed against any Credit Party in any other
jurisdiction.
(b) Each Credit Party hereby irrevocably waives any
objection which it may now or hereafter have to the laying of
venue of any of the aforesaid actions or proceedings arising
out of or in connection with this Agreement or any other Credit
Document brought in the courts referred to in clause (a) above
and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient
forum.
11.09 Counterparts. This Agreement may be executed
in any number of counterparts and by the different parties
hereto on separate counterparts, each of which when so executed
and delivered shall be an original, but all of which shall
together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged
with the Borrower and the Agent.
11.10 Effectiveness. This Agreement shall become
effective on the date (the "Effective Date") on which the
Borrower and each of the Banks shall have signed a copy hereof
(whether the same or different copies) and shall have delivered
the same to the Agent at the Agent's Office or, in the case of
the Banks, shall have given to the Agent telephonic (confirmed
in writing), written, telex or telecopy notice (actually
received) at such office that the same has been signed and
mailed to it. The Agent will give the Borrower and each Bank
prompt written notice of the occurrence of the Effective Date.
11.11 Headings Descriptive. The headings of the
several sections and subsections of this Agreement are inserted
for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement.
11.12 Amendment or Waiver. Neither this Agreement
nor any other Credit Document nor any terms hereof or thereof
may be changed, waived, discharged or terminated unless such
change, waiver, discharge or termination is in writing signed
by the Borrower and the Required Banks; provided that no such
change, waiver, discharge or termination shall, without the
consent of each affected Bank and the Agent, (i) extend the
scheduled final maturity date of any Loan, or any portion
thereof, or reduce the rate or extend the time of payment of
interest thereon or fees or reduce the principal amount
<PAGE>
-142-
thereof, or increase the Commitments of any Bank over the
amount thereof then in effect (it being understood that a
waiver of any Default or Event of Default or of a mandatory
reduction in the Total Commitment shall not constitute a change
in the terms of any Commitment of any Bank), (ii) release all
or a substantial portion of the Collateral or Guarantees
(except as expressly permitted by the Credit Documents),
(iii) amend, modify or waive any provision of this Section, or
Section 1.10, 1.11, 3.04, Section 8, 10.07, 11.01, 11.02,
11.04, 11.06, 11.07(b) or 11.12, (iv) reduce any percentage
specified in, or otherwise modify, the definition of Required
Banks or (v) consent to the assignment or transfer by any
Credit Party of any of its rights and obligations under this
Agreement. No provision of Section 10 may be amended without
the consent of the Agent.
11.13 Survival. All indemnities set forth herein
including, without limitation, in Section 1.11, 3.04, 10.07 or
11.01 shall survive the execution and delivery of this
Agreement and the making of the Loans, the repayment of the
Obligations and the termination of the Total Commitments.
11.14 Domicile of Loans. Each Bank may transfer and
carry its Loans at, to or for the account of any branch office,
subsidiary or affiliate of such Bank; provided, however, that
any such transfer shall not result in the Borrower paying
additional amounts as of the time of such transfer pursuant to
Section 1.10(e), 1.11, 1.13 or 3.04.
11.15 Waiver of Jury Trial. Each of the parties to
this Agreement hereby irrevocably waives all right to a trial
by jury in any action, proceeding or counterclaim arising out
of or relating to this Agreement, the Credit Documents or the
transactions contemplated hereby or thereby.
11.16 Independence of Covenants. All covenants
hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitation of, another covenant
shall not avoid the occurrence of a Default or an Event of
Default if such action is taken or condition exists.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has
caused a counterpart of this Agreement to be duly executed and
delivered as of the date first above written.
CARSON PRODUCTS COMPANY
By:
---------------------------
Name:
Title:
<PAGE>
Credit Agreement among Carson Products Company,
Banque Indosuez and the Banks listed herein.
BANQUE INDOSUEZ, NEW YORK BRANCH
as Agent and Collateral
Agent
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
A Term Loan Commitment: $15,000,000
B Term Loan Commitment: $10,000,000
Revolving Loan Commitment: $15,000,000
<PAGE>
ANNEX I
List of Banks
Banque Indosuez, New York Branch
Assignment Banks
<PAGE>
ANNEX II
Agent and Bank Addresses
Banque Indosuez, New York Branch
1211 Avenue of the Americas
7th Floor
New York, New York 10036
<PAGE>
-2-
Assignment Banks
<PAGE>
ANNEX III
Existing Debt
<PAGE>
ANNEX IV
Subsidiaries
<PAGE>
ANNEX V
Collective Bargaining Agreements
<PAGE>
ANNEX VI
INSURANCE
<PAGE>
ANNEX VII
Liens
<PAGE>
ANNEX VIII
Mortgaged Real Property
<PAGE>
ANNEX IX
Litigation
<PAGE>
ANNEX X
Consents
<PAGE>
ANNEX XI
Restrictions
<PAGE>
ANNEX XII
Environmental Matters
<PAGE>
ANNEX XIII
Taxes
<PAGE>
ANNEX XIV
Schedule of Intellectual Property
<PAGE>
Exhibit A to the
Credit Agreement
FORM OF REVOLVING NOTE
CARSON PRODUCTS COMPANY
U.S. $ New York, New York
, 1996
FOR VALUE RECEIVED, CARSON PRODUCTS COMPANY, a
Delaware corporation (the "Borrower"), hereby promises to pay
to the order of (the "Bank"), in lawful money
of the United States of America in immediately available funds,
at the office of Banque Indosuez, New York Branch, located at
1211 Avenue of the Americas, 7th Floor, New York, New York
10036 or as otherwise designated pursuant to the Credit
Agreement (which is hereinafter defined), on the Final
Revolving Loan Maturity Date (as defined in the Credit
Agreement), the principal sum of
AND /100 U.S.
DOLLARS ($ ) or, if less, the unpaid principal
amount of the Revolving Loans (as defined in the Credit
Agreement) made by the Bank pursuant to the Credit Agreement.
The Borrower also promises to pay interest on the
unpaid principal amount hereof in like money at said office
from the date hereof until paid at the rates and at the times
provided in the Credit Agreement.
This Note is one of the Revolving Notes referred to
in the Credit Agreement, dated as of October [ ], 1996, among
the Borrower, the Bank and the other lending institutions party
thereto and Banque Indosuez, New York Branch, as Agent (as
amended, amended and restated, supplemented or otherwise
modified in accordance with the terms thereof in effect, the
"Credit Agreement") and is entitled to the benefits thereof and
shall be subject to the provisions thereof. This Note is also
entitled to the benefits of the Security Documents (as defined
in the Credit Agreement). As provided in the Credit Agreement,
this Note is subject to mandatory and voluntary prepayment, in
whole or in part.
In case an Event of Default (as defined in the Credit
Agreement) shall occur and be continuing, the principal of and
accrued interest on this Note may be declared to be due and
payable in the manner and with the effect provided in the
Credit Agreement.
<PAGE>
-2-
The Borrower hereby waives presentment, demand,
protest or notice of any kind in connection with this Note.
All borrowings evidenced by this Note and all
payments and prepayments of the principal hereof and interest
hereon and the respective dates thereof shall be endorsed by
the holder hereof on the schedule attached hereto and made a
part hereof, or on a continuation thereof which shall be
attached hereto and made a part hereof, or otherwise recorded
by such holder in its internal records; provided, however, that
the failure of the holder hereof to make such an endorsement or
recordation or any error in such an endorsement or recordation
shall not affect the obligations of the Borrower to make
payments when due of any amounts owing under the Credit
Agreement or under this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW.
CARSON PRODUCTS COMPANY
By
Name:
Title:
<PAGE>
<TABLE>
<CAPTION>
TRANSACTIONS
ON
REVOLVING NOTE
Principal Amount of Outstanding
Type of Amount of Duration Principal or Principal
Loan Made Loan Made Interest of Interest Interest Paid Balance Notation
Date This Date This Date Rate Period This Date This Date Made By
- --- --------- --------- -------- ----------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
Exhibit B-1 to the
Credit Agreement
FORM OF A TERM NOTE
CARSON PRODUCTS COMPANY
New York, New York
U.S. $ , 1996
FOR VALUE RECEIVED, CARSON PRODUCTS COMPANY, a
Delaware corporation (the "Borrower"), hereby promises to pay
to the order of (the "Bank"), in lawful money
of the United States of America in immediately available funds,
at the office of Banque Indosuez, New York Branch, located at
1211 Avenue of the Americas, 7th Floor, New York, New York
10036 or as otherwise designated pursuant to the Credit
Agreement (which is hereinafter defined), on the Final A Term
Loan Maturity Date (as defined in the Credit Agreement), the
principal sum of
AND /100 U.S. DOLLARS
($ ) or, if less, the unpaid principal amount of the
A Term Loans (as defined in the Credit Agreement) made by the
Bank pursuant to the Credit Agreement.
The Borrower also promises to pay interest on the
unpaid principal amount hereof in like money at said office
from the date hereof until paid at the rates and at the times
provided in the Credit Agreement.
This Note is one of the A Term Notes referred to in
the Credit Agreement, dated as of October [ ], 1996, among the
Borrower, the Bank and the other lending institutions party
thereto and Banque Indosuez, New York Branch, as Agent (as
amended, amended and restated, supplemented or otherwise
modified in accordance with the terms thereof in effect, the
"Credit Agreement") and is entitled to the benefits thereof and
shall be subject to the provisions thereof. This Note is also
entitled to the benefits of the Security Documents (as defined
in the Credit Agreement). As provided in the Credit Agreement,
this Note is subject to mandatory and voluntary prepayment, in
whole or in part.
In case an Event of Default (as defined in the Credit
Agreement) shall occur and be continuing, the principal of and
accrued interest on this Note may be declared to be due and
payable in the manner and with the effect provided in the
Credit Agreement.
<PAGE>
-2-
The Borrower hereby waives presentment, demand,
protest or notice of any kind in connection with this Note.
All borrowings evidenced by this Note and all
payments and prepayments of the principal hereof and interest
hereon and the respective dates thereof shall be endorsed by
the holder hereof on the schedule attached hereto and made a
part hereof, or on a continuation thereof which shall be
attached hereto and made a part hereof, or otherwise recorded
by such holder in its internal records; provided, however, that
the failure of the holder hereof to make such an endorsement or
recordation or any error in such an endorsement or recordation
shall not affect the obligations of the Borrower to make
payments when due of any amounts owing under the Credit
Agreement or under this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW.
CARSON PRODUCTS COMPANY
By
Name:
Title:
<PAGE>
<TABLE>
<CAPTION>
TRANSACTIONS
ON
A TERM NOTE
Principal Amount of Outstanding
Type of Amount of Duration Principal or Principal
Loan Made Loan Made Interest of Interest Interest Paid Balance Notation
Date This Date This Date Rate Period This Date This Date Made By
- ---- --------- --------- -------- ----------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
Exhibit B-2 to the
Credit Agreement
FORM OF B TERM NOTE
CARSON PRODUCTS COMPANY
New York, New York
U.S. $ , 1996
FOR VALUE RECEIVED, CARSON PRODUCTS COMPANY, a
Delaware corporation (the "Borrower"), hereby promises to pay
to the order of (the "Bank"), in lawful money
of the United States of America in immediately available funds,
at the office of Banque Indosuez, New York Branch, located at
1211 Avenue of the Americas, 7th Floor, New York, New York
10036 or as otherwise designated pursuant to the Credit
Agreement (which is hereinafter defined), on the Final B Term
Loan Maturity Date (as defined in the Credit Agreement), the
principal sum of
AND /100 U.S. DOLLARS
($ ) or, if less, the unpaid principal amount of the
B Term Loans (as defined in the Credit Agreement) made by the
Bank pursuant to the Credit Agreement.
The Borrower also promises to pay interest on the
unpaid principal amount hereof in like money at said office
from the date hereof until paid at the rates and at the times
provided in the Credit Agreement.
This Note is one of the B Term Notes referred to in
the Credit Agreement, dated as of October [ ], 1996, among the
Borrower, the Bank and the other lending institutions party
thereto and Banque Indosuez, New York Branch, as Agent (as
amended, amended and restated, supplemented or otherwise
modified in accordance with the terms thereof in effect, the
"Credit Agreement") and is entitled to the benefits thereof and
shall be subject to the provisions thereof. This Note is also
entitled to the benefits of the Security Documents (as defined
in the Credit Agreement). As provided in the Credit Agreement,
this Note is subject to mandatory and voluntary prepayment, in
whole or in part.
In case an Event of Default (as defined in the Credit
Agreement) shall occur and be continuing, the principal of and
accrued interest on this Note may be declared to be due and
payable in the manner and with the effect provided in the
Credit Agreement.
166
<PAGE>
-2-
The Borrower hereby waives presentment, demand,
protest or notice of any kind in connection with this Note.
All borrowings evidenced by this Note and all
payments and prepayments of the principal hereof and interest
hereon and the respective dates thereof shall be endorsed by
the holder hereof on the schedule attached hereto and made a
part hereof, or on a continuation thereof which shall be
attached hereto and made a part hereof, or otherwise recorded
by such holder in its internal records; provided, however, that
the failure of the holder hereof to make such an endorsement or
recordation or any error in such an endorsement or recordation
shall not affect the obligations of the Borrower to make
payments when due of any amounts owing under the Credit
Agreement or under this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW.
CARSON PRODUCTS COMPANY
By
Name:
Title:
167
<PAGE>
<TABLE>
<CAPTION>
TRANSACTIONS
ON
B TERM NOTE
Principal Amount of Outstanding
Type of Amount of Duration Principal or Principal
Loan Made Loan Made Interest of Interest Interest Paid Balance Notation
Date This Date This Date Rate Period This Date This Date Made By
- ---- --------- --------- -------- ----------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
168
<PAGE>
Exhibit C-1 to the
Credit Agreement
[Form of Opinion of Milbank, Tweed, Hadley & McCloy]
October [ ], 1996
Banque Indosuez, New York Branch,
As Agent and Collateral Agent
1211 Avenue of the Americas - 7th Floor
New York, New York 10036
and
The Banks party to the Credit
Agreement referenced below
Ladies and Gentlemen:
We have acted as counsel to Carson, Inc., a Delaware
corporation ("Holdings") and its wholly owned subsidiary,
Carson Products Company, a Delaware corporation, ("Borrower"),
in connection with (i) the Credit Agreement, dated as of
October [ ], 1996 (the "Credit Agreement"), among Borrower,
and together with Holdings, the "Credit Parties", the lending
institutions named therein (the "Banks"), and the New York
Branch of Banque Indosuez, as Agent and Collateral Agent,
providing for, among other things, extensions of credit to be
made by the Banks to the Company in an aggregate principal
amount not exceeding $40,000,000 and (ii) the agreements,
instruments and other documents referred to below. This
opinion letter is delivered to you pursuant to Section
4.01(C)(i) of the Credit Agreement. All capitalized terms used
but not defined herein have the respective meanings given to
such terms in the Credit Agreement.
In rendering the opinions expressed below, we have
participated in the preparation of and reviewed the Credit
Documents (including all respective Annexes and Exhibits
thereto).
We have also reviewed (i) originals or copies of the
Certificate of Incorporation and By-laws of each Credit Party,
resolutions of the boards of directors of each Credit Party
and, where appropriate, the stockholder of each Credit Party,
and certificates of public officials concerning the legal
existence and good standing of each Credit Party in the
jurisdictions where each Credit Party is incorporated and (ii)
material agreements, contracts, licenses and other instruments
and
<PAGE>
-2-
records of each Credit Party, as we have deemed necessary
or appropriate to express the opinions set forth herein. As to
all factual matters material to the opinions set forth herein,
we have relied upon, and assumed the accuracy of, such
certificates, corporate records, searches and other documents
(including certificates of officers of the Credit Parties and
representations and warranties made in or pursuant to the
Credit Documents, and other instruments and agreements by the
Credit Parties and others as to matters of fact) with respect
to the facts stated therein.
We have, in acting as counsel to Holdings and the Borrower
as described above, participated in certain due diligence
activities of Holdings in connection with the Holdings IPO.
The opinions expressed herein as being to the best of our
knowledge or with respect to matters known to us reflect
knowledge obtained in connection with such participation, the
participation and review referred to in the second paragraph of
this opinion letter and the review referred to in the third
paragraph of this opinion letter but no other independent
inquiry, and are limited to the actual knowledge of the lawyers
of this firm who have actively worked on the transactions
contemplated by the Credit Documents.
In rendering the opinions expressed below, we have
assumed, with your permission and without independent
verification, that (except, as to the Credit Parties, to the
extent set forth in the opinions expressed below):
a the signatures of persons signing all documents
in connection with which this opinion is rendered are
genuine and authorized;
b all documents submitted to us as originals or
duplicate originals are authentic;
c all documents submitted to us as copies, whether
certified or not, conform to original documents; and
d all parties to the documents reviewed by us are
duly organized and validly existing and have full power
and authority to execute, deliver and perform their
obligations under such documents, that all such documents
have been duly authorized by all necessary action on the
part of the parties thereto, that such documents have been
duly executed and delivered by such parties, and that such
<PAGE>
-3-
documents are valid, binding and enforceable obligations
of such parties.
Based upon and subject to the foregoing and subject
also to the comments and qualifications set forth below, and
having regard to legal considerations we deem relevant, we are
of the opinion that:
1. Each of Holdings and the Borrower is a duly
organized and validly existing corporation in good
standing under the laws of the State of Delaware; and each
of the Credit Parties has the corporate power and
authority to own and operate its property and assets and
to transact the business in which it is engaged and
proposes to engage.
2. Each Credit Party has the corporate power and
authority to execute, deliver and carry out the terms and
provisions of the Credit Documents to which it is a party
and has taken all necessary corporate action to authorize
the execution, delivery and performance of the Credit
Documents to which it is a party, including in the case of
Holdings, the consummation of the Holdings IPO. Each
Credit Party has duly executed and delivered each Credit
Document to which it is a party and each such Credit
Document constitutes the legal, valid and binding
obligation of such Person and is enforceable against such
Person in accordance with its terms.
3. Neither the execution, delivery or performance
by any Credit Party of the Credit Documents to which it is
a party nor compliance with the terms and provisions
thereof, nor the consummation of the transactions
contemplated therein (i) will contravene any applicable
provision (or any provision to be applicable following the
Refinancing) of the Delaware General Corporation Law or
any applicable provision of any law, statute, rule or
regulation of any Federal or New York state Governmental
Authority or any order, writ, injunction or decree of any
Federal or New York state Governmental Authority of which
we have knowledge, or (ii) conflicts or will conflict or
be inconsistent with, results or will result in any breach
or violation of any of the terms, covenants, conditions or
provisions of, or constitute a default under, or (other
than pursuant to the Security Documents) result in the
creation or imposition of (or the obligation to create or
impose) any Lien upon any of the property or assets of any
<PAGE>
-4-
Credit Party or its Subsidiaries pursuant to, the terms of
any indenture, mortgage, deed of trust, material agreement
or other material instrument to which any Credit Party or
its Subsidiaries is a party or by which it or any of its
property or assets is bound (or will be bound after giving
effect to the Refinancing) or to which it may be subject,
in each case of which we have knowledge, except, in each
such case described in clause (i) or (ii) of this
paragraph, where such contravention, conflict,
inconsistency, breach, violation, default, creation,
imposition or obligation would not have a Materially
Adverse Effect, or would occur solely as a result of the
identity or regulatory status of the Banks or any of their
respective affiliates, or (iii) will violate any provision
of the charter or by-laws of any Credit Party.
4. To the best of our knowledge, there are no
actions, judgments, suits, investigations or proceedings
by any Governmental Authority or other Person pending or
threatened with respect to any Credit Party or any of
their respective assets (both before and after giving
effect to the Refinancing) that (a) challenges the
consummation of the Refinancing or the validity of any of
the Credit Documents or the transactions contemplated
thereby, including the making of any Loans or (b) would
have a Materially Adverse Effect.
5. Assuming the Banks are "banks" as defined in
Regulation U of the Board of Governors of the Federal
Reserve System, neither the making of any Loan under the
Credit Agreement, nor the use of the proceeds thereof
(provided such proceeds are used in the manner set forth
in the Credit Agreement), will violate or be inconsistent
with the provisions of Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System.
6. To the best of our knowledge, no order, consent,
approval, license, authorization, or validation of, or
filing, recording or registration with, or exemption by,
any third party (other than any Governmental Authority
except as specified below) or any Federal or New York
state Governmental Authority or any Delaware state
Governmental Authority pursuant to the Delaware General
Corporation Law (other than those orders, consents,
approvals, licenses, authorizations or validations which,
if not obtained or made, would not have a Materially
Adverse Effect or which have previously been obtained or
made and
<PAGE>
-5-
except for filings to perfect security interests
granted pursuant to the Security Documents (including
filings with the United States Patent and Trademark Office
and the United States Copyright Office)) is required to
authorize or is required in connection with (i) the
execution, delivery and performance of any Credit Document
or the transactions contemplated therein or (ii) the
legality, validity, binding effect or enforceability of
any Credit Document. To the best of our knowledge, at the
time of the making of the Initial Loans, there does not
exist any judgment, order, injunction or other restraint
issued or filed with respect to the transactions
contemplated by the Credit Documents or the making of
Loans or the performance by any Credit Party of its
obligations under the Credit Documents.
7. No Credit Party and no Subsidiary of any Credit
Party is, or will be after giving effect to the
transactions contemplated by the Documents, an "investment
company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act
of 1940, as amended.
8. No Credit Party and no Subsidiary of any Credit
Party is, or will be after giving effect to the
transactions contemplated by the Documents, a "holding
company," or a "subsidiary company" or a "holding company"
or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935,
as amended.
9. All issued and outstanding capital stock of each
of Holdings and the Borrower has been duly authorized,
issued and delivered and is fully paid, nonassessable and
free of preemptive rights (other than any preemptive
rights pursuant to each of the Subscription Agreements
dated as of August 23, 1995 (i) among Holdings, Indosuez
Carson partners and Indosuez CM II, Inc., (ii) among
Holdings, Indosuez CM II, Inc. and the Morgan Guaranty
entities named therein and (iii) between Holdings and DNL
Partners, Limited Partnership). It is not necessary, in
connection with such issuance of all of such securities,
to register such securities under the Securities Act and
the rules and regulations thereunder, and to the best of
our knowledge no action has been taken by Holdings or the
Borrower in connection with any such registration. Other
than as set forth in the final prospectus relating to the
<PAGE>
-6-
Holdings IPO, there are not, to the best of our knowledge,
any existing options, warrants, calls, subscriptions,
convertible or exchangeable securities, rights,
agreements, commitments or arrangements for any person to
acquire any capital stock of any Credit Party or any other
securities convertible into, exchangeable for or
evidencing the right to subscribe for any such capital
stock. To the best of our knowledge, Holdings' only
directly owned Subsidiary is Borrower and Borrower's only
directly owned Subsidiaries are Fine Products Company, a
Georgia corporation, Carson Products Company SA
(Proprietary) Limited, a South Africa company, and Carson
Botswana (Pty) ltd., a Botswana company.
10. To the best our knowledge, no claim is pending
or threatened to the effect that Borrower or any of its
Subsidiaries infringes upon the rights of others with
respect to any of its material patents, trademarks,
service marks, trade names, copyrights, trade secrets and
know how, necessary to conduct its business as proposed to
be conducted (the "Intellectual Property"), in each case
where the resolution of such claim in a manner adverse to
the Borrower or any of its Subsidiaries would have a
Materially Adverse Effect. To the best of our knowledge,
no claim is pending or threatened to the effect that (i)
any of the Intellectual Property owned by the Borrower or
any of its Subsidiaries is invalid or (ii) the Borrower or
any of its Subsidiaries has breached any material
obligation in any agreement pursuant to which the Borrower
or any of its Subsidiaries has the right to use the
Intellectual Property, in each case where the resolution
of such claim in a manner adverse to the Borrower or any
of its Subsidiaries would have a Materially Adverse
Effect.
11. Each of the Borrower General Security Agreement,
the Borrower Intellectual Property Security Agreement and
the Pledge Agreements will be effective to create in favor
of the Collateral Agent for the benefit of the Collateral
Agent and the Banks, a valid security interest under the
Uniform Commercial Code as in effect in the State of New
York (the "UCC") in all of the right, title and interest
of the Borrower and Holdings, as the case may be, in, to
and under the Pledged Collateral (as defined in each of
such agreements) as collateral security for the payment
when due of the Secured Obligations (as defined in each of
such agreements) except that (a) such security interest
will continue in Pledged Collateral after its sale,
<PAGE>
-7-
exchange or other disposition and in any proceeds (within
the meaning of Section 9-306(1) of the UCC) thereof only
to the extent provided in Sections 9-306 and 9-307 of the
UCC, (b) such security interest in any portion of the
Pledged Collateral in which the Borrower acquires rights
after the commencement of a case under the Bankruptcy Code
in respect of the Borrower may be limited by Section 552
of the Bankruptcy Code, (c) the creation of a security
interest in any issued and outstanding shares of capital
stock described on Schedule I to each of the Pledge
Agreements (the "Pledged Stock") constituting a "security"
(as defined in Section 8-102(1)(c) of the UCC) requires
the transfer of said Pledged Stock to the Collateral Agent
pursuant to Section 8-313(1) of the UCC, which transfer in
the case of a "certificated security" (as defined in
Section 8-102(1)(a) of the UCC) may be effected by the
Collateral Agent taking possession thereof (or any
certificates representing or instruments evidencing the
same) in the State of New York and thereafter retaining
possession in the State of New York.
12. Assuming the Collateral Agent (or any custodian
(within the meaning of Section 8-102(4) of the UCC) acting
on its behalf) obtains possession in New York of the
Pledged Stock in good faith and without notice of any
adverse claim (as defined in Section 8-302(2) of the UCC)
and endorsed to the Collateral Agent or in blank, and
thereafter retains possession thereof in New York, the
Collateral Agent (or such custodian) will have a perfected
security interest in the Pledged Stock, and such perfected
security interest therein will have priority over all
other security interests theretofore or thereafter created
under the UCC.
13. Other than filings which may be required
pursuant to applicable state law (which are not required
in the State of New York), the filing of the Intellectual
Property Security Agreement in the United States Patent
and Trademark Office and in the United States Copyright
Office are the only actions, recordings or filings
necessary to protect the validity of and to establish of
record the rights of the secured parties thereunder in the
United States of America.
The foregoing opinions are 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
<PAGE>
-8-
York, and we do not express any opinion as to the laws of
any other jurisdiction.
[In connection with the transactions contemplated by
the Holdings IPO, we have issued an opinion pursuant to Section
[ ] of the Underwriting Agreement. You are entitled, with
our permission, to rely on such opinion, as if such opinion
were issued and addressed to you.]
At the request of our clients, this opinion letter is
provided to you by us in our capacity as counsel to Holdings
and the Borrower and this opinion letter may not be relied upon
by any Person for any purpose other than in connection with the
transactions contemplated by the Credit Agreement without, in
each instance, our prior written consent.
Very truly yours,
<PAGE>
Exhibit D to the
Credit Agreement
This instrument prepared by and,
after recording, please return to:
Jonathan I. Mark, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
TERM LOAN AND REVOLVING CREDIT DEED TO SECURE DEBT,
ASSIGNMENT OF LEASES AND SECURITY AGREEMENT
BY
CARSON PRODUCTS COMPANY
(formerly known as Aminco, Inc.),
Grantor,
TO
BANQUE INDOSUEZ, NEW YORK BRANCH,
as Collateral Agent,
Beneficiary
Relating to Premises in:
Savannah, Chatham County, Georgia
$40,000,000
Dated as of: October __, 1996
<PAGE>
TABLE OF CONTENTS
Section Heading Page
INTRODUCTION....................................................... 1
RECITALS........................................................... 1
GRANTING CLAUSES................................................... 2
COVENANTS.......................................................... 5
ARTICLE I WARRANTIES, REPRESENTATIONS AND
COVENANTS OF GRANTOR
1.1 Payment................................................... 5
1.2 Authority and Validity.................................... 5
1.3 Good Title................................................ 6
1.4 Recording Documentation To Assure Security
Interest; Fees and Expenses............................ 7
1.5 Payment of Taxes, Insurance Premiums,
Assessments; Compliance with Law and
Insurance Requirements................................. 8
1.6 Certain Tax Law Changes................................... 11
1.7 Required Insurance Policies............................... 12
1.8 Failure To Make Certain Payments.......................... 15
1.9 Inspection................................................ 16
1.10 Grantor To Maintain Improvements.......................... 16
1.11 Grantor's Obligations with Respect to Leases.............. 17
1.12 Transfer Restrictions and Liens........................... 20
1.13 Destruction; Condemnation................................. 20
1.14 Alterations............................................... 25
1.15 Hazardous Material........................................ 25
1.16 Asbestos.................................................. 27
1.17 Books and Records; Other Information...................... 27
1.18 No Claims Against Beneficiary............................. 28
1.19 Utility Services.......................................... 28
ARTICLE II ASSIGNMENT OF LEASES; SECURITY
AGREEMENT; ASSIGNMENT AGREEMENT
2.1 Assignment of Leases, Rents, Issues and
Profits................................................ 29
2.2 Security Interest in Fixtures............................. 31
<PAGE>
Section Heading Page
ARTICLE III EVENTS OF DEFAULT AND REMEDIES
3.1 Events of Default......................................... 32
3.2 Remedies in Case of an Event of Default................... 32
3.3 Sale of Mortgaged Property if Event of
Default Occurs; Proceeds of Sale....................... 34
3.4 Additional Remedies in Case of an Event of
Default................................................ 37
3.5 Legal Proceedings After an Event of Default............... 38
3.6 Remedies Not Exclusive.................................... 39
ARTICLE IV CERTAIN DEFINITIONS.................................... 40
ARTICLE V MISCELLANEOUS
5.1 Severability of Provisions................................ 41
5.2 Notices................................................... 41
5.3 Covenants To Run with the Land............................ 41
5.4 Headings.................................................. 41
5.5 Limitation on Interest Payable............................ 41
5.6 Governing Law; Submission to Jurisdiction;
Venue.................................................. 42
5.7 No Merger................................................. 43
5.8 Modification in Writing................................... 43
5.9 No Credit for Payment of Taxes or Impositions............. 43
5.10 Stamp and Other Taxes..................................... 43
5.11 Estoppel Certificates..................................... 43
5.12 Additional Security....................................... 44
5.13 Release................................................... 44
5.14 Certain Expenses of Beneficiary........................... 44
5.15 Expenses of Collection.................................... 45
5.16 Business Days............................................. 45
5.17 Relationship.............................................. 45
5.18 Reconveyance Upon Payment of Secured
Obligations............................................ 46
5.19 Concerning Beneficiary.................................... 46
5.20 Future Advances........................................... 47
5.21 Waiver of Stay............................................ 47
5.22 Continuing Security Interest; Assignment.................. 48
5.23 Obligations Absolute...................................... 48
5.24 Beneficiary's Right to Sever Indebtedness................. 49
-ii-
<PAGE>
SIGNATURES
SCHEDULE A LEGAL DESCRIPTION
SCHEDULE B PRIOR LIENS
-iii-
<PAGE>
TERM LOAN AND REVOLVING CREDIT DEED TO SECURE DEBT,
ASSIGNMENT OF LEASES AND SECURITY AGREEMENT
TERM LOAN AND REVOLVING CREDIT DEED TO SECURE DEBT, ASSIGNMENT
OF LEASES AND SECURITY AGREEMENT ("Deed to Secure Debt"), dated as of
October __, 1996, made by CARSON PRODUCTS COMPANY (formerly known as
Aminco, Inc., as successor by merger to DNL Savannah Acquisition Corp.), a
Delaware corporation, having an office at 64 Ross Road, Savannah, Georgia
31405, as grantor, assignor and debtor (in such capacities and together
with any successors in such capacities, "Grantor"), to BANQUE INDOSUEZ, NEW
YORK BRANCH, having an office at 1211 Avenue of the Americas, 7th Floor,
New York, New York 10036, as beneficiary, assignee and secured party (in
such capacities and together with any successors in such capacities,
"Beneficiary") as collateral agent for the lending institutions (the
"Banks") from time to time party to the Credit Agreement (as hereinafter
defined).
R E C I T A L S :
A. Pursuant to a certain credit agreement, dated as of the
date hereof (as amended, amended and restated, supplemented, or otherwise
modified from time to time, the "Credit Agreement"; capitalized terms used
herein and not defined shall have the meanings assigned to them in the
Credit Agreement), among Grantor, the Banks and Banque Indosuez, New York
Branch, as Agent for the Banks, the Banks have agreed (i) to make to or for
the account of Grantor certain A Term Loans up to an aggregate principal
amount of $15,000,000, certain B Term Loans up to an aggregate principal
amount of $10,000,000 and certain Revolving Loans up to an aggregate
principal amount of $15,000,000 and (ii) to issue certain Letters of Credit
for the account of Grantor.
B. It is contemplated that Grantor may enter into one or
more agreements with one or more of the Banks ("Interest Rate Agreements")
fixing the interest rates with respect to Loans under the Credit Agreement
(all obligations of Grantor now existing or hereafter arising under such
Interest Rate Agreements, collectively, the "Interest Rate Obligations").
C. Grantor is the owner of the Mortgaged Property (as
hereinafter defined).
D. It is a condition to the obligations of the Banks to make
the Loans under the Credit Agreement and a
<PAGE>
-2-
condition to any Bank issuing Letters of Credit under the Credit Agreement or
entering into the Interest Rate Agreements that Grantor execute and deliver the
applicable Credit Documents, including this Deed to Secure Debt.
E. This Deed to Secure Debt is given by Grantor in favor of
Beneficiary for its benefit and the benefit of the Banks and the Agent
(collectively, the "Secured Parties") to secure the payment and performance
in full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts
which would accrue and become due but for the filing of a petition in
bankruptcy or the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. { 362(a)), of (i) all Obligations of Grantor
now existing or hereafter arising under the Credit Agreement and all
Interest Rate Obligations of Grantor now existing or hereafter arising
under any Interest Rate Agreement (including, without limitation, Grantor's
obligation provided for therein to pay principal, interest and all other
charges, fees, expenses, commissions, reimbursements, premiums, indemnities
and other payments related to or in respect of the Obligations contained in
the Credit Agreement and the obligations contained in any Interest Rate
Agreement), and (ii) without duplication of the amounts described in clause
(i), all Obligations of Grantor now existing or hereafter arising under
this Deed to Secure Debt or any other Security Document, including, without
limitation, with respect to all charges, fees, expenses, commissions,
reimbursements, premiums, indemnities and other payments that Grantor is
obligated to pay under this Deed to Secure Debt or any other Security
Document (the obligations described in clauses (i) and (ii), collectively,
the "Secured Obligations").
G R A N T I N G C L A U S E S :
For and in consideration of the sum of Ten Dollars ($10.00) and
other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Grantor does hereby pledge, give, grant, sell, convey
and transfer to Beneficiary, its successors and assigns, with powers of
sale, for the use and benefit of Beneficiary, all Grantor's right, title
and interest in and to the following property, whether now owned or held or
hereafter acquired (collectively, the "Mortgaged Property"):
<PAGE>
-3-
A. Any and all present estates or interest of Grantor in the
land described in Schedule A, together with all Grantor's reversionary
rights in and to any and all easements, rights-of-way, sidewalks, strips
and gores of land, drives, roads, curbs, streets, ways, alleys, passages,
passageways, sewer rights, waters, water courses, water rights, and all
power, air, light and other rights, estates, titles, interests, privileges,
liberties, servitudes, licenses, tenements, hereditaments and appurtenances
whatsoever, in any way belonging, relating or appertaining thereto, or any part
thereof, or which hereafter shall in any way belong, relate or be appurtenant
thereto (collectively, the "Land");
B. Any and all estates or interests of Grantor in the
buildings, structures and other improvements and any and all Alterations
(as hereinafter defined) now or hereafter located or erected on the Land,
including, without limitation, attachments, walks and ways (collectively,
the "Improvements"; together with the Land, the "Premises");
C. Any and all permits, certificates, approvals and
authorizations, however characterized, issued or in any way furnished in
connection with the Premises to the extent assignable, whether necessary or
not for the operation and use of the Premises, including, without
limitation, building permits, certificates of occupancy, environmental
certificates, industrial permits or licenses and certificates of operation;
D. Any and all interest of Grantor in all machinery,
apparatus, equipment, fittings, fixtures, improvements and articles of
personal property of every kind and nature whatsoever now or hereafter
attached or affixed to the Premises or used in connection with the use and
enjoyment of the Premises or the maintenance or preservation thereof,
including, without limitation, all utility systems, fire sprinkler and
alarm systems, HVAC equipment, boilers, electronic data processing,
telecommunications or computer equipment, refrigeration, electronic
monitoring, water or lighting systems, power, sanitation, waste removal,
elevators, maintenance or other systems or equipment, and all other
articles used or useful in connection with the use or operation of any part
of the Premises, all to the extent the same constitute "fixtures" as such
term is defined in the UCC as in effect in the State of Georgia
(collectively, the "Equipment");
E. All Grantor's right, title and interest as landlord,
licensor or grantor, in all leases and subleases of
<PAGE>
-4-
space, licenses, occupancy or concession agreements now existing or hereafter
entered into relating in any manner to the Premises or the Equipment and any and
all amendments, modifications, supplements and renewals of any thereof (each
such lease, license or agreement, together with any such amendment,
modification, supplement or renewal, a "Lease"), whether now in effect or
hereafter coming into effect, including, without limitation, all rents,
additional rents, cash, guaranties, letters of credit, bonds, sureties or
securities deposited thereunder to secure performance of the lessee's,
licensee's or obligee's obligations thereunder, revenues, earnings, profits and
income, advance rental payments, payments incident to assignment, sublease or
surrender of a Lease, claims for forfeited deposits and claims for damages, now
due or hereafter to become due, with respect to any Lease, any indemnification
against, or reimbursement for, sums paid and costs and expenses incurred by
Grantor under any Lease or otherwise, and any award in the event of the
bankruptcy of any tenant under or guarantor of a Lease (collectively, the
"Rents");
F. All general intangibles and contract rights relating to
the Premises and the Equipment and all reserves, deferred payments,
deposits, refunds and claims of every kind or character relating thereto
(collectively, the "Contract Rights");
G. All drawings, plans, specifications, file materials,
operating and maintenance records, catalogues, tenant lists,
correspondence, advertising materials, operating manuals, warranties,
guaranties, appraisals, studies and data relating to the Premises or the
Equipment or the construction of any Alteration or the maintenance of any
Permit (as hereinafter defined); and
H. All proceeds of the conversion, voluntary or involuntary,
of any of the foregoing into cash or liquidated claims, including, without
limitation, proceeds of insurance and condemnation or other awards or
payments and refunds of real estate taxes and assessments, including
interest thereon (collectively, "Proceeds");
TO HAVE AND TO HOLD the Mortgaged Property together with the
rights, privileges and appurtenances thereto belonging unto Beneficiary,
for the benefit of Beneficiary and Beneficiary's successors and assigns
forever, for the purpose of securing payment and performance by Grantor of
the Secured Obligations, and Grantor hereby binds itself and its successors
and
<PAGE>
-5-
assigns to warrant and forever defend the Mortgaged Property unto Beneficiary,
its substitutes, successors and assigns, as the case may be, against the claim
or claims of all persons claiming or to claim the same or any part thereof. This
Deed to Secure Debt is a deed passing legal title pursuant to the laws of the
State of Georgia governing loan or security deeds and security agreements and is
not a mortgage as such term is defined under such laws.
C O V E N A N T S :
Grantor warrants, represents and covenants to and for the
benefit of Beneficiary as follows:
ARTICLE I
WARRANTIES, REPRESENTATIONS AND
COVENANTS OF GRANTOR
SECTION 1.1 Payment. Grantor shall pay as and when the same
shall become due, whether at its stated maturity, by acceleration or
otherwise, each and every amount payable by Grantor under the Credit
Documents and the Interest Rate Agreements.
SECTION 1.2 Authority and Validity. Grantor represents,
warrants and covenants that (i) Grantor is duly authorized to execute and
deliver this Deed to Secure Debt, and all corporate and governmental
consents, authorizations and approvals necessary or required therefor have
been duly and effectively taken or obtained, (ii) this Deed to Secure Debt
is a legal, valid, binding and enforceable obligation of Grantor, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights generally and
except as such enforceability may be limited by the application of general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and (iii) Grantor has full
corporate power and lawful authority to execute and deliver this Deed to
Secure Debt and to convey and grant a security interest in the Mortgaged
Property as contemplated herein.
<PAGE>
-6-
SECTION 1.3 Good Title.
1.3.1 Grantor represents, warrants and covenants that
(i) Grantor has good and marketable fee simple title to the Premises and
the landlord's interest and estate under or in respect of the Leases and
good title to the interest it purports to own in and to each of the
Permits, the Equipment and the Contract Rights, in each case subject to no
deed of trust, mortgage, deed to secure debt, pledge, security interest,
encumbrance, lien, lease, license, easement, assignment, collateral
assignment or charge of any kind, including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof, any filing or agreement to file a financing statement as debtor
under the Uniform Commercial Code or any similar statute or any
subordination arrangement in favor of any party other than Grantor
(collectively, "Liens"; each, a "Lien"), except for those Liens identified
on Schedule B hereto (collectively, the "Prior Liens"), (ii) Grantor will
keep in effect all rights and appurtenances to or that constitute a part of
the Mortgaged Property the failure to maintain which would have a material
adverse effect upon the interests of Beneficiary under this Deed to Secure
Debt or upon the value of the Mortgaged Property (a "Material Adverse
Effect"), (iii) Grantor will protect, preserve and defend its interest in the
Mortgaged Property and title thereto, provided that the failure to preserve such
interest would have a Material Adverse Effect, (iv) Grantor will comply with
each of the terms, conditions and provisions of any obligation of Grantor which
is secured by the Mortgaged Property, the noncompliance with which might
reasonably be expected to result in the imposition of a Lien on the Mortgaged
Property, which Lien is not permitted pursuant to the terms hereof, (v) Grantor
will appear and defend the Lien and security interests created and evidenced
hereby and the validity and priority of this Deed to Secure Debt (subject to
Prior Liens) in any action or proceeding affecting or purporting to affect the
Mortgaged Property or any of the rights of Beneficiary hereunder, (vi) this Deed
to Secure Debt creates and constitutes a valid and enforceable first Lien on the
Mortgaged Property, which first Lien is and will be subject only to (a) Prior
Liens (but not to extensions, amendments, supplements or replacements of Prior
Liens unless consented to by Beneficiary) and (b) Liens hereafter created and
which, pursuant to the provisions of Section 1.12, are superior to the Lien and
security interests created and evidenced hereby, and Grantor does now and will
forever warrant and defend to Beneficiary and all its successors and assigns
such title and the validity and priority
<PAGE>
-7-
of the Lien and security interests created and evidenced hereby against the
claims of all persons and parties whomsoever and (vii) there has been issued and
there remain in effect each and every certificate of occupancy or use or other
Permit currently required for the existing use and occupancy by Grantor which if
not obtained or maintained would have a Material Adverse Effect.
1.3.2 Grantor, immediately upon obtaining actual knowledge of
the pendency of any proceedings for the eviction of Grantor from the
Mortgaged Property or any part thereof by paramount title or otherwise
questioning Grantor's title to the Mortgaged Property as warranted in this
Deed to Secure Debt, or of any condition that might reasonably be expected
to give rise to any such proceedings, shall notify Beneficiary thereof.
Beneficiary may participate in such proceedings, and Grantor will deliver
or cause to be delivered to Beneficiary all instruments reasonably
requested by Beneficiary to permit such participation. In any such
proceedings Beneficiary may be represented by counsel reasonably
satisfactory to Beneficiary at the reasonable expense of Grantor. If, upon
the resolution of such proceedings, Grantor shall suffer a loss of the
Mortgaged Property or any part thereof or interest therein and title
insurance proceeds shall be payable in connection therewith, such proceeds
are hereby assigned to and shall be paid to Beneficiary to be applied to
the payment of the Secured Obligations in accordance with the provisions of
Section 3.02(B)(a) of the Credit Agreement.
SECTION 1.4 Recording Documentation To Assure Security
Interest; Fees and Expenses.
1.4.1 Grantor shall, forthwith after the execution and
delivery of this Deed to Secure Debt and thereafter, from time to time,
cause this Deed to Secure Debt and any financing statement, continuation
statement or similar instrument relating to any thereof or to any property
intended to be subject to the Lien of this Deed to Secure Debt to be filed,
registered and recorded in such manner and in such places as may be
required by any present or future law in order to publish notice of and
fully to protect the validity and priority thereof or the Lien hereof
purported to be created upon the Mortgaged Property and the interest and
rights of Beneficiary therein. Grantor shall pay or cause to be paid all
taxes and fees incident to such filing, registration and recording, and all
reasonable expenses incident to the preparation, execution and
acknowledgment thereof, and of any instrument of further
<PAGE>
-8-
assurance, and all Federal or state stamp taxes or other taxes, duties and
charges arising out of or in connection with the execution and delivery of such
instruments.
1.4.2 Grantor shall, at the sole cost and expense of Grantor,
do, execute, acknowledge and deliver all and every such further acts,
deeds, conveyances, mortgages, assignments, notices of assignment,
transfers, financing statements, continuation statements and assurances as
Beneficiary shall from time to time reasonably request, which may be
necessary in the reasonable judgment of Beneficiary from time to time to
assure, perfect, convey, assign, mortgage, transfer and confirm unto
Beneficiary, the property and rights hereby conveyed or assigned or which
Grantor may be or may hereafter become bound to convey or assign to
Beneficiary or for carrying out the intention or facilitating the
performance of the terms of this Deed to Secure Debt or the filing,
registering or recording of this Deed to Secure Debt. In the event Grantor
shall fail after demand to execute any instrument reasonably requested to
be executed by Grantor under this subsection 1.4.2, Beneficiary may execute
the same as the attorney-in-fact for Grantor, such power of attorney being
coupled with an interest and irrevocable.
SECTION 1.5 Payment of Taxes, Insurance Premiums, Assessments;
Compliance with Law and Insurance Requirements.
1.5.1 Unless and to the extent contested by Grantor in
accordance with the provisions of subsection 1.5.5 hereof, Grantor shall
pay and discharge, or cause to be paid and discharged, from time to time
prior to the date on which material penalties attach thereto, all real
estate and other material taxes, special assessments, levies, permits,
inspection and license fees, all premiums for insurance, all water and sewer
rents and charges and all other public charges imposed upon or assessed against
or in respect of the Mortgaged Property or any part thereof or upon the Rents.
Grantor shall, upon Beneficiary's reasonable request, deliver to Beneficiary,
receipts evidencing the payment of all such taxes, assessments, levies, fees,
rents and other public charges imposed upon or assessed against the Mortgaged
Property or any part thereof or the Rents.
1.5.2 From and after the occurrence and during the continuance
of an Event of Default (as hereinafter defined), at the option and upon the
request of Beneficiary, Grantor shall deposit with Beneficiary, on the
first day of each month, an
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amount estimated by Beneficiary to be equal to one-twelfth of the annual taxes,
assessments and other items required to be discharged by Grantor under
subsection 1.5.1. Such amounts shall be held by Beneficiary without interest to
Grantor and applied to the payment of the obligations in respect of which such
amounts were deposited, in such priority as Beneficiary shall determine, on or
before the respective dates on which such obligations or any part thereof would
become delinquent. Nothing contained in this Section 1.5 shall (i) affect any
right or remedy of Beneficiary under any provision of this Deed to Secure Debt
or of any statute or rule of law following an Event of Default to pay any such
amount as provided above from its own funds and to add the amount so paid,
together with interest at a rate per annum (the "Default Rate") equal to the
highest rate then payable under the Credit Agreement during such time that any
amount remains outstanding, to the Secured Obligations or (ii) relieve Grantor
of its obligations to make or provide for the payment of the annual taxes,
assessments and other charges required to be discharged by Grantor under
subsection 1.5.1. Grantor hereby grants to Beneficiary a security interest in
all sums held pursuant to this subsec-tion 1.5.2 to secure payment and
performance of the Secured Obligations. During the continuance of any Event of
Default, Beneficiary may, at its option, apply all or any part of the sums held
pursuant to this subsec-tion 1.5.2 to payment and performance of the Secured
Obligations. Grantor shall redeposit with Beneficiary an amount equal to all
amounts so applied as a condition to the cure, if any, of such Event of Default
in addition to fulfillment of any other required conditions.
1.5.3 Unless and to the extent contested by Grantor in
accordance with the provisions of subsection 1.5.5, Grantor shall timely
pay, or cause to be paid, all lawful claims and demands of mechanics,
materialmen, laborers, government agencies administering worker's
compensation insurance, old age pensions and social security benefits and
all other claims, judgments, demands or amounts of any nature which, if
unpaid, might reasonably be expected to result in, or permit the creation
of, a Lien on the Mortgaged Property or any part thereof, or on the Rents
(other than Liens permitted pursuant to the terms hereof) or which might
reasonably be expected to result in forfeiture of all or any part of the
Mortgaged Property.
1.5.4 Grantor shall maintain, or cause to be maintained, in
full force and effect all permits, certificates, authorizations, consents,
approvals, licenses, franchises or other instruments now or hereafter
required by any Governmental
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Authority to operate or use and occupy the Premises and the Equipment in the
manner and for the purposes operated by Grantor, or which Grantor otherwise
deems necessary or appropriate in its commercially reasonable judgment
(collectively, "Permits"; each, a "Permit"), except where the failure to
maintain such Permit would not reasonably be expected to have a Material Adverse
Effect. Unless and to the extent contested by Grantor in accordance with the
provisions of subsection 1.5.5 hereof, Grantor shall comply with all material
requirements set forth in the Permits and all requirements of any law,
ordinance, rule, regulation or similar statute or case law (collectively,
"Requirements of Law") of any Governmental Authority applicable to all or any
part of the Mortgaged Property or the condition, use or occupancy of all or any
part thereof or any recorded deed of restriction, declaration, covenant running
with the land or otherwise, now or hereafter in force, except where the failure
to comply with such Requirements of Law would not reasonably be expected to have
a Material Adverse Effect. Grantor shall not initiate, join in, or consent to
any change in the zoning or any other permitted use classification of the
Premises without the prior written consent of Beneficiary, which consent will
not be unreasonably withheld or delayed.
1.5.5 Grantor may at its own expense contest the amount or
applicability of any of the obligations described in subsections 1.5.1,
1.5.3 or 1.5.4 by appropriate legal proceedings, prosecution of which
operates to prevent the collection or enforcement thereof and the sale or
forfeiture of the Mortgaged Property or any part thereof to satisfy such
obligations; provided, however, that in connection with such contest,
Grantor shall have made provision for the payment or performance of such
contested obligation on Grantor's books if and to the extent required by
GAAP. Notwithstanding the foregoing provisions of this subsection 1.5.5,
(i) no contest of any such obligations may be pursued by Grantor if such
contest would expose Beneficiary or any Bank to any possible criminal
liability or, unless Grantor shall have furnished a bond or other security
therefor reasonably satisfactory to Beneficiary or such Bank, as the case
may be, any additional civil liability for failure to comply with such
obligations and (ii) if at any time payment or performance of any
obligation contested by Grantor pursuant to this subsection 1.5.5 shall
become necessary to prevent the delivery of a tax or similar deed conveying
the Mortgaged Property or any portion thereof because of nonpayment or
nonperformance, Grantor shall pay or perform the same, in sufficient time to
prevent the delivery of such tax or similar deed or such termination or
forfeiture.
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1.5.6 Grantor shall not take any action that could be the
basis for termination, revocation or denial of any insurance coverage
required to be maintained under this Deed to Secure Debt or that could be
the basis for a defense to any claim under any insurance policy maintained
in respect of the Premises or the Equipment and Grantor shall otherwise
comply in all respects with the requirements of any insurer that issues a
policy of insurance in respect of the Premises or the Equipment; provided,
however, that Grantor may, at its own expense and after notice to
Beneficiary, (i) contest the applicability or enforceability of any such
requirements by appropriate legal proceedings, prosecution of which does
not constitute a basis for cancellation or revocation of any insurance
coverage required under Section 1.7 hereof or (ii) cause the insurance
policy containing any such requirement to be replaced by a new policy
complying with the provisions of Section 1.7.
1.5.7 Grantor shall, promptly upon receipt of any written
notice regarding any failure by Grantor to pay or discharge any of the
obligations described in subsection 1.5.1, 1.5.3, 1.5.4 or 1.5.6, furnish a
copy of such notice to Beneficiary.
1.5.8 In the event that the proceeds of any tax claim are paid
after Beneficiary has exercised its right to foreclose the Lien of this
Deed to Secure Debt, such proceeds shall be paid to Beneficiary to satisfy
any deficiency remaining after such foreclosure. Beneficiary shall retain
its interest in the proceeds of any tax claim during any redemption period.
The amount of any such proceeds in excess of any deficiency claim of
Beneficiary shall reasonably promptly be released to Grantor.
SECTION 1.6 Certain Tax Law Changes. In the event of the
passage after the date of this Deed to Secure Debt of any law deducting
from the value of real property, for the purpose of taxation, amounts in
respect of any Lien thereon or changing in any way the laws for the
taxation of mortgages or debts secured by mortgages for state or local
purposes or the manner of the collection of any such taxes (excluding
therefrom taxes on income), and imposing a tax, either directly or
indirectly, on this Deed to Secure Debt, any Interest Rate Agreement or any
other Credit Document that is payable by Beneficiary, Grantor shall
promptly pay to Beneficiary such amount or amounts as may be necessary from
time to time to pay such tax.
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SECTION 1.7 Required Insurance Policies.
1.7.1 Grantor shall maintain in respect of the Premises and
the Equipment the following insurance coverages:
(i) Physical hazard insurance on an "all risk" basis
covering, without limitation, hazards commonly covered by fire and
extended coverage, lightning, windstorm, civil commotion, hail, riot,
strike, water damage, sprinkler leakage, collapse and malicious
mischief, in an amount equal to the full replacement cost of the
Improvements and all Equipment, with such deductibles as Beneficiary
may from time to time reasonably require, and, if Beneficiary shall
not have imposed any such requirements, with such deductibles as
would be maintained by a prudent operator of property similar in use
and configuration to the Premises and located in the locality where
the Premises are located. "Full replacement cost" means the Cost of
Construction (as hereinafter defined) to replace the Improvements and
the Equipment, exclusive of depreciation, excavation, foundation and
footings, as determined from time to time (but not less frequently
than once every twelve (12) months) by a Person selected by Grantor
and reasonably acceptable to Beneficiary, such determination to be
based upon the appraisals delivered to Beneficiary pursuant to
Section 4.01(R) of the Credit Agreement, with appropriate updates for
capitalized additions, deletions, industry trends and other factors;
(ii) Comprehensive general liability insurance against claims
for bodily injury, death or property damage occurring on, in or about
the Premises and any adjoining streets, sidewalks and passageways,
and covering any and all claims, including, without limitation, all
legal liability to the extent insurable imposed upon Beneficiary and
all court costs and attorneys' fees, arising out of or connected with
the possession, use, leasing, operation or condition of the Premises
with policy limits and deductibles in such amounts as Beneficiary may
from time to time reasonably require, and, if Beneficiary shall not
have imposed any such requirements, in such amounts as from time to
time would be maintained by a prudent operator of property similar in
use and configuration to the Premises and located in the locality
where the Premises are located;
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(iii) Worker's compensation insurance as required by the laws
of the state where the Premises are located to protect Grantor
against claims for injuries sustained in the course of employment at
the Premises;
(iv) Explosion insurance in respect of any boilers and similar
apparatus located on the Premises or comprising any Equipment, with policy
limits and deductibles in such amounts as Beneficiary may from time to
time reasonably require, and, if Beneficiary shall not have imposed any
such requirements, in such amounts as would be maintained by a prudent
operator of property similar in use and configuration to the Premises and
the Equipment and located in the locality where the Premises and Equipment
are located;
(v) Business interruption insurance and/or "loss of rents"
insurance covering one year of loss, the term "loss of rents" to mean
the total estimated gross rental income from tenant occupation of the
Improvements as furnished and equipped under Leases;
(vi) If the Premises are located in an area identified by the
Federal Emergency Management Agency as an area having special flood
hazards pursuant to the National Flood Insurance Act of 1968 or the
Flood Disaster Protection Act of 1973, each as amended, or any
successor laws, flood insurance with policy limits and deductibles in
such amounts as Beneficiary may from time to time reasonably require,
and, if Beneficiary shall not have imposed any such requirements, in
such amounts as would be maintained by a prudent operator of property
similar in use and configuration to the Premises and located in the
locality where the Premises are located; and
(vii) Such other insurance, against such risks and with policy
limits and deductibles in such amounts as Beneficiary may from time
to time reasonably require, and, if no such requirements shall have
been imposed, in such amounts as would be maintained by a prudent
operator of property similar in use and configuration to the Premises
and located in the locality where the Premises are located.
1.7.2 All insurance policies required by this Section 1.7
shall be in form reasonably satisfactory to Beneficiary. All insurance
policies in respect of the coverages
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required by subsections 1.7.1(i), 1.7.1(iv), 1.7.1(v), 1.7.1(vi) and, if
applicable, 1.7.1(vii), shall be in amounts at least sufficient to prevent
coinsurance liability, and all losses thereunder shall be payable to
Beneficiary, as loss payee, pursuant to a standard non-contributory New York
mortgagee endorsement. All insurance policies in respect of the coverages
required by subsections 1.7.1(ii) and, if applicable, 1.7.1(vii) shall name
Beneficiary as an additional insured. Each policy of insurance required under
this Section 1.7 shall provide that it may not be modified, reduced, cancelled
or otherwise terminated without at least thirty (30) days' prior written notice
to Beneficiary and shall permit Beneficiary to pay any premium therefor within
thirty (30) days after receipt of any notice stating that such premium has not
been paid when due. All insurance policies required hereunder shall provide that
all losses thereunder shall be payable notwithstanding any act or negligence of
Grantor or its agents or employees which otherwise might have resulted in a
forfeiture of all or a part of such insurance payments. The policy or policies
of such insurance or certificates of insurance evidencing the required
coverages, and all renewals or extensions thereof, shall be delivered to
Beneficiary on the Closing Date. Settlement of any claim under any of the
insurance policies referred to in this Section 1.7, if such claim involves (in
the reasonable judgment of Beneficiary) loss in excess of $500,000 or more,
shall require the prior written approval of Beneficiary, which approval shall
not be unreasonably withheld or delayed, and Grantor shall use reasonable
efforts to cause each such policy to contain a provision to such effect.
1.7.3 At least ten (10) days prior to the expiration of any
insurance policy required by this Section 1.7, a policy or policies
renewing or extending such expiring policy or renewal or extension
certificates or other reasonable evidence of renewal or extension and
reasonable evidence that the applicable policies are in full force and
effect shall be delivered to Beneficiary.
1.7.4 Grantor shall not purchase separate insurance policies
concurrent in form or contributing in the event of loss with those policies
required to be maintained under this Section 1.7, unless (to the extent
such coverage may be obtained under applicable law) Beneficiary is included
thereon as a named insured and, if applicable, with loss payable to
Beneficiary under an endorsement containing the provisions described in
subsection 1.7.2. Grantor shall immediately notify Beneficiary whenever
any such separate insurance policy
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is obtained and shall promptly deliver to Beneficiary the policy or certificate
evidencing such insurance.
1.7.5 Grantor shall, immediately upon receipt of any written
notice of any failure by Grantor to pay any insurance premium in respect of
any insurance policy required to be maintained under this Section 1.7,
furnish a copy of such notice to Beneficiary.
1.7.6 In the event that the proceeds of any insurance claim
are paid after Beneficiary has exercised its right to foreclose the Lien of
this Deed to Secure Debt, such proceeds shall be paid to Beneficiary to
satisfy any deficiency remaining after such foreclosure. Beneficiary shall
retain its interest in the policies of insurance required to be maintained
pursuant to this Deed to Secure Debt during any redemption period. The
amount of any such proceeds in excess of any deficiency claim of Beneficiary
shall reasonably promptly be released to Grantor.
SECTION 1.8 Failure To Make Certain Payments. If Grantor
shall fail to perform any of the covenants contained in this Deed to Secure
Debt, including, without limitation, Grantor's covenants to (i) pay the
premiums in respect of all required insurance coverages, (ii) pay taxes and
assessments, (iii) make repairs, (iv) discharge liens and encumbrances or
(v) pay or perform any obligations of Grantor under the Leases, Beneficiary
may, following five (5) Business Days' prior written notice by Beneficiary
to Grantor of its intent to do so during which time Grantor shall not have
remedied such failure, but shall not be obligated to, make advances to
perform such covenant on Grantor's behalf, and all sums so advanced shall
be included in the Secured Obligations and, to the extent permitted by
applicable law, shall be secured hereby. Grantor shall repay on demand all
sums so advanced by Beneficiary on behalf of Grantor, with interest at the
Default Rate from the date of payment by Beneficiary to the date of
reimbursement. Neither the provisions of this Section 1.8 nor any action
taken by Beneficiary pursuant to the provisions of this Section 1.8 shall
prevent any such failure to observe any covenant contained in this Deed to
Secure Debt from constituting an Event of Default. Beneficiary shall not
be bound to inquire into the validity of any tax, lien or imposition which
Grantor fails to pay as and when required hereby and which Grantor does not
contest in accordance with the terms hereof.
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SECTION 1.9 Inspection. Grantor shall, upon reasonable prior
notice by Beneficiary to the chief financial officer, controller or any
other Authorized Officer of Grantor, permit Beneficiary, by its agents,
accountants and attorneys, to visit and inspect the Premises at such
reasonable times during regular business hours and intervals and to such
reasonable extent as may be reasonably requested by Beneficiary.
SECTION 1.10 Grantor To Maintain Improvements. Grantor shall
not commit or suffer any waste on the Premises or with respect to any
Equipment. Grantor represents and warrants that (i) the Premises are
served by all utilities required or necessary for the current use thereof
and (ii) Grantor has access to the Premises from public roads sufficient to
allow Grantor and its tenants and invitees to conduct its and their
businesses at the Premises in accordance with sound commercial practices.
Grantor shall, at all times, exercise commercially reasonable efforts to
maintain the Premises and Equipment in good repair, working order and
insurable condition (subject to normal wear and tear) and shall make all
repairs, structural or nonstructural, which Grantor deems appropriate in
its commercially reasonable judgment, when necessary. Grantor shall
(a) not alter the occupancy or use of all or any part of the Premises on which
Grantor is conducting its business without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld or delayed, and
(b) do all other reasonable acts which from the character or use of the Premises
and Equipment may, in the commercially reasonable opinion of Grantor, be
necessary or appropriate to maintain and preserve their value. Grantor shall not
remove, demolish or alter the structural character of any Improvement now or
hereafter erected upon all or any part of the Premises, or permit any such
removal, demolition or alteration, without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld or delayed, except
that items constituting Equipment may be removed if such removal is temporary
and for the purpose of making repairs or such items are immediately replaced
with similar items of Equipment having a value and utility for their intended
purposes that is not less than the value and such utility of the Equipment so
removed or if in the commercially reasonable opinion of Grantor such Equipment
is not necessary for the use or operation of the Premises, and except as
permitted pursuant to Section 7.16 of the Credit Agreement.
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SECTION 1.11 Grantor's Obligations with Respect to Leases.
1.11.1 Subject to the provisions of subsection 1.11.2 herein,
Grantor will manage and operate the Mortgaged Property in a reasonably
prudent manner and will not without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld or delayed,
enter into any Lease of all or any part of the Premises, other than a Lease
to an Affiliate of Grantor (which will not require the consent of
Beneficiary), which (i) interferes with the operation of Grantor's business
on the Premises, (ii) might reasonably be expected to have a Material
Adverse Effect on the value of the Premises or (iii) is for space in excess
of 10,000 square feet (each, a "Material Lease").
1.11.2 Grantor shall not:
(i) receive or collect, or permit the receipt or collection
of, any rental or other payments under any Material Lease more than
one month in advance of the respective period in respect of which
they are to accrue, except that (a) in connection with the execution
and delivery of any Lease or of any amendment to any Lease, rental
payments thereunder may be collected and received in advance in an
amount not in excess of one month's rent and/or a reasonable security
deposit may be required thereunder and (b) Grantor may receive and
collect escalation and other charges in accordance with the terms of
each Lease;
(ii) assign, transfer or hypothecate (other than to
Beneficiary hereunder) any rental or other payment under any Lease
whether then due or to accrue in the future, the interest of Grantor
as lessor under any Lease or the rents, issues, revenues, profits or
other income of the Mortgaged Property;
(iii) enter into any Lease after the date hereof that does not
contain terms to the effect as follows:
(a) such Lease and the rights of the tenant thereunder
(including, without limitation, any options to purchase or
rights of first offer or refusal) shall be subject and
subordinate to the rights of Beneficiary under and the Lien of
this Deed to Secure Debt;
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(b) such Lease has been assigned as collateral security
by Grantor as landlord thereunder to Beneficiary under this
Deed to Secure Debt;
(c) in the case of any foreclosure hereunder, the
rights and remedies of the tenant in respect of any obligations
of any successor landlord thereunder shall be limited to the
equity interest of such successor landlord in the Premises and
any successor landlord shall not (1) be liable for any act,
omission or default of any prior landlord under the Lease,
(2) be required to make or complete any tenant improvements or
capital improvements or repair, restore, rebuild or replace the
demised premises or any part thereof in the event of damage,
casualty or condemnation or (3) be required to pay any amounts
to tenant arising under the Lease prior to such successor
landlord taking possession;
(d) the tenant's obligation to pay rent and any
additional rent shall not be subject to any abatement,
deduction, counterclaim or setoff as against any mortgagee or
purchaser upon the foreclosure of any of the Premises or the
giving or granting of a deed in lieu thereof by reason of a
landlord default occurring prior to such foreclosure and such
mortgagee or purchaser will not be bound by any advance
payments of rent in excess of one month or any security
deposits unless such security was actually received (or in the
case of a letter of credit, was properly transferred in
negotiable form);
(e) the tenant agrees to attorn, at the option of
Beneficiary or any purchaser of the Premises, upon a
foreclosure of the Premises or the giving or granting of a deed
in lieu thereof; and
(f) the tenant agrees to give notice to Beneficiary of
any default by landlord under the Lease and Beneficiary shall
have a reasonable time to cure, should Beneficiary so elect,
any default of landlord prior to tenant exercising any rights
of tenant to terminate or cancel such Lease.
(iv) enter into any amendment or modification of any Material
Lease which would change the unexpired term thereof or decrease the
amount of the rents or other
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amounts payable thereunder or materially impair the value or utility of
the Mortgaged Property or impair the security provided by this Deed to
Secure Debt;
(v) enter into any further lease or sublease of the property
subject to any Material Lease without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld or
delayed, unless such Material Lease is not amended in any material
respect and the primary obligor under such Material Lease is not
released in any material respect from its material responsibilities
and liabilities under such Material Lease as a result of such lease
or sublease;
(vi) terminate (whether by exercising any contractual right of
Grantor to recapture leased space or otherwise) or permit the
termination of any Material Lease or accept surrender of all or any
portion of the space demised under any Material Lease prior to the
end of the term thereof or accept assignment of any Material Lease to
Grantor unless:
(a) the tenant under such Lease has not paid the
equivalent of two (2) months' rent and Grantor has made
reasonable efforts to collect such rent; or
(b) Grantor shall deliver to Beneficiary an Officer's
Certificate to the effect that Grantor has entered into a new
Lease (or Leases) for the space covered by the terminated or
assigned Lease with a term (or terms) which expire(s) no
earlier than the date on which the terminated or assigned Lease
was to expire (excluding renewal options), and with a tenant
(or tenants) having a creditworthiness (as reasonably
determined by Grantor) sufficient to pay the rent and other
charges due under the new Lease (or Leases), and the tenant(s)
shall have commenced paying rent, including all operating
expenses and other amounts payable under the new Lease (or
Leases) without any abatement or concession; or
(vii) waive, excuse, condone or in any manner discharge or
release any tenants of or from the material obligations of such
tenants under their respective Leases or guarantors of tenants from
material obligations under any guarantees of the Leases except in the
ordinary and prudent course of business with due regard for the security
afforded Beneficiary thereby.
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1.11.3 Grantor shall timely perform and observe all the
material terms, covenants and conditions required to be performed and
observed by Grantor under each Lease and shall at all times do all things
reasonably necessary to require performance by the lessee, franchisee,
licensee or grantee under each Lease of all obligations, covenants and
agreements by such party to be performed thereunder. Grantor shall
promptly notify Beneficiary of the receipt of any notice from any lessee
under any Lease claiming that Grantor is in default in the performance or
observance of any of the terms, covenants or conditions thereof to be
performed or observed by Grantor and will cause a copy of each such notice
to be promptly delivered to Beneficiary.
SECTION 1.12 Transfer Restrictions and Liens. Except as
provided in Section 1.11 and as permitted pursuant to Section 7.16 of the
Credit Agreement, Grantor may not, without the prior written consent of
Beneficiary, further mortgage, encumber, hypothecate, sell, convey or
assign all or any part of the Mortgaged Property or suffer any of the
foregoing to occur by operation of law or otherwise. Notwithstanding the
provisions of the foregoing sentence, so long as no Event of Default shall
have occurred and be continuing, Grantor shall have the right to suffer, in
respect of the Mortgaged Property, (i) the Liens in respect of amounts
payable or obligations to be performed by Grantor pursuant to subsections
1.5.1, 1.5.3 and 1.5.4, provided, however, that such amounts are not yet
delinquent or are being contested in accordance with the provisions of
subsection 1.5.5 and (ii) Liens of the type described in paragraphs (c),
(e), (f), (g) and (i) of the definition of Permitted Encumbrances. Each of
the Liens and other transfers permitted by this Section 1.12 shall in all
respects be subject and subordinate in priority to the Lien and security
interests created and evidenced hereby except to the extent the law or
regulation creating or authorizing such Lien provides that such Lien must
be superior to the Lien and security interest created and evidenced hereby.
SECTION 1.13 Destruction; Condemnation.
1.13.1 Destruction; Insurance Proceeds. If there shall occur
any damage to, or loss or destruction of, the Improvements, Equipment, or
any part of any thereof (each, a "Destruction"), Grantor shall promptly
send to Beneficiary a notice setting forth the nature and extent of such
Destruction. The proceeds of any insurance payable in respect of such
Destruction are hereby assigned and shall be paid to
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Beneficiary, provided that Grantor shall be entitled to retain the proceeds of
any insurance payable in respect of a Destruction to the extent that the
aggregate amount of any such insurance proceeds received by Grantor in such
fiscal year when added to the aggregate of any award or payment in respect of
any Taking (as hereinafter defined) received by Grantor in such fiscal year does
not exceed $500,000. All such proceeds, together with any interest earned
thereon, less the amount of any expenses incurred in litigating, arbitrating,
compromising or settling any claim arising out of such Destruction (the "Net
Proceeds"), shall be applied in accordance with the provisions of subsections
1.13.3, 1.13.4 and 1.13.5.
1.13.2 Condemnation; Assignment of Award. If there shall
occur any taking of the Mortgaged Property or any part thereof, in or by
condemnation or other eminent domain proceedings pursuant to any law,
general or special, or by reason of the temporary requisition of the use or
occupancy of the Mortgaged Property or any part thereof, by any
Governmental Authority, civil or military (each, a "Taking"), Grantor shall
promptly notify Beneficiary upon receiving notice of such Taking or
commencement of proceedings therefor. Beneficiary may participate in any
proceedings or negotiations which might result in any Taking, and Grantor
shall deliver or cause to be delivered to Beneficiary all instruments
requested by it to permit such participation. Beneficiary may be
represented by counsel reasonably satisfactory to it at the reasonable
expense of Grantor in connection with any such participation. Grantor
shall pay all reasonable fees, costs and expenses incurred by Beneficiary
in connection with any Taking and in seeking and obtaining any award or
payment on account thereof. Any proceeds, award or payment in respect of
any Taking are hereby assigned and shall be paid to Beneficiary, provided
that Grantor shall be entitled to the award or payment payable in respect
of a Taking to the extent that the aggregate amount of any such award
received by Grantor in such fiscal year when added to the aggregate of any
insurance proceeds in respect of any Destruction received by Grantor in
such fiscal year does not exceed $500,000. Grantor shall take all steps
necessary to notify the condemning authority of such assignment. Such
proceeds, award or payment, together with any interest earned thereon, less
the amount of any expenses incurred in litigating, arbitrating,
compromising or settling any claim arising out of such Taking (the "Net
Award"), shall be applied in accordance with the provisions of subsec-
tions 1.13.3, 1.13.4 and 1.13.5.
<PAGE>
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1.13.3 Restoration. So long as no Event of Default shall have
occurred and be continuing, in the event there shall be a Net Award or Net
Proceeds in an amount less than or equal to $1,000,000, Grantor shall have
the right, at Grantor's option, to apply such Net Award or Net Proceeds as
Net Cash Proceeds in accordance with the provisions of Section 3.02(B)(a)
of the Credit Agreement or to perform a restoration (each, a "Restoration") of
the Premises and Equipment. In the event Grantor elects to perform any
Restoration contemplated by this subsection 1.13.3, Beneficiary shall release
such Net Award or Net Proceeds to Grantor as soon as practicable. Grantor shall
promptly following the date of its receipt of any proceeds in respect of a
Destruction or Taking, as the case may be, commence and diligently continue to
perform the Restoration in accordance with Section 3.02(A)(i) of the Credit
Agreement (subject to extensions for delays caused by reason of force majeure)
of that portion or portions of the Improvements and Equipment subject to such
Destruction or affected by such Taking so that, upon the completion of the
Restoration, the Premises and Equipment will be in substantially the same
condition and shall be as near as practicable to the value and utility as the
Premises and Equipment was immediately prior to such Destruction or Taking.
Grantor shall so complete such Restoration with its own funds to the extent that
the amount of any Net Award or Net Proceeds is insufficient for such purpose.
1.13.4 Major Restoration. In the event there shall be a Net
Award or Net Proceeds other than as described in subsection 1.13.3, Grantor
shall have the option to apply such Net Award or Net Proceeds, as the case
may be, as Net Cash Proceeds in accordance with the provisions of
Section 3.02(B)(a) of the Credit Agreement or to require a Restoration of
the Mortgaged Property. In the event a Restoration is to be performed
under this subsection 1.13.4, Beneficiary shall not release any part of the
Net Award or the Net Proceeds except in accordance with the provisions of
subsection 1.13.5, and Grantor shall, prior to commencing any work to
effect a Restoration of the Premises and Equipment, promptly (but in no
event later than ninety (90) days following any Destruction or Taking)
furnish to Beneficiary:
(i) complete plans and specifications (the "Plans and
Specifications") for the Restoration;
(ii) a certificate (an "Architect's Certificate") of an
independent, reputable architect or engineer reasonably
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acceptable to Beneficiary and licensed in the state where the Premises is
located (a) listing all permits and approvals required by law in
connection with the Restoration, (b) stating that all permits and
approvals required by law to commence work in connection with the
Restoration have been obtained, (c) stating that the Plans and
Specifications have been reviewed and approved by the signatory thereto,
(d) stating such signatory's estimate (an "Estimate") of the costs of
completing the Restoration and (e) stating that upon completion of such
Restoration in accordance with the Plans and Specifications, the value and
utility of the Premises and the Equipment will be approximately equal to
or greater than the value and utility thereof immediately prior to the
Destruction or Taking relating to such Restoration; and
(iii) if the Estimate exceeds the Net Proceeds or Net Award, as
the case may be, a surety bond for, guarantee of, or irrevocable
letter of credit (a "Letter of Credit") or other irrevocable and
unconditional commitment to provide funds (each, a "Commitment") for
the payment of the excess cost of such Restoration, payable to or in
favor of Beneficiary, as Collateral Agent, which bond, guaranty,
Letter of Credit or Commitment (A) shall be signed by a surety or
sureties or guarantor(s), as the case may be, reasonably acceptable
to Beneficiary and, in the case of a Letter of Credit or Commitment,
shall be provided by a bank or other financial institution having
capital and surplus in excess of $250 million as shown in its most
recent available statement of financial condition and (B) shall be in
an amount not less than the excess of the amount of the Estimate over
the amount of the Net Award or Net Proceeds, as the case may be, then
held by Beneficiary for application toward the cost of such
Restoration.
Beneficiary shall have the right to review and approve the
Plans and Specifications as to structural matters only, such review and
approval not to be unreasonably withheld or delayed. Promptly upon any
approval of the Plans and Specifications by Beneficiary, Grantor shall
commence and diligently continue to perform the Restoration in accordance
with such approved Plans and Specifications. Grantor shall so complete
such Restoration with its own funds to the extent that the amount of any
Net Award or Net Proceeds is insufficient for such purpose.
<PAGE>
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1.13.5 Restoration Advances Following Destruction or Taking of
Mortgaged Property. In the event Grantor shall elect to perform a
Restoration of the Premises and Equipment as provided in subsection 1.13.4,
Beneficiary shall apply any Net Proceeds or the Net Award held by
Beneficiary on account of the applicable Destruction or Taking to the
payment of the cost of performing such Restoration and shall pay portions
of the same, from time to time, to Grantor or, at Beneficiary's option,
exercised from time to time, directly to the contractors, subcontractors,
materialmen, laborers, engineers, architects, and other persons rendering
services or material for such Restoration, subject to the following
conditions:
(i) Each request for payment shall be made on at least ten
(10) days' prior notice to Beneficiary and shall be accompanied by an
Architect's Certificate stating (a) that all the Restoration work
then completed has been done in compliance with the Plans and
Specifications, as approved by Beneficiary, and in accordance with
all provisions of law, (b) the sums requested are required to reimburse
Grantor for payments by Grantor to, or are due to, the contractors,
subcontractors, materialmen, laborers, engineers, architects, or other
persons rendering services or materials for the Restoration, and that,
when added to the sums, if any, previously paid out by Beneficiary, such
sums do not exceed the cost of the Restoration to the date of such
Architect's Certificate, (c) whether or not the Estimate continues to be
accurate, and if not, what the entire cost of such Restoration is then
estimated to be and (d) that the amount of the Net Proceeds or Net Award,
as the case may be, remaining after giving effect to such payment will be
sufficient on completion of the Restoration to pay for the same in full
(including, in detail, an estimate by trade of the remaining costs of
completion);
(ii) Each request for payment shall be accompanied by an
opinion of counsel to Grantor (which counsel shall be independent and
reasonably acceptable to Beneficiary) or a title insurance policy,
binder or endorsement in form and substance reasonably satisfactory
to Beneficiary confirming that (a) all Liens (other than Prior Liens
and Liens otherwise permitted hereunder) covering that part of the
Restoration previously paid for, if any, have been waived and
(b) there has not been filed with respect to all or any part of the
Premises any Lien (other than Prior Liens and Liens otherwise
permitted hereunder) which is not discharged of record and which
could have priority over the
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Lien of this Deed to Secure Debt in respect of any part of the Secured
Obligations; and
(iii) The final request for any payment after the Restoration
has been completed shall be accompanied by an Architect's Certificate
listing all certificates, permits, licenses, waivers, other
documents, or any combination of the foregoing required by law in
connection with or as a result of such Restoration and stating that
all of the same have been obtained, or if not obtained, the failure
to obtain such certificate, permit, license or waiver will not have a
Material Adverse Effect.
In the event that there shall be any surplus after application
of the Net Award or the Net Proceeds to Restoration of the Improvements and
the Equipment, such surplus shall be applied as Net Cash Proceeds in
accordance with Section 3.02(B)(a) of the Credit Agreement or, at the
option of Beneficiary, shall be held by Beneficiary as additional
collateral to secure the performance by Grantor of the Secured Obligations.
SECTION 1.14 Alterations. Grantor shall not, without the
prior written consent of Beneficiary, which consent shall not be unreasonably
withheld or delayed, make any addition, modification or change which is
structural in nature (each, an "Alteration") to the Premises that costs more to
effect than $250,000. Whether or not Beneficiary has consented to the making of
any Alteration, Grantor shall (i) complete each Alteration promptly, in a good
and workmanlike manner and in compliance with all applicable material local
laws, ordinances and requirements (subject to extensions for delays caused by
reason of force majeure) and (ii) pay when due all claims for labor performed
and materials furnished in connection with such Alteration, unless contested in
accordance with the provisions of subsection 1.5.5.
SECTION 1.15 Hazardous Material.
1.15.1 Each of the provisions of Section 5.23 of the Credit
Agreement is restated herein in its entirety (including all defined terms
referenced therein) mutatis mutandis. Grantor shall comply with the
provisions of such section as if such grantor were the "Borrower and its
Subsidiaries" as referenced therein.
<PAGE>
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1.15.2 Each of the provisions of Sections 6.16 of the Credit
Agreement is restated herein in its entirety (including all defined terms
referenced therein) mutatis mutandis. Grantor shall comply with the
provisions of such section as if such Grantor were the "Borrower and its
Subsidiaries" as referenced therein. In the event Grantor fails to comply
with the referenced covenants, Beneficiary may, in addition to any other
remedies set forth herein, as agent for and at Grantor's sole cost and
expense, cause any necessary remediation, removal or response action
required by Environmental Laws relating to Hazardous Materials to be taken
and Grantor shall provide to Beneficiary and its agents and employees
reasonable access to the Mortgaged Property for such purpose. Any
reasonable costs or expenses incurred by Beneficiary for such purpose shall
be payable by Grantor immediately upon demand therefor and shall bear
interest at the Default Rate. Beneficiary shall have the right at any time
that the Secured Obligations are outstanding, at the sole cost and expense
of Grantor, to conduct an environmental audit of the Mortgaged Property
where Beneficiary believes that cause exists, including in the event any
change in any applicable Environmental Law would either require the conduct
of an environmental audit or make such an audit prudent, by such persons or
firms appointed by Beneficiary, and Grantor shall cooperate in all
reasonable respects in the conduct of such environmental audit, including,
without limitation, by providing reasonable access to the Mortgaged
Property and to all relevant records relating thereto. To the extent that
any such environmental audit identifies conditions which violate, or could
be expected to give rise to material liability or obligations under
Environmental Laws, Grantor agrees to expeditiously correct any such violation
or respond to conditions giving rise to such liability or obligations in a
manner which complies with Environmental Laws. Grantor shall indemnify and hold
Beneficiary and each Bank harmless from and against all loss, cost, damage
(including, without limitation, consequential damages) and expense (including,
without limitation, attorneys' and consultants' fees and disbursements and the
allocated costs of staff counsel) that Beneficiary or such Bank may sustain by
reason of the assertion against Beneficiary or such Bank by any party of any
claim relating to such Hazardous Materials on, under or from the Mortgaged
Property or actions taken with respect thereto as authorized hereunder. The
foregoing indemnification shall survive repayment of all Secured Obligations and
any release or assignment of this Deed to Secure Debt except with regard to any
loss, cost, damage or expense arising from or relating to acts or omissions
occurring after Beneficiary or any Bank takes possession of, uses,
<PAGE>
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operates, manages, controls or sells the Mortgaged Property provided, however,
that such exception shall apply only to the extent such loss, cost, damage or
expense arises solely from the gross negligence, bad faith or willful misconduct
of Beneficiary or any Bank or of the agents of Beneficiary or any Bank.
SECTION 1.16 Asbestos. Grantor shall not install nor permit
to be installed in or removed from the Mortgaged Property, asbestos or any
asbestos-containing material (collectively, "ACM") except in compliance
with all applicable Environmental Laws, and with respect to any ACM
currently present in the Mortgaged Property, Grantor shall promptly either
(i) remove or encapsulate any ACM which such Environmental Laws require to
be removed or (ii) otherwise comply with such Environmental Laws with
respect to such ACM, all at Grantor's sole cost and expense. If Grantor
shall fail to so remove or encapsulate any ACM or otherwise comply with
such Environmental Laws, Beneficiary may, in addition to any other remedies
set forth herein, take whatever steps it deems necessary or appropriate to
remove or encapsulate any ACM from the Mortgaged Property or otherwise
comply with applicable Environmental Laws, and Grantor shall provide to
Beneficiary and its agents and employees reasonable access to the Mortgaged
Property for such purpose. Any reasonable costs or expenses incurred by
Beneficiary for such purpose shall be payable by Grantor immediately upon
demand therefor and shall bear interest at the Default Rate. Grantor shall
indemnify and hold Beneficiary and each Bank harmless from and against all
loss, cost, damage (including, without limitation, consequential damages)
and expense (including, without limitation, attorneys' and consultants'
fees and disbursements and the allocated costs of staff counsel) that
Beneficiary or such Bank may sustain as a result of the presence of any ACM
and any removal thereof or compliance with Environmental Laws. The
foregoing indemnification shall survive repayment of all Secured
Obligations and any release or assignment of this Deed to Secure Debt
except with regard to any loss, cost, damage or expense arising from or
relating to acts or omissions occurring after Beneficiary or any Bank takes
possession of, uses, operates, manages, controls or sells the Mortgaged
Property provided, however, that such exception shall apply only to the
extent such loss, cost, damage or expense arises solely from the gross
negligence, bad faith or willful misconduct of Beneficiary or any Bank or
of the agents of Beneficiary or any Bank.
<PAGE>
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SECTION 1.17 Books and Records; Other Information.
1.17.1 Grantor shall keep proper books of record and account
in which full, true and correct entries shall be made of all dealings or
transactions of or in relation to the Mortgaged Property and the business
and affairs of Grantor relating to the Mortgaged Property. Upon reasonable
notice by Beneficiary to the chief financial officer, controller or any
other Authorized Officer of Grantor, Beneficiary and its authorized
representatives shall have the right at reasonable times during regular
business hours and intervals and to such reasonable extent as may be
reasonably requested by Beneficiary to examine the books and records of
Grantor relating to the operation of the Mortgaged Property.
1.17.2 Grantor shall, at any and all times, within a
reasonable time after written request by Beneficiary, furnish or cause to
be furnished to Beneficiary, in such manner and in such detail as may be
reasonably requested by Beneficiary, additional information with respect to
the Mortgaged Property.
SECTION 1.18 No Claims Against Beneficiary. Nothing contained
in this Deed to Secure Debt shall constitute any consent or request by
Beneficiary, express or implied, for the performance of any labor or
services or the furnishing of any materials or other property in respect of
the Premises or any part thereof, nor as giving Grantor any right, power or
authority to contract for or permit the performance of any labor or
services or the furnishing of any materials or other property in such
fashion as would permit the making of any claim against Beneficiary in
respect thereof or any claim that any Lien based on the performance of such
labor or services or the furnishing of any such materials or other property
is prior to the Lien of this Deed to Secure Debt.
SECTION 1.19 Utility Services. Grantor shall pay, or cause to
be paid, when due all charges for all public or private utility services,
all public or private rail and highway services, all public or private
communication services, all sprinkler systems, and all protective services
and any other services of whatever kind or nature at any time rendered to
or in connection with the Premises or any part thereof, shall comply with all
contracts relating to any such services, and shall do all other things required
for the maintenance and continuance of all such services to the extent required
to fulfill the obligations set forth in Section 1.10.
<PAGE>
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ARTICLE II
ASSIGNMENT OF LEASES; SECURITY AGREEMENT;
ASSIGNMENT AGREEMENT
SECTION 2.1 Assignment of Leases, Rents, Issues and Profits.
2.1.1 Grantor absolutely, presently and irrevocably assigns,
transfers and sets over to Beneficiary, and grants to Beneficiary subject
to the terms and conditions hereof, all Grantor's estate, right, title,
interest, claim and demand as landlord to collect rent and other sums due
under all existing Leases and any other Leases, including, without
limitation, all extensions of the terms of the Leases (such assigned
rights, "Grantor's Interest"), as follows:
(i) the immediate and continuing right to receive and collect
Rents payable by all tenants or other parties pursuant to the Leases;
(ii) all claims, rights, powers, privileges and remedies of
Grantor, whether provided for in any Lease or arising by statute or
at law or in equity or otherwise, consequent on any failure on the
part of any tenant to perform or comply with any term of any Lease;
(iii) all rights to take all actions upon the happening of a
default under any Lease as shall be permitted by such Lease or by
law, including, without limitation, the commencement, conduct and
consummation of proceedings at law or in equity; and
(iv) the full power and authority, in the name of Grantor or
otherwise, to enforce, collect, receive and receipt for any and all
of the foregoing and to do any and all other acts and things
whatsoever which Grantor or any landlord is or may be entitled to do
under the Leases.
2.1.2 Any Rents receivable by Beneficiary hereunder, after
payment of all proper costs and charges, shall be applied to all amounts
due and owing under and as provided in this Deed to Secure Debt and the
Credit Agreement. Beneficiary shall be accountable to Grantor only for
Rents actually received by Beneficiary pursuant to this assignment. The
collection of such Rents and the application thereof shall not cure or
waive
<PAGE>
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any Event or Default or waive, modify or affect notice of Event of Default
or invalidate any act done pursuant to such notice.
2.1.3 So long as no Event of Default shall have occurred and
be continuing, Grantor shall have a license to collect and apply the Rents
and to enforce the obligations of tenants under the Leases. Immediately
upon the occurrence and during the continuance of any Event of Default, the
license granted in the immediately preceding sentence shall cease and
terminate, with or without any notice, action or proceeding or the
intervention of a receiver appointed by a court. Upon such Event of
Default and during the continuance thereof, Beneficiary may, to the fullest
extent permitted by the Leases, (i) exercise any of Grantor's rights under
the Leases, (ii) enforce the Leases, (iii) demand, collect, sue for,
attach, levy, recover, receive, compromise and adjust, and make, execute
and deliver receipts and releases for all Rents or other payments that may
then be or may thereafter become due, owing or payable with respect to the
Leases and (iv) generally, do, execute and perform any other act, deed,
matter or thing whatsoever that ought to be done, executed and performed in
and about or with respect to the Leases, as fully as allowed or authorized
by Grantor's Interest.
2.1.4 Upon the occurrence and during the continuance of an
Event of Default, Grantor shall, at the direction of Beneficiary, further
authorize and direct the tenant under each Lease to pay directly to, or as
directed by, Beneficiary all Rents accruing or due under its Lease without
proof to the tenant of the occurrence and continuance of such Event of
Default. Grantor hereby authorizes the tenant under each Lease to rely
upon and comply with any notice or demand from Beneficiary for payment of
Rents to Beneficiary and Grantor shall have no claim against any tenant for
Rents paid by such tenant to Beneficiary pursuant to such notice or demand.
2.1.5 Grantor at its sole cost and expense shall use
commercially reasonable efforts to enforce the material terms of the Leases
in accordance with their terms. Neither this Deed to Secure Debt nor any
action or inaction on the part of Beneficiary shall release any tenant
under any Lease, any guarantor of any Lease or Grantor from any of their
respective obligations under the Leases or constitute an assumption of any
such obligation on the part of Beneficiary. No action or failure to act on
the part of Grantor shall adversely affect or limit the rights of
Beneficiary under this Deed to Secure Debt or, through this Deed to Secure
Debt, under the Leases.
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2.1.6 All rights, powers and privileges of Beneficiary herein
set forth are coupled with an interest and are irrevocable, subject to the
terms and conditions hereof, and Grantor shall not take any action under
the Leases or otherwise which is inconsistent with this Deed to Secure Debt
or any of the terms hereof and any such action inconsistent herewith or
therewith shall be void. Grantor shall, from time to time, upon reasonable
request of Beneficiary, execute all instruments and further assurances and
all supplemental instruments and take all such action as Beneficiary from
time to time may reasonably request in order to perfect, preserve and
protect the interests intended to be assigned to Beneficiary hereby.
2.1.7 Grantor shall not, unilaterally or by agreement,
subordinate, amend, modify, extend, discharge, terminate, surrender, waive
or otherwise change any material term of any of the Material Leases in any
manner which would violate this Deed to Secure Debt. If the Leases shall
be amended as permitted hereby, they shall continue to be subject to the
provisions hereof without the necessity of any further act by any of the
parties hereto.
2.1.8 Nothing contained herein shall operate or be construed
to (i) obligate Beneficiary to perform any of the terms, covenants or
conditions contained in the Leases or otherwise to impose any obligation
upon Beneficiary with respect to the Leases (including, without limitation,
any obligation arising out of any covenant of quiet enjoyment contained in
the Leases in the event that any tenant under a Lease shall have been
joined as a party defendant in any action by which the estate of such
tenant shall be terminated) or (ii) place upon Beneficiary any
responsibility for the operation, control, care, management or repair of
the Premises.
SECTION 2.2 Security Interest in Fixtures.
2.2.1 This Deed to Secure Debt shall constitute a security
agreement and shall create and evidence a security interest in all the
Equipment and in all the other items of Mortgaged Property to the extent
the same constitute "fixtures" under the UCC as in effect in Georgia in
which a security interest may be granted pursuant to the UCC as in effect
in the State of Georgia (collectively, "Fixtures").
2.2.2 Upon the occurrence of any Event of Default, in addition
to the remedies set forth in Article III, Beneficiary shall have the power
to sell the Fixtures in accordance
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with the Uniform Commercial Code as enacted in the state in which the Premises
are located or under other applicable law. It shall not be necessary that any
Fixtures offered be physically present at any such sale or constructively in the
possession of Beneficiary or the person conducting the sale.
2.2.3 Upon the occurrence and during the continuance of any
Event of Default, Beneficiary may sell the Fixtures or any part thereof at
public or private sale with notice to Grantor as hereinafter provided. The
proceeds of any such sale, after deducting all expenses of Beneficiary in
taking, storing, repairing and selling the Fixtures (including, without
limitation, attorneys' fees and legal expenses) shall be applied in the manner
set forth in subsection 3.3.3. At any sale, public or private, of the Fixtures
or any part thereof, Beneficiary may purchase any or all of the Fixtures offered
at such sale.
2.2.4 Beneficiary shall give Grantor reasonable notice of any
sale of any of the Fixtures pursuant to the provisions of this Section 2.2.
Notwithstanding the provisions of Section 5.2, any such notice shall
conclusively be deemed to be reasonable and effective if such notice is
mailed at least five (5) days prior to any sale, by first class or
certified mail, postage prepaid, to Grantor at its address determined in
accordance with the provisions of Section 5.2.
ARTICLE III
EVENTS OF DEFAULT AND REMEDIES
SECTION 3.1 Events of Default. It shall be an Event of
Default hereunder if there shall have occurred and be continuing an Event
of Default under the Credit Agreement.
SECTION 3.2 Remedies in Case of an Event of Default. If any
Event of Default shall have occurred and be continuing, Beneficiary may at
Beneficiary's option, in addition to any other action permitted under this
Deed to Secure Debt or the Credit Agreement or by law, statute or in
equity, take one or more of the following actions:
3.2.1 by written notice to Grantor, declare in accordance with
and pursuant to the terms of the Credit Agreement the entire unpaid amount
of the Secured Obligations to be due and payable immediately;
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3.2.2 personally, or by its agents or attorneys, (i) enter
into and upon and take possession of all or any part of the Premises
together with the books, records and accounts of Grantor relating thereto
and, exclude Grantor, its agents and servants wholly therefrom, (ii) use,
operate, manage and control the Premises and the Equipment and conduct the
business thereof, (iii) maintain and restore the Premises and the
Equipment, (iv) make all necessary or proper repairs, renewals and
replacements and such useful Alterations thereto and thereon as Beneficiary
may deem advisable, (v) manage, lease and operate the Premises and carry on
the business thereof and exercise all rights and powers of Grantor with
respect thereto either in the name of Grantor or otherwise or (vi) collect
and receive all earnings, revenues, rents, issues, profits and
income of the Mortgaged Property and every part thereof. Beneficiary shall
be under no liability for or by reason of any such taking of possession,
entry, removal or holding, operation or management except that any amounts
so received by Beneficiary shall be applied as follows:
FIRST: to pay costs and expenses (including, without
limitation, attorneys' fees and expenses) of so entering upon,
taking possession of, holding, operating and managing the Mortgaged
Property or any part thereof, and any taxes, assessments or other
charges which Beneficiary may consider necessary or desirable to
pay, and any other amounts due to Beneficiary;
SECOND: to the payment in full in cash of Secured Obligations
consisting of interest and all amounts other than principal under
the Credit Agreement at any time and from time to time owing by
Grantor under or in connection with the Credit Agreement, ratably
according to the unpaid amounts thereof, in the manner and priority
set forth in the Credit Agreement, together with interest on each
such amount in the manner and to the extent set forth in the Credit
Agreement from and after the date such amount is due, owing or
unpaid until paid in full;
THIRD: to the pro rata payment in full in cash of Secured
Obligations consisting of (i) principal at any time and from time to
time owing by Grantor under or in connection with the Credit
Agreement, ratably according to the unpaid amounts thereof, in the
manner and priority set forth in the Credit Agreement and (ii) the
amount of Grantor's obligations then due and payable under any
Interest Rate Agreement, including any early termination
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payments then due (exclusive of expenses or similar liabilities to any
Bank under the applicable Interest Rate Agreement(s)), together with
interest on each such amount in the manner and to the extent set forth in
the Credit Agreement from and after the date such amount is due, owing or
unpaid until paid in full; and
FOURTH: the balance, if any, to the Person lawfully entitled
thereto (including Grantor or its successors or assigns), if all
conditions to the release of this Deed to Secure Debt shall have
been fulfilled, but if any such condition shall not have been
fulfilled, to be held by Beneficiary and thereafter applied to any
future payments required to be made in accordance with clauses
FIRST, SECOND and THIRD above.
3.2.3 with or without entry, personally or by its agents or
attorneys, (i) sell the Mortgaged Property and all estate, right, title and
interest, claim and demand therein at one or more sales in one or more
parcels, in accordance with the provisions of Section 3.3 or (ii) institute and
prosecute proceedings for the complete or partial foreclosure of the Lien and
security interests created and evidenced hereby; or
3.2.4 take such steps to protect and enforce its rights
whether by action, suit or proceeding at law or in equity for the specific
performance of any covenant, condition or agreement in the Credit Agreement
and the other Credit Documents, or in aid of the execution of any power
granted in this Deed to Secure Debt, or for any foreclosure hereunder, or
for the enforcement of any other appropriate legal or equitable remedy or
otherwise as Beneficiary shall elect.
SECTION 3.3 Sale of Mortgaged Property if Event of Default
Occurs; Proceeds of Sale.
3.3.1 Upon acceleration of the Loans and all Obligations owing
under the Credit Agreement as provided in subsection 3.2.1 hereof,
Beneficiary may institute an action to foreclose this Deed to Secure Debt
or take such other action as may be permitted and available to Beneficiary
at law or in equity for the enforcement of the Credit Agreement and
realization on the Mortgaged Property and proceeds thereon through power of
sale or to final judgment and execution thereof for the Secured
Obligations, and in furtherance thereof Beneficiary may sell the Mortgaged
Property at one or more sales, as an entirety or in parcels, at such time
and place, upon such terms and after
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such notice thereof as may be required or permitted by law or statute or in
equity. Beneficiary may execute and deliver to the purchaser at such sale a
conveyance of the Mortgaged Property in fee simple and an assignment or
conveyance of all Grantor's Interest in the Leases and the Mortgaged Property,
each of which conveyances and assignments shall contain recitals as to the Event
of Default upon which the execution of the power of sale herein granted depends,
and Grantor hereby constitutes and appoints Beneficiary the true and lawful
attorney in fact of Grantor to make any such recitals, sale, assignment and
conveyance, and all of the acts of Beneficiary as such attorney in fact are
hereby ratified and confirmed. Grantor agrees that such recitals shall be
binding and conclusive upon Grantor and that any assignment or conveyance to be
made by Beneficiary shall divest Grantor of all right, title, interest, equity
and right of redemption, including any statutory redemption, in and to the
Mortgaged Property. The power and agency hereby granted are coupled with an
interest and are irrevocable by death or dissolution, or otherwise, and are in
addition to any and all other remedies which Beneficiary may have hereunder, at
law or in equity. So long as the Secured Obligations, or any part thereof,
remain unpaid, Grantor agrees that possession of the Mortgaged Property by
Grantor, or any person claiming under Grantor, shall be as tenant, and, in case
of a sale under power or upon foreclosure as provided in this Deed to Secure
Debt, Grantor and any person in possession under Grantor, as to whose interest
such sale was not made subject, shall, at the option of the purchaser at such
sale, then become and be tenants holding over, and shall forthwith deliver
possession to such purchaser, or be summarily dispossessed in accordance with
the laws applicable to tenants holding over. In case of any sale under this Deed
to Secure Debt by virtue of the exercise of the powers herein granted, or
pursuant to any order in any judicial proceeding or otherwise, the Mortgaged
Property may be sold as an entirety or in separate parcels in such manner or
order as Beneficiary in its discretion may elect. One or more exercises of
powers herein granted shall not extinguish or exhaust such powers, until the
entire Mortgaged Property is sold or all amounts secured hereby are paid in
full.
3.3.2 In the event of any sale made under or by virtue of this
Article III, the entire principal of, and interest in respect of the
Secured Obligations, if not previously due and payable, shall, at the
option of Beneficiary, immediately become due and payable, anything in this
Deed to Secure Debt to the contrary notwithstanding.
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3.3.3 The proceeds of any sale made under or by virtue of this
Article III, together with any other sums which then may be held by
Beneficiary under this Deed to Secure Debt, whether under the provisions of
this Article III or otherwise, shall be applied as follows:
FIRST: to pay the costs and expenses incurred by Beneficiary
in enforcing its remedies under this Deed to Secure Debt;
SECOND: to pay the costs and expenses of the sale and of any
receiver of the Mortgaged Property or any part thereof appointed
pursuant to subsection 3.5.2;
THIRD: to the payment in full in cash of Secured Obligations
consisting of interest and all amounts other than principal under the
Credit Agreement at any time and from time to time owing by Grantor
under or in connection with the Credit Agreement, ratably according
to the unpaid amounts thereof, in the manner and priority set forth
in the Credit Agreement, together with interest on each such amount
in the manner and to the extent set forth in the Credit Agreement
from and after the date such amount is due, owing or unpaid until
paid in full;
FOURTH: to the pro rata payment in full in cash of Secured
Obligations consisting of (i) principal at any time and from time to
time owing by Grantor under or in connection with the Credit
Agreement, ratably according to the unpaid amounts thereof, in the
manner and priority set forth in the Credit Agreement and (ii) the
amount of Grantor's obligations then due and payable under any Interest
Rate Agreement, including any early termination payments then due
(exclusive of expenses or similar liabilities to any Bank under the
applicable Interest Rate Agreement(s)), together with interest on each
such amount in the manner and to the extent set forth in the Credit
Agreement from and after the date such amount is due, owing or unpaid
until paid in full; and
FIFTH: the balance, if any, to the Person lawfully entitled
thereto (including Grantor or its successors or assigns).
3.3.4 Beneficiary (on behalf of any Bank or on its own behalf)
or any Bank or any of their respective Affiliates may bid for and acquire
the Mortgaged Property or any part
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thereof at any sale made under or by virtue of this Article III and, in lieu of
paying cash therefor, may make settlement for the purchase price by crediting
against the purchase price the unpaid amounts (whether or not then due) owing to
Beneficiary, or such Bank in respect of the Secured Obligations, after deducting
from the sales price the expense of the sale and the reasonable costs of the
action or proceedings and any other sums that Beneficiary or such Bank is
authorized to deduct under this Deed to Secure Debt.
3.3.5 Beneficiary may adjourn from time to time any sale by it
to be made under or by virtue of this Deed to Secure Debt by announcement
at the time and place appointed for such sale or for such adjourned sale or
sales, and, Beneficiary, without further notice or publication, may make
such sale at the time and place to which the same shall be so adjourned.
3.3.6 If the Premises is comprised of more than one parcel of
land, Beneficiary may take any of the actions authorized by this Section
3.3 in respect of any or a number of individual parcels.
SECTION 3.4 Additional Remedies in Case of an Event of
Default.
3.4.1 Beneficiary shall be entitled to recover judgment as
aforesaid either before, after or during the pendency of any proceedings
for the enforcement of the provisions of this Deed to Secure Debt, and the
right of Beneficiary to recover such judgment shall not be affected by any
entry or sale hereunder, or by the exercise of any other right, power or
remedy for the enforcement of the provisions of this Deed to Secure Debt,
or the foreclosure of, or absolute conveyance pursuant to, this Deed to
Secure Debt. In case of proceedings against Grantor in insolvency or
bankruptcy or any proceedings for its reorganization or involving the
liquidation of its assets, Beneficiary shall be entitled to prove the whole
amount of principal and interest and other payments, charges and costs due
in respect of the Secured Obligations to the full amount thereof without
deducting therefrom any proceeds obtained from the sale of the whole or any
part of the Mortgaged Property; provided, however, that in no case shall
Beneficiary receive a greater amount than the aggregate of such principal,
interest and such other payments, charges and costs (with interest at the
Default Rate) from the proceeds of the sale of the Mortgaged Property and
the distribution from the estate of Grantor.
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3.4.2 Any recovery of any judgment by Beneficiary and any levy
of any execution under any judgment upon the Mortgaged Property shall not
affect in any manner or to any extent the Lien and security interests
created and evidenced hereby upon the Mortgaged Property or any part
thereof, or any conveyances, powers, rights and remedies of Beneficiary
hereunder, but such conveyances, powers, rights and remedies shall continue
unimpaired as before.
3.4.3 Any moneys collected by Beneficiary under this
Section 3.4 shall be applied in accordance with the provisions of
subsection 3.3.3.
SECTION 3.5 Legal Proceedings After an Event of Default.
3.5.1 After the occurrence of any Event of Default and
immediately upon the commencement of any action, suit or legal proceedings
to obtain judgment for the Secured Obligations or any part thereof, or of
any proceedings to foreclose the Lien and security interest created and
evidenced hereby or otherwise enforce the provisions of this Deed to Secure
Debt or of any other proceedings in aid of the enforcement of this Deed to
Secure Debt, Grantor shall enter its voluntary appearance in such action,
suit or proceeding.
3.5.2 Upon the occurrence and during the continuance of an
Event of Default, Beneficiary shall be entitled forthwith as a matter of
right, concurrently or independently of any other right or remedy hereunder
either before or after declaring the Secured Obligations or any part
thereof to be due and payable, to the appointment of a receiver without
giving notice to any party and without regard to the adequacy or inadequacy
of any security for the Secured Obligations or the solvency or insolvency
of any person or entity then legally or equitably liable for the Secured
Obligations or any portion thereof. Grantor hereby consents to the
appointment of such receiver. Notwithstanding the appointment of any
receiver, Beneficiary shall be entitled as pledgee to the possession and
control of any cash, deposits or instruments at the time held by or payable
or deliverable under the terms of the Credit Agreement to Beneficiary.
3.5.3 Grantor shall not (i) at any time insist upon, or plead,
or in any manner whatsoever claim or take any benefit or advantage of any
stay or extension or moratorium law, any exemption from execution or sale
of the Mortgaged Property or
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any part thereof, wherever enacted, now or at any time hereafter in force, which
may affect the covenants and terms of performance of this Deed to Secure Debt,
(ii) claim, take or insist on any benefit or advantage of any law now or
hereafter in force providing for the valuation or appraisal of the Mortgaged
Property, or any part thereof, prior to any sale or sales of the Mortgaged
Property which may be made pursuant to this Deed to Secure Debt, or pursuant to
any decree, judgment or order of any court of competent jurisdiction or (iii)
after any such sale or sales, claim or exercise any right under any statute
heretofore or hereafter enacted to redeem the property so sold or any part
thereof. To the extent permitted by applicable law, Grantor hereby expressly (i)
waives all benefit or advantage of any such law or laws, including, without
limitation, any statute of limitations applicable to this Deed to Secure Debt,
(ii) waives any and all rights to trial by jury in any action or proceeding
relating to the enforcement of this Deed to Secure Debt, (iii) waives any
objection which it may now or hereafter have to the laying of venue of any
action, suit or proceeding brought in connection with this Deed to Secure Debt
and further waives and agrees not to plead that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum
and (iv) covenants not to hinder, delay or impede the execution of any power
granted or delegated to Beneficiary by this Deed to Secure Debt but to suffer
and permit the execution of every such power as though no such law or laws had
been made or enacted. Beneficiary shall not be liable for any incorrect or
improper payment made pursuant to this Article III in the absence of gross
negligence or willful misconduct.
SECTION 3.6 Remedies Not Exclusive. No remedy conferred upon
or reserved to Beneficiary by this Deed to Secure Debt is intended to be
exclusive of any other remedy or remedies, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
under this Deed to Secure Debt or now or hereafter existing at law or in
equity. Any delay or omission of Beneficiary to exercise any right or
power accruing on any Event of Default shall not impair any such right or
power and shall not be construed to be a waiver of or acquiescence in any
such Event of Default. Every power and remedy given by this Deed to Secure
Debt may be exercised from time to time concurrently or independently, when
and as often as may be deemed expedient by Beneficiary in such order and
manner as Beneficiary, in its sole discretion, may elect. If Beneficiary
accepts any moneys required to be paid by Grantor under this Deed to Secure
Debt after the same become
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due, such acceptance shall not constitute a waiver of the right either to
require prompt payment, when due, of all other sums secured by this Deed to
Secure Debt or to declare an Event of Default with regard to subsequent
defaults. If Beneficiary accepts any moneys required to be paid by Grantor under
this Deed to Secure Debt in an amount less than the sum then due, such
acceptance shall be deemed an acceptance on account only and on the condition
that it shall not constitute a waiver of the obligation of Grantor to pay the
entire sum then due, and Grantor's failure to pay the entire sum then due shall
be and continue to be a default hereunder notwithstanding acceptance of such
amount on account.
ARTICLE IV
CERTAIN DEFINITIONS
The following terms shall have the following respective
meanings:
"Cost of Construction" means the sum, so far as it relates to
the reconstructing, renewing, restoring or replacing of the Improvements,
of (i) obligations incurred or assumed by Grantor or undertaken by tenants
pursuant to the terms of the Leases for labor, materials and other expenses
and to contractors, builders and materialmen; (ii) the cost of contract
bonds and of insurance of all kinds that may reasonably be deemed by
Grantor to be desirable or necessary during the course of construction;
(iii) the expenses incurred or assumed by Grantor for test borings,
surveys, estimates, any Plans and Specifications and preliminary
investigations therefor, and for supervising construction, as well as for
the performance of all other duties required by or reasonably necessary for
proper construction; (iv) ad valorem property taxes levied upon the
Premises during performance of any Restoration; and (v) any costs or other
charges in connection with obtaining title insurance and counsel opinions
that may be required or necessary in connection with a Restoration.
"Governmental Authority" shall mean any federal, state, local
or foreign court, agency, authority, board, bureau, commission, department,
office or instrumentality of any nature whatsoever or any governmental or
quasi-governmental unit, whether now or hereafter in existence, or any
officer or official thereof, having jurisdiction over Grantor or the
Mortgaged Property.
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ARTICLE V
MISCELLANEOUS
SECTION 5.1 Severability of Provisions. Any provision of this
Deed to Secure Debt which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 5.2 Notices. Unless otherwise provided herein or in
the Credit Agreement, any notice or other communication herein required or
permitted to be given shall be given in the manner set forth in the Credit
Agreement, if to Grantor or Beneficiary, addressed to it at the address set
forth in the Credit Agreement, or as to either party at such other address
as shall be designated by such party in a written notice to the other
parties complying as to delivery with the terms of this Section 5.2;
provided, however, that notices to Beneficiary shall not be effective until
received by Beneficiary.
SECTION 5.3 Covenants To Run with the Land. All of the
grants, covenants, terms, provisions and conditions in this Deed to Secure
Debt shall run with the Land and shall apply to, and bind the successors
and assigns of, Grantor. If there shall be more than one grantor, the
covenants and warranties hereof shall be joint and several.
SECTION 5.4 Headings. The Section headings used in this Deed
to Secure Debt are for convenience of reference only and shall not affect
the construction of this Deed to Secure Debt.
SECTION 5.5 Limitation on Interest Payable. It is the
intention of the parties to conform strictly to the usury laws, whether
state or federal, that are applicable to the transaction of which this Deed
to Secure Debt is a part. All agreements between Grantor and Beneficiary
whether now existing or hereafter arising and whether oral or written, are
hereby expressly limited so that in no contingency or event whatsoever
shall the amount paid or agreed to be paid by Grantor for the use,
forbearance or detention of the money to be loaned under the Credit
Agreement or any related document, or for the payment or performance of any
covenant or obligation contained herein or in the Credit Agreement or any
related document,
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exceed the maximum amount permissible under applicable federal or state usury
laws. If under any circumstances whatsoever fulfillment of any such provision,
at the time performance of such provision shall be due, shall involve exceeding
the limit of validity prescribed by law, then the obligation to be fulfilled
shall be reduced to the limit of such validity. If under any circumstances
Grantor shall have paid an amount deemed interest by applicable law, which would
exceed the highest lawful rate, such amount that would be excessive interest
under applicable usury laws shall be applied to the reduction of the principal
amount owing in respect of the Secured Obligations and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of principal
and any other amounts due hereunder, the excess shall be refunded to Grantor.
All sums paid or agreed to be paid for the use, forbearance or detention of the
principal under any extension of credit by Beneficiary shall, to the extent
permitted by applicable law, and to the extent necessary to preclude exceeding
the limit of validity prescribed by law, be amortized, prorated, allocated and
spread from the date of this Deed to Secure Debt until payment in full of the
Secured Obligations so that the actual rate of interest on account of such
principal amounts is uniform throughout the term hereof.
SECTION 5.6 Governing Law; Submission to Jurisdiction; Venue.
(a) This Deed to Secure Debt and the rights and obligations of the parties
hereunder shall be construed and enforced in accordance with and be
governed by the laws of the State in which the Premises are located.
Grantor hereby irrevocably appoints CT Corporation System, having an
address at 1633 Broadway, New York, New York 10019 and such other persons
as may hereafter be selected by Grantor irrevocably agreeing in writing to
serve as its agent for service of process in respect of any such action or
proceeding. Nothing herein shall affect the right of Beneficiary to serve
process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against Grantor in any other jurisdiction.
(b) Grantor hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Deed to
Secure Debt and hereby further irrevocably waives and agrees not to plead
or claim in any court that any such action or proceeding brought in any
court has been brought in an inconvenient forum.
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SECTION 5.7 No Merger. The rights and estate created by this
Deed to Secure Debt shall not, under any circumstances, be held to have
merged into any other estate or interest now owned or hereafter acquired by
Beneficiary unless Beneficiary shall have consented to such merger in
writing.
SECTION 5.8 Modification in Writing. No amendment,
modification, supplement, termination or waiver of or to any provision of
this Deed to Secure Debt, nor consent to any departure by Grantor therefrom
shall be effective unless the same shall be done in accordance with the
terms of the Credit Agreement and unless in writing and signed by
Beneficiary. Any amendment, modification or supplement of or to any
provision of this Deed to Secure Debt, any waiver of any provision of this
Deed to Secure Debt, and any consent to any departure by Grantor from the
terms of any provision of this Deed to Secure Debt shall be effective only
in the specific instance and for the specific purpose for which made or given.
Except where notice is specifically required by this Deed to Secure Debt or any
other Credit Document, no notice to or demand on Grantor in any case shall
entitle Grantor to any other or further notice or demand in similar or other
circumstances.
SECTION 5.9 No Credit for Payment of Taxes or Impositions.
Grantor shall not be entitled to any credit against the principal, premium,
if any, or interest payable under the Credit Agreement, and Grantor shall
not be entitled to any credit against any other sums which may become
payable under the terms thereof or hereof, by reason of the payment of any
tax or other impositions on the Mortgaged Property or any part thereof.
SECTION 5.10 Stamp and Other Taxes. Subject to the provisions
of subsection 1.5.5 relating to permitted contests, Grantor shall pay any
mortgage recording taxes, with interest and fines and penalties, that may
hereafter be levied, imposed or assessed under or upon or by reason of this
Deed to Secure Debt or the Secured Obligations or any instrument or
transaction affecting or relating to either thereof and in default thereof
Beneficiary may advance the same and the amount so advanced shall be
payable by Grantor to Beneficiary within ten (10) days after demand
therefor, together with interest thereon at the Default Rate.
SECTION 5.11 Estoppel Certificates. Grantor and Beneficiary
shall, from time to time, upon thirty (30) days' prior written request of
the other party, execute, acknowledge
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and deliver to the other party a certificate signed by an authorized officer or
officers stating that this Deed to Secure Debt, the Credit Agreement and the
other Credit Documents are unmodified and in full force and effect (or, if there
have been modifications, that this Deed to Secure Debt, the Credit Agreement or
such Credit Document, as applicable, is in full force and effect as modified and
setting forth such modifications) and stating the date to which principal and
interest have been paid on the Loans.
SECTION 5.12 Additional Security. Without notice to or
consent of Grantor and without impairment of the Lien and rights created by
this Deed to Secure Beneficiary may accept (but Grantor shall not be
obligated to furnish) from Grantor or from any other Person or Persons,
additional security for the Secured Obligations. Neither the giving of
this Deed to Secure Debt nor the acceptance of any such additional security
shall prevent Beneficiary from resorting, first, to such additional
security, and, second, to the security created by this Deed to Secure Debt
without affecting Beneficiary's Lien and rights under this Deed to Secure
Debt.
SECTION 5.13 Release. The Mortgaged Property shall be
released from the Lien of this Deed to Secure Debt in accordance with the
provisions of the Credit Agreement or at such time as all Secured
Obligations have been paid in full and the Commitments of the Banks to make
any Loan or issue any Letter of Credit under the Credit Agreement shall
have expired or been sooner terminated. Beneficiary, on the written
request and at the expense of Grantor, will execute and deliver such proper
instruments of release and satisfaction or assignment as may reasonably be
requested to evidence such release or assignment, and any such instrument,
when duly executed by Beneficiary and duly recorded by Grantor in the
places where this Deed to Secure Debt is recorded, shall conclusively
evidence the release or assignment of this Deed to Secure Debt.
SECTION 5.14 Certain Expenses of Beneficiary. If any action,
suit or other proceeding affecting the Mortgaged Property or any part
thereof be commenced, in which action, suit or proceeding Beneficiary is
made a party or participates or in which the right to use the Mortgaged
Property or any part thereof is threatened, or in which it becomes
necessary in the judgment of Beneficiary to defend or uphold the Lien of
this Deed to Secure Debt (including, without limitation, any action, suit
or proceeding to establish or uphold the compliance of the Improvements
with any Requirements of Law), then all amounts
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reasonably paid or incurred by Beneficiary for the expense of any such action,
suit or other proceeding or to protect its rights therein (whether or not it is
made or becomes a party thereto) or otherwise to enforce or defend the rights
and Lien created by this Deed to Secure Debt, shall be paid by Grantor upon
demand together with interest at the Default Rate from the date of the payment
or incurring thereof to the date of repayment, and any such amount and the
interest thereon shall be a Lien on the Mortgaged Property, prior to any right,
or right to, interest in, or claim upon the Mortgaged Property attaching or
accruing subsequent to or otherwise subordinate to the Lien of this Deed to
Secure Debt, and the same shall be deemed to be secured hereby. All other
amounts reasonably paid, advanced or incurred by Beneficiary in order to secure
and protect the Lien of this Deed to Secure Debt or other security provided
hereunder shall be a like Lien on the Mortgaged Property and be deemed to be
secured hereby.
SECTION 5.15 Expenses of Collection. Grantor will upon demand
pay to Beneficiary the amount of any and all reasonable expenses, including
the reasonable fees and expenses of its counsel and the reasonable fees and
expenses of any experts and agents, which Beneficiary may incur in
connection with (i) the collection of the Secured Obligations, (ii) the
enforcement and administration of this Deed to Secure Debt, (iii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Mortgaged Property, (iv) the exercise or
enforcement of any of the rights of Beneficiary or any Secured Party hereunder
or (v) the failure by Grantor to perform or observe any of the provisions
hereof. All amounts payable by Grantor under this Section 5.16 shall be due upon
demand and shall be part of the Secured Obligations. Grantor's obligations under
this Section shall survive the termination of this Deed to Secure Debt and the
discharge of Grantor's other obligations hereunder.
SECTION 5.16 Business Days. In the event any time period or
any date provided in this Deed to Secure Debt ends or falls on a day other
than a Business Day, then such time period shall be deemed to end and such
date shall be deemed to fall on the next succeeding Business Day, and
performance herein may be made on such Business Day, with the same force
and effect as if made on such other day.
SECTION 5.17 Relationship. The relationship of Beneficiary to
Grantor hereunder is strictly and solely that of lender and borrower and
grantor and beneficiary and nothing
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contained in the Credit Agreement, this Deed to Secure Debt or any other
document or instrument now existing and delivered in connection therewith or
otherwise in connection with the Secured Obligations is intended to create, or
shall in any event or under any circumstance be construed as creating a
partnership, joint venture, tenancy-in-common, joint tenancy or other
relationship of any nature whatsoever between Beneficiary and Grantor other than
as lender and borrower and grantor and beneficiary.
SECTION 5.18 Reconveyance Upon Payment of Secured Obligations.
In the event that Grantor shall cause to be paid and performed in full all
of the Secured Obligations, Beneficiary shall release the Mortgaged
Property from the Lien of this Deed to Secure Debt and to reconvey (without
warranty by or recourse against Beneficiary or any Bank) the Mortgaged
Property to Grantor.
SECTION 5.19 Concerning Beneficiary.
5.19.1 Beneficiary shall be entitled to rely upon any written
notice, statement, certificate, order or other document or any telephone
message believed by it to be genuine and correct and to have been signed,
sent or made by the proper person, and, with respect to all matters
pertaining to this Deed to Secure Debt and its duties hereunder, upon
advice of counsel selected by it.
5.19.2 With respect to any of its rights and obligations as a
Bank, Beneficiary shall have and may exercise the same rights and powers
hereunder. The term "Banks," "Bank" or any similar terms shall, unless the
context clearly otherwise indicates, include Beneficiary in its individual
capacity as a Bank. Beneficiary may accept deposits from, lend
money to, and generally engage in any kind of banking, trust or other
business with Grantor or any entity related to or affiliated with Grantor
to the same extent as if Beneficiary were not acting as collateral agent.
5.19.3 If any item of Mortgaged Property also constitutes
collateral granted to Beneficiary under any other deed of trust, mortgage,
deed to secure debt, security agreement, pledge or instrument of any type,
in the event of any conflict between the provisions of this Deed to Secure
Debt and the provisions of such other deed of trust, mortgage, security
agreement, pledge or instrument of any type in respect of such
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collateral, Beneficiary, in its sole discretion, shall select which provision or
provisions shall control.
5.19.4 Beneficiary has been appointed as collateral agent
pursuant to the Credit Agreement. The actions of Beneficiary hereunder are
subject to the provisions of the Credit Agreement. Beneficiary shall have
the right hereunder to make demands, to give notices, to exercise or
refrain from exercising any rights, and to take or refrain from taking
action (including, without limitation, the release or substitution of
Mortgaged Property), in accordance with this Deed to Secure Debt and the
Credit Agreement. Beneficiary may resign and a successor Beneficiary may
be appointed in the manner provided in the Credit Agreement. Upon the
acceptance of any appointment as Beneficiary by a successor Beneficiary,
that successor Beneficiary shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring
Beneficiary under this Deed to Secure Debt, and the retiring Beneficiary
shall thereupon be discharged from its duties and obligations under this
Deed to Secure Debt. After any retiring Beneficiary's resignation, the
provisions of this Deed to Secure Debt shall inure to its benefit as to any
actions taken or omitted to be taken by it under this Deed to Secure Debt
while it was Beneficiary.
SECTION 5.20 Future Advances. This Deed to Secure Debt may
secure future advances. The maximum aggregate amount of all advances of
principal under the Credit Agreement that may be outstanding hereunder at
any time is $40,000,000.
SECTION 5.21 Waiver of Stay.
5.21.1 Grantor agrees that in the event that Grantor or any
property or assets of Grantor shall hereafter become the subject of a
voluntary or involuntary proceeding under the Bankruptcy Code or Grantor
shall otherwise be a party to any federal or state bankruptcy, insolvency,
moratorium or similar proceeding to which the provisions relating to the
automatic stay under Section 362 of the Bankruptcy Code or any similar
provision in any such law is applicable, then, in any such case, whether or
not Beneficiary has commenced foreclosure proceedings under this Deed to Secure
Debt, Beneficiary shall be entitled to relief from any such automatic stay as it
relates to the exercise of any of the rights and remedies (including, without
limitation, any foreclosure proceedings) available to Beneficiary as provided in
this Deed to Secure Debt or in any other Security Document.
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5.21.2 Beneficiary shall have the right to petition or move
any court having jurisdiction over any proceeding described in subsection
5.21.1 for the purposes provided therein, and Grantor agrees (i) not to
oppose any such petition or motion and (ii) at Grantor's sole cost and
expense, to assist and cooperate with Beneficiary, as may be requested by
Beneficiary from time to time, in obtaining any relief requested by
Beneficiary, including, without limitation, by filing any such petitions,
supplemental petitions, requests for relief, documents, instruments or
other items from time to time requested by Beneficiary or any such court.
SECTION 5.22 Continuing Security Interest; Assignment. This
Deed to Secure Debt shall create a continuing security interest in the
Mortgaged Property and shall (i) be binding upon Grantor, its successors
and assigns and (ii) inure, together with the rights and remedies of
Beneficiary hereunder, to the benefit of Beneficiary and the other Secured
Parties and each of their respective successors, transferees and assigns;
no other Persons (including, without limitation, any other creditor of
Grantor) shall have any interest herein or any right or benefit with
respect hereto. Without limiting the generality of the foregoing
clause (ii), any Bank may assign or otherwise transfer any indebtedness
held by it secured by this Deed to Secure Debt to any other Person, and
such other Person shall thereupon become vested with all the benefits in
respect thereof granted to such Bank, herein or otherwise, subject however,
to the provisions of the Credit Agreement and any applicable Interest Rate
Agreement.
SECTION 5.23 Obligations Absolute. All obligations of Grantor
hereunder shall be absolute and unconditional irrespective of:
(i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Grantor or any
other Credit Party;
(ii) any lack of validity or enforceability of the Credit
Agreement, any Interest Rate Agreement, any Letter of Credit, any
other Credit Document, or any other agreement or instrument relating
thereto;
(iii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Secured Obligations, or any
other amendment or waiver of or any consent to any departure from
the Credit Agreement,
<PAGE>
-49-
any Interest Rate Agreement, any Letter of Credit, any other Credit
Document, or any other agreement or instrument relating thereto;
(iv) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
any departure from any guarantee, for all or any of the Secured
Obligations;
(v) any exercise or non-exercise, or any waiver of any right,
remedy, power or privilege under or in respect of this Deed to Secure
Debt, any Interest Rate Agreement or any other Credit Document except
as specifically set forth in a waiver granted pursuant to the
provisions of Section 5.8 hereof; or
(vi) any other circumstance or happening whatsoever that is
similar to any of the foregoing.
SECTION 5.24 Beneficiary's Right to Sever Indebtedness.
5.24.1 Grantor acknowledges that (a) the Mortgaged Property
does not constitute the sole source of security for the payment and
performance of the Secured Obligations and that the Secured Obligations are
also secured by property of Grantor in other jurisdictions (all such
property, collectively, the "Collateral"), (b) the number of such
jurisdictions and the nature of the transaction of which this instrument is
a part are such that it would have been impracticable for the parties to
allocate to each item of Collateral a specific loan amount and to execute
in respect of such item a separate credit agreement or interest rate
agreement and (c) Grantor intends that Beneficiary have the same rights
with respect to the Mortgaged Property, in foreclosure or otherwise, that
Beneficiary would have had if each item of Collateral had been secured,
mortgaged or pledged pursuant to a separate credit agreement or interest
rate agreement, mortgage or security document. In furtherance of such
intent, Grantor agrees that Beneficiary may at any time by notice (an
"Allocation Notice") to Grantor allocate a portion (the "Allocated
Indebtedness") of the Secured Obligations to the Mortgaged Property and
sever from the remaining Secured Obligations the Allocated Indebtedness.
From and after the giving of an Allocation Notice with respect to the
Mortgaged Property, the Secured Obligations hereunder shall be limited to
the extent set forth in the Allocation Notice and (as so limited) shall,
for all purposes, be construed as a separate loan
<PAGE>
-50-
obligation of Grantor unrelated to the other transactions contemplated by the
Credit Agreement, any Interest Rate Agreement, any other Credit Document or any
document related to any thereof. To the extent that the proceeds on any
foreclosure of the Mortgaged Property shall exceed the Allocated Indebtedness,
such proceeds shall belong to Grantor and shall not be available hereunder to
satisfy any Secured Obligations of Grantor other than the Allocated
Indebtedness. In any action or proceeding to foreclose the Lien of this Deed to
Secure Debt or in connection with any power of sale foreclosure or other remedy
exercised under this Deed to Secure Debt commenced after the giving by
Beneficiary of an Allocation Notice, the Allocation Notice shall be conclusive
proof of the limits of the Secured Obligations hereby secured, and Grantor may
introduce, by way of defense or counterclaim, evidence thereof in any such
action or proceeding. Notwithstanding any provision of this Section 5.24, the
proceeds received by Beneficiary pursuant to this Deed to Secure Debt shall be
applied by Beneficiary in accordance with the provisions of subsection 3.3.3
hereof.
5.24.2 Grantor hereby waives to the greatest extent permitted
under law the right to a discharge of any of the Secured Obligations under
any statute or rule of law now or hereafter in effect which provides that
foreclosure of the Lien of this Deed to Secure Debt or other remedy
exercised under this Deed to Secure Debt constitutes the exclusive means
for satisfaction of the Secured Obligations or which makes unavailable a
deficiency judgment or any subsequent remedy because Beneficiary elected to
proceed with a power of sale foreclosure or such other remedy or because of
any failure by Beneficiary to comply with laws that prescribe conditions to
the entitlement to a deficiency judgment. In the event that,
notwithstanding the foregoing waiver, any court shall for any reason hold
that Beneficiary is not entitled to a deficiency judgment, Grantor shall
not (a) introduce in any other jurisdiction such judgment as a defense to
enforcement against Grantor of any remedy in the Credit Agreement, any
Interest Rate Agreement or any other Credit Document or (b) seek to have
such judgment recognized or entered in any other jurisdiction, and any such
judgment shall in all events be limited in application only to the state or
jurisdiction where rendered.
5.24.3 In the event any instrument in addition to the
Allocation Notice is necessary to effectuate the provisions of this Section
5.24, including, without limitation, any amendment to this Deed to Secure
Debt, any substitute promissory note or affidavit or certificate of any
kind, Beneficiary may
<PAGE>
-51-
execute, deliver or record such instrument as the attorney-in-fact of Grantor.
Such power of attorney is coupled with an interest and is irrevocable.
5.24.4 Notwithstanding anything set forth herein to the
contrary, the provisions of this Section 5.24 shall be effective only to
the maximum extent permitted by law.
<PAGE>
IN WITNESS WHEREOF, Grantor has caused this Deed to Secure Debt
to be duly executed and delivered under seal the day and year first above
written.
CARSON PRODUCTS COMPANY
(formerly known as Aminco, Inc.),
Grantor
By:___________________________
Name:
Title:
Attest:_______________________
Name:
Title:
Signed, sealed and delivered
in the presence of:
Witness
______________________________
Name:
_____________________________
Notary Public
[Notary Seal]
<PAGE>
Schedule A
[Legal Description]
[To come from Title Policy]
<PAGE>
Schedule B
[Prior Liens]
[To come from Title Policy]
<PAGE>
Exhibit E to the
Credit Agreement
FORM OF HOLDINGS GUARANTEE
This GUARANTEE (the "Guarantee") dated as of
October [ ], 1996 by Carson, Inc., a Delaware corporation (the
"Guarantor"), in favor of and for the benefit of the Banks
under the Credit Agreement (each as hereinafter defined).
R E C I T A L S :
A. Pursuant to a certain Credit Agreement dated as
of October [ ], 1996 (as amended, amended and restated,
supplemented or otherwise modified in accordance with its
terms, the "Credit Agreement"; capitalized terms not defined
herein have the meanings ascribed to them in the Credit
Agreement) among Carson Products Company (the "Borrower") the
lending institutions identified therein (collectively, the
"Banks") and Banque Indosuez, New York Branch as Agent (the
"Agent"), the Banks have agreed to make certain Loans to the
Borrower and to issue Letters of Credit for the accounts of the
Borrower.
B. It is a condition precedent to the Banks
obligations to make the Loans and to issue the Letters of
Credit under to the Credit Agreement that the Guarantor shall
have executed and delivered this Guarantee and that this
Guarantee shall be in full force and effect.
C. This Guarantee is given by the Guarantor in
favor of the Banks to guarantee all of the Obligations of the
Borrower, to the extent of the Pledged Securities as defined in
the Holdings Pledge Agreement, in accordance with the terms of
the Credit Agreement.
D. All of the Guarantor's obligations hereunder
shall be secured pursuant to the Holdings Pledge Agreement to
which the Guarantor is a party.
NOW, THEREFORE, in consideration of the foregoing
premises and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
Guarantor hereby agrees as follows:
<PAGE>
-2-
SECTION 1. Guarantee. (i) To induce the Banks to
execute and deliver the Credit Agreement and to make the Loans
and issue the Letters of Credit upon the terms and conditions
set forth in the Credit Agreement, and in consideration
thereof, the Guarantor hereby unconditionally and irrevocably
(a) guarantees to the Banks and their respective successors,
transferees and assigns, the prompt and complete payment and
performance when due (whether at the stated maturity, by
acceleration or otherwise) and at all times thereafter of the
Obligations of the Borrower (including amounts which would
become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, or similar provisions
under the bankruptcy laws of foreign jurisdictions); and (b)
agrees to pay any and all reasonable expenses (including
reasonable attorneys' fees and disbursements) which may be paid
or incurred by the Banks, the Agent or the Collateral Agent in
enforcing any rights with respect to, or collecting, any or all
of the Obligations and/or enforcing any rights with respect to,
or collecting against, the Guarantor under this Guarantee;
provided, that this Guarantee is limited as set forth in
Section 6 hereof (as so limited, collectively, the "Guaranteed
Obligations").
(ii) The Guarantor agrees that this Guarantee
constitutes a guarantee of payment when due and not of
collection and waives any right to require that any resort be
held by the Collateral Agent, the Agent or any Bank to any of
the security held for payment of any of the Guaranteed
Obligations or to any balance of any deposit account or credit
on the books of the Agent, the Collateral Agent or any Bank in
favor of the Borrower or any other Person.
(iii) No payment or payments made by any other Person
or received or collected by the Banks (or the Collateral Agent
or Agent on behalf of the Banks) from any other Person by
virtue of any action or proceeding or any set-off or
appropriation or application at any time in reduction of or in
payment of the Guaranteed Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability or
obligations of the Guarantor hereunder which shall,
notwithstanding any such payment or payments other than
payments made to the Banks (or the Collateral Agent or the
Agent on behalf of the Banks) by the Guarantor or payments
received or collected by the Banks (or the Collateral Agent or
Agent on behalf of the Banks) from the Guarantor, remain liable
for the Guaranteed Obligations until the Guaranteed Obligations
are indefeasibly paid in full in Cash or Cash Equivalents,
subject to the provisions of Section 1(iv) hereof.
<PAGE>
-3-
(iv) The Guarantor understands, agrees and confirms
that this is a guarantee of payment when due and not of
collection and that each Bank may, from time to time, enforce
this Guarantee up to the full amount of the Guaranteed
Obligations owed to such Bank without proceeding against any
other Credit Party, against any security for the Guaranteed
Obligations, against any other guarantor or under any other
guarantee covering the Guaranteed Obligations.
SECTION 2. Waiver by Guarantor. Until the payment
and satisfaction in full of all Guaranteed Obligations and the
expiration or termination of the Commitments and all Letters of
Credit Usage of the Banks under the Credit Agreement, the
Guarantor hereby waives absolutely and irrevocably any claim
which it may have against the Borrower or any of its Affiliates
by reason of any payment to the Agent, Collateral Agent, or any
Bank, or to any other Person pursuant to or in respect of this
Guarantee, including any claims by way of subrogation,
contribution, reimbursement, indemnity or otherwise.
SECTION 3. Consent by Guarantor. The Guarantor
hereby consents and agrees that, without the necessity of any
reservation of rights against the Guarantor and without notice
to or further assent by the Guarantor, any demand for payment
of any of the Guaranteed Obligations made by the Agent, the
Collateral Agent or any Bank may be rescinded by the Banks (or
the Agent or Collateral Agent on behalf of the Banks) and any
of the Guaranteed Obligations continued, and the Guaranteed
Obligations, or the liability of any other party upon or for
any part thereof, or any collateral security or guarantee
therefor or right of offset with respect thereto, may, from
time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived,
surrendered or released by the Banks (or the Agent or
Collateral Agent on behalf of the Banks); and the Credit
Agreement or any of the Credit Document, or other guarantee or
documents in connection therewith, or any of them, may be
amended, modified, supplemented or terminated, in whole or in
part, as the Banks (or the Agent or Collateral Agent on behalf
of the Banks) may deem advisable from time to time; and any
Guarantee (subject to Section 11.04 of the Credit Agreement) or
right of offset or any Collateral may be sold, exchanged,
waived, surrendered or released, all without the necessity of
any reservation of rights against the Guarantor and without
notice to or further assent by the Guarantor, which will remain
bound hereunder, notwithstanding any such renewal, extension,
modification,
<PAGE>
-4-
acceleration, compromise, amendment, supplement, termination,
sale, exchange, waiver, surrender or release. Neither the
Banks nor the Agent or the Collateral Agent shall have any
obligation to protect, secure, perfect or insure any
Collateral or property at any time held as security for the
guaranteed Obligations or this Guarantee (other than the
exercise of reasonable care in the custody and preservation
of the Pledged Collateral referred to in the Holdings Pledge
Agreement). When making any demand hereunder against the
Guarantor, the Agent, the Collateral Agent or the Banks may,
but shall be under no obligation to, make a similar demand on
any other Credit Party or any such other guarantor, and any
failure by the the Agent, the Collateral Agent or the Banks
to make any such demand or to collect any payments from any
such other Credit Party or any such other guarantor or any
release of such other Credit Party or any such other
guarantor or of the Guarantor's obligations or liabilities
hereunder shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of the Banks
against the Guarantor hereunder. For the purposes hereof
"demand" shall include the commencement and continuance of
any legal proceedings.
SECTION 4. Waivers; Successors and Assigns. The
Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Guaranteed Obligations and
notice of or proof of reliance by the Banks upon this Guarantee
or acceptance of this Guarantee, and the Guaranteed Obligations
shall conclusively be deemed to have been created, contracted
or incurred in reliance upon this Guarantee, and all dealings
between the Guarantor and any other Credit Party, on the one
hand, and the Banks, on the other hand, shall likewise be
conclusively presumed to have been had or consummated in
reliance upon this Guarantee. The Guarantor waives diligence,
presentment, protest, demand for payment and notice of default
or nonpayment to or upon any Credit Party or the Guarantor with
respect to the Guaranteed Obligations. This Guarantee shall be
construed as a continuing, absolute and unconditional guarantee
of payment without regard to the validity, regularity or
enforceability of the Credit Agreement, the other Credit
Documents, any of the Guaranteed Obligations or any guarantee
therefor or right of offset with respect thereto at any time or
from time to time held by the Banks and without regard to any
defense (other than the defense of payment), set-off or
counterclaim which may at any time be available to or be
asserted by any Credit Party against the Banks, or by any other
circumstance whatsoever (with or without notice to or knowledge
of the Guarantor) which constitutes, or might be construed to
<PAGE>
-5-
constitute, an equitable or legal discharge of the Guaranteed
Obligations, or of the Guarantor under this Guarantee, in
bankruptcy or in any other instance, and the obligations and
liabilities of the Guarantor hereunder shall not be conditioned
or contingent upon the pursuit by the Banks or any other Person
at any time of any right or remedy against any Credit Party or
against any other Person which may be or become liable or
obligated in respect of all or any part of the Guaranteed
Obligations or against any collateral security or guarantee
therefor or right of offset with respect thereto. This
Guarantee shall remain in full force and effect and be binding
in accordance with and to the extent of its terms upon the
Guarantor and the successors and assigns thereof, and shall
inure to the benefit of the Banks, and their respective
successors, transferees and assigns (including each holder from
time to time of Guaranteed Obligations) until all of the
Guaranteed Obligations and the obligations of the Guarantor
under this Guarantee shall have been satisfied by indefeasible
payment in full in cash or cash equivalents, notwithstanding
that from time to time during the term of the Credit Agreement
any Credit Party may be released from all of its Guaranteed
Obligations thereunder.
SECTION 5. Guarantee Secured. Payment under this
Guarantee is secured by a pledge of Securities pursuant to the
Holdings Pledge Agreement in accordance with the Credit
Agreement. Reference is hereby made to the Credit Agreement
and the Holdings Pledge Agreement for a description of the
Securities pledged and the right of the respective parties to
such property, to secure all the obligations of the Guarantor
hereunder.
SECTION 6. Limited Liability. Notwithstanding any
contrary provision of this Agreement, the Holdings Pledge
Agreement or the Credit Agreement, it is hereby expressly
agreed that no partner, officer, employee, servant, controlling
Person, executive, director, agent, authorized representative
or affiliate (herein referred to as "operatives") of any of the
Guarantor, DNL Group, L.L.C. or DNL Partners, Limited
Partnership (collectively, the "Guarantor and Equity Entities")
shall be personally liable for payments due under this
Agreement for the performance of any obligation hereunder.
Except for the representations and warranties made by the
Guarantor in Section 10 of this Agreement, the sole recourse of
the Banks, or the Agent or Collateral Agent on behalf of the
Banks, for satisfaction of the obligations of the Guarantor
under this Agreement, the Holdings Pledge Agreement or the
Credit Agreement shall be against the Pledged Securities (as
such term is defined in the Holdings Pledge Agreement) and no
against any
<PAGE>
-6-
other assets or property of any of the Guarantor and Equity
Entities or any of the operatives of any of the Guarantor and
Equity Entities other than the remedies provided hereunder and
under the Holdings Pledge Agreement. In the event that a
default occurs in connection with such obligations, no action
shall be brought against any of he Guarantor and Equity
Entities or any of the operatives of any of the Guarantor and
Equity Entities by virtue solely of its direct or indirect
ownership interest in the Borrower, except in accordance with
the Holdings Pledge Agreement. In the event of foreclosure or
other sale or disposition of Mortgaged Real Property or
Pledged Collateral, no judgment for any deficiency upon the
obligations of the obligors thereunder shall be obtainable by
the Banks, or the Agent or Collateral Agent on behalf of the
Banks, against any of the Guarantor and Equity Entities or any
of the operatives of any of the Guarantor and Equity Entities
by virtue solely of its direct or indirect ownership interest
in the Borrower or its Subsidiaries. Nothing contained in this
Section shall prevent the Banks, or the Agent or Collateral
Agent on behalf of the Banks, from exercising any rights or
remedies against the Borrower or its Subsidiaries, the
Mortgaged Real Property or the Pledged Collateral pursuant to
the Credit Agreement, the Security Documents or this
Agreement.
SECTION 7. Effectiveness; Reinstatement. This
Guarantee shall continue to be effective, or be reinstated, as
the case may be, if at any time payment, or any part thereof,
of any of the Guaranteed Obligations is rescinded or must
otherwise be restored or returned by the Banks upon the
insolvency, bankruptcy, dissolution, liquidation or
reorganization of any Credit Party, or upon or as a result of
the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, any Credit Party or any
substantial part of its property, or otherwise, all as though
such payments had not been made.
SECTION 8. Payment of Guaranteed Obligations. The
Guarantor hereby guarantees that the Guaranteed Obligations
will be paid for the ratable benefit of the Banks without
set-off or counterclaim in lawful currency of the United States
of America at the office of the Collateral Agent located at
1211 Avenue of the Americas, New York, New York 10036. The
Guarantor shall make any payments required hereunder upon
receipt of written notice thereof from the Agent or Collateral
Agent or any Bank; provided, however, that the failure of the
Agent or Collateral Agent or any Bank to give such notice shall
not affect the Guarantor's obligations hereunder.
<PAGE>
-7-
SECTION 9. Default. If (a) the Borrower has failed
to pay or perform when due its Obligations guaranteed hereby or
(b) there is an event with respect to the Guarantor that would
require or permit the acceleration pursuant to Section 8.05 of
the Credit Agreement of any outstanding Loan, then in the case
of clause (a) all of the obligations with respect to the
Borrower guaranteed hereby and in the case of clause (b) all of
the Guaranteed Obligations shall be immediately due and payable
by the Guarantor, regardless of whether in the case of clause
(a) the payment of the Obligations guaranteed hereby has been
accelerated or in the case of clause (b) the Borrower is in
default with respect to the Obligations guaranteed hereby.
SECTION 10. Representations and Warranties. To
induce the Banks to enter into the Credit Agreement and to make
Loans thereunder and to issue the Letters of Credit, the
Guarantor represents and warrants to each Bank that the
following statements are true, correct and complete on and as
of the Closing Date:
A. Organization and Powers. The Guarantor is a
duly organized and validly existing corporation in good
standing under the laws of the jurisdiction of its organization
and has the corporate power and authority to own its property
and assets and to transact the business in which it is engaged
and currently proposes to engage. The Guarantor has duly
qualified and is authorized to do business and is in good
standing in all jurisdictions in which the conduct of its
business or the ownership of its properties requires such
qualification, except where the failure to be so qualified
would not have a Materially Adverse Effect. The Guarantor has
all requisite governmental licenses, authorizations, consents
and approvals to own and carry on its business as now conducted
and as presently contemplated to be conducted by the Guarantor,
other than such licenses, authorizations, consents and
approvals the failure to obtain which has not had and will not
have a Materially Adverse Effect. The Guarantor has all
corporate authority to enter into each of the Security
Documents to which it is a party and to carry out the
transactions contemplated therby and to execute and deliver
this Guarantee.
B. No Violations. Neither the execution, delivery
or performance by the Guarantor of any of the Credit Documents
to which it is a party, nor compliance with any of the terms
and provisions thereof, nor the consummation of any of the
transactions contemplated therein, nor the grant and perfection
of the security interests pursuant to the Security Documents
<PAGE>
-8-
(a) will contravene any applicable provision of any law,
statute, rule, regulation, order, writ, injunction or decree of
any Governmental Authority, (b) will conflict or be
inconsistent with or result in any breach of, any of the terms,
covenants, conditions or provisions of, or constitute (with
notice or lapse of time or both) a default under any material
contractual obligation of the Guarantor or any of its
Subsidiaries, or (other than as contemplated by the Security
Documents) result in the creation or imposition of (or the
obligation to create or impose), any Lien upon any of the
property or assets of the Guarantor or any of its Subsidiaries
pursuant to any material contractual obligation of the
Guarantor or (c) will violate any provision of the
organizational documents of the Guarantor or any of its
Subsidiaries, except in each such case where such
contravention, conflict, inconsistancy, breach, default,
creation, impostion, obligation or violation would not have a
Materially Adverse Effect.
C. Approvals. The execution, delivery and
performance by the Guarantor of the Credit Documents to which
it is a party do not and will not require any registration
with, consent or waiver or approval of, or notice to, or other
action to, with or by, any Governmental Authority or other
Person (other than those registrations, consents, waivers,
approvals, notices or other actions which if not obtained or
made, would not have a Materially Adverse Effect) except
filings required for the perfection of security intersts
granted pursuant to the Security documents. All consents and
approvals from or notices to or filings with any Governmental
Authority or other Person required to be obtained by Guarantor
have been obtained and are in full force and effect (other than
those consents, waivers, approvals, notices or filings which,
if not obtained or made, would not have a Materially Adverse
Effect).
D. Binding Obligation. This Guarantee constitutes
the legal, valid and binding obligation of the Guarantor,
enforceable against the Guarantor in accordance with its terms,
except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors'
rights generally and except as such enforceability may be
limited by the application general principles of equity,
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
E. Investment Company. The Guarantor is not an
"investment company" or a company "controlled" by an
"investment company" (as each of such quoted terms is defined
or used
<PAGE>
-9-
in the Investment Company Act of 1940, as amended) or
subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act or any foreign, federal or
local statute or regulation limiting its ability to incur
Indebtedness for money borrowed or guarantee such Indebtedness
as contemplated hereby or by any other Credit Document.
SECTION 11. Ratable Sharing. The Banks by
acceptance of this Guarantee agree among themselves that with
respect to all amounts received by them which are applicable to
the payment of obligations of the Guarantor under this
Guarantee, if the Banks, or the Agent or Collateral Agent on
behalf of the Banks, exercise their rights hereunder,
including, without limitation, acceleration of the obligations
of the Guarantor hereunder, equitable adjustment will be made
so that, in effect, all such amounts will be shared among the
Banks pro rata based on the relative outstanding Guaranteed
Obligations.
SECTION 12. Merger. If the Guarantor shall merge
into or consolidate with another corporation, or liquidate,
wind up or dissolve itself in a transaction not prohibited by
the Credit Agreement, or if all of the stock of the Guarantor
shall be sold or otherwise disposed of in a manner not
prohibited by the Credit Agreement, the Guarantor hereby
covenants and agrees, that upon any such merger, consolidation,
liquidation, or dissolution, the guarantee given in this
Guarantee and the due and punctual performance and observance
of all of the covenants and conditions of the Credit Agreement
to be performed by the Guarantor, shall be expressly assumed
(in the event that the Guarantor is not the surviving
corporation in the merger) by supplemental agreements
satisfactory in form to the Agent or Collateral Agent on behalf
of the Banks, by the corporation or corporations formed by such
consolidation, or into which the Guarantor shall have been
merged, or by the corporation or corporations which shall have
acquired such property. In addition, the Guarantor shall
deliver to the Agent or Collateral Agent on behalf of the
Banks, an Officers' Certificate and an opinion of counsel, each
stating that such merger, consolidation or transfer and such
supplemental agreements comply with this Guarantee and that all
conditions precedent herein provided relating to such
transaction have been complied with. In case of any such
consolidation, merger, sale or conveyance and upon the
assumption by the successor corporation or corporations, by
supplemental agreements executed and delivered to the Agent or
Collateral Agent on behalf of the Banks, and reasonably
satisfactory in form to the Agent or Collateral Agent on behalf
of the Banks, of the guarantee given in this
<PAGE>
-10-
Guarantee and the due and punctual performance of all of the
covenants and conditions of the Credit Agreement to be performed
by the Guarantor, such successor corporation or corporations
shall succeed to and be substituted for the Guarantor, with the
same effect as if it or they had been named herein as a
guarantor.
SECTION 13. No Waiver. No failure to exercise and
no delay in exercising, on the part of the Banks, or the Agent
or Collateral Agent on behalf of the Banks, any right, power or
privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof, or
the exercise of any other power of right. The rights and
remedies herein provided are cumulative and are not exclusive
of any rights and remedies provided by law.
SECTION 14. Notices. All notices, demands,
instructions or other communications required or permitted to
be given to or made upon any party hereto shall be given in
accordance with the provisions of the Credit Agreement and at
the address set forth therein or as provided on the signature
page hereof.
SECTION 15. Amendments, Waivers, etc. No
provision of this Guarantee shall be waived, amended,
terminated or supplemented except by a written instrument
executed by the Guarantor and the Agent or Collateral Agent, on
behalf of the Banks.
SECTION 16. Notice of Exercise. Upon exercise of
its rights hereunder, each Bank, or the Agent or Collateral
Agent on behalf of the Banks, as the case may be, shall provide
written notice on the date of such exercise to the Banks, or
the Agent or Collateral Agent on behalf of the Banks, as the
case may be, of such exercise.
SECTION 17. GOVERNING LAW. THIS GUARANTEE SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 18. CONSENT TO JURISDICTION AND SERVICE OF
PROCESS. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE
GUARANTOR WITH RESPECT TO THIS GUARANTEE MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETANT JURISDICTION IN THE STATE
OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS GUARANTEE THE
<PAGE>
-11-
GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS. THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVE TO THE EXTENT PERMITTED BY APPLICABLE
LAW ANY RIGHT TO TRIAL BY JURY, AND THE GUARANTOR HEREBY
IRREVOCABLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR
PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THE GUARANTOR
DESIGNATES AND APPOINTS CT CORPORATION, SYSTEM, HAVING AN
ADDRESS AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, AND SUCH
OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE GUARANTOR
IRREVOCABLY AGREEING IN WRITING TO SERVE, AS ITS AGENT TO
RECEIVE ON ITS BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE GUARANTOR TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED
SHALL BE MAILED BY REGISTERED MAIL TO THE GUARANTOR AS PROVIDED
IN SECTION 14 HEREOF. IF ANY AGENT APPOINTED BY THE GUARANTOR
REFUSES TO ACCEPT SERVICE, THE GUARANTOR HEREBY AGREES THAT
SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE.
NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF ANY
BANK TO BRING PROCEEDINGS AGAINST THE GUARANTOR IN THE COURTS
OF ANY OTHER JURISDICTION.
SECTION 19. Counterparts. This Guarantee and any
amendments, waivers, consents or supplements may be executed in
any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this
Guarantee to be duly executed and delivered by its duly
authorized officer on the day and year first above written.
CARSON, INC.
By: _______________________________
Name:
Title:
Notice Address:
CARSON, INC.
1 Morningside Drive, North
Suite 200
Westport, CT 06880
Attn: President
<PAGE>
Exhibit F-1 to the
Credit Agreement
BORROWER SECURITIES PLEDGE AGREEMENT
BORROWER SECURITIES PLEDGE AGREEMENT (the
"Agreement"), dated as of October __, 1996, made by CARSON
PRODUCTS COMPANY (formerly known as Aminco, Inc., as successor
by merger to DNL Savannah Acquisition Corp.), a Delaware
corporation having an office at 64 Ross Road, Savannah, Georgia
31405 ("Pledgor"), in favor of BANQUE INDOSUEZ, NEW YORK
BRANCH, having an office at 1211 Avenue of the Americas, 7th
Floor, New York, New York 10036, as pledgee, assignee and
secured party, in its capacity as collateral agent (in such
capacities and together with any successors in such capacities,
"Collateral Agent") for the lending institutions (the "Banks")
from time to time party to the Credit Agreement (as hereinafter
defined).
R E C I T A L S :
A. Pursuant to a certain credit agreement, dated as
of the date hereof (as amended, amended and restated,
supplemented or otherwise modified from time to time, the
"Credit Agreement"; capitalized terms used herein and not
defined shall have the meanings assigned to them in the Credit
Agreement), among Pledgor, the Banks and Banque Indosuez, New
York Branch, as Agent and Collateral Agent for the Banks, the
Banks have agreed (i) to make to or for the account of Pledgor
certain A Term Loans up to an aggregate principal amount of
$15,000,000, certain B Term Loans up to an aggregate principal
amount of $10,000,000 and certain Revolving Loans up to an
aggregate principal amount of $15,000,000 and (ii) to issue
certain Letters of Credit for the account of Pledgor.
B. It is contemplated that Pledgor may enter into
one or more agreements with one or more of the Banks ("Interest
Rate Agreements") fixing the interest rates with respect to
Loans under the Credit Agreement (all obligations of Pledgor
now existing or hereafter arising under such Interest Rate
Agreements, collectively, the "Interest Rate Obligations").
C. Pledgor is the legal and beneficial owner of the
Pledged Collateral (as hereinafter defined).
D. It is a condition to the obligations of the
Banks to make the Loans under the Credit Agreement and a
condition to any Bank issuing Letters of Credit under the
Credit
<PAGE>
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Agreement or entering into the Interest Rate Agreements that Pledgor execute and
deliver the applicable Credit Documents, including this Agreement.
E. This Agreement is given by Pledgor in favor of Collateral
Agent for its benefit and the benefit of the Banks and the Agent
(collectively, the "Secured Parties") to secure the payment and performance
of all of the Secured Obligations (as defined in Section 2).
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing premises and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Pledgor and Collateral Agent hereby agree as
follows:
Section 1. Pledge. As collateral security for the payment and
performance when due of all the Secured Obligations, Pledgor hereby
pledges, assigns, transfers and grants to Collateral Agent for its benefit
and the benefit of the Secured Parties, a continuing first priority
security interest in and to all of the right, title and interest of Pledgor
in, to and under the following property, whether now existing or hereafter
acquired (collectively, the "Pledged Collateral"):
(a) issued and outstanding shares of capital stock of each
Person described in Schedule I hereto (the "Pledged Shares") (which
are and shall remain at all times until this Agreement terminates,
certificated shares), including the certificates representing the
Pledged Shares and any interest of Pledgor in the entries on the
books of any financial intermediary pertaining to the Pledged Shares;
(b) all additional shares of capital stock of any issuer of
the Pledged Shares from time to time acquired by Pledgor in any
manner (which are and shall remain at all times until this Agreement
terminates, certificated shares) (which shares shall be deemed to be
part of the Pledged Shares), including the certificates representing
such additional shares and any interest of Pledgor in the entries on
the books of any financial intermediary pertaining to such additional
shares;
(c) all intercompany notes described on Schedule II hereto
(the "Intercompany Notes") now owned or held by
<PAGE>
-3-
Pledgor and from time to time acquired by Pledgor in any way, and all
certificates or instruments evidencing such Intercompany Notes and all
proceeds thereof, all accessions thereto and substitutions therefor;
(d) all dividends, cash, options, warrants, rights,
instruments, distributions, returns of capital, income,
profits and other property, interests or proceeds from time to time
received, receivable or otherwise distributed to Pledgor in respect
of or in exchange for any or all of the Pledged Shares or
Intercompany Notes (collectively, "Distributions"); and
(e) all "proceeds" (as such term is defined in the UCC or
under other relevant law) of any of the foregoing.
Section 2. Secured Obligations. This Agreement secures, and
the Pledged Collateral is collateral security for, the payment and
performance in full when due, whether at stated maturity, by acceleration
or otherwise (including, without limitation, the payment of interest and
other amounts which would accrue and become due but for the filing of a
petition in bankruptcy or the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, 11 U.S.C. { 362(a)) of (i) all
Obligations of Pledgor now existing or hereafter arising under the Credit
Agreement and all Interest Rate Obligations of Pledgor now existing or
hereafter arising under any Interest Rate Agreement (including, without
limitation, Pledgor's obligation provided for therein to pay principal,
interest and all other charges, fees, expenses, commissions,
reimbursements, premiums, indemnities and other payments related to or in
respect of the Obligations contained in the Credit Agreement and the
obligations contained in any Interest Rate Agreement), and (ii) without
duplication of the amounts described in clause (i), all obligations of
Pledgor now existing or hereafter arising under this Agreement or any other
Security Document, including, without limitation, with respect to all
charges, fees, expenses, commissions, reimbursements, premiums, indemnities
and other payments that Pledgor is obligated to pay under this Agreement or
any other Security Document (the obligations described in clauses (i) and
(ii), collectively, the "Secured Obligations").
Section 3. No Release. Nothing set forth in this Agreement
shall relieve Pledgor from the performance of any term, covenant, condition
or agreement on Pledgor's part to be performed or observed under or in
respect of any of the Pledged
<PAGE>
-4-
Collateral or from any liability to any Person under or in respect of any of the
Pledged Collateral or shall impose any obligation on Collateral Agent or any
Secured Party to perform or observe any such term, covenant, condition or
agreement on Pledgor's part to be so performed or observed or shall impose any
liability on Collateral Agent or any Secured Party for any act or omission on
the part of Pledgor relating thereto or for any breach of any representation or
warranty on the part of Pledgor contained in this Agreement, any Interest Rate
Agreement or any other Credit Document or under or in respect of the Pledged
Collateral or made in connection herewith or therewith. The obligations of
Pledgor contained in this Section 3 shall survive the termination of this
Agreement and the discharge of Pledgor's other obligations under this Agreement,
any Interest Rate Agreement and the other Credit Documents.
Section 4. Delivery of Pledged Collateral.
(a) All certificates, agreements or instruments representing
or evidencing the Pledged Collateral, to the extent not previously
delivered to Collateral Agent, shall immediately upon receipt thereof by
Pledgor be delivered to and held by or on behalf of Collateral Agent
pursuant hereto. All Pledged Collateral shall be in suitable form for
transfer by delivery or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance reasonably
satisfactory to Collateral Agent. Collateral Agent shall have the right,
at any time upon the occurrence of an Event of Default and without notice
to Pledgor, to endorse, assign or otherwise transfer to or to register in
the name of Collateral Agent or any of its nominees any or all of the
Pledged Collateral. In addition, Collateral Agent shall have the right at
any time to exchange certificates representing or evidencing Pledged
Collateral for certificates of smaller or larger denominations.
(b) If the issuer of Pledged Shares is incorporated in a
jurisdiction which does not permit the use of certificates to evidence
equity ownership, then Pledgor shall, to the extent permitted by applicable
law, record such pledge on the stock register of the issuer, execute any
customary stock pledge forms or other documents necessary or appropriate to
complete the pledge and give Collateral Agent the right to transfer such
Pledged Shares under the terms hereof and provide to Collateral Agent an
opinion of counsel, in form and substance reasonably satisfactory to
Collateral Agent, confirming such pledge.
<PAGE>
-5-
Section 5. Supplements, Further Assurances.
(a) Pledgor agrees that at any time and from time to time, at
the sole cost and expense of Pledgor, Pledgor shall promptly execute and
deliver all further instruments and documents, including, without
limitation, supplemental or additional UCC-1 financing statements, and take
all further action that may be necessary or that Collateral Agent may
reasonably request, in order to perfect and protect the pledge, security
interest and Lien granted or purported to be granted hereby or to enable
Collateral Agent to exercise and enforce its rights and remedies hereunder
with respect to any Pledged Collateral.
(b) Pledgor shall, upon obtaining any Pledged Shares or
Intercompany Notes of any Person, promptly (and in any event within five
Business Days) deliver to Collateral Agent a pledge amendment, duly
executed by Pledgor, in substantially the form of Exhibit 1 hereto (each, a
"Pledge Amendment"), in respect of the additional Pledged Shares or
Intercompany Notes which are to be pledged pursuant to this Agreement, and
confirming the attachment of the Lien hereby created on and in respect of such
additional shares. Pledgor hereby authorizes Collateral Agent to attach each
Pledge Amendment to this Agreement and agrees that all Pledged Shares or
Intercompany Notes listed on any Pledge Amendment delivered to Collateral Agent
shall for all purposes hereunder be considered Pledged Collateral.
Section 6. Representations, Warranties and Covenants. Pledgor
represents, warrants and covenants as follows; provided that the
representations, warranties, covenants and conditions of or relating to the
Sellers in the Purchase Agreement (i) are given only to the best of
Pledgor's knowledge, and (ii) shall not be deemed a waiver of any rights
nor an admission of the truth thereof by any Credit Party or any other
Purchaser Indemnified Party (as defined in the Purchase Agreement) as
against any other party to the Purchase Agreement:
(a) No Liens. Pledgor is as of the date hereof, and at the
time of any delivery of any Pledged Collateral to Collateral Agent
pursuant to Section 4 of this Agreement, Pledgor will be, the sole
legal and beneficial owner of the Pledged Collateral. All Pledged
Collateral is on the date hereof, and will be, so owned by Pledgor
free and clear of any Lien except for the Lien created by this
Agreement and Liens of the type described in paragraph (a) of the
definition of Permitted Encumbrances.
<PAGE>
-6-
(b) Authorization, Enforceability. Pledgor has the requisite
corporate power, authority and legal right to pledge and grant a
security interest in all the Pledged Collateral pursuant to this
Agreement, and this Agreement constitutes the legal, valid and
binding obligation of Pledgor, enforceable against Pledgor in
accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
affecting creditors' rights generally and except as such
enforceability may be limited by the application of general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(c) No Consents, etc. No consent of any party (including,
without limitation, stockholders or creditors of Pledgor) and no
consent, authorization, approval, license or other action by, and no
notice to or filing with, any Governmental Authority or regulatory
body or other Person is required for (x) the pledge by Pledgor of the
Pledged Collateral pursuant to this Agreement or for the execution,
delivery or performance of this Agreement by Pledgor, (y) the
exercise by Collateral Agent of the voting or other rights provided
for in this Agreement, or (z) the exercise by Collateral Agent of the
remedies in respect of the Pledged Collateral pursuant to this Agreement
(other than those consents, authorizations, approvals, actions, notices or
filings which, if not obtained or made, would not have a material adverse
effect upon the interests of Collateral Agent under this Agreement).
(d) Due Authorization and Issuance. All of the Pledged Shares
have been, and to the extent hereafter issued will be upon such
pledge, duly authorized and validly issued and fully paid and
nonassessable.
(e) Chief Executive Office. Pledgor's chief executive office
is located at 64 Ross Road, Savannah, Georgia 31405. Pledgor shall
not move its chief executive office except to such new location as
Pledgor may establish in accordance with the last sentence of this
Section 6(e). Pledgor shall not establish a new location for its
chief executive office nor shall it change its name until (i) it
shall have given Collateral Agent not less than 45 days' prior
written notice of its intention so to do, clearly describing such new
location or name and providing such other information in connection
therewith as Collateral
<PAGE>
-7-
Agent or any Secured Party may request, and (ii) with respect to such new
location or name, Pledgor shall have taken all action satisfactory to
Collateral Agent and the Secured Parties to maintain the perfection and
priority of the security interest of Collateral Agent for the benefit of
the Secured Parties in the Pledged Collateral intended to be granted
hereby.
(f) Delivery of Pledged Collateral; Filings. Pledgor has
delivered to Collateral Agent all certificates representing the
Pledged Shares and Intercompany Notes and has delivered to Collateral
Agent appropriate UCC-1 financing statements to be filed with the
Secretary of State of the States of New York and Georgia, the State
in which the chief executive office of Pledgor is located, evidencing
the Lien created by this Agreement, and such delivery, filing and
pledge of the Pledged Collateral pursuant to this Agreement will
create a valid and perfected first priority security interest in the
Pledged Collateral securing the payment of the Secured Obligations
pursuant to the UCC in effect in each applicable jurisdiction,
including, without limitation, the States of New York and Georgia.
(g) Pledged Collateral. All information set forth herein,
including the Schedules annexed hereto, and all information contained
in any documents, schedules and lists heretofore delivered to any
Secured Party in connection with this Agreement, in each case,
relating to the Pledged Collateral is accurate and complete in all
material respects.
(h) No Violations, etc. The pledge of the Pledged Collateral
pursuant to this Agreement does not violate Regulation G, T, U or X
of the Federal Reserve Board.
(i) Ownership of Pledged Collateral. Except as otherwise
permitted by the Credit Agreement, Pledgor at all times will be the
sole beneficial owner of the Pledged Collateral.
(j) No Options, Warrants, etc. There are no options,
warrants, calls, rights, commitments or agreements of any character
to which Pledgor is a party or by which it is bound obligating
Pledgor to deliver or sell or cause to be issued, delivered or sold,
additional Pledged Shares or obligating Pledgor to grant, extend or
enter
<PAGE>
-8-
into any such option, warrant, call, right, commitment or agreement. There
are no voting trusts or other agreements or understandings to which
Pledgor is a party with respect to the voting of the capital stock of any
issuer of the Pledged Shares.
Section 7. Voting Rights; Distributions; etc.
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) Pledgor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Pledged Shares or any
part thereof for any purpose not inconsistent with the terms or
purpose of this Agreement or any other Credit Document; provided,
however, that Pledgor shall not in any event exercise such rights in
any manner which may have a material adverse effect on the value of
the Pledged Collateral or the security intended to be provided by
this Agreement.
(ii) Subject to the terms of the Credit Agreement, Pledgor
shall be entitled to receive and retain, and to utilize free and
clear of the Lien of this Agreement, any and all Distributions, but
only if and to the extent made in accordance with the provisions of
the Credit Agreement; provided, however, that any and all such
Distributions consisting of rights or interests in the form of
securities shall be, and shall be forthwith delivered to Collateral
Agent to hold as Pledged Collateral and shall, if received by
Pledgor, be received in trust for the benefit of Collateral Agent, be
segregated from the other property or funds of Pledgor, and be
forthwith delivered to Collateral Agent as Pledged Collateral in the
same form as so received (with any necessary endorsement).
(iii) Collateral Agent shall be deemed without further action or
formality to have granted to Pledgor all necessary consents relating
to voting rights and shall, if necessary, upon written request of Pledgor
and at Pledgor's sole cost and expense, from time to time execute and
deliver (or cause to be executed and delivered) to Pledgor all such
instruments as Pledgor may reasonably request in order to permit Pledgor
to exercise the voting and other rights which it is entitled to exercise
pursuant to Section 7(a)(i) hereof and to receive the Distributions
<PAGE>
-9-
which it is authorized to receive and retain pursuant to Section 7(a)(ii)
hereof.
(b) Upon the occurrence and during the continuance of an Event
of Default:
(i) All rights of Pledgor to exercise the voting and other
consensual rights it would otherwise be entitled to exercise pursuant
to Section 7(a)(i) hereof without any action or the giving of any
notice shall cease, and all such rights shall thereupon become vested
in Collateral Agent, which shall thereupon have the sole right to
exercise such voting and other consensual rights.
(ii) All rights of Pledgor to receive Distributions which it
would otherwise be authorized to receive and retain pursuant to
Section 7(a)(ii) hereof shall cease and all such rights shall
thereupon become vested in Collateral Agent, which shall thereupon
have the sole right to receive and hold as Pledged Collateral such
Distributions; provided, that if such Event of Default is cured, any
such Distributions theretofore paid to Collateral Agent shall, upon
the request of Pledgor (except to the extent theretofore applied to
the Secured Obligations), be returned by Collateral Agent to Pledgor.
(c) Pledgor shall, at its sole cost and expense, from time to
time execute and deliver to Collateral Agent appropriate instruments as
Collateral Agent may reasonably request in order to permit Collateral Agent
to exercise the voting and other rights which it may be entitled to
exercise pursuant to Section 7(b)(i) hereof and to receive all
Distributions which it may be entitled to receive under Section 7(b)(ii)
hereof.
(d) All Distributions which are received by Pledgor contrary
to the provisions of Section 7(b)(ii) hereof shall be received in trust for
the benefit of Collateral Agent, shall be segregated from other funds of
Pledgor and shall immediately be paid over to Collateral Agent as Pledged
Collateral in the same form as so received (with any necessary
endorsement).
Section 8. Transfers and Other Liens; Additional Shares;
Principal Office.
(a) Pledgor shall not (i) sell, convey, assign or otherwise
dispose of, or grant any option, right or warrant
<PAGE>
-10-
with respect to, any of the Pledged Collateral except as permitted by the
Credit Agreement, (ii) create or permit to exist any Lien upon or with
respect to any Pledged Collateral other than the Lien and security interest
granted to Collateral Agent pursuant to this Agreement and Liens of the
type described in paragraph (a) of the definition of Permitted
Encumbrances, or (iii) permit any issuer of the Pledged Shares to merge,
consolidate or change its legal form, except as permitted by the Credit
Agreement unless all of the outstanding capital stock of the surviving or
resulting corporation is, upon such merger or consolidation, pledged
hereunder and no cash, securities or other property is distributed in
respect of the outstanding shares of any other constituent corporation.
The preceding sentence shall not apply to any sale or other disposition of
all of the stock of the issuer of Pledged Shares which is in compliance
with the Credit Agreement and the proceeds of which sale or other
disposition are used to make a mandatory prepayment of the Loans pursuant
to Section 3.02(A) of the Credit Agreement. Upon such sale or other
disposition, such Pledged Shares shall be released from the Lien of this
Agreement in accordance with Section 17 of this Agreement.
(b) Pledgor shall (i) cause each issuer of the Pledged Shares
not to issue any stock or other securities in addition to or in
substitution for the Pledged Shares issued by such issuer, except to
Pledgor, unless required by applicable law, and (ii) pledge hereunder,
immediately upon its acquisition (directly or indirectly) thereof, any and
all additional shares of capital stock or other equity securities of the
issuer of the Pledged Shares which are required to be pledged hereunder.
Section 9. Reasonable Care. Collateral Agent shall be deemed
to have exercised reasonable care in the custody and preservation of the
Pledged Collateral in its possession if such Pledged Collateral is accorded
treatment substantially equivalent to that which Collateral Agent, in its
individual capacity, accords its own property consisting of similar
instruments or interests, it being understood that neither Collateral Agent
nor any of the Secured Parties shall have responsibility for (i)
ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relating to any Pledged
Collateral, whether or not Collateral Agent or any other Secured Party has
or is deemed to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any Person with respect to any
Pledged Collateral.
<PAGE>
-11-
Section 10. Remedies Upon Default; Decisions Relating to
Exercise of Remedies.
(a) If an Event of Default shall have occurred and be
continuing, and the Secured Obligations have been declared due and payable
in accordance with the Credit Agreement, Collateral Agent shall have the right,
in addition to other rights and remedies provided for herein or otherwise
available to it to be exercised from time to time, (i) to retain and apply the
Distributions to the Secured Obligations as provided in Section 11 hereof, and
(ii) to exercise all the rights and remedies of a secured party on default under
the UCC in effect in the State of New York at that time, and Collateral Agent
may also in its sole discretion, without notice except as specified below, sell
the Pledged Collateral or any part thereof (including, without limitation, any
partial interest in the Pledged Shares) in one or more parcels at public or
private sale, at any exchange, broker's board or at any of Collateral Agent's
offices or elsewhere, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as Collateral Agent may deem
commercially reasonable, irrespective of the impact of any such sales on the
market price of the Pledged Collateral. Collateral Agent or any other Secured
Party or any of their respective Affiliates may be the purchaser of any or all
of the Pledged Collateral at any such sale and shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Pledged Collateral sold at such sale, to use and apply
any of the Secured Obligations owed to such Person as a credit on account of the
purchase price of any Pledged Collateral payable by such Person at such sale.
Each purchaser at any such sale shall acquire the property sold absolutely free
from any claim or right on the part of Pledgor, and Pledgor hereby waives, to
the fullest extent permitted by law, all rights of redemption, stay and/or
appraisal which it now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted. Pledgor acknowledges and
agrees that, to the extent notice of sale shall be required by law, ten days
notice to Pledgor of the time and place of any public sale or the time after
which any private sale or other intended disposition is to take place shall
constitute reasonable notification of such matters. No notification need be
given to Pledgor if it has signed, after the occurrence of an Event of Default,
a statement renouncing or modifying any right to notification of sale or other
intended disposition. Collateral Agent shall not be obligated to make any sale
of Pledged Collateral regardless of notice of sale
<PAGE>
-12-
having been given. Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Pledgor hereby waives, to the fullest extent permitted by law, any
claims against Collateral Agent arising by reason of the fact that the price at
which any Pledged Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale, even if
Collateral Agent accepts the first offer received and does not offer such
Pledged Collateral to more than one offeree. Collateral Agent shall not be
liable for any incorrect or improper payment made pursuant to this Section 10 in
the absence of gross negligence or willful misconduct.
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Securities Act"),
and applicable state securities laws, Collateral Agent may be compelled,
with respect to any sale of all or any part of the Pledged Collateral, to
limit purchasers to Persons who will agree, among other things, to acquire
the Pledged 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
Collateral Agent than those obtainable through a public sale without such
restrictions (including, without limitation, a public offering made
pursuant to a registration statement under the Securities Act), and,
notwithstanding such circumstances, agrees that any such private sale shall
be deemed to have been made in a commercially reasonable manner and that
Collateral Agent shall have no obligation to engage in public sales and no
obligation to delay the sale of any Pledged Collateral for the period of
time necessary to permit the issuer thereof to register it for a form of
public sale requiring registration under the Securities Act or under
applicable state securities laws, even if such issuer would agree to do so.
(c) If Collateral Agent determines to exercise its right to
sell any or all of the Pledged Collateral, upon written request, Pledgor
shall from time to time furnish to Collateral Agent all such information as
Collateral Agent may request in order to determine the number of securities
included in the Pledged Collateral which may be sold by Collateral Agent as
exempt transactions under the Securities Act and the rules of the
Securities and Exchange Commission thereunder, as the same are from time to
time in effect.
<PAGE>
-13-
(d) Pledgor recognizes that, by reason of certain prohibitions
contained in laws, rules, regulations or orders of any foreign Governmental
Authority, Collateral Agent may be compelled, with respect to any sale of
all or any part of the Pledged Collateral, to limit purchasers to those who
meet the requirements of such foreign Governmental Authority. Pledgor
acknowledges that any such sales may be at prices and on terms less
favorable to Collateral Agent than those obtainable through a public sale
without such restrictions, and, notwithstanding such circumstances, agrees
that any such restricted sale shall be deemed to have been made in a
commercially reasonable manner and that, except as may be required by
applicable law, Collateral Agent shall have no obligation to engage in
public sales.
(e) In addition to any of the other rights and remedies
hereunder, Collateral Agent shall have the right to institute a proceeding
seeking specific performance in connection with any of the agreements or
obligations hereunder.
Section 11. Application of Proceeds. All Distributions held
from time to time by Collateral Agent and all proceeds received by
Collateral Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Pledged Collateral pursuant to the
exercise by Collateral Agent of its remedies as a secured creditor as
provided in Section 10 hereof shall be applied, together with any other
sums then held by Collateral Agent pursuant to this Agreement, promptly by
Collateral Agent as follows:
First, to the payment of all costs and expenses, fees,
commissions and taxes of such sale, collection or other realization,
including, without limitation, reasonable out-of-pocket costs and
expenses of Collateral Agent and its agents and counsel, and all
expenses, liabilities and advances made or incurred by Collateral
Agent in connection therewith;
Second, to the payment of all other costs and expenses of such
sale, collection or other realization, including reasonable
out-of-pocket costs and expenses of the Banks and their agents and
counsel and all costs, liabilities and advances made or incurred by
the Banks in connection therewith;
Third, to the payment in full in cash of Secured Obligations
consisting of interest and all amounts other
<PAGE>
-14-
than principal under the Credit Agreement at any time and from time to
time owing by Pledgor under or in connection with the Credit Agreement,
ratably according to the unpaid amounts thereof, in the manner and
priority set forth in the Credit Agreement, together with interest on each
such amount in the manner and to the extent set forth in the Credit
Agreement from and after the date such amount is due, owing or unpaid
until paid in full;
Fourth, to the pro rata payment in full in cash of Secured
Obligations consisting of (i) principal at any time and from time to
time owing by Pledgor under or in connection with the Credit
Agreement, ratably according to the unpaid amounts thereof, in the
manner and priority set forth in the Credit Agreement and (ii) the
amount of Pledgor's obligations then due and payable under any
Interest Rate Agreement, including any early termination payments
then due (exclusive of expenses or similar liabilities to any Bank
under the applicable Interest Rate Agreement(s)), together with
interest on each such amount in the manner and to the extent set
forth in the Credit Agreement from and after the date such amount is
due, owing or unpaid until paid in full; and
Fifth, the balance, if any, to the Person lawfully entitled
thereto (including Pledgor or its successors or assigns).
Section 12. Expenses. Pledgor will upon demand pay to
Collateral Agent the amount of any and all reasonable expenses, including
the reasonable fees and expenses of its counsel and the reasonable fees and
expenses of any experts and agents, which Collateral Agent may incur in
connection with (i) the collection of the Secured Obligations, (ii) the
enforcement and administration of this Agreement, (iii) the custody or
preservation of, or the sale of, collection from, or other realization
upon, any of the Pledged Collateral, (iv) the exercise or enforcement of
any of the rights of Collateral Agent or any Secured Party hereunder or (v)
the failure by Pledgor to perform or observe any of the provisions hereof.
All amounts payable by Pledgor under this Section 12 shall be due within
ten Business Days after demand and shall be part of the Secured
Obligations. Pledgor's obligations under this Section 12 shall survive the
termination of this Agreement and the discharge of Pledgor's other
obligations hereunder.
<PAGE>
-15-
Section 13. No Waiver; Cumulative Remedies. (a) No failure
on the part of Collateral Agent to exercise, no course of dealing with
respect to, and no delay on the part of Collateral Agent in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such 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 provided are
cumulative and are not exclusive of any remedies provided by law.
(b) In the event Collateral Agent shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined
adversely to Collateral Agent, then and in every such case, Pledgor,
Collateral Agent and each Secured Party shall be restored to their
respective former positions and rights hereunder with respect to the
Pledged Collateral, and all rights, remedies and powers of Collateral Agent
and the Secured Parties shall continue as if no such proceeding had been
instituted.
Section 14. Collateral Agent. Collateral Agent has been
appointed as collateral agent pursuant to the Credit Agreement. The
actions of Collateral Agent hereunder are subject to the provisions of the
Credit Agreement. Collateral Agent shall have the right hereunder to make
demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking action (including, without
limitation, the release or substitution of Pledged Collateral), in
accordance with this Agreement and the Credit Agreement. Collateral Agent may
resign and a successor Collateral Agent may be appointed in the manner provided
in the Credit Agreement. Upon the acceptance of any appointment as Collateral
Agent by a successor Collateral Agent, that successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Collateral Agent under this Agreement, and the
retiring Collateral Agent shall thereupon be discharged from its duties and
obligations under this Agreement. After any retiring Collateral Agent's
resignation, the provisions of this Agreement shall inure to its benefit as to
any actions taken or omitted to be taken by it under this Agreement while it was
Collateral Agent.
Section 15. Collateral Agent May Perform; Collateral Agent
Appointed Attorney-in-Fact. If Pledgor shall fail to do
<PAGE>
-16-
any act or thing that it has covenanted to do hereunder or any warranty on the
part of Pledgor contained herein shall be breached, Collateral Agent or any
Secured Party may (but shall not be obligated to) do the same or cause it to be
done or remedy any such breach, and may, following five Business Days' prior
written notice to Pledgor of its intention to do so, expend funds for such
purpose. Any and all amounts so expended by Collateral Agent or such Secured
Party shall be paid by Pledgor within ten Business Days after demand therefor,
with interest at the highest rate then in effect under the Credit Agreement
during the period from and including the date on which such funds were so
expended to the date of repayment. Pledgor's obligations under this Section 15
shall survive the termination of this Agreement and the discharge of Pledgor's
other obligations under this Agreement, the Credit Agreement, any Interest Rate
Agreement and the other Credit Documents. Pledgor hereby appoints Collateral
Agent its attorney-in-fact, with full authority in the place and stead of
Pledgor and in the name of Pledgor, or otherwise, from time to time in
Collateral Agent's reasonable discretion to take any action and to execute any
instrument consistent with the terms of this Agreement and the other Credit
Documents which Collateral Agent may deem reasonably necessary or advisable to
accomplish the purposes of this Agreement. The foregoing grant of authority is a
power of attorney coupled with an interest and such appointment shall be
irrevocable for the term of this Agreement. Pledgor hereby ratifies all that
such attorney shall lawfully do or cause to be done by virtue hereof.
Section 16. Modification in Writing. No amendment,
modification, supplement, termination or waiver of or to any provision of
this Agreement, nor consent to any departure by Pledgor therefrom, shall be
effective unless the same shall be done in accordance with the terms of the
Credit Agreement and unless in writing and signed by Collateral Agent. Any
amendment, modification or supplement of or to any provision of this
Agreement, any waiver of any provision of this Agreement and any consent to
any departure by Pledgor from the terms of any provision of this Agreement shall
be effective only in the specific instance and for the specific purpose for
which made or given. Except where notice is specifically required by this
Agreement or any other Credit Document, no notice to or demand on Pledgor in any
case shall entitle Pledgor to any other or further notice or demand in similar
or other circumstances.
Section 17. Termination; Release. When all the Secured
Obligations have been paid in full and the Commitments
<PAGE>
-17-
of the Banks to make any Loan or to issue any Letter of Credit under the Credit
Agreement shall have expired or been sooner terminated, this Agreement shall
terminate. Upon termination of this Agreement or any release of Pledged
Collateral in accordance with the provisions of the Credit Agreement, Collateral
Agent shall, upon the request and at the sole cost and expense of Pledgor,
forthwith assign, transfer and deliver to Pledgor, against receipt and without
recourse to or warranty by Collateral Agent, such of the Pledged Collateral to
be released (in the case of a release) as may be in the possession of Collateral
Agent and as shall not have been sold or otherwise applied pursuant to the terms
hereof, and, with respect to any other Pledged Collateral, proper instruments
(including UCC termination statements on Form UCC-3) acknowledging the
termination of this Agreement or the release of such Pledged Collateral, as the
case may be.
Section 18. Notices. Unless otherwise provided herein or in
the Credit Agreement, any notice or other communication herein required or
permitted to be given shall be given in the manner set forth in the Credit
Agreement, as to either party addressed to it at the address set forth in
the Credit Agreement or at such other address as shall be designated by
such party in a written notice to the other party complying as to delivery
with the terms of this Section 18; provided that notices to Collateral
Agent shall not be effective until received by Collateral Agent.
Section 19. Continuing Security Interest; Assignment. This
Agreement shall create a continuing security interest in the Pledged
Collateral and shall (i) be binding upon Pledgor, its successors and
assigns and (ii) inure, together with the rights and remedies of Collateral
Agent hereunder, to the benefit of Collateral Agent and the other Secured
Parties and each of their respective successors, transferees and assigns;
no other Persons (including, without limitation, any other creditor of
Pledgor) shall have any interest herein or any right or benefit with
respect hereto. Without limiting the generality of the foregoing
clause (ii), any Bank may assign or otherwise transfer any indebtedness
held by it secured by this Agreement to any other Person, and such other
Person shall thereupon become vested with all the benefits in respect
thereof granted to such Bank, herein or otherwise, subject however, to the
provisions of the Credit Agreement and any applicable Interest Rate
Agreement.
<PAGE>
-18-
Section 20. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN,
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK.
Section 21. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
(a) Any legal action or proceeding with respect to this Agreement may be
brought in the courts of the State of New York or of the United States for
the Southern District of New York, and, by execution and delivery of this
Agreement, Pledgor hereby irrevocably accepts for itself and in respect of
its property, generally and unconditionally, the non-exclusive jurisdiction
of the aforesaid courts. Pledgor further irrevocably consents to the
service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to Pledgor at its address for notices
pursuant to the Credit Agreement, such service to become effective 30 days
after such mailing. Pledgor hereby irrevocably appoints CT Corporation
System having an address at 1633 Broadway, New York, New York 10019 and
such other persons as may hereafter be selected by Borrower irrevocably
agreeing in writing to serve as its agent for service of process in respect
of any such action or proceeding. Nothing herein shall affect the right of
Collateral Agent to serve process in any other manner permitted by law or
to commence legal proceedings or otherwise proceed against Pledgor in any
other jurisdiction.
(b) Pledgor hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement
brought in the courts referred to in clause (a) above and hereby further
irrevocably waives and agrees not to plead or claim in any such court that
any such action or proceeding brought in any such court has been brought in
an inconvenient forum.
Section 22. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof or
affecting the
<PAGE>
-19-
validity or enforceability of such provision in any other jurisdiction.
Section 23. Execution in Counterparts. This Agreement and any
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original, but all such counterparts together shall constitute one and the
same agreement.
Section 24. Headings. The Section headings used in this
Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
Section 25. Obligations Absolute. All obligations of Pledgor
hereunder shall be absolute and unconditional irrespective of:
(i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Pledgor or any
other Credit Party;
(ii) any lack of validity or enforceability of the Credit
Agreement, any Interest Rate Agreement, any Letter of Credit, any
other Credit Document, or any other agreement or instrument relating
thereto;
(iii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Secured Obligations, or any
other amendment or waiver of or any consent to any departure from the
Credit Agreement, any Interest Rate Agreement, any Letter of Credit,
any other Credit Document, or any other agreement or instrument
relating thereto;
(iv) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
any departure from any guarantee, for all or any of the Secured
Obligations;
(v) any exercise or non-exercise, or any waiver of any right,
remedy, power or privilege under or in respect of this Agreement any
Interest Rate Agreement, or any other Credit Document except as
specifically set forth in a waiver granted pursuant to the provisions
of Section 17 hereof; or
<PAGE>
-20-
(vi) any other circumstance or happening whatsoever that is
similar to any of the foregoing.
Section 26. Collateral Agent's Right to Sever Indebtedness.
(a) Pledgor acknowledges that (i) the Pledged Collateral does not
constitute the sole source of security for the payment and performance of
the Secured Obligations and that the Secured Obligations are also secured
by other types of property of Pledgor and its Affiliates in other
jurisdictions (all such property, collectively, the "Collateral"), (ii) the
number of such jurisdictions and the nature of the transaction of which
this instrument is a part are such that it would have been impracticable
for the parties to allocate to each item of Collateral a specific loan amount
and to execute in respect of such item a separate credit agreement, and (iii)
Pledgor intends that Collateral Agent have the same rights with respect to the
Pledged Collateral, in any judicial proceeding relating to the exercise of any
right or remedy hereunder or otherwise, that Collateral Agent would have had if
each item of Collateral had been pledged or encumbered pursuant to a separate
credit agreement and security instrument. In furtherance of such intent, Pledgor
agrees to the greatest extent permitted by law that Collateral Agent may at any
time by notice (an "Allocation Notice") to Pledgor allocate a portion of the
Secured Obligations (the "Allocated Indebtedness") to the Pledged Collateral and
sever from the remaining Secured Obligations the Allocated Indebtedness. From
and after the giving of an Allocation Notice with respect to the Pledged
Collateral, the Secured Obligations hereunder shall be limited to the extent set
forth in the Allocation Notice and (as so limited) shall, for all purposes, be
construed as a separate credit obligation of Pledgor unrelated to the other
transactions contemplated by the Credit Agreement, any Interest Rate Agreement,
any other Credit Document or any document related to any thereof. To the extent
that the proceeds of any judicial proceeding relating to the exercise of any
right or remedy hereunder of the Pledged Collateral shall exceed the Allocated
Indebtedness, such proceeds shall belong to Pledgor and shall not be available
hereunder to satisfy any Secured Obligations of Pledgor other than the Allocated
Indebtedness. In any action or proceeding to exercise any right or remedy under
this Agreement which is commenced after the giving by Collateral Agent of an
Allocation Notice, the Allocation Notice shall be conclusive proof of the limits
of the Secured Obligations hereby secured, and Pledgor may introduce, by way of
defense or counterclaim, evidence thereof in any such action or proceeding.
Notwithstanding any provision of this Section 26, the proceeds received by
Collateral
<PAGE>
-21-
Agent pursuant to this Agreement shall be applied by Collateral Agent in
accordance with the provisions of Section 11 hereof.
(b) Pledgor hereby waives to the greatest extent permitted
under law the right to a discharge of any of the Secured Obligations under
any statute or rule of law now or hereafter in effect which provides that
the exercise of any particular right or remedy as provided for herein (by
judicial proceedings or otherwise) constitutes the exclusive means for
satisfaction of the Secured Obligations or which makes unavailable any
further judgment or any other right or remedy provided for herein because
Collateral Agent elected to proceed with the exercise of such initial right
or remedy or because of any failure by Collateral Agent to comply with laws
that prescribe conditions to the entitlement to such subsequent judgment or
the availability of such subsequent right or remedy. In the event that,
notwithstanding the foregoing waiver, any court shall for any reason hold
that such subsequent judgment or action is not available to Collateral
Agent, Pledgor shall not (i) introduce in any other jurisdiction any
judgment so holding as a defense to enforcement against Pledgor of any
remedy in the Credit Agreement, any Interest Rate Agreement or any other
Credit Document or (ii) seek to have such judgment recognized or entered in
any other jurisdiction, and any such judgment shall in all events be
limited in application only to the state or jurisdiction where rendered and
only with respect to the collateral referred to in such judgment.
(c) In the event any instrument in addition to the Allocation
Notice is necessary to effectuate the provisions of this Section 26,
including, without limitation, any amendment to this Agreement, any
substitute promissory note or affidavit or certificate of any kind,
Collateral Agent may execute and deliver such instrument as the
attorney-in-fact of Pledgor. Such power of attorney is coupled with an
interest and is irrevocable.
(d) Notwithstanding anything set forth herein to the
contrary, the provisions of this Section 26 shall be effective only to the
maximum extent permitted by law.
Section 27. Future Advances. This Agreement shall secure the
payment of any amounts advanced from time to time pursuant to the Credit
Agreement.
<PAGE>
IN WITNESS WHEREOF, Pledgor and Collateral Agent have caused
this Agreement to be duly executed and delivered by their duly authorized
officers as of the date first above written.
CARSON PRODUCTS COMPANY,
as Pledgor
By:
Name:
Title:
BANQUE INDOSUEZ, NEW YORK BRANCH,
as Collateral Agent
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
SCHEDULE I
Pledged Shares
PERCENTAGE OF
ALL CAPITAL OR
CERTIFI- NUMBER OTHER EQUITY
CLASS PAR CATE OF INTERESTS OF
ISSUER OF STOCK VALUE NO(S). SHARES ISSUER
Fine Products Company Capital None 4 2,000,000 100%
Carson Products Common R1.00 2 10 100%
Company S.A. (one 3 90
(Proprietary) Limited Rand) 4 1
5 1
Carson Botswana Common P1 3 99 99%
(Proprietary) Limited
<PAGE>
SCHEDULE II
Intercompany Notes
PRINCIPAL DATE OF INTEREST MATURITY
ISSUER AMOUNT ISSUANCE RATE DATE
- ------ --------- -------- -------- --------
NONE
<PAGE>
EXHIBIT 1
PLEDGE AMENDMENT
This Pledge Amendment, dated ______________, is delivered
pursuant to Section 5 of the Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to the Borrower
Securities Pledge Agreement, dated as of October __, 1996, between the
undersigned and Banque Indosuez, New York Branch, as Collateral Agent (the
"Agreement"; capitalized terms used herein and not defined shall have the
meanings assigned to them in the Agreement) and that the Pledged Shares
and/or Intercompany Notes listed on this Pledge Amendment shall be deemed
to be and shall become part of the Pledged Collateral and shall secure all
Secured Obligations.
CARSON PRODUCTS COMPANY,
as Pledgor
By:
Name:
Title:
<PAGE>
Pledged Shares
PERCENTAGE OF
ALL CAPITAL OR
OTHER EQUITY
CLASS OF PAR CERTIFICATE NUMBER INTERESTS OF
ISSUER STOCK VALUE NO(S). OF SHARES ISSUER
<PAGE>
Intercompany Notes
PRINCIPAL DATE OF INTEREST MATURITY
ISSUER AMOUNT ISSUANCE RATE DATE
<PAGE>
Exhibit F-2 to the
Credit Agreement
HOLDINGS SECURITIES PLEDGE AGREEMENT
HOLDINGS SECURITIES PLEDGE AGREEMENT (the
"Agreement"), dated as of October __, 1996, made by CARSON,
INC. (formerly DNL Savannah Holding Corp.), a Delaware
corporation having an office at 64 Ross Road, Savannah, Georgia
31405 ("Pledgor"), in favor of BANQUE INDOSUEZ, NEW YORK
BRANCH, having an office at 1211 Avenue of the Americas, 7th
Floor, New York, New York 10036, as pledgee, assignee and
secured party, in its capacity as collateral agent (in such
capacities and together with any successors in such capacities,
"Collateral Agent") for the lending institutions (the "Banks")
from time to time party to the Credit Agreement (as hereinafter
defined).
R E C I T A L S :
A. Pursuant to a certain credit agreement, dated as
of the date hereof (as amended, amended and restated,
supplemented or otherwise modified from time to time, the
"Credit Agreement"; capitalized terms used herein and not
defined shall have the meanings assigned to them in the Credit
Agreement), among Carson Products Company (the "Borrower"), the
Banks and Banque Indosuez, New York Branch, as Agent and
Collateral Agent for the Banks, the Banks have agreed (i) to
make to or for the account of the Borrower certain A Term Loans
up to an aggregate principal amount of $15,000,000, certain
B Term Loans up to an aggregate principal amount of $10,000,000
and certain Revolving Loans up to an aggregate principal amount
of $15,000,000 and (ii) to issue certain Letters of Credit for
the account of the Borrower.
B. It is contemplated that the Borrower may enter
into one or more agreements with one or more of the Banks
("Interest Rate Agreements") fixing the interest rates with
respect to Loans under the Credit Agreement (all obligations of
the Borrower now existing or hereafter arising under such
Interest Rate Agreements, collectively, the "Interest Rate
Obligations").
C. Pledgor is the legal and beneficial owner of the
Pledged Collateral (as hereinafter defined).
D. Pledgor has executed and delivered to Collateral
Agent a certain guarantee instrument (the "Guarantee") pursuant
<PAGE>
-2-
to which, among other things, Pledgor has guaranteed the
obligations of the Borrower under the Credit Agreement and
under any Interest Rate Agreements, and Pledgor desires that
such Guarantee be secured hereunder.
E. It is a condition to the obligations of the
Banks to make the Loans under the Credit Agreement and a
condition to any Bank issuing Letters of Credit under the
Credit Agreement or entering into the Interest Rate Agreements
that Pledgor execute and deliver the applicable Credit
Documents, including this Agreement.
F. This Agreement is given by Pledgor in favor of
Collateral Agent for its benefit and the benefit of the Banks
and the Agent (collectively, the "Secured Parties") to secure
the payment and performance of all of the Secured Obligations
(as defined in Section 2).
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing
premises and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Pledgor and
Collateral Agent hereby agree as follows:
Section 1. Pledge. As collateral security for the
payment and performance when due of all the Secured
Obligations, Pledgor hereby pledges, assigns, transfers and
grants to Collateral Agent for its benefit and the benefit of
the Secured Parties, a continuing first priority security
interest in and to all of the right, title and interest of
Pledgor in, to and under the following property, whether now
existing or hereafter acquired (collectively, the "Pledged
Collateral"):
(a) issued and outstanding shares of capital stock
of each Person described in Schedule I hereto (the
"Pledged Shares") (which are and shall remain at all times
until this Agreement terminates, certificated shares),
including the certificates representing the Pledged Shares
and any interest of Pledgor in the entries on the books of
any financial intermediary pertaining to the Pledged
Shares;
(b) all additional shares of capital stock of any
issuer of the Pledged Shares from time to time acquired by
Pledgor in any manner (which are and shall remain at all
times until this Agreement terminates, certificated
<PAGE>
-3-
shares) (which shares shall be deemed to be part of the
Pledged Shares), including the certificates representing
such additional shares and any interest of Pledgor in the
entries on the books of any financial intermediary
pertaining to such additional shares;
(c) all dividends, cash, options, warrants, rights,
instruments, distributions, returns of capital, income,
profits and other property, interests or proceeds from
time to time received, receivable or otherwise distributed
to Pledgor in respect of or in exchange for any or all of
the Pledged Shares (collectively, "Distributions"); and
(d) all "proceeds" (as such term is defined in the
UCC or under other relevant law) of any of the foregoing.
Section 2. Secured Obligations. This Agreement
secures, and the Pledged Collateral is collateral security for,
the payment and performance in full when due, whether at stated
maturity, by acceleration or otherwise (including, without
limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in
bankruptcy or the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, 11 U.S.C. { 362(a)) of
(i) all Obligations of Pledgor under the Guarantee (including,
without limitation, Pledgor's obligation provided for therein
to pay principal, interest and all other charges, fees,
expenses, commissions, reimbursements, premiums, indemnities
and other payments related to or in respect of the Obligations
contained in the Guarantee, (ii) all Obligations of the
Borrower now existing or hereafter arising under the Credit
Agreement and all Interest Rate Obligations of the Borrower now
existing or hereafter arising under any Interest Rate Agreement
(including, without limitation, Pledgor's obligation provided
for therein to pay principal, interest and all other charges,
fees, expenses, commissions, reimbursements, premiums,
indemnities and other payments related to or in respect of the
Obligations contained in the Credit Agreement and the
obligations contained in any Interest Rate Agreement), and
(iii) without duplication of the amounts described in
clauses (i) and (ii), all obligations of Pledgor now existing
or hereafter arising under this Agreement or any other Security
Document, including, without limitation, with respect to all
charges, fees, expenses, commissions, reimbursements, premiums,
indemnities and other payments that Pledgor is obligated to pay
under this Agreement or any other Security Document (the
obligations
<PAGE>
-4-
described in clauses (i), (ii) and (iii), collectively, the
"Secured Obligations").
Section 3. No Release. Nothing set forth in this
Agreement shall relieve Pledgor from the performance of any
term, covenant, condition or agreement on Pledgor's part to be
performed or observed under or in respect of any of the Pledged
Collateral or from any liability to any Person under or in
respect of any of the Pledged Collateral or shall impose any
obligation on Collateral Agent or any Secured Party to perform
or observe any such term, covenant, condition or agreement on
Pledgor's part to be so performed or observed or shall impose
any liability on Collateral Agent or any Secured Party for any
act or omission on the part of Pledgor relating thereto or for
any breach of any representation or warranty on the part of
Pledgor contained in this Agreement, any Interest Rate
Agreement or any other Credit Document or under or in respect
of the Pledged Collateral or made in connection herewith or
therewith. The obligations of Pledgor contained in this
Section 3 shall survive the termination of this Agreement and
the discharge of Pledgor's other obligations under this
Agreement, any Interest Rate Agreement and the other Credit
Documents.
Section 4. Delivery of Pledged Collateral.
(a) All certificates, agreements or instruments
representing or evidencing the Pledged Collateral, to the
extent not previously delivered to Collateral Agent, shall
immediately upon receipt thereof by Pledgor be delivered to and
held by or on behalf of Collateral Agent pursuant hereto. All
Pledged Collateral shall be in suitable form for transfer by
delivery or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance
reasonably satisfactory to Collateral Agent. Collateral Agent
shall have the right, at any time upon the occurrence of an
Event of Default and without notice to Pledgor, to endorse,
assign or otherwise transfer to or to register in the name of
Collateral Agent or any of its nominees any or all of the
Pledged Collateral. In addition, Collateral Agent shall have
the right at any time to exchange certificates representing or
evidencing Pledged Collateral for certificates of smaller or
larger denominations.
(b) If the issuer of Pledged Shares is incorporated
in a jurisdiction which does not permit the use of certificates
to evidence equity ownership, then Pledgor shall, to the extent
permitted by applicable law, record such pledge on the stock
<PAGE>
-5-
register of the issuer, execute any customary stock pledge
forms or other documents necessary or appropriate to complete
the pledge and give Collateral Agent the right to transfer such
Pledged Shares under the terms hereof and provide to Collateral
Agent an opinion of counsel, in form and substance reasonably
satisfactory to Collateral Agent, confirming such pledge.
Section 5. Supplements, Further Assurances.
(a) Pledgor agrees that at any time and from time to
time, at the sole cost and expense of Pledgor, Pledgor shall
promptly execute and deliver all further instruments and
documents, including, without limitation, supplemental or
additional UCC-1 financing statements, and take all further
action that may be necessary or that Collateral Agent may
reasonably request, in order to perfect and protect the pledge,
security interest and Lien granted or purported to be granted
hereby or to enable Collateral Agent to exercise and enforce
its rights and remedies hereunder with respect to any Pledged
Collateral.
(b) Pledgor shall, upon obtaining any Pledged Shares
of any Person, promptly (and in any event within five Business
Days) deliver to Collateral Agent a pledge amendment, duly
executed by Pledgor, in substantially the form of Exhibit 1
hereto (each, a "Pledge Amendment"), in respect of the
additional Pledged Shares which are to be pledged pursuant to
this Agreement, and confirming the attachment of the Lien
hereby created on and in respect of such additional shares.
Pledgor hereby authorizes Collateral Agent to attach each
Pledge Amendment to this Agreement and agrees that all Pledged
Shares listed on any Pledge Amendment delivered to Collateral
Agent shall for all purposes hereunder be considered Pledged
Collateral.
Section 6. Representations, Warranties and
Covenants. Pledgor represents, warrants and covenants as
follows; provided that the representations, warranties,
covenants and conditions of or relating to the Sellers in the
Purchase Agreement (i) are given only to the best of Pledgor's
knowledge, and (ii) shall not be deemed a waiver of any rights
nor an admission of the truth thereof by any Credit Party or
any other Purchaser Indemnified Party (as defined in the
Purchase Agreement) as against any other party to the Purchase
Agreement:
(a) No Liens. Pledgor is as of the date hereof, and
at the time of any delivery of any Pledged Collateral to
Collateral Agent pursuant to Section 4 of this Agreement,
Pledgor will be, the sole legal and beneficial owner of
<PAGE>
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the Pledged Collateral. All Pledged Collateral is on the
date hereof, and will be, so owned by Pledgor free and
clear of any Lien except for the Lien created by this
Agreement and Liens of the type described in paragraph (a)
of the definition of Permitted Encumbrances.
(b) Authorization, Enforceability. Pledgor has the
requisite corporate power, authority and legal right to
pledge and grant a security interest in all the Pledged
Collateral pursuant to this Agreement, and this Agreement
constitutes the legal, valid and binding obligation of
Pledgor, enforceable against Pledgor in accordance with
its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally and
except as such enforceability may be limited by the
application of general principles of equity (regardless of
whether such enforceability is considered in a proceeding
in equity or at law).
(c) No Consents, etc. No consent of any party
(including, without limitation, stockholders or creditors
of Pledgor) and no consent, authorization, approval,
license or other action by, and no notice to or filing
with, any Governmental Authority or regulatory body or
other Person is required for (x) the pledge by Pledgor of
the Pledged Collateral pursuant to this Agreement or for
the execution, delivery or performance of this Agreement
by Pledgor, (y) the exercise by Collateral Agent of the
voting or other rights provided for in this Agreement, or
(z) the exercise by Collateral Agent of the remedies in
respect of the Pledged Collateral pursuant to this
Agreement (other than those consents, authorizations,
approvals, actions, notices or filings which, if not
obtained or made, would not have a material adverse effect
upon the interests of Collateral Agent under this
Agreement).
(d) Due Authorization and Issuance. All of the
Pledged Shares have been, and to the extent hereafter
issued will be upon such pledge, duly authorized and
validly issued and fully paid and nonassessable.
(e) Chief Executive Office. Pledgor's chief
executive office is located at 64 Ross Road, Savannah,
Georgia 31405. Pledgor shall not move its chief executive
office except to such new location as Pledgor may
establish in accordance with the last sentence of this
Section 6(e).
<PAGE>
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Pledgor shall not establish a new location for its chief
executive office nor shall it change its name until (i)
it shall have given Collateral Agent not less than 45
days' prior written notice of its intention so to do,
clearly describing such new location or name and
providing such other information in connection therewith
as Collateral Agent or any Secured Party may request,
and (ii) with respect to such new location or name,
Pledgor shall have taken all action satisfactory to
Collateral Agent and the Secured Parties to maintain the
perfection and priority of the security interest of
Collateral Agent for the benefit of the Secured Parties
in the Pledged Collateral intended to be granted hereby.
(f) Delivery of Pledged Collateral; Filings.
Pledgor has delivered to Collateral Agent all certificates
representing the Pledged Shares and has delivered to
Collateral Agent appropriate UCC-1 financing statements to
be filed with the Secretary of State of the States of New
York and Georgia, the State in which the chief executive
office of Pledgor is located, evidencing the Lien created
by this Agreement, and such delivery, filing and pledge of
the Pledged Collateral pursuant to this Agreement will
create a valid and perfected first priority security
interest in the Pledged Collateral securing the payment of
the Secured Obligations pursuant to the UCC in effect in
each applicable jurisdiction, including, without
limitation, the States of New York and Georgia.
(g) Pledged Collateral. All information set forth
herein, including the Schedules annexed hereto, and all
information contained in any documents, schedules and
lists heretofore delivered to any Secured Party in
connection with this Agreement, in each case, relating to
the Pledged Collateral is accurate and complete in all
material respects.
(h) No Violations, etc. The pledge of the Pledged
Collateral pursuant to this Agreement does not violate
Regulation G, T, U or X of the Federal Reserve Board.
(i) Ownership of Pledged Collateral. Except as
otherwise permitted by the Credit Agreement, Pledgor at
all times will be the sole beneficial owner of the Pledged
Collateral.
<PAGE>
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(j) No Options, Warrants, etc. There are no
options, warrants, calls, rights, commitments or
agreements of any character to which Pledgor is a party or
by which it is bound obligating Pledgor to deliver or sell
or cause to be issued, delivered or sold, additional
Pledged Shares or obligating Pledgor to grant, extend or
enter into any such option, warrant, call, right,
commitment or agreement. There are no voting trusts or
other agreements or understandings to which Pledgor is a
party with respect to the voting of the capital stock of
any issuer of the Pledged Shares.
Section 7. Voting Rights; Distributions; etc.
(a) So long as no Event of Default shall have
occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and
all voting and other consensual rights pertaining to the
Pledged Shares or any part thereof for any purpose not
inconsistent with the terms or purpose of this Agreement
or any other Credit Document; provided, however, that
Pledgor shall not in any event exercise such rights in any
manner which may have a material adverse effect on the
value of the Pledged Collateral or the security intended
to be provided by this Agreement.
(ii) Subject to the terms of the Credit Agreement,
Pledgor shall be entitled to receive and retain, and to
utilize free and clear of the Lien of this Agreement, any
and all Distributions, but only if and to the extent made
in accordance with the provisions of the Credit Agreement;
provided, however, that any and all such Distributions
consisting of rights or interests in the form of
securities shall be, and shall be forthwith delivered to
Collateral Agent to hold as Pledged Collateral and shall,
if received by Pledgor, be received in trust for the
benefit of Collateral Agent, be segregated from the other
property or funds of Pledgor, and be forthwith delivered
to Collateral Agent as Pledged Collateral in the same form
as so received (with any necessary endorsement).
(iii) Collateral Agent shall be deemed without further
action or formality to have granted to Pledgor all
necessary consents relating to voting rights and shall,
if necessary, upon written request of Pledgor and at
Pledgor's sole cost and expense, from time to time execute
<PAGE>
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and deliver (or cause to be executed and delivered) to
Pledgor all such instruments as Pledgor may reasonably
request in order to permit Pledgor to exercise the voting
and other rights which it is entitled to exercise pursuant
to Section 7(a)(i) hereof and to receive the Distributions
which it is authorized to receive and retain pursuant to
Section 7(a)(ii) hereof.
(b) Upon the occurrence and during the continuance
of an Event of Default:
(i) All rights of Pledgor to exercise the voting and
other consensual rights it would otherwise be entitled to
exercise pursuant to Section 7(a)(i) hereof without any
action or the giving of any notice shall cease, and all
such rights shall thereupon become vested in Collateral
Agent, which shall thereupon have the sole right to
exercise such voting and other consensual rights.
(ii) All rights of Pledgor to receive Distributions
which it would otherwise be authorized to receive and
retain pursuant to Section 7(a)(ii) hereof shall cease and
all such rights shall thereupon become vested in
Collateral Agent, which shall thereupon have the sole
right to receive and hold as Pledged Collateral such
Distributions; provided, that if such Event of Default is
cured, any such Distributions theretofore paid to
Collateral Agent shall, upon the request of Pledgor
(except to the extent theretofore applied to the Secured
Obligations), be returned by Collateral Agent to Pledgor.
(c) Pledgor shall, at its sole cost and expense,
from time to time execute and deliver to Collateral Agent
appropriate instruments as Collateral Agent may reasonably
request in order to permit Collateral Agent to exercise the
voting and other rights which it may be entitled to exercise
pursuant to Section 7(b)(i) hereof and to receive all
Distributions which it may be entitled to receive under Section
7(b)(ii) hereof.
(d) All Distributions which are received by Pledgor
contrary to the provisions of Section 7(b)(ii) hereof shall be
received in trust for the benefit of Collateral Agent, shall be
segregated from other funds of Pledgor and shall immediately be
paid over to Collateral Agent as Pledged Collateral in the same
form as so received (with any necessary endorsement).
<PAGE>
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Section 8. Transfers and Other Liens; Additional
Shares; Principal Office.
(a) Pledgor shall not (i) sell, convey, assign or
otherwise dispose of, or grant any option, right or warrant
with respect to, any of the Pledged Collateral except as
permitted by the Credit Agreement, (ii) create or permit to
exist any Lien upon or with respect to any Pledged Collateral
other than the Lien and security interest granted to Collateral
Agent pursuant to this Agreement and Liens of the type
described in paragraph (a) of the definition of Permitted
Encumbrances, or (iii) permit any issuer of the Pledged Shares
to merge, consolidate or change its legal form, except as
permitted by the Credit Agreement unless all of the outstanding
capital stock of the surviving or resulting corporation is,
upon such merger or consolidation, pledged hereunder and no
cash, securities or other property is distributed in respect of
the outstanding shares of any other constituent corporation.
The preceding sentence shall not apply to any sale or other
disposition of all of the stock of the issuer of Pledged Shares
which is in compliance with the Credit Agreement and the
proceeds of which sale or other disposition are used to make a
mandatory prepayment of the Loans pursuant to Section 3.02(A)
of the Credit Agreement. Upon such sale or other disposition,
such Pledged Shares shall be released from the Lien of this
Agreement in accordance with Section 17 of this Agreement.
(b) Pledgor shall (i) cause each issuer of the
Pledged Shares not to issue any stock or other securities in
addition to or in substitution for the Pledged Shares issued by
such issuer, except to Pledgor, unless required by applicable
law, and (ii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all
additional shares of capital stock or other equity securities
of the issuer of the Pledged Shares which are required to be
pledged hereunder.
Section 9. Reasonable Care. Collateral Agent shall
be deemed to have exercised reasonable care in the custody and
preservation of the Pledged Collateral in its possession if
such Pledged Collateral is accorded treatment substantially
equivalent to that which Collateral Agent, in its individual
capacity, accords its own property consisting of similar
instruments or interests, it being understood that neither
Collateral Agent nor any of the Secured Parties shall have
responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders
or other
<PAGE>
-11-
matters relating to any Pledged Collateral, whether or not
Collateral Agent or any other Secured Party has or is deemed
to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any Person with
respect to any Pledged Collateral.
Section 10. Remedies Upon Default; Decisions
Relating to Exercise of Remedies.
(a) If an Event of Default shall have occurred and
be continuing, and the Secured Obligations have been declared
due and payable in accordance with the Credit Agreement,
Collateral Agent shall have the right, in addition to other
rights and remedies provided for herein or otherwise available
to it to be exercised from time to time, (i) to retain and
apply the Distributions to the Secured Obligations as provided
in Section 11 hereof, and (ii) to exercise all the rights and
remedies of a secured party on default under the UCC in effect
in the State of New York at that time, and Collateral Agent may
also in its sole discretion, without notice except as specified
below, sell the Pledged Collateral or any part thereof
(including, without limitation, any partial interest in the
Pledged Shares) in one or more parcels at public or private
sale, at any exchange, broker's board or at any of Collateral
Agent's offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms
as Collateral Agent may deem commercially reasonable,
irrespective of the impact of any such sales on the market
price of the Pledged Collateral. Collateral Agent or any other
Secured Party or any of their respective Affiliates may be the
purchaser of any or all of the Pledged Collateral at any such
sale and shall be entitled, for the purpose of bidding and
making settlement or payment of the purchase price for all or
any portion of the Pledged Collateral sold at such sale, to use
and apply any of the Secured Obligations owed to such Person as
a credit on account of the purchase price of any Pledged
Collateral payable by such Person at such sale. Each purchaser
at any such sale shall acquire the property sold absolutely
free from any claim or right on the part of Pledgor, and
Pledgor hereby waives, to the fullest extent permitted by law,
all rights of redemption, stay and/or appraisal which it now
has or may at any time in the future have under any rule of law
or statute now existing or hereafter enacted. Pledgor
acknowledges and agrees that, to the extent notice of sale
shall be required by law, ten days notice to Pledgor of the
time and place of any public sale or the time after which any
private sale or other intended disposition is to take place
shall
<PAGE>
-12-
constitute reasonable notification of such matters. No
notification need be given to Pledgor if it has signed, after
the occurrence of an Event of Default, a statement renouncing
or modifying any right to notification of sale or other
intended disposition. Collateral Agent shall not be obligated
to make any sale of Pledged Collateral regardless of notice of
sale having been given. Collateral Agent may adjourn any
public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was
so adjourned. Pledgor hereby waives, to the fullest extent
permitted by law, any claims against Collateral Agent arising
by reason of the fact that the price at which any Pledged
Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale,
even if Collateral Agent accepts the first offer received and
does not offer such Pledged Collateral to more than one
offeree. Collateral Agent shall not be liable for any
incorrect or improper payment made pursuant to this Section 10
in the absence of gross negligence or willful misconduct.
(b) Pledgor recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933, as
amended (the "Securities Act"), and applicable state securities
laws, Collateral Agent may be compelled, with respect to any
sale of all or any part of the Pledged Collateral, to limit
purchasers to Persons who will agree, among other things, to
acquire the Pledged 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 Collateral Agent
than those obtainable through a public sale without such
restrictions (including, without limitation, a public offering
made pursuant to a registration statement under the Securities
Act), and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a
commercially reasonable manner and that Collateral Agent shall
have no obligation to engage in public sales and no obligation
to delay the sale of any Pledged Collateral for the period of
time necessary to permit the issuer thereof to register it for
a form of public sale requiring registration under the
Securities Act or under applicable state securities laws, even
if such issuer would agree to do so.
(c) If Collateral Agent determines to exercise its
right to sell any or all of the Pledged Collateral, upon
written request, Pledgor shall from time to time furnish to
<PAGE>
-13-
Collateral Agent all such information as Collateral Agent may
request in order to determine the number of securities included
in the Pledged Collateral which may be sold by Collateral Agent
as exempt transactions under the Securities Act and the rules
of the Securities and Exchange Commission thereunder, as the
same are from time to time in effect.
(d) Pledgor recognizes that, by reason of certain
prohibitions contained in laws, rules, regulations or orders of
any foreign Governmental Authority, Collateral Agent may be
compelled, with respect to any sale of all or any part of the
Pledged Collateral, to limit purchasers to those who meet the
requirements of such foreign Governmental Authority. Pledgor
acknowledges that any such sales may be at prices and on terms
less favorable to Collateral Agent than those obtainable
through a public sale without such restrictions, and,
notwithstanding such circumstances, agrees that any such
restricted sale shall be deemed to have been made in a
commercially reasonable manner and that, except as may be
required by applicable law, Collateral Agent shall have no
obligation to engage in public sales.
(e) In addition to any of the other rights and
remedies hereunder, Collateral Agent shall have the right to
institute a proceeding seeking specific performance in
connection with any of the agreements or obligations hereunder.
Section 11. Application of Proceeds. All
Distributions held from time to time by Collateral Agent and
all proceeds received by Collateral Agent in respect of any
sale of, collection from, or other realization upon all or any
part of the Pledged Collateral pursuant to the exercise by
Collateral Agent of its remedies as a secured creditor as
provided in Section 10 hereof shall be applied, together with
any other sums then held by Collateral Agent pursuant to this
Agreement, promptly by Collateral Agent as follows:
First, to the payment of all costs and expenses,
fees, commissions and taxes of such sale, collection or
other realization, including, without limitation,
reasonable out-of-pocket costs and expenses of Collateral
Agent and its agents and counsel, and all expenses,
liabilities and advances made or incurred by Collateral
Agent in connection therewith;
Second, to the payment of all other costs and
expenses of such sale, collection or other realization,
<PAGE>
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including reasonable out-of-pocket costs and expenses of
the Banks and their agents and counsel and all costs,
liabilities and advances made or incurred by the Banks in
connection therewith;
Third, to the payment in full in cash of Secured
Obligations consisting of interest and all amounts other
than principal under the Credit Agreement at any time and
from time to time owing by Pledgor or the Borrower under
or in connection with the Credit Agreement, ratably
according to the unpaid amounts thereof, in the manner and
priority set forth in the Credit Agreement, together with
interest on each such amount in the manner and to the
extent set forth in the Credit Agreement from and after
the date such amount is due, owing or unpaid until paid in
full;
Fourth, to the pro rata payment in full in cash of
Secured Obligations consisting of (i) principal at any
time and from time to time owing by Pledgor or the
Borrower under or in connection with the Credit Agreement,
ratably according to the unpaid amounts thereof, in the
manner and priority set forth in the Credit Agreement and
(ii) the amount of the Borrower's obligations then due and
payable under any Interest Rate Agreement, including any
early termination payments then due (exclusive of expenses
or similar liabilities to any Bank under the applicable
Interest Rate Agreement(s)), together with interest on
each such amount in the manner and to the extent set forth
in the Credit Agreement from and after the date such
amount is due, owing or unpaid until paid in full; and
Fifth, the balance, if any, to the Person lawfully
entitled thereto (including Pledgor or its successors or
assigns).
Section 12. Expenses. Pledgor will upon demand pay
to Collateral Agent the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its
counsel and the reasonable fees and expenses of any experts and
agents, which Collateral Agent may incur in connection with
(i) the collection of the Secured Obligations, (ii) the
enforcement and administration of this Agreement, (iii) the
custody or preservation of, or the sale of, collection from, or
other realization upon, any of the Pledged Collateral, (iv) the
exercise or enforcement of any of the rights of Collateral
Agent or any Secured Party hereunder or (v) the failure by
<PAGE>
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Pledgor to perform or observe any of the provisions hereof.
All amounts payable by Pledgor under this Section 12 shall be
due within ten Business Days after demand and shall be part of
the Secured Obligations. Pledgor's obligations under this
Section 12 shall survive the termination of this Agreement and
the discharge of Pledgor's other obligations hereunder.
Section 13. No Waiver; Cumulative Remedies. (a) No
failure on the part of Collateral Agent to exercise, no course
of dealing with respect to, and no delay on the part of
Collateral Agent in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such 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 provided are cumulative and are not exclusive of any
remedies provided by law.
(b) In the event Collateral Agent shall have
instituted any proceeding to enforce any right, power or remedy
under this Agreement by foreclosure, sale, entry or otherwise,
and such proceeding shall have been discontinued or abandoned
for any reason or shall have been determined adversely to
Collateral Agent, then and in every such case, Pledgor,
Collateral Agent and each Secured Party shall be restored to
their respective former positions and rights hereunder with
respect to the Pledged Collateral, and all rights, remedies and
powers of Collateral Agent and the Secured Parties shall
continue as if no such proceeding had been instituted.
Section 14. Collateral Agent. Collateral Agent has
been appointed as collateral agent pursuant to the Credit
Agreement. The actions of Collateral Agent hereunder are
subject to the provisions of the Credit Agreement. Collateral
Agent shall have the right hereunder to make demands, to give
notices, to exercise or refrain from exercising any rights, and
to take or refrain from taking action (including, without
limitation, the release or substitution of Pledged Collateral),
in accordance with this Agreement and the Credit Agreement.
Collateral Agent may resign and a successor Collateral Agent
may be appointed in the manner provided in the Credit
Agreement. Upon the acceptance of any appointment as
Collateral Agent by a successor Collateral Agent, that
successor Collateral Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and
duties of the retiring Collateral Agent under this Agreement,
and the retiring Collateral Agent shall thereupon be discharged
from its duties and
<PAGE>
-16-
obligations under this Agreement. After any retiring Collateral
Agent's resignation, the provisions of this Agreement shall
inure to its benefit as to any actions taken or omitted to be
taken by it under this Agreement while it was Collateral Agent.
Section 15. Collateral Agent May Perform; Collateral
Agent Appointed Attorney-in-Fact. If Pledgor shall fail to do
any act or thing that it has covenanted to do hereunder or any
warranty on the part of Pledgor contained herein shall be
breached, Collateral Agent or any Secured Party may (but shall
not be obligated to) do the same or cause it to be done or
remedy any such breach, and may, following five Business Days'
prior written notice to Pledgor of its intention to do so,
expend funds for such purpose. Any and all amounts so expended
by Collateral Agent or such Secured Party shall be paid by
Pledgor within ten Business Days after demand therefor, with
interest at the highest rate then in effect under the Credit
Agreement during the period from and including the date on
which such funds were so expended to the date of repayment.
Pledgor's obligations under this Section 15 shall survive the
termination of this Agreement and the discharge of Pledgor's
other obligations under this Agreement, the Credit Agreement,
any Interest Rate Agreement and the other Credit Documents.
Pledgor hereby appoints Collateral Agent its attorney-in-fact,
with full authority in the place and stead of Pledgor and in
the name of Pledgor, or otherwise, from time to time in
Collateral Agent's reasonable discretion to take any action and
to execute any instrument consistent with the terms of this
Agreement and the other Credit Documents which Collateral Agent
may deem reasonably necessary or advisable to accomplish the
purposes of this Agreement. The foregoing grant of authority
is a power of attorney coupled with an interest and such
appointment shall be irrevocable for the term of this
Agreement. Pledgor hereby ratifies all that such attorney
shall lawfully do or cause to be done by virtue hereof.
Section 16. Modification in Writing. No amendment,
modification, supplement, termination or waiver of or to any
provision of this Agreement, nor consent to any departure by
Pledgor therefrom, shall be effective unless the same shall be
done in accordance with the terms of the Credit Agreement and
unless in writing and signed by Collateral Agent. Any
amendment, modification or supplement of or to any provision of
this Agreement, any waiver of any provision of this Agreement
and any consent to any departure by Pledgor from the terms of
any provision of this Agreement shall be effective only in the
<PAGE>
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specific instance and for the specific purpose for which made
or given. Except where notice is specifically required by this
Agreement or any other Credit Document, no notice to or demand
on Pledgor in any case shall entitle Pledgor to any other or
further notice or demand in similar or other circumstances.
Section 17. Termination; Release. When all the
Secured Obligations have been paid in full and the Commitments
of the Banks to make any Loan or to issue any Letter of Credit
under the Credit Agreement shall have expired or been sooner
terminated, this Agreement shall terminate. Upon termination
of this Agreement or any release of Pledged Collateral in
accordance with the provisions of the Credit Agreement,
Collateral Agent shall, upon the request and at the sole cost
and expense of Pledgor, forthwith assign, transfer and deliver
to Pledgor, against receipt and without recourse to or warranty
by Collateral Agent, such of the Pledged Collateral to be
released (in the case of a release) as may be in the possession
of Collateral Agent and as shall not have been sold or
otherwise applied pursuant to the terms hereof, and, with
respect to any other Pledged Collateral, proper instruments
(including UCC termination statements on Form UCC-3)
acknowledging the termination of this Agreement or the release
of such Pledged Collateral, as the case may be.
Section 18. Notices. Unless otherwise provided
herein or in the Credit Agreement, any notice or other
communication herein required or permitted to be given shall be
given in the manner set forth in the Credit Agreement, as to
either party addressed to it at the address set forth in the
Credit Agreement or at such other address as shall be
designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section 18;
provided that notices to Collateral Agent shall not be
effective until received by Collateral Agent.
Section 19. Continuing Security Interest;
Assignment. This Agreement shall create a continuing security
interest in the Pledged Collateral and shall (i) be binding
upon Pledgor, its successors and assigns and (ii) inure,
together with the rights and remedies of Collateral Agent
hereunder, to the benefit of Collateral Agent and the other
Secured Parties and each of their respective successors,
transferees and assigns; no other Persons (including, without
limitation, any other creditor of Pledgor) shall have any
interest herein or any right or benefit with respect hereto.
Without limiting the generality of the foregoing clause (ii),
any Bank may assign or
<PAGE>
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otherwise transfer any indebtedness held by it secured by
this Agreement to any other Person, and such other Person
shall thereupon become vested with all the benefits in
respect thereof granted to such Bank, herein or otherwise,
subject however, to the provisions of the Credit Agreement
and any applicable Interest Rate Agreement.
Section 20. GOVERNING LAW; TERMS. THIS AGREEMENT
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED WHOLLY THEREIN, EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY
ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE
OF NEW YORK.
Section 21. CONSENT TO JURISDICTION AND SERVICE OF
PROCESS. (a) Any legal action or proceeding with respect to
this Agreement may be brought in the courts of the State of New
York or of the United States for the Southern District of New
York, and, by execution and delivery of this Agreement, Pledgor
hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts. Pledgor further
irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by
the mailing of copies thereof by registered or certified mail,
postage prepaid, to Pledgor at its address for notices pursuant
to the Credit Agreement, such service to become effective 30
days after such mailing. Pledgor hereby irrevocably appoints
CT Corporation System having an address at 1633 Broadway,
New York, New York 10019 and such other persons as may
hereafter be selected by Borrower irrevocably agreeing in
writing to serve as its agent for service of process in respect
of any such action or proceeding. Nothing herein shall affect
the right of Collateral Agent to serve process in any other
manner permitted by law or to commence legal proceedings or
otherwise proceed against Pledgor in any other jurisdiction.
(b) Pledgor hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of
any of the aforesaid actions or proceedings arising out of or
in connection with this Agreement brought in the courts
referred to in clause (a) above and hereby further irrevocably
waives and agrees not to plead or claim in any such court that
<PAGE>
-19-
any such action or proceeding brought in any such court has
been brought in an inconvenient forum.
Section 22. Severability of Provisions. Any
provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
Section 23. Execution in Counterparts. This
Agreement and any amendments, waivers, consents or supplements
hereto may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an
original, but all such counterparts together shall constitute
one and the same agreement.
Section 24. Headings. The Section headings used in
this Agreement are for convenience of reference only and shall
not affect the construction of this Agreement.
Section 25. Obligations Absolute. All obligations
of Pledgor hereunder shall be absolute and unconditional
irrespective of:
(i) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the
like of Pledgor or any other Credit Party;
(ii) any lack of validity or enforceability of the
Credit Agreement, any Interest Rate Agreement, any Letter
of Credit, any other Credit Document, or any other
agreement or instrument relating thereto;
(iii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
Secured Obligations, or any other amendment or waiver of
or any consent to any departure from the Credit Agreement,
any Interest Rate Agreement, any Letter of Credit, any
other Credit Document, or any other agreement or
instrument relating thereto;
(iv) any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of
<PAGE>
-20-
or consent to any departure from any guarantee, for all or
any of the Secured Obligations;
(v) any exercise or non-exercise, or any waiver of
any right, remedy, power or privilege under or in respect
of this Agreement any Interest Rate Agreement, or any
other Credit Document except as specifically set forth in
a waiver granted pursuant to the provisions of Section 17
hereof; or
(vi) any other circumstance or happening whatsoever
that is similar to any of the foregoing.
Section 26. Collateral Agent's Right to Sever
Indebtedness. (a) Pledgor acknowledges that (i) the Pledged
Collateral does not constitute the sole source of security for
the payment and performance of the Secured Obligations and that
the Secured Obligations are also secured by other types of
property of Pledgor and its Affiliates in other jurisdictions
(all such property, collectively, the "Collateral"), (ii) the
number of such jurisdictions and the nature of the transaction
of which this instrument is a part are such that it would have
been impracticable for the parties to allocate to each item of
Collateral a specific loan amount and to execute in respect of
such item a separate credit agreement, and (iii) Pledgor
intends that Collateral Agent have the same rights with respect
to the Pledged Collateral, in any judicial proceeding relating
to the exercise of any right or remedy hereunder or otherwise,
that Collateral Agent would have had if each item of Collateral
had been pledged or encumbered pursuant to a separate credit
agreement and security instrument. In furtherance of such
intent, Pledgor agrees to the greatest extent permitted by law
that Collateral Agent may at any time by notice (an "Allocation
Notice") to Pledgor allocate a portion of the Secured
Obligations (the "Allocated Indebtedness") to the Pledged
Collateral and sever from the remaining Secured Obligations the
Allocated Indebtedness. From and after the giving of an
Allocation Notice with respect to the Pledged Collateral, the
Secured Obligations hereunder shall be limited to the extent
set forth in the Allocation Notice and (as so limited) shall,
for all purposes, be construed as a separate credit obligation
of Pledgor unrelated to the other transactions contemplated by
the Credit Agreement, any Interest Rate Agreement, any other
Credit Document or any document related to any thereof. To the
extent that the proceeds of any judicial proceeding relating to
the exercise of any right or remedy hereunder of the Pledged
Collateral shall exceed the Allocated Indebtedness, such
proceeds
<PAGE>
-21-
shall belong to Pledgor and shall not be available hereunder
to satisfy any Secured Obligations of Pledgor other than the
Allocated Indebtedness. In any action or proceeding to
exercise any right or remedy under this Agreement which is
commenced after the giving by Collateral Agent of an
Allocation Notice, the Allocation Notice shall be conclusive
proof of the limits of the Secured Obligations hereby
secured, and Pledgor may introduce, by way of defense or
counterclaim, evidence thereof in any such action or
proceeding. Notwithstanding any provision of this Section 26,
the proceeds received by Collateral Agent pursuant to this
Agreement shall be applied by Collateral Agent in accordance
with the provisions of Sec-tion 11 hereof.
(b) Pledgor hereby waives to the greatest extent
permitted under law the right to a discharge of any of the
Secured Obligations under any statute or rule of law now or
hereafter in effect which provides that the exercise of any
particular right or remedy as provided for herein (by judicial
proceedings or otherwise) constitutes the exclusive means for
satisfaction of the Secured Obligations or which makes
unavailable any further judgment or any other right or remedy
provided for herein because Collateral Agent elected to proceed
with the exercise of such initial right or remedy or because of
any failure by Collateral Agent to comply with laws that
prescribe conditions to the entitlement to such subsequent
judgment or the availability of such subsequent right or
remedy. In the event that, notwithstanding the foregoing
waiver, any court shall for any reason hold that such
subsequent judgment or action is not available to Collateral
Agent, Pledgor shall not (i) introduce in any other
jurisdiction any judgment so holding as a defense to
enforcement against Pledgor of any remedy in the Credit
Agreement, any Interest Rate Agreement or any other Credit
Document or (ii) seek to have such judgment recognized or
entered in any other jurisdiction, and any such judgment shall
in all events be limited in application only to the state or
jurisdiction where rendered and only with respect to the
collateral referred to in such judgment.
(c) In the event any instrument in addition to the
Allocation Notice is necessary to effectuate the provisions of
this Section 26, including, without limitation, any amendment
to this Agreement, any substitute promissory note or affidavit
or certificate of any kind, Collateral Agent may execute and
deliver such instrument as the attorney-in-fact of Pledgor.
Such power of attorney is coupled with an interest and is
irrevocable.
<PAGE>
-22-
(d) Notwithstanding anything set forth herein to the
contrary, the provisions of this Section 26 shall be effective
only to the maximum extent permitted by law.
Section 27. Future Advances. This Agreement shall
secure the payment of any amounts advanced from time to time
pursuant to the Credit Agreement.
<PAGE>
IN WITNESS WHEREOF, Pledgor and Collateral Agent have
caused this Agreement to be duly executed and delivered by
their duly authorized officers as of the date first above
written.
CARSON, INC.,
as Pledgor
By:
Name:
Title:
BANQUE INDOSUEZ, NEW YORK BRANCH,
as Collateral Agent
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
SCHEDULE I
Pledged Shares
<TABLE>
<CAPTION>
PERCENTAGE OF
ALL CAPITAL OR
OTHER EQUITY
CLASS PAR CERTIFICATE NUMBER INTERESTS OF
ISSUER OF STOCK VALUE NO(S). OF SHARES ISSUER
<S> <C> <C> <C> <C> <C>
Carson Products Common $.01 1 1 100%
Company
</TABLE>
<PAGE>
EXHIBIT 1
PLEDGE AMENDMENT
This Pledge Amendment, dated ______________, is
delivered pursuant to Section 5 of the Agreement referred to
below. The undersigned hereby agrees that this Pledge
Amendment may be attached to the Holdings Securities Pledge
Agreement, dated as of October __, 1996, between the
undersigned and Banque Indosuez, New York Branch, as Collateral
Agent (the "Agreement"; capitalized terms used herein and not
defined shall have the meanings assigned to them in the
Agreement) and that the Pledged Shares and/or Intercompany
Notes listed on this Pledge Amendment shall be deemed to be and
shall become part of the Pledged Collateral and shall secure
all Secured Obligations.
CARSON, INC.,
as Pledgor
By:
Name:
Title:
<PAGE>
Pledged Shares
PERCENTAGE OF
ALL CAPITAL OR
OTHER EQUITY
CLASS OF PAR CERTIFICATE NUMBER INTERESTS OF
ISSUER STOCK VALUE NO(S). OF SHARES ISSUER
<PAGE>
Exhibit G to the
Credit Agreement
BORROWER INTELLECTUAL PROPERTY SECURITY AGREEMENT
BORROWER INTELLECTUAL PROPERTY SECURITY AGREEMENT
(the "Agreement"), dated as of October __, 1996, made by CARSON
PRODUCTS COMPANY (formerly known as Aminco, Inc., as successor
by merger to DNL Savannah Acquisition Corp.), a Delaware
corporation having an office at 64 Ross Road, Savannah, Georgia
31405 ("Pledgor"), in favor of BANQUE INDOSUEZ, NEW YORK
BRANCH, having an office at 1211 Avenue of the Americas, 7th
Floor, New York, New York 10036, as pledgee, assignee and
secured party, in its capacity as collateral agent (in such
capacities and together with any successors in such capacities,
"Collateral Agent") for the lending institutions (the "Banks")
from time to time party to the Credit Agreement (as hereinafter
defined).
R E C I T A L S :
A. Pursuant to a certain credit agreement, dated as
of the date hereof (as amended, amended and restated,
supplemented or otherwise modified from time to time, the
"Credit Agreement"; capitalized terms used herein and not
defined shall have the meanings assigned to them in the Credit
Agreement) by and among Pledgor, the Banks and Banque Indosuez,
New York Branch, as Agent and Collateral Agent for the Banks,
the Banks have agreed (i) to make to or for the account of
Pledgor certain A Term Loans up to an aggregate principal
amount of $15,000,000, certain B Term Loans up to an aggregate
principal amount of $10,000,000 and certain Revolving Loans up
to an aggregate principal amount of $15,000,000 and (ii) to
issue certain Letters of Credit for the account of Pledgor.
B. It is contemplated that Pledgor may enter into
one or more agreements with one or more of the Banks ("Interest
Rate Agreements") fixing the interest rates with respect to
Loans under the Credit Agreement (all obligations of Pledgor
now existing or hereafter arising under such Interest Rate
Agreements, collectively, the "Interest Rate Obligations").
C. Pledgor is the owner of the Pledged Collateral
(as hereinafter defined).
D. It is a condition to the obligations of the
Banks to make the Loans under the Credit Agreement and a
condition to any Bank issuing Letters of Credit under the
Credit
<PAGE>
-2-
Agreement or entering into the Interest Rate Agreements
that Pledgor execute and deliver the applicable Credit
Documents, including this Agreement.
E. This Agreement is given by Pledgor in favor of
Collateral Agent for its benefit and the benefit of the Banks
and the Agent (collectively, the "Secured Parties") to secure
the payment and performance of all of the Secured Obligations
(as defined in Section 2).
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing
premises and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Pledgor and
Collateral Agent hereby agree as follows:
Section 1. Pledge. As collateral security for the
payment and performance when due of all the Secured
Obligations, Pledgor hereby pledges, assigns, transfers and
grants to Collateral Agent for its benefit and the benefit of
the Secured Parties, a continuing first priority security
interest in and to all of the right, title and interest of
Pledgor in, to and under the following property, whether now
existing or hereafter acquired (collectively, the "Pledged
Collateral"):
(a) Patents issued or assigned to and all patent
applications made by Pledgor, including, without
limitation, the patents and patent applications listed on
Schedule A hereto, along with any and all (i) inventions
and improvements described and claimed therein, (ii) re-
issues, divisions, continuations, extensions and conti-
nuations-in-part thereof, (iii) income, royalties,
damages, claims and payments now and hereafter due and/or
payable under and with respect thereto, including, without
limitation, damages and payments for past or future
infringements thereof, and (iv) rights to sue for past,
present and future infringements thereof (collectively,
the "Patents");
(b) Trademarks (including service marks), federal
and state trademark registrations and applications made by
Pledgor, common law trademarks and trade names owned by or
assigned to Pledgor and all registrations and applications
for the foregoing, including, without limitation, the
registrations and applications listed on Schedule B
hereto, along with any and all (i) renewals thereof,
(ii) income,
<PAGE>
-3-
royalties, damages and payments now and hereafter
due and/or payable with respect thereto,
including, without limitation, damages, claims and
payments for past or future infringements thereof,
and (iii) rights to sue for past, present and
future infringements thereof (collectively, the
"Trademarks");
(c) Copyrights owned by or assigned to Pledgor,
including, without limitation, the registrations and
applications listed on Schedule C hereto, along with any
and all (i) renewals and extensions thereof, (ii) income,
royalties, damages, claims and payments now and hereafter
due and/or payable with respect thereto, including,
without limitation, damages and payments for past, present
or future infringements thereof, and (iii) rights to sue
for past, present and future infringements thereof
(collectively, the "Copyrights");
(d) License agreements and covenants not to sue with
any other party with respect to any Patent, Trademark, or
Copyright listed on Schedule D hereto, along with any and
all (i) renewals, extensions, supplements and
continuations thereof, (ii) income, royalties, damages,
claims and payments now and hereafter due and/or payable
to Pledgor with respect thereto, including, without
limitation, damages and payments for past, present or
future breaches thereof, (iii) rights to sue for past,
present and future breaches thereof, and (iv) any other
rights to use, exploit or practice any or all of the
Patents, Trademarks or Copyrights (collectively, the
"Licenses");
(e) the entire goodwill of Pledgor's business and
other general intangibles, including, without limitation,
know-how, trade secrets, customer lists, proprietary
information, inventions, methods, procedures and formulae
connected with the use of and symbolized by the Trademarks
of Pledgor; and
(f) all "proceeds" (as such term is defined in the
UCC or under other relevant law) of any of the foregoing.
Section 2. Secured Obligations. This Agreement
secures, and the Pledged Collateral is collateral security for,
the payment and performance in full when due, whether at stated
maturity, by acceleration or otherwise (including, without
limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in
bankruptcy or the operation of the automatic stay under
<PAGE>
-4-
Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)), of
(i) all Obligations of Pledgor now existing or hereafter
arising under the Credit Agreement and all Interest Rate
Obligations of Pledgor now existing or hereafter arising under
any Interest Rate Agreement (including, without limitation,
Pledgor's obligation provided for therein to pay principal,
interest and all other charges, fees, expenses, commissions,
reimbursements, premiums, indemnities and other payments
related to or in respect of the Obligations contained in the
Credit Agreement and the obligations contained in any Interest
Rate Agreement and (ii) without duplication of the amounts
described in clause (i), all Obligations of Pledgor now
existing or hereafter arising under this Agreement or any other
Security Document, including, without limitation, all charges,
fees, expenses, commissions, reimbursements, premiums,
indemnities and other payments that Pledgor is obligated to pay
under this Agreement or in any other Security Document (the
obligations described in clauses (i) and (ii), collectively,
the "Secured Obligations").
Section 3. No Release. Nothing set forth in this
Agreement shall relieve Pledgor from the performance of any
term, covenant, condition or agreement on Pledgor's part to be
performed or observed under or in respect of any of the Pledged
Collateral or from any liability to any Person under or in
respect of any of the Pledged Collateral or shall impose any
obligation on Collateral Agent or any Secured Party to perform
or observe any such term, covenant, condition or agreement on
Pledgor's part to be so performed or observed or shall impose
any liability on Collateral Agent or any Secured Party for any
act or omission on the part of Pledgor relating thereto or for
any breach of any representation or warranty on the part of
Pledgor contained in this Agreement, any Interest Rate
Agreement or any other Credit Document, or under or in respect
of the Pledged Collateral or made in connection herewith or
therewith. The obligations of Pledgor contained in this
Section 3 shall survive the termination of this Agreement and
the discharge of Pledgor's other obligations under this
Agreement, any Interest Rate Agreement and the other Credit
Documents.
Section 4. Use and Pledge of Pledged Collateral.
Unless an Event of Default shall have occurred and be
continuing, Collateral Agent shall from time to time execute
and deliver, upon written request of Pledgor and at Pledgor's
sole cost and expense, any and all instruments, certificates or
other documents, in the form so requested, necessary or
appropriate in the reasonable judgment of Pledgor to enable
Pledgor to continue to exploit, license, use, enjoy and protect
the
<PAGE>
-5-
Pledged Collateral throughout the world. Pledgor and
Collateral Agent acknowledge that this Agreement is intended to
grant to Collateral Agent for the benefit of the Secured
Parties a security interest in and Lien upon the Pledged
Collateral and shall not constitute or create a present
assignment of the Pledged Collateral.
Section 5. Supplements; Further Assurances.
(a) Pledgor agrees that at any time and from time to
time, it will execute and, at its sole cost and expense, file
and refile, or permit Collateral Agent to file and refile, such
financing statements, continuation statements and other
documents (including, without limitation, this Agreement), in
such offices (including, without limitation, the United States
Patent and Trademark Office and the United States Copyright
Office) as Collateral Agent may reasonably deem necessary or
appropriate, wherever required or permitted by law in order to
perfect and preserve the rights and interests granted to
Collateral Agent hereunder.
(b) Pledgor hereby authorizes Collateral Agent,
without relieving Pledgor of any obligations hereunder, to file
financing statements, continuation statements, amendments
thereto and other documents, relative to all or any part
thereof, without the signature of Pledgor where permitted by
law, and Pledgor agrees to do such further acts and things, and
to execute and deliver to Collateral Agent such additional
assignments, agreements, powers and instruments, as Collateral
Agent may reasonably deem necessary or appropriate, wherever
required or permitted by law in order to perfect and preserve
the rights and interests granted to Collateral Agent hereunder
or to carry into effect the purposes of this Agreement or
better to assure and confirm unto Collateral Agent its
respective rights, powers and remedies hereunder. All of the
foregoing shall be at the sole cost and expense of Pledgor.
Section 6. Representations, Warranties and
Covenants. Pledgor hereby represents, warrants and covenants
as follows; provided, that the representations, warranties,
covenants and conditions of or relating to the Sellers in the
Purchase Agreement (i) are given only to the best of Pledgor's
knowledge, and (ii) shall not be deemed a waiver of any rights
nor an admission of the truth thereof by any Credit Party or
any other Purchaser Indemnified Party (as defined in the
Purchase Agreement) as against any other party to the Purchase
Agreement:
<PAGE>
-6-
(a) Necessary Filings. Upon the filing of financing
statements and the acceptance thereof in the appropriate
offices under the UCC and the filing of this Agreement and
the acceptance thereof in the United States Patent and
Trademark Office and the United States Copyright Office,
the security interest granted to Collateral Agent for the
benefit of the Secured Parties pursuant to this Agreement
in and to the Pledged Collateral constitutes and hereafter
will constitute a valid and duly perfected first priority
security interest in the Pledged Collateral superior and
prior to the rights of all other Persons therein and
subject to no other Liens.
(b) No Liens. Pledgor is as of the date hereof, and
as to Pledged Collateral acquired by it from time to time
after the date hereof, Pledgor will be, the sole and
exclusive owner or, as applicable, licensee of the Pledged
Collateral free from any Lien or other right, title or
interest of any Person other than the Lien and security
interest created by this Agreement and Liens of the type
described in paragraph (a) of the definition of Permitted
Encumbrances. Pledgor shall take all reasonable steps to
defend the Pledged Collateral against all claims and
demands of all Persons at any time claiming any interest
therein adverse to Collateral Agent or any Secured Party.
(c) Other Financing Statements. There is no
financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) covering
or purporting to cover any interest of any kind in the
Pledged Collateral and, so long as the Secured Obligations
remain unpaid or the Commitments of the Banks to make any
Loan or to issue any Letter of Credit shall not have
expired or been sooner terminated, Pledgor shall not
execute or authorize to be filed in any public office any
financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) or
statements relating to the Pledged Collateral, except, in
each case, financing statements filed or to be filed in
respect of and covering the security interests granted by
Pledgor pursuant to this Agreement.
(d) Authorization; Enforceability. Pledgor has the
requisite corporate power, authority and legal right to
pledge and grant a security interest in all the Pledged
Collateral pursuant to this Agreement, and this Agreement
constitutes the legal, valid and binding obligation of
Pledgor, enforceable against Pledgor in accordance with
<PAGE>
-7-
its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally and
except as such enforceability may be limited by the
application of general principles of equity (regardless of
whether such enforceability is considered in a proceeding
in equity or at law).
(e) No Consents, etc. No consent of any party
(including, without limitation, stockholders or creditors
of Pledgor) and no consent, authorization, approval,
license, or other action by, and no notice to or filing
with, any Governmental Authority or regulatory body or
other Person is required for (x) the execution, delivery
or performance of this Agreement by Pledgor, (y) the
assignment of, and the grant of a Lien (including the
priority thereof) on and security interest in, the Pledged
Collateral by Pledgor in the manner and for the purpose
contemplated by this Agreement or (z) the exercise by
Collateral Agent of the remedies in respect of the Pledged
Collateral pursuant to this Agreement (other than those
consents, authorizations, approvals, licenses, actions,
notices or filings which, if not obtained or made, would
not have a material adverse effect upon the interests of
Collateral Agent under this Agreement).
(f) No Claims. Pledgor owns or has rights to use
all the Pledged Collateral and all rights with respect to
any of the foregoing used in, necessary for or material to
Pledgor's business as currently conducted and as
contemplated to be conducted pursuant to the Credit
Documents. To the best of Pledgor's knowledge, the use by
Pledgor of such Pledged Collateral and all such rights
with respect to the foregoing does not infringe on the
rights of any Person. To the best of Pledgor's knowledge,
no claim has been made and remains outstanding that
Pledgor's use of the Pledged Collateral does or may
violate the rights of any third person.
(g) Pledged Collateral. Schedules A, B, C and D
hereto, respectively, are true, accurate and complete
lists as of the date hereof of all issued, registered or
applied for Patents, Trademarks, Copyrights and Licenses
owned by Pledgor.
<PAGE>
-8-
Section 7. Covenants Concerning Pledged Collateral.
(a) Protection of Collateral Agent's Security. On a
continuing basis, Pledgor shall, at its sole cost and expense,
make, execute, acknowledge and deliver, and file and record in
the proper filing and recording offices, all such instruments
or documents, including, without limitation, appropriate
financing and continuation statements and collateral
agreements, and take all such action as may reasonably be
deemed necessary by Collateral Agent to carry out the intent
and purposes of this Agreement, to assure and confirm to
Collateral Agent the grant or perfection of a first priority
security interest in the Pledged Collateral for the benefit of
the Secured Parties, and to enable Collateral Agent to exercise
and enforce its rights and remedies hereunder with respect to
any Pledged Collateral. Without limiting the generality of the
foregoing, Pledgor (i) will not enter into any agreement that
would impair or conflict with Pledgor's obligations hereunder;
(ii) will, from time to time, upon Collateral Agent's
reasonable request, cause its books and records to be marked
with such legends or segregated in such manner as Collateral
Agent may reasonably specify and take or cause to be taken such
other action and adopt such procedures as Collateral Agent may
reasonably specify to give notice to or to perfect the security
interest in the Pledged Collateral intended to be conveyed
hereby; (iii) will, promptly following its becoming aware
thereof, notify Collateral Agent of (A) any adverse
determination in any proceeding in the United States Patent and
Trademark Office or the United States Copyright Office with
respect to any Patent, Trademark or Copyright, or (B) the
institution of any proceeding or any adverse determination in
any Federal, state or local court or administrative body
regarding Pledgor's claim of ownership in or right to use any
of the Pledged Collateral, its right to register the Pledged
Collateral, or its right to keep and maintain such registration
in full force and effect; (iv) will maintain and protect the
Pledged Collateral necessary for the operation of Pledgor's
business; (v) will not permit to lapse or become abandoned any
Pledged Collateral necessary for the operation of Pledgor's
business, and will not settle or compromise any pending or
future litigation or administrative proceeding with respect to
the Pledged Collateral necessary for the operation of Pledgor's
business, in each case, without the consent of Collateral Agent
(such consent not to be unreasonably withheld or delayed);
(vi) upon Pledgor obtaining knowledge thereof, will promptly
notify Collateral Agent in writing of any event which may
reasonably be expected to adversely affect the value or utility
of the Pledged Collateral or any portion thereof necessary for
the operation of
<PAGE>
-9-
Pledgor's business, the ability of Pledgor or
Collateral Agent to dispose of the Pledged Collateral or any
portion thereof or the rights and remedies of Collateral Agent
in relation thereto, including, without limitation, a levy or
threat of levy or any legal process against the Pledged
Collateral or any portion thereof; (vii) will not license the
Pledged Collateral other than licenses entered into by Pledgor
in, or incidental to, the ordinary course of business, or amend
or permit the amendment of any of the licenses in a manner that
materially adversely affects the right to receive payments
thereunder, in any manner that would materially impair the
value of the Pledged Collateral or the Lien on the Pledged
Collateral intended to be granted to Collateral Agent for the
benefit of Secured Parties without the consent of Collateral
Agent; (viii) until Collateral Agent exercises its rights to
make collection, will diligently keep adequate records
respecting the Pledged Collateral; (ix) will furnish to
Collateral Agent from time to time statements and amended
schedules further identifying and describing the Pledged
Collateral and such other materials evidencing or reports
pertaining to the Pledged Collateral as Collateral Agent may
from time to time reasonably request, all in reasonable detail;
(x) will pay when due any and all material taxes, levies,
maintenance fees, charges, assessments, license fees and
similar taxes or impositions payable in respect of each item of
Pledged Collateral; and (xi) will comply with all material
laws, rules and regulations applicable to the Pledged
Collateral the failure to comply with which would have a
material adverse effect on the value or use of the Pledged
Collateral or a material adverse effect on the Lien on the
Pledged Collateral granted to the Collateral Agent hereunder.
(b) After-Acquired Property. If Pledgor shall, at
any time before the Secured Obligations have been paid or the
Commitments of the Banks to make any Loan or to issue any
Letter of Credit have expired or been sooner terminated (i)
obtain any rights to any additional Pledged Collateral or
(ii) become entitled to the benefit of any additional Pledged
Collateral or any renewal or extension thereof, including any
reissue, division, continuation, or continuation-in-part of any
Patent, or any improvement on any Patent, the provisions of
this Agreement shall automatically apply thereto and any such
item enumerated in clause (i) or (ii) with respect to Pledgor
shall automatically constitute Pledged Collateral if such would
have constituted Pledged Collateral at the time of execution of
this Agreement, and be subject to the Lien created by this
Agreement without further action by any party other than
actions required to perfect such Lien. Pledgor shall promptly
provide to
<PAGE>
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Collateral Agent written notice of any of the foregoing. Pledgor agrees,
promptly following a request by Collateral Agent, to confirm the attachment of
the Lien created by this Agreement to any rights described in clauses (i) and
(ii) above if such would have constituted Pledged Collateral at the time of
execution of this Agreement by execution of an instrument in form reasonably
acceptable to Collateral Agent.
(c) Modifications. Pledgor agrees to modify this Agreement by
amending Schedules A, B, C and D hereto to include any future Pledged Collateral
of Pledgor, including, without limitation, any of the items listed in Section
7(b).
(d) Applications. Pledgor shall file and prosecute diligently all
applications for the Patents, the Trademarks or the Copyrights now or hereafter
pending that would be necessary to the business of Pledgor to which any such
applications pertain, and shall do all acts necessary to preserve and maintain
all rights in the Pledged Collateral necessary for the operation of Pledgor's
business. Any and all costs and expenses incurred in connection with any such
actions shall be borne by Pledgor. Pledgor shall not abandon any right to file a
Patent, Trademark or Copyright application, or any pending Patent, Trademark or
Copyright application or any Patent, Trademark or Copyright necessary for the
operation of Pledgor's business without the consent of Collateral Agent (such
consent not to be unreasonably withheld or delayed).
Section 8. Transfers and Other Liens. Pledgor shall not (i) sell,
convey, assign or otherwise dispose of, or grant any option with respect to, any
of the Pledged Collateral other than licenses entered into by Pledgor in, or
incidental to, the ordinary course of business or with any Affiliate of Pledgor
or (ii) create or permit to exist any Lien upon or with respect to any of the
Pledged Collateral, other than the Lien granted to Collateral Agent pursuant to
this Agreement and Liens of the type described in paragraph (a) of the
definition of Permitted Encumbrances.
Section 9. Reasonable Care. Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded treatment
substantially equivalent to that which Collateral Agent, in its individual
capacity, accords its own property, it being understood that neither Collateral
Agent nor any of the Secured Parties shall have responsibility for taking any
necessary steps to preserve
<PAGE>
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rights against any Person with respect to any Pledged Collateral.
Section 10. Remedies Upon Default.
(a) Remedies; Disposition of Collateral. If any
Event of Default shall have occurred and be continuing, and the
Secured Obligations have been declared due and payable in
accordance with the Credit Agreement, then and in every such
case, Collateral Agent may, (i) to the full extent permitted by
law, and without advertisement, hearing or process of law of
any kind, (A) exercise any and all rights as beneficial and
legal owner of the Pledged Collateral, including, without
limitation, perfecting assignment of any and all consensual
rights and powers with respect to the Pledged Collateral and
(B) sell or assign or grant a license to use, or cause to be
sold or assigned or a license granted to use any or all of the
Pledged Collateral (in the case of Trademarks, along with the
goodwill associated therewith) or any part thereof, in each
case, free of all rights and claims of Pledgor therein and
thereto. In that connection, Collateral Agent shall have the
right to cause any or all of the Pledged Collateral to be
transferred of record into the name of Collateral Agent or its
nominee and the right to impose (1) such limitations and
restrictions on the sale or assignment of the Pledged
Collateral as Collateral Agent may deem to be necessary or
appropriate to comply with any law, rule or regulation
(federal, state or local) having applicability to the sale or
assignment, and (2) any necessary or appropriate requirements
for any required governmental approvals or consents;
(ii) Exercise in respect of the Pledged Collateral,
in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a
secured party on default under the UCC to the extent permitted
by applicable law and whether or not the UCC is applicable
thereto. Pledgor acknowledges and agrees that, to the extent
notice of sale shall be required by law, ten days' notice to
Pledgor of the time and place of any public sale or of the time
after which any private sale or other intended disposition is
to take place shall constitute commercially reasonable
notification of such matters. No notification need be given to
Pledgor if it has signed, after the occurrence of an Event of
Default, a statement renouncing or modifying any right to
notification of sale or other intended disposition;
(iii) Collateral Agent or any other Secured Party or
any of their respective Affiliates may be the purchaser of any
<PAGE>
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or all of the Pledged Collateral at any public or private sale
and shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any
portion of the Pledged Collateral sold at such sale, to use and
apply any of the Secured Obligations owed to such Person as a
credit on account of the purchase price of such item of
Collateral payable by such Person at such sale. Each purchaser
at any such sale shall acquire the property sold absolutely
free from any claim or right on the part of Pledgor, and
Pledgor hereby waives, to the fullest extent permitted by law,
all rights of redemption, stay and/or appraisal which it now
has or may at any time in the future have under any rule of law
or statute now existing or hereafter enacted. Collateral Agent
shall not be obligated to make any sale of Pledged Collateral
regardless of notice of sale having been given. Collateral
Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place
to which it was so adjourned. Pledgor hereby waives, to the
fullest extent permitted by applicable law, any claims against
Collateral Agent arising by reason of the fact that the price
at which any Pledged Collateral may have been sold at such a
private sale was less than the price which might have been
obtained at a public sale, even if Collateral Agent accepts the
first offer received and does not offer such Pledged Collateral
to more than one offeree.
(b) (i) Waiver of Notice and Claims. Pledgor
hereby waives, to the fullest extent permitted by applicable
law, any and all notices, advertisements, hearings or process
of law in connection with the exercise by Collateral Agent of
any of its rights and remedies hereunder. Collateral Agent
shall not be liable to any Person for any incorrect or improper
payment made pursuant to this Section 10 in the absence of
gross negligence or willful misconduct.
(ii) Pledgor hereby waives, to the fullest extent
permitted by applicable law, notice or judicial hearing in
connection with Collateral Agent's taking possession or
Collateral Agent's disposition of any of the Pledged
Collateral, including, without limitation, any and all prior
notice and hearing for any prejudgment remedy or remedies and
any such right which Pledgor would otherwise have under law,
and Pledgor hereby further waives to the extent permitted by
applicable law: (A) all damages occasioned by such taking of
possession; (B) all other requirements as to the time, place
and terms of sale or other requirements with respect to the
enforcement of Collateral Agent's rights hereunder; and (C) all
rights of redemption,
<PAGE>
-13-
appraisal, valuation, stay, extension or moratorium now or hereafter in force
under any applicable law. Any sale of, or the grant of options to purchase, or
any other realization upon, any Pledged Collateral shall operate to divest all
right, title, interest, claim and demand, either at law or in equity, of Pledgor
therein and thereto, and shall be a perpetual bar both at law and in equity
against Pledgor and against any and all Persons claiming or attempting to claim
the Pledged Collateral so sold, optioned or realized upon, or any part thereof,
from, through or under Pledgor.
Section 11. Application of Proceeds. The proceeds received by
Collateral Agent in respect of any sale of, collection from or other realization
upon all or any part of the Pledged Collateral pursuant to the exercise by
Collateral Agent of its remedies as a secured creditor as provided in Section 10
hereof shall be applied, together with any other sums then held by Collateral
Agent pursuant to this Agreement, promptly by Collateral Agent as follows:
First, to the payment of all costs and expenses, fees, commissions
and taxes of such sale, collection or other realization, including,
without limitation, reasonable out-of-pocket costs and expenses of
Collateral Agent and its agents and counsel, and all expenses,
liabilities and advances made or incurred by Collateral
Agent in connection therewith;
Second, to the payment of all other costs and expenses of such sale,
collection or other realization, including, without limitation, reasonable
out-of-pocket costs and expenses of the Banks and their agents and counsel
and all costs, liabilities and advances made or incurred by the Banks in
connection therewith;
Third, to the payment in full in cash of Secured Obligations
consisting of interest and all amounts other than principal under the
Credit Agreement at any time and from time to time owing by Pledgor under
or in connection with the Credit Agreement, ratably according to the
unpaid amounts thereof, in the manner and priority set forth in the Credit
Agreement, together with interest on each such amount in the manner and to
the extent set forth in the Credit Agreement from and after the date such
amount is due, owing or unpaid until paid in full;
Fourth, to the pro rata payment in full in cash of Secured
Obligations consisting of (i) principal at any
<PAGE>
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time and from time to time owing by Pledgor under or in connection with
the Credit Agreement, ratably according to the unpaid amounts thereof, in
the manner and priority set forth in the Credit Agreement and (ii) the
amount of Pledgor's obligations then due and payable under any Interest
Rate Agreement, including any early termination payments then due
(exclusive of expenses or similar liabilities to any Bank under the
applicable Interest Rate Agreement(s)), together with interest on each
such amount in the manner and to the extent set forth in the Credit
Agreement from and after the date such amount is due, owing or unpaid
until paid in full; and
Fifth, the balance, if any, to the Person lawfully
entitled thereto (including Pledgor or its successors or
assigns).
Section 12. Expenses. Pledgor will upon demand pay
to Collateral Agent the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its
counsel and the reasonable fees and expenses of any experts and
agents, which Collateral Agent may incur in connection with (i)
the collection of the Secured Obligations, (ii) the enforcement
and administration of this Agreement, (iii) the custody or
preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iv) the
exercise or enforcement of any of the rights of Collateral
Agent or any Secured Party hereunder or (v) the failure by
Pledgor to perform or observe any of the provisions hereof.
All amounts payable by Pledgor under this Section 12 shall be
due within ten Business Days after demand and shall be part of
the Secured Obligations. Pledgor's obligations under this
Section 12 shall survive the termination of this Agreement and
the discharge of Pledgor's other obligations hereunder.
Section 13. No Waiver; Cumulative Remedies.
(a) No failure on the part of Collateral Agent to
exercise, no course of dealing with respect to, and no delay on
the part of Collateral Agent in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any such 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 provided are cumulative and are not exclusive
of any remedies provided by law.
<PAGE>
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(b) In the event Collateral Agent shall have
instituted any proceeding to enforce any right, power or remedy
under this instrument by foreclosure, sale or otherwise, and
such proceeding shall have been discontinued or abandoned for
any reason or shall have been determined adversely to
Collateral Agent, then and in every such case, Pledgor,
Collateral Agent and each Secured Party shall be restored to
their respective former positions and rights hereunder with
respect to the Pledged Collateral, and all rights, remedies and
powers of Collateral Agent and the Secured Parties shall
continue as if no such proceeding had been instituted.
Section 14. Collateral Agent. Collateral Agent has
been appointed as collateral agent pursuant to the Credit
Agreement. The actions of Collateral Agent hereunder are
subject to the provisions of the Credit Agreement. Collateral
Agent shall have the right hereunder to make demands, to give
notices, to exercise or refrain from exercising any rights, and
to take or refrain from taking action (including, without
limitation, the release or substitution of Pledged Collateral),
in accordance with this Agreement and the Credit Agreement.
Collateral Agent may resign and a successor Collateral Agent
may be appointed in the manner provided in the Credit
Agreement. Upon the acceptance of any appointment as
Collateral Agent by a successor Collateral Agent, that
successor Collateral Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and
duties of the retiring Collateral Agent under this Agreement,
and the retiring Collateral Agent shall thereupon be discharged
from its duties and obligations under this Agreement. After
any retiring Collateral Agent's resignation, the provisions of
this Agreement shall inure to its benefit as to any actions
taken or omitted to be taken by it under this Agreement while
it was Collateral Agent.
Section 15. Collateral Agent May Perform; Collateral
Agent Appointed Attorney-in-Fact. If Pledgor shall fail to do
any act or thing that it has covenanted to do hereunder or any
warranty on the part of Pledgor contained herein shall be
breached, Collateral Agent or any Secured Party may (but shall
not be obligated to) do the same or cause it to be done or
remedy any such breach, and may, following five Business Days'
written notice to Pledgor of its intention to do so, expend
funds for such purpose. Any and all amounts so expended by
Collateral Agent or such Secured Party shall be paid by Pledgor
within ten Business Days after demand therefor, with interest
at the highest rate then in effect under the Credit Agreement
during the period from and including the date on which such
funds were so expended to the date of repayment. Pledgor's
<PAGE>
-16-
obligations under this Section 15 shall survive the termination
of this Agreement and the discharge of Pledgor's other
obligations under this Agreement, the Credit Agreement, any
Interest Rate Agreement and the other Credit Documents.
Pledgor hereby appoints Collateral Agent its attorney-in-fact
with an interest, with full authority in the place and stead of
Pledgor and in the name of Pledgor, or otherwise, from time to
time in Collateral Agent's reasonable discretion to take any
action and to execute any instrument consistent with the terms
of this Agreement and the other Credit Documents which
Collateral Agent may deem reasonably necessary or advisable to
accomplish the purposes of this Agreement. The foregoing grant
of authority is a power of attorney coupled with an interest
and such appointment shall be irrevocable for the term of this
Agreement. Pledgor hereby ratifies all that such attorney
shall lawfully do or cause to be done by virtue hereof.
Section 16. Litigation.
(a) Unless there shall occur an Event of Default,
Pledgor shall have the right to commence and prosecute in its
own name, as real party in interest, for its own benefit and at
its sole cost and expense, such applications for protection of
the Pledged Collateral, suits, proceedings or other actions for
infringement, counterfeiting, unfair competition, dilution or
other damage as are in its reasonable business judgment
necessary to protect the Pledged Collateral. Pledgor shall
promptly notify Collateral Agent in writing as to the
commencement and prosecution of any such actions, or threat
thereof relating to the Pledged Collateral and shall provide to
Collateral Agent such information with respect thereto as may
be reasonably requested by Collateral Agent. Pledgor shall
indemnify and hold harmless each Secured Party for any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, expenses or disbursements (including
reasonable attorneys' fees and expenses) of any kind whatsoever
which may be imposed on, incurred by or asserted against such
Secured Party in connection with or in any way arising out of
such suits, proceedings or other actions.
(b) Upon the occurrence and during the continuance
of an Event of Default, Collateral Agent shall have the right
but shall in no way be obligated to file applications for
protection of the Pledged Collateral and/or bring suit in the
name of Pledgor, Collateral Agent or the Secured Parties to
enforce the Pledged Collateral and any license thereunder; in
the event of such suit, Pledgor shall, at the request of
Collateral Agent, do any and all lawful acts and execute any
and all
<PAGE>
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documents requested by Collateral Agent in aid of such
enforcement and Pledgor shall promptly, upon demand, reimburse
and indemnify Collateral Agent, as the case may be, for all
costs and expenses (including reasonable fees and expenses of
counsel) incurred by Collateral Agent in the exercise of its
rights under this Section 16. In the event that Collateral
Agent shall elect not to bring suit to enforce the Pledged
Collateral, Pledgor agrees, at the request of Collateral Agent,
to use all reasonable measures, whether by action, suit,
proceeding or otherwise, to prevent the infringement,
counterfeiting or other diminution in value of any of the
Pledged Collateral by others and for that purpose agrees to
diligently maintain any action, suit or proceeding against any
person so infringing necessary to prevent such infringement
unless Pledgor has determined that the Pledged Collateral that
is the subject of any pending or contemplated infringement or
enforcement action or proceeding does not contain or represent
any value or utility (other than of an immaterial nature),
consistent with prudent business practice.
Section 17. Modification in Writing. No amendment,
modification, supplement, termination or waiver of or to any
provision of this Agreement, nor consent to any departure by
Pledgor therefrom, shall be effective unless the same shall be
done in accordance with the terms of the Credit Agreement and
unless in writing and signed by Collateral Agent. Any
amendment, modification or supplement of or to any provision of
this Agreement, any waiver of any provision of this Agreement
and any consent to any departure by Pledgor from the terms of
any provision of this Agreement shall be effective only in the
specific instance and for the specific purpose for which made
or given. Except where notice is specifically required by this
Agreement or any other Credit Document, no notice to or demand
on Pledgor in any case shall entitle Pledgor to any other or
further notice or demand in similar or other circumstances.
Section 18. Termination; Release. When all the
Secured Obligations have been paid in full and the Commitments
of the Banks to make any Loan or to issue any Letter of Credit
under the Credit Agreement shall have expired or been sooner
terminated, this Agreement shall terminate. Upon termination
of this Agreement or any release of Pledged Collateral in
accordance with the provisions of the Credit Agreement,
Collateral Agent shall, upon the request and at the sole cost
and expense of Pledgor, forthwith assign, transfer and deliver
to Pledgor, against receipt and without recourse to or warranty
by Collateral Agent, such of the Pledged Collateral to be
released (in the case of a release) as shall not have been sold
or
<PAGE>
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otherwise applied pursuant to the terms hereof, and with
respect to any other Pledged Collateral, proper instruments
(including UCC termination statements on Form UCC-3 and
documents suitable for recordation in the United States Patent
and Trademark Office, the United States Copyright Office or
similar domestic or foreign authority) acknowledging the
termination of this Agreement or the release of such Pledged
Collateral, as the case may be.
Section 19. Notices. Unless otherwise provided
herein or in the Credit Agreement, any notice or other
communication herein required or permitted to be given shall be
given in the manner set forth in the Credit Agreement, as to
either party, addressed to it at the address set forth in the
Credit Agreement or at such other address as shall be
designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section 19;
provided that notices to Collateral Agent shall not be
effective until received by Collateral Agent.
Section 20. Continuing Security Interest;
Assignment. This Agreement shall create a continuing security
interest in the Pledged Collateral and shall (i) be binding
upon Pledgor, its successors and assigns and (ii) inure,
together with the rights and remedies of Collateral Agent
hereunder, to the benefit of Collateral Agent and the other
Secured Parties and each of their respective successors,
transferees and assigns; no other Persons (including, without
limitation, any other creditor of Pledgor) shall have any
interest herein or any right or benefit with respect hereto.
Without limiting the generality of the foregoing clause (ii),
any Bank may assign or otherwise transfer any indebtedness held
by it secured by this Agreement to any other Person, and such
other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Bank, herein or
otherwise, subject however, to the provisions of the Credit
Agreement and any applicable Interest Rate Agreement.
Section 21. GOVERNING LAW; TERMS. THIS AGREEMENT
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK, APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED WHOLLY THEREIN, EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY
ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE
OF NEW YORK.
<PAGE>
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Section 22. CONSENT TO JURISDICTION AND SERVICE OF
PROCESS.
(a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, PLEDGOR
HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS. PLEDGOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY
THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO PLEDGOR AT ITS ADDRESS FOR NOTICES PURSUANT
TO THE CREDIT AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE 30
DAYS AFTER SUCH MAILING. PLEDGOR HEREBY IRREVOCABLY APPOINTS
CT CORPORATION SYSTEM HAVING AN ADDRESS AT 1633 BROADWAY,
NEW YORK, NEW YORK 10019 AND SUCH OTHER PERSONS AS MAY
HEREAFTER BE SELECTED BY BORROWER IRREVOCABLY AGREEING IN
WRITING TO SERVE AS ITS AGENT FOR SERVICE OF PROCESS IN RESPECT
OF ANY SUCH ACTION OR PROCEEDING. NOTHING HEREIN SHALL AFFECT
THE RIGHT OF COLLATERAL AGENT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST PLEDGOR IN ANY OTHER JURISDICTION.
(b) PLEDGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR
IN CONNECTION WITH THIS AGREEMENT BROUGHT IN THE COURTS
REFERRED TO IN CLAUSE (A) ABOVE AND HEREBY FURTHER IRREVOCABLY
WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT
ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
Section 23. Severability of Provisions. Any
provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
Section 24. Execution in Counterparts. This
Agreement and any amendments, waivers, consents or supplements
hereto may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an
<PAGE>
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original, but all such counterparts together shall constitute
one and the same agreement.
Section 25. Headings. The Section headings used in
this Agreement are for convenience of reference only and shall
not affect the construction of this Agreement.
Section 26. Obligations Absolute. All obligations
of Pledgor hereunder shall be absolute and unconditional
irrespective of:
(i) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the
like of either Pledgor or any other Credit Party;
(ii) any lack of validity or enforceability of the
Credit Agreement, any Interest Rate Agreement, any Letter
of Credit or any other Credit Document, or any other
agreement or instrument relating thereto;
(iii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
Secured Obligations, or any other amendment or waiver of
or any consent to any departure from the Credit Agreement,
any Interest Rate Agreement, any Letter of Credit or any
other Credit Document, or any other agreement or
instrument relating thereto;
(iv) any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of
or consent to any departure from any guarantee, for all or
any of the Secured Obligations;
(v) any exercise or non-exercise, or any waiver of
any right, remedy, power or privilege under or in respect
of this Agreement any Interest Rate Agreement, or any
other Credit Document except as specifically set forth in
a waiver granted pursuant to the provisions of Section 18
hereof; or
(vi) any other circumstance or happening whatsoever
that is similar to any of the foregoing.
Section 27. Collateral Agent's Right to Sever
Indebtedness.
(a) Pledgor acknowledges that (i) the Pledged
Collateral does not constitute the sole source of security for
the
<PAGE>
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payment and performance of the Secured Obligations and that
the Secured Obligations are also secured by other types of
property of Pledgor and its Affiliates in other jurisdictions
(all such property, collectively, the "Collateral"), (ii) the
number of such jurisdictions and the nature of the transaction
of which this instrument is a part are such that it would have
been impracticable for the parties to allocate to each item of
Collateral a specific loan amount and to execute in respect of
such item a separate credit agreement, and (iii) Pledgor
intends that Collateral Agent have the same rights with respect
to the Pledged Collateral, in any judicial proceeding relating
to the exercise of any right or remedy hereunder or otherwise,
that Collateral Agent would have had if each item of Collateral
had been pledged or encumbered pursuant to a separate credit
agreement and security instrument. In furtherance of such
intent, Pledgor agrees to the greatest extent permitted by law
that Collateral Agent may at any time by notice (an "Allocation
Notice") to Pledgor allocate a portion of the Secured
Obligations (the "Allocated Indebtedness") to all or a
specified portion of the Pledged Collateral and sever from the
remaining Secured Obligations the Allocated Indebtedness. From
and after the giving of an Allocation Notice with respect to
any of the Pledged Collateral, the Secured Obligations
hereunder shall be limited to the extent set forth in the
Allocation Notice and (as so limited) shall, for all purposes,
be construed as a separate credit obligation of Pledgor
unrelated to the other transactions contemplated by the Credit
Agreement, any Interest Rate Agreement, any other Credit
Document or any document related to any thereof. To the extent
that the proceeds of any judicial proceeding relating to the
exercise of any right or remedy hereunder of the Pledged
Collateral shall exceed the Allocated Indebtedness, such
proceeds shall belong to Pledgor and shall not be available
hereunder to satisfy any Secured Obligations of Pledgor other
than the Allocated Indebtedness. In any action or proceeding
to exercise any right or remedy under this Agreement which is
commenced after the giving by Collateral Agent of an Allocation
Notice, the Allocation Notice shall be conclusive proof of the
limits of the Secured Obligations hereby secured, and Pledgor
may introduce, by way of defense or counterclaim, evidence
thereof in any such action or proceeding. Notwithstanding any
provision of this Section 27, the proceeds received by
Collateral Agent pursuant to this Agreement shall be applied by
Collateral Agent in accordance with the provisions of Sec-
tion 11 hereof.
(b) Pledgor hereby waives to the greatest extent
permitted under law the right to a discharge of any of the
Secured Obligations under any statute or rule of law now or
<PAGE>
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hereafter in effect which provides that the exercise of any
particular right or remedy as provided for herein (by judicial
proceedings or otherwise) constitutes the exclusive means for
satisfaction of the Secured Obligations or which makes
unavailable any further judgment or any other right or remedy
provided for herein because Collateral Agent elected to proceed
with the exercise of such initial right or remedy or because of
any failure by Collateral Agent to comply with laws that
prescribe conditions to the entitlement to such subsequent
judgment or the availability of such subsequent right or
remedy. In the event that, notwithstanding the foregoing
waiver, any court shall for any reason hold that such
subsequent judgment or action is not available to Collateral
Agent, Pledgor shall not (i) introduce in any other
jurisdiction any judgment so holding as a defense to
enforcement against Pledgor of any remedy in the Credit
Agreement, any Interest Rate Agreement or any other Credit
Document or (ii) seek to have such judgment recognized or
entered in any other jurisdiction, and any such judgment shall
in all events be limited in application only to the state or
jurisdiction where rendered and only with respect to the
collateral referred to in such judgment.
(c) In the event any instrument in addition to the
Allocation Notice is necessary to effectuate the provisions of
this Section 27, including, without limitation, any amendment
to this Agreement, any substitute promissory note or affidavit
or certificate of any kind, Collateral Agent may execute and
deliver such instrument as the attorney-in-fact of Pledgor.
Such power of attorney is coupled with an interest and is
irrevocable.
(d) Notwithstanding anything set forth herein to the
contrary, the provisions of this Section 27 shall be effective
only to the maximum extent permitted by law.
Section 28. Future Advances. This Agreement shall
secure the payment of any amounts advanced from time to time
pursuant to the Credit Agreement.
<PAGE>
IN WITNESS WHEREOF, Pledgor and Collateral Agent have
caused this Agreement to be duly executed and delivered by
their duly authorized officers as of the date first above
written.
CARSON PRODUCTS COMPANY,
as Pledgor
By:
-----------------------------------------
Name:
Title:
BANQUE INDOSUEZ, NEW YORK BRANCH,
as Collateral Agent
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
<PAGE>
Schedule A
1. U.S. Patent Registrations:
2. Pending Applications for U.S. Patents:
3. Pending Applications for U.S. Patents in which Pledgor has
a partial legal interest:
<PAGE>
Schedule B
1. U.S. Trademark Registrations:
Trademark U.S. Registration No. Registration Date
<PAGE>
Schedule C
U.S. Copyright Registrations:
<PAGE>
Schedule D
Proprietary Rights for which Pledgor has a license from a third
party:
<PAGE>
Exhibit H to the
Credit Agreement
BORROWER GENERAL SECURITY AGREEMENT
BORROWER GENERAL SECURITY AGREEMENT (the
"Agreement"), dated as of October __, 1996, made by CARSON
PRODUCTS COMPANY (formerly known as Aminco, Inc., as successor
by merger to DNL Savannah Acquisition Corp.), a Delaware
corporation having an office at 64 Ross Road, Savannah, Georgia
31405 ("Pledgor"), in favor of BANQUE INDOSUEZ, NEW YORK
BRANCH, having an office at 1211 Avenue of the Americas, 7th
Floor, New York, New York 10036, as pledgee, assignee and
secured party, in its capacity as collateral agent (in such
capacities and together with any successors in such capacities,
"Collateral Agent") for the lending institutions (the "Banks")
from time to time party to the Credit Agreement (as hereinafter
defined).
R E C I T A L S :
A. Pursuant to a certain credit agreement, dated as
of the date hereof (as amended, amended and restated,
supplemented or otherwise modified from time to time, the
"Credit Agreement"; capitalized terms used herein and not
defined shall have the meanings assigned to them in the Credit
Agreement), among Pledgor, the Banks and Banque Indosuez, New
York Branch, as Agent and Collateral Agent for the Banks, the
Banks have agreed (i) to make to or for the account of Pledgor
certain A Term Loans up to an aggregate principal amount of
$15,000,000, certain B Term Loans up to an aggregate principal
amount of $10,000,000 and certain Revolving Loans up to an
aggregate principal amount of $15,000,000 and (ii) to issue
certain Letters of Credit for the account of Pledgor.
B. It is contemplated that Pledgor may enter into
one or more agreements with one or more of the Banks ("Interest
Rate Agreements") fixing the interest rates with respect to
Loans under the Credit Agreement (all obligations of Pledgor
now existing or hereafter arising under such Interest Rate
Agreements, collectively, the "Interest Rate Obligations").
C. Pledgor is the legal and beneficial owner of the
Pledged Collateral (as hereinafter defined).
D. It is a condition to the obligations of the
Banks to make the Loans under the Credit Agreement and a
<PAGE>
-2-
condition to any Bank issuing Letters of Credit under the
Credit Agreement or entering into the Interest Rate Agreements
that Pledgor execute and deliver the applicable Credit Documents, including
this Agreement.
E. This Agreement is given by Pledgor in favor of Collateral
Agent for its benefit and the benefit of the Banks and the Agent
(collectively, the "Secured Parties") to secure the payment and performance
of all of the Secured Obligations (as defined in Section 2).
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing premises and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Pledgor and Collateral Agent hereby agree as
follows:
Section 1. Pledge. As collateral security for the payment and
performance when due of all the Secured Obligations, Pledgor hereby
pledges, assigns, transfers and grants to Collateral Agent for its benefit
and the benefit of the Secured Parties, a continuing first priority
security interest (except as set forth on Schedule A hereto) in and to all
of the right, title and interest of Pledgor in, to and under the following
property whether now existing or hereafter acquired (collectively, the
"Pledged Collateral"):
(a) each and every Receivable (as hereinafter
defined);
(b) all Inventory (as hereinafter defined);
(c) all books, records, ledgers, print-outs, file
materials and other papers containing information relating
to Receivables and any account debtors in respect thereof,
together with all Contracts (as hereinafter defined) (except
where such pledge, assignment, transfer or grant would
violate the provisions of any such Contracts);
(d) all Equipment (as hereinafter defined);
(e) all Intangibles (as hereinafter defined);
<PAGE>
-3-
(f) all Insurance Policies (as hereinafter
defined);
(g) all Pension Plan Reversions (as hereinafter
defined);
(h) any and all property of every name and nature
(excluding any property constituting Pledged Collateral
under the Borrower Intellectual Property Security Agreement)
which from time to time after the date hereof, by delivery
or by writing of any kind for the purposes hereof, shall
have been conveyed, mortgaged, pledged, assigned or
transferred by Pledgor or by anyone on Pledgor's behalf or
with its consent to Collateral Agent for the benefit of the
Secured Parties, which is hereby authorized to receive at
any and all times any such property, as and for additional
security for the payment of the Secured Obligations and to
hold and apply such property subject to and in accordance
with this Agreement; including, without limitation, all
monies due and to become due to Pledgor in connection with
any of the foregoing and all rights, remedies, powers,
privileges and claims of Pledgor under or in connection
therewith;
(i) all Documents (as hereinafter defined);
(j) all Instruments (as hereinafter defined); and
(k) all Proceeds (as hereinafter defined) of any
and all of the foregoing.
Section 2. Secured Obligations. This Agreement secures, and
the Pledged Collateral is collateral security for, the payment and
performance in full when due, whether at stated maturity, by acceleration
or otherwise (including, without limitation, the payment of interest and
other amounts which would accrue and become due but for the filing of a
petition in bankruptcy or the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. { 362(a)), of (i) all Obligations
of Pledgor now existing or hereafter arising under the Credit Agreement and
all Interest Rate Obligations of Pledgor now existing or hereafter arising
under any Interest Rate Agreement (including, without limitation, the
obligations
<PAGE>
-4-
of Pledgor provided for therein to pay principal, interest and
all other charges, fees, expenses, commissions, reimbursements, premiums,
indemnities and other payments related to or in respect of the Obligations
contained in the Credit Agreement and the obligations contained in any
Interest Rate Agreement) and (ii) without duplication of the amounts
described in clause (i), all obligations of Pledgor now existing or
hereafter arising under this Agreement or any other Security Document,
including, without limitation, all charges, fees, expenses, commissions,
reimbursements, premiums, indemnities and other payments that Pledgor is
obligated to pay under this Agreement
or any other Security Document (the obligations described clauses (i) and
(ii), collectively, the "Secured Obligations").
Section 3. No Release. Nothing set forth in this Agreement
shall relieve Pledgor from the performance of any term, covenant, condition
or agreement on Pledgor's part to be performed or observed under or in
respect of any of the Pledged Collateral or from any liability to any
Person under or in respect of any of the Pledged Collateral or shall impose
any obligation on Collateral Agent or any Secured Party to perform or
observe any such term, covenant, condition or agreement on Pledgor's part
to be so performed or observed or shall impose any liability on Collateral
Agent or any Secured Party for any act or omission on the part of Pledgor
relating thereto or for any breach of any representation or warranty on the
part of Pledgor contained in this Agreement, any Interest Rate Agreement or
any other Credit Document, or under or in respect of the Pledged Collateral
or made in connection herewith or therewith. The obligations of Pledgor
contained in this Section 3 shall survive the termination of this Agreement
and the discharge of Pledgor's other obligations under this Agreement, any
Interest Rate Agreement and the other Credit Documents.
Section 4. Supplements by Collateral Agent. Pledgor hereby
authorizes Collateral Agent, without relieving Pledgor of any obligations
hereunder, to file financing statements, continuation statements,
amendments thereto and other documents relative to all or any part thereof,
without the signature of Pledgor where permitted by law, and Pledgor agrees
to do such further acts and things, and to execute and deliver to
Collateral Agent such additional assignments, agreements, powers and
instruments, as Collateral Agent may reasonably deem necessary or
appropriate, wherever required or permitted by law in order to perfect and
preserve the rights and interests granted to Collateral Agent hereunder or
to carry into effect the purposes of this Agreement or better to assure and
confirm unto
<PAGE>
-5-
Collateral Agent its respective rights, powers and remedies
hereunder. All of the foregoing shall be at the sole cost and expense of
Pledgor.
Section 5. Representations, Warranties and Covenants. Pledgor
represents, warrants and covenants as follows; provided, that the
representations, warranties, covenants and conditions of or relating to the
Sellers in the Purchase Agreement (i) are given only to the best of
Pledgor's knowledge, and (ii) shall not be deemed a waiver of any rights
nor an admission of the truth thereof by any Credit Party or any other
Purchaser Indemnified Party (as defined in the Purchase Agreement) as
against any other party to the Purchase Agreement:
(a) Necessary Filings. Upon the filing of financing
statements and acceptance thereof in the appropriate offices under
the UCC, the security interest granted to Collateral Agent for the
benefit of the Secured Parties pursuant to this Agreement in and to
the Pledged Collateral will constitute a perfected security interest
therein, superior and prior to the rights of all other Persons
therein and subject to no Liens other than the Liens identified on
Schedule A hereto relating to the items of Pledged Collateral
identified on such schedule (collectively, "Prior Liens").
(b) No Liens. Pledgor is as of the date hereof, and, as to
Pledged Collateral acquired by it from time to time after the date
hereof, Pledgor will be, the owner of all Pledged Collateral free
from any Lien or other right, title or interest of any Person other
than (i) Prior Liens, (ii) the Lien and security interest created by
this Agreement, and (iii) Liens of the type described in paragraphs
(a), (b), (c), (d), (e), (h), (i) and (j) of the definition of
Permitted Encumbrances (collectively, "Permitted Liens"), and Pledgor
shall take all reasonable steps to defend the Pledged Collateral
against all claims and demands of all Persons at any time claiming
any interest therein adverse to Collateral Agent or any Secured
Party.
(c) Other Financing Statements. There is no financing
statement (or similar statement or instrument of registration under
the law of any jurisdiction) covering or purporting to cover any
interest of any kind in the Pledged Collateral other than financing
statements relating to (i) Prior Liens, (ii) this Agreement and (iii)
<PAGE>
-6-
Permitted Liens, and so long as any of the Secured Obligations remain
unpaid or the Commitments of the Banks to make any Loan or to issue
any Letter of Credit shall not have expired or been sooner
terminated, Pledgor shall not execute, authorize or permit to be
filed in any public office any financing statement (or similar
statement or instrument of registration under the law of any
jurisdiction) or statements relating to the Pledged Collateral,
except, in each case, financing statements filed or to be filed in
respect of and covering the security interests granted by Pledgor
pursuant to this Agreement and financing statements relating to Prior
Liens and Permitted Liens.
(d) Chief Executive Office; Records. The chief executive
office of Pledgor is located at 64 Ross Road, Savannah, Georgia
31405. Pledgor shall not move its chief executive office except to
such new location as Pledgor may establish in accordance with the
last sentence of this Section 5(d). All tangible evidence of all
Receivables, Pension Plan Reversions, Contracts, Intangibles and Insurance
Policies of Pledgor and the only original books of account and records of
Pledgor relating thereto are, and will continue to be, kept at such chief
executive office, or at such new location for such chief executive office
as Pledgor may establish in accordance with the last sentence of this
Section 5(d). All Receivables, Pension Plan Reversions, Contracts,
Intangibles and Insurance Policies of Pledgor are, and will continue to
be, controlled and monitored (including, without limitation, for general
accounting purposes) from such chief executive office location shown
above, or such new location as Pledgor may establish in accordance with
the last sentence of this Section 5(d). Pledgor shall not establish a new
location for its chief executive office nor shall it change its name until
(i) it shall have given Collateral Agent not less than 30 days' prior
written notice of its intention so to do, clearly describing such new
location or name and providing such other information in connection
therewith as Collateral Agent or any Secured Party may request, and (ii)
with respect to such new location or name, Pledgor shall have taken all
action reasonably satisfactory to Collateral Agent to maintain the
perfection and priority of the security interest of Collateral Agent for
the benefit of the Secured Parties in the Pledged Collateral intended to
be granted hereby, including, without
<PAGE>
-7-
limitation, obtaining waivers of landlord's or warehouseman's liens with
respect to such new location, if applicable.
(e) Location of Inventory. All Inventory held on the date
hereof by Pledgor is located at one of the locations shown on
Schedule B hereto, except for Inventory in transit in the ordinary
course of business to or from one or more of such locations. All
Inventory now held or subsequently acquired shall be kept at one of
the locations shown on Schedule B hereto, except for Inventory in
transit in the ordinary course of business to or from one or more of
such locations, or at such new location as Pledgor may establish if
(i) it shall have given to Collateral Agent at least 30 days' prior
written notice of its intention so to do, clearly describing such new
location and providing such other information in connection therewith
as Collateral Agent or any Secured Party may request, and (ii) with
respect to such new location, Pledgor shall have taken all action
reasonably satisfactory to Collateral Agent to maintain the
perfection and priority of the security interest in the Pledged
Collateral intended to be granted hereby, including, without
limitation, obtaining waivers of landlord's or warehouseman's liens
with respect to such new location, if applicable.
(f) Location of Equipment. All Equipment held on the date
hereof by Pledgor is located at one of the locations shown on
Schedule C hereto. All Equipment now held or subsequently acquired
by Pledgor shall be kept at one of the locations shown on Schedule C
hereto, or such new location as Pledgor may establish if (i) it shall
have given to Collateral Agent at least 30 days' prior written notice
of its intention so to do, clearly describing such new location and
providing such other information in connection therewith as
Collateral Agent or any Secured Party may request, and (ii) with
respect to such new location, Pledgor shall have taken all action
reasonably satisfactory to Collateral Agent to maintain the
perfection and priority of the security interest of Collateral Agent
for the benefit of the Secured Parties in the Pledged Collateral
intended to be granted hereby, including, without limitation,
obtaining waivers of landlord's or warehouseman's liens with respect
to such new location, if applicable.
<PAGE>
-8-
(g) Authorization, Enforceability. Pledgor has the requisite
corporate power, authority and legal right to pledge and grant a
security interest in all the Pledged Collateral pursuant to this
Agreement, and this Agreement constitutes the legal, valid and
binding obligation of Pledgor, enforceable against Pledgor in
accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
affecting creditors' rights generally and except as such
enforceability may be limited by the application of general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(h) No Consents, etc. No consent of any party (including,
without limitation, stockholders or creditors of Pledgor or any
account debtor under a Receivable) and no consent, authorization,
approval, license or other action by, and no notice to or filing
with, any Governmental Authority or regulatory body or other Person
is required for (x) the pledge by Pledgor of the Pledged Collateral
pursuant to this Agreement or for the execution, delivery or
performance of this Agreement by Pledgor, or (y) the exercise by
Collateral Agent of the rights provided for in this Agreement, or
(z) the exercise by Collateral Agent of the remedies in respect of
the Pledged Collateral pursuant to this Agreement (other than those
consents, authorizations, approvals, licenses, actions, notices or
filings which, if not obtained or made, would not have a material
adverse effect upon the interests of Collateral Agent under this
Agreement).
(i) Pledged Collateral. All information set forth herein,
including the Schedules annexed hereto, and all information contained
in any documents, schedules and lists heretofore delivered to any
Secured Party in connection with this Agreement, in each case,
relating to the Pledged Collateral is accurate and complete in all
material respects.
Section 6. Special Provisions Concerning Receivables.
(a) Special Representations and Warranties. As of the time
when each of its Receivables arises, Pledgor shall be deemed to have
represented and warranted that such Receivable and all records, papers and
documents relating thereto (i) are
<PAGE>
-9-
genuine and correct and in all material respects what they purport to be, (ii)
represent the legal, valid and binding obligation of the account debtor,
evidencing indebtedness unpaid and owed by such account debtor, arising out of
the performance of labor or services or the sale or lease and delivery of the
merchandise listed therein or out of an advance or a loan, (iii) will, in the
case of a Receivable, except for the original or duplicate original invoice sent
to a purchaser evidencing such purchaser's account, be the only original
writings evidencing and embodying such obligation of the account debtor named
therein, (iv) constitute and evidence true and valid obligations, enforceable in
accordance with their respective terms, not subject to the fulfillment of any
contract or condition whatsoever or to any defenses, set-offs or counterclaims
except with respect to refunds, returns and allowances in the ordinary course of
business, or stamp or other taxes, and (v) are in compliance and conform in all
material respects with all applicable Federal, state and local laws and
applicable laws of any relevant foreign jurisdiction.
(b) Maintenance of Records. Pledgor shall keep and maintain
at its own cost and expense complete records of each Receivable, in a
manner consistent with prudent business practice, including, without
limitation, records of all payments received, all credits granted thereon,
all merchandise returned and all other documentation relating thereto, and
Pledgor shall make the same available to Collateral Agent or any Secured
Party for inspection upon reasonable prior notice to any Authorized Officer
of Pledgor, at such reasonable times during regular business hours and
intervals and to such reasonable extent as Collateral Agent or any Secured
Party may reasonably request. Pledgor shall, at Pledgor's sole cost and
expense, upon Collateral Agent's demand made at any time after the
occurrence of an Event of Default, deliver all tangible evidence of
Receivables, including, without limitation, all documents evidencing Receivables
and any books and records relating thereto to Collateral Agent or to its
representatives (copies of which evidence and books and records may be retained
by Pledgor). Upon the occurrence and during the continuance of an Event of
Default, Collateral Agent may transfer a full and complete copy of Pledgor's
books, records, credit information, reports, memoranda and all other writings
relating to the Receivables to and for the use by any Person that has acquired
or is contemplating acquisition of an interest in the Receivables or Collateral
Agent's security interest therein without the consent of Pledgor.
<PAGE>
-10-
(c) Legend. Pledgor shall legend, at the request of
Collateral Agent made at any time after the occurrence of an Event of
Default and in form and manner reasonably satisfactory to Collateral Agent,
the Receivables and other books, records and documents of Pledgor
evidencing or pertaining to the Receivables with an appropriate reference
to the fact that the Receivables have been assigned to Collateral Agent for
the benefit of the Secured Parties and that Collateral Agent has a security
interest therein.
(d) Modification of Terms, etc. Pledgor shall not rescind or
cancel any indebtedness evidenced by any Receivable or modify any material
term thereof or make any material adjustment with respect thereto except in
the ordinary course of business consistent with prudent business practice,
or extend or renew any such indebtedness except in the ordinary course of
business consistent with prudent business practice or compromise or settle
any dispute, claim, suit or legal proceeding relating thereto except in the
ordinary course of business consistent with prudent business practice or
sell any Receivable or interest therein without the prior written consent
of Collateral Agent (such consent not to be unreasonably withheld or
delayed). Pledgor shall timely fulfill all obligations on its part to be
fulfilled under or in connection with the Receivables (except for such
obligations the failure to fulfill which would not have in the aggregate, a
material adverse effect upon the interests of Collateral Agent under this
Agreement).
(e) Collection. Pledgor shall use reasonable efforts to cause
to be collected from the account debtor of each of the Receivables, as and
when due (including, without limitation, Receivables that are delinquent,
such Receivables to be collected in accordance with generally accepted
commercial collection procedures), any and all amounts owing under or on
account of such Receivable, and apply forthwith upon receipt thereof all
such amounts as are so collected to the outstanding balance of such
Receivable, except that Pledgor may, with respect to a Receivable, allow in
the ordinary course of business (i) a refund or credit due as a result of
returned or damaged or defective merchandise and (ii) such extensions of time to
pay amounts due in respect of Receivables and such other modifications of
payment terms or settlements in respect of Receivables as shall be commercially
reasonable in the circumstances, all in accordance with Pledgor's ordinary
course of business consistent with its collection practices as in effect from
time to time. The reasonable costs and expenses
<PAGE>
-11-
(including, without limitation, attorneys' fees) of collection, in any case,
whether incurred by Pledgor, Collateral Agent or any Secured Party, shall be
paid by Pledgor.
(f) Instruments. Pledgor shall deliver to Collateral Agent,
within five days after receipt thereof by Pledgor, any Instrument
evidencing Receivables which is in the principal amount of $500,000 or
more. Any Instrument delivered to Collateral Agent pursuant to this
Section 6(f) shall be appropriately endorsed (if applicable) to the order
of Collateral Agent, as agent for the Secured Parties, and shall be held by
Collateral Agent as further security hereunder; provided, that, so long as
no Default or Event of Default shall have occurred and be continuing,
Pledgor may retain for collection in the ordinary course any Instruments
received by Pledgor in the ordinary course of business and Collateral Agent
shall, promptly upon request of Pledgor, make appropriate arrangements for
making any Instrument pledged by Pledgor available to Pledgor for purposes
of presentation, collection or renewal (any such arrangement to be
effected, to the extent deemed appropriate by Collateral Agent, against
trust receipt or like document).
(g) Cash Collateral. Upon the occurrence and during the
continuance of an Event of Default, if Collateral Agent so directs, Pledgor
shall cause all payments on account of the Receivables to be held by
Collateral Agent as cash collateral, upon acceleration or otherwise.
Without notice to or assent by Pledgor, Collateral Agent may apply any or
all amounts then or thereafter held as cash collateral in the manner
provided in Section 11. The reasonable costs and expenses (including,
without limitation, reasonable attorneys' fees) of collection, whether
incurred by Collateral Agent or any Secured Party, shall be paid by
Pledgor.
Section 7. Provisions Concerning All Pledged Collateral.
(a) Protection of Collateral Agent's Security. Pledgor shall
not take any action that impairs the rights of Collateral Agent or any
Secured Party in the Pledged Collateral. Pledgor shall at all times keep
the Inventory and Equipment insured, at Pledgor's own expense, to
Collateral Agent's reasonable satisfaction against fire, theft and all
other risks of the kind customarily insured against, in such amounts and
with such deductibles as would customarily be maintained under similar
circumstances by operators of businesses similar to the
<PAGE>
-12-
business of Pledgor to the extent available at commercially reasonable rates.
Each policy or certificate with respect to such insurance shall be endorsed to
Collateral Agent's reasonable satisfaction for the benefit of Collateral
Agent (including, without limitation, by naming Collateral Agent as an
additional named insured and sole loss payee as Collateral Agent may
request) and such policy or certificate shall be delivered to Collateral
Agent. Each such policy shall state that it cannot be cancelled without 30
days' prior written notice to Collateral Agent. At least 30 days prior to
the expiration of any such policy of insurance, Pledgor shall deliver to
Collateral Agent an extension or renewal policy or an insurance certificate
evidencing renewal or extension of such policy. If Pledgor shall fail to
insure such Pledged Collateral to Collateral Agent's reasonable
satisfaction, Collateral Agent shall have the right (but shall be under no
obligation), following five (5) Business Days' prior written notice to
Pledgor of its intention to do so, to advance funds to procure or renew or
extend such insurance and Pledgor agrees to reimburse Collateral Agent for
all reasonable costs and expenses thereof, with interest on all such funds
from the date advanced until paid in full at the highest rate then in
effect under the Credit Agreement.
(b) Insurance Proceeds. So long as no Event of Default shall
have occurred and be continuing, Pledgor shall have the option as provided
in Section 3.02(A)(h) of the Credit Agreement (i) to apply any proceeds of
property insurance (less any portion of such proceeds not in excess of
$500,000) received by it as Net Cash Proceeds in accordance with
Section 3.02(B)(a) of the Credit Agreement or (ii) to apply the proceeds of
such insurance to the repair or replacement of the item or items of Pledged
Collateral in respect of which such proceeds were received. In the event
that Pledgor elects to apply such proceeds to the repair or replacement of
any item of Pledged Collateral pursuant to clause (ii) of the preceding
sentence, Pledgor shall upon its receipt of such proceeds from Collateral
Agent as promptly as practicable commence and diligently continue to
perform such repair or as promptly as practicable effect such replacement.
Upon the occurrence and during the continuance of an Event of Default,
Collateral Agent shall have the option to apply any proceeds of insurance
received by Pledgor in respect of the Pledged Collateral toward the payment
of the Secured Obligations in accordance with Section 11 hereof or to
continue to hold such proceeds as additional collateral to secure the
performance by Pledgor of the Secured Obligations.
<PAGE>
-13-
(c) Maintenance of Equipment. Pledgor shall exercise
commercially reasonable efforts to cause the Equipment to be maintained and
preserved in good repair, working order and condition, ordinary wear and
tear excepted, and to the extent consistent with current business practice
in accordance with any manufacturer's manual, and shall, in the case of any
loss or damage which (individually or in the aggregate) exceeds $100,000 to any
of the Equipment (of which prompt notice shall be given to Collateral Agent) as
quickly as commercially practicable after the occurrence thereof, make or cause
to be made all repairs, replacements and other improvements in connection
therewith which are necessary or desirable in the conduct of Pledgor's business
in Pledgor's commercially reasonable judgment.
(d) Payment of Taxes; Claims. Pledgor shall pay, prior to
the date on which material penalties attach thereto, all property and other
material taxes, assessments and governmental charges or levies imposed
upon, and all lawful claims (including claims for labor, materials and
supplies) against, the Pledged Collateral which, if unpaid might become a
Lien upon the Pledged Collateral. Notwithstanding the foregoing, Pledgor
may at its own expense contest the amount or applicability of any of the
obligations described in the preceding sentence as permitted under the
Credit Agreement.
(e) Further Actions. Pledgor shall, at its sole cost and
expense, make, execute, endorse, acknowledge, file or refile and/or deliver
to Collateral Agent from time to time such lists, descriptions and
designations of the Pledged Collateral, copies of warehouse receipts,
receipts in the nature of warehouse receipts, bills of lading, documents of
title, vouchers, invoices, schedules, confirmatory assignments,
supplements, additional security agreements, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates,
reports and other assurances or instruments and take such further steps
relating to the Pledged Collateral and other property or rights covered by
the security interest hereby granted, which Collateral Agent reasonably
deems appropriate or advisable to exercise and enforce its rights and
remedies hereunder with respect to any Pledged Collateral and to perfect,
preserve or protect the security interest in the Pledged Collateral created
and granted by this Agreement.
(f) Financing Statements. Pledgor shall sign and deliver to
Collateral Agent such financing and continuation statements, in form
reasonably acceptable to Collateral Agent,
<PAGE>
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as may from time to time be required to continue and maintain a valid,
enforceable, first priority security interest in the Pledged Collateral as
provided herein and the other rights, as against third parties, provided hereby,
all in accordance with the UCC or any other relevant law. Pledgor shall pay any
applicable filing fees and other expenses related to the filing of such
financing and continuation statements. Pledgor authorizes Collateral Agent to
file any such financing or continuation statements without the signature of
Pledgor where permitted by law.
(g) Warehouse Receipts Non-Negotiable. If any warehouse
receipt or receipt in the nature of a warehouse
receipt is issued with respect to any of the Inventory, Pledgor shall not
permit such warehouse receipt or receipt in the nature thereof to be
"negotiable" (as such term is used in Section 7-104 of the UCC or under
other relevant law).
Section 8. Transfers and Other Liens. Pledgor shall not (a)
sell, convey, assign or otherwise dispose of, or grant any option with
respect to, any of the Pledged Collateral except as permitted by the Credit
Agreement or (b) create or permit to exist any Lien upon or with respect to
any of the Pledged Collateral other than (i) Prior Liens, (ii) the Lien and
security interest granted to Collateral Agent pursuant to this Agreement,
and (iii) Permitted Liens.
Upon any sale or other disposition of any assets of Pledgor
which is in compliance with the Credit Agreement and the proceeds of which
sale or other disposition are used to make a mandatory prepayment of the
Loans pursuant to Section 3.02(A) of the Credit Agreement, such assets
constituting Pledged Collateral shall be released from the Lien of this
Agreement in accordance with Section 17 of this Agreement.
Section 9. Reasonable Care. Collateral Agent shall be deemed
to have exercised reasonable care in the custody and preservation of the
Pledged Collateral in its possession if such Pledged Collateral is accorded
treatment substantially equivalent to that which Collateral Agent, in its
individual capacity, accords its own property, it being understood that
Collateral Agent shall not have responsibility for taking any necessary
steps to preserve rights against any Person with respect to any Pledged
Collateral.
<PAGE>
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Section 10. Remedies Upon Default; Obtaining the Pledged
Collateral Upon Event of Default. (a) If an Event of Default shall have
occurred and be continuing, and the Secured Obligations have been declared
due and payable in accordance with the Credit Agreement, then and in every
such case, Collateral Agent may:
(i) Personally, or by agents or attorneys, immediately take
possession of the Pledged Collateral or any part thereof, from
Pledgor or any other Person who then has possession of any part
thereof with or without notice or process of law, and for that
purpose may enter upon Pledgor's premises where any of the Pledged
Collateral is located and remove such Pledged Collateral and use in
connection with such removal any and all services, supplies, aids and
other facilities of Pledgor.
(ii) Instruct the obligor or obligors on any agreement,
instrument or other obligation (including, without limitation, the
Receivables and Contracts) constituting the Pledged Collateral to
make any payment
required by the terms of such instrument or agreement directly to
Collateral Agent; provided, however, that in the event that any such
payments are made directly to Pledgor, prior to receipt by any such
obligor of such instruction, Pledgor shall segregate all amounts
received pursuant thereto in a separate account and pay the same as
promptly as practicable to Collateral Agent.
(iii) Sell, assign or otherwise liquidate, or direct Pledgor to
sell, assign or otherwise liquidate, any or all investments made in
whole or in part with the Pledged Collateral or any part thereof, and
take possession of the proceeds of any such sale, assignment or
liquidation.
(iv) Take possession of the Pledged Collateral or any part
thereof, by directing Pledgor in writing to deliver the same to
Collateral Agent at any place or places so designated by Collateral
Agent, in which event Pledgor shall at its own expense: (A)
forthwith cause the same to be moved to the place or places
designated by Collateral Agent and there delivered to Collateral
Agent; (B) store and keep any Pledged Collateral so delivered to
Collateral Agent at such place or places pending further action by
Collateral Agent; and (C) while the Pledged Collateral shall be so
stored and kept, provide such security and maintenance services as
shall be reasonably necessary to
<PAGE>
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protect the same and to preserve and maintain them in good condition.
Pledgor's obligation to deliver the Pledged Collateral is of the essence
of this Agreement. Upon application to a court of equity having
jurisdiction, Collateral Agent shall be entitled to a decree requiring
specific performance by Pledgor of such obligation.
(b) Remedies; Disposition of the Pledged Collateral.
(i) Upon the occurrence and during the continuance of an Event
of Default, Collateral Agent may from time to time exercise in
respect of the Pledged Collateral, in addition to other rights and
remedies provided for herein or otherwise available to it, all the
rights and remedies of a secured party on default under the UCC, and
Collateral Agent may also in its sole discretion, without notice
except as specified below, sell the Pledged Collateral or any part
thereof in one or more parcels at public or private sale, at any
exchange, broker's board or at any of Collateral Agent's offices or
elsewhere, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as Collateral Agent may
deem commercially reasonable. Collateral Agent or any other Secured
Party or any of their respective Affiliates may be the purchaser of any or
all of the Pledged Collateral at any such sale and shall be entitled, for
the purpose of bidding and making settlement or payment of the purchase
price for all or any portion of the Pledged Collateral sold at such sale,
to use and apply any of the Secured Obligations owed to such Person as a
credit on account of the purchase price of any Pledged Collateral payable
by such Person at such sale. Each purchaser at any such sale shall acquire
the property sold absolutely free from any claim or right on the part of
Pledgor. Collateral Agent shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given.
Collateral Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Pledgor hereby waives, to the fullest extent permitted by law,
any claims against Collateral Agent arising by reason of the fact that the
price at which any Pledged Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public
sale, even if Collateral Agent accepts the first offer received
<PAGE>
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and does not offer such Pledged Collateral to more than one offeree.
(ii) Pledgor acknowledges and agrees that, to the extent notice
of sale shall be required by law, ten days' notice to Pledgor of the
time and place of any public sale or of the time after which any
private sale or other intended disposition is to take place shall be
commercially reasonable notification of such matters. No
notification need be given to Pledgor if it has signed, after the
occurrence of an Event of Default, a statement renouncing or
modifying any right to notification of sale or other intended
disposition.
(c) Waiver of Notice and Claims. Pledgor hereby waives, to
the fullest extent permitted by applicable law, notice or judicial hearing
in connection with Collateral Agent's taking possession or Collateral
Agent's disposition of any of the Pledged Collateral, including, without
limitation, any and all prior notice and hearing for any prejudgment remedy
or remedies and any such right which Pledgor would otherwise have under
law, and Pledgor hereby further waives, to the fullest extent permitted by
applicable law: (i) all damages occasioned by such taking of possession;
(ii) all other requirements as to the time, place and terms of sale or
other requirements with respect to the enforcement of Collateral Agent's
rights hereunder; and (iii) all rights of redemption, appraisal, valuation,
stay, extension or moratorium now or hereafter in force under any
applicable law. Collateral Agent shall not be liable for any incorrect or
improper payment made pursuant to this Section 10 in the absence of gross
negligence or willful misconduct. Any sale of, or the grant of options to
purchase, or any other realization upon, any Pledged Collateral shall operate to
divest all right, title, interest, claim and demand, either at law or in equity,
of Pledgor therein and thereto, and shall be a perpetual bar both at law and in
equity against Pledgor and against any and all Persons claiming or attempting to
claim the Pledged Collateral so sold, optioned or realized upon, or any part
thereof, from, through or under Pledgor.
(d) Certain Sales of Pledged Collateral. Pledgor recognizes
that, by reason of certain prohibitions contained in law, rules,
regulations or orders of any foreign
<PAGE>
-18-
Governmental Authority, Collateral Agent may be compelled, with respect to any
sale of all or any part of the Pledged Collateral, to limit purchasers to those
who meet the requirements of such foreign Governmental Authority. Pledgor
acknowledges that any such sales may be at prices and on terms less favorable to
Collateral Agent than those obtainable through a public sale without such
restrictions, and, notwithstanding such circumstances, agrees that any such
restricted sale shall be deemed to have been made in a commercially reasonable
manner.
Section 11. Application of Proceeds. The proceeds received by
Collateral Agent in respect of any sale of, collection from or other
realization upon all or any part of the Pledged Collateral pursuant to the
exercise by Collateral Agent of its remedies as a secured creditor as
provided in Section 10 hereof shall be applied, together with any other
sums then held by Collateral Agent pursuant to this Agreement, promptly by
Collateral Agent as follows:
First, to the payment of all costs and expenses, fees,
commissions and taxes of such sale, collection or other realization,
including, without limitation, reasonable out of pocket costs and
expenses of Collateral Agent and its agents and counsel, and all
expenses, liabilities and advances made or incurred by Collateral
Agent in connection therewith;
Second, to the payment of all other costs and expenses of such
sale, collection or other realization, including, without limitation,
compensation to the Banks and their agents and counsel and all costs,
liabilities and advances made or incurred by the Banks in connection
therewith;
Third, to the payment in full in cash of Secured Obligations
consisting of interest and all amounts other than principal under the
Credit Agreement at any time and from time to time owing by Pledgor
under or in connection with the Credit Agreement, ratably according
to the unpaid amounts thereof, in the manner and priority set forth
in the Credit Agreement, together with interest on each such amount in the
manner and to the extent set forth in the Credit Agreement from and after
the date such amount is due, owing or unpaid until paid in full;
Fourth, to the pro rata payment in full in cash of Secured
Obligations consisting of (i) principal at any time and from time to
time owing by Pledgor under or in connection with the Credit
Agreement, ratably according to the unpaid amounts thereof, in the
manner and priority set
<PAGE>
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forth in the Credit Agreement and (ii) the amount of Pledgor's obligations
then due and payable under any Interest Rate Agreement, including any
early termination payments then due (exclusive of expenses or similar
liabilities to any Bank under the applicable Interest Rate Agreement(s)),
together with interest on each such amount in the manner and to the extent
set forth in the Credit Agreement from and after the date such amount is
due, owing or unpaid until paid in full; and
Fifth, the balance, if any, to the Person lawfully entitled
thereto (including Pledgor or its successors or assigns).
Section 12. Expenses. Pledgor will upon demand pay to
Collateral Agent the amount of any and all reasonable expenses, including
the reasonable fees and expenses of its counsel and the reasonable fees and
expenses of any experts and agents which Collateral Agent may incur in
connection with (i) the collection of the Secured Obligations, (ii) the
enforcement and administration of this Agreement, (iii) the custody or
preservation of, or the sale of, collection from, or other realization
upon, any of the Pledged Collateral, (iv) the exercise or enforcement of
any of the rights of Collateral Agent or any Secured Party hereunder or (v)
the failure by Pledgor to perform or observe any of the provisions hereof.
All amounts payable by Pledgor under this Section 12 shall be due within
ten Business Days after demand and shall be part of the Secured
Obligations. Pledgor's obligations under this Section 12 shall survive the
termination of this Agreement and the discharge of Pledgor's other
obligations hereunder.
Section 13. No Waiver; Cumulative Remedies. (a) No failure
on the part of Collateral Agent to exercise, no course of dealing with
respect to, and no delay on the part of Collateral Agent in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such 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 provided are
cumulative and are not exclusive of any remedies provided by law.
(b) In the event Collateral Agent shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned
<PAGE>
-20-
for any reason or shall have been determined adversely to Collateral Agent, then
and in every such case, Pledgor, Collateral Agent and each Secured Party shall
be restored to their respective former positions and rights hereunder with
respect to the Pledged Collateral, and all rights, remedies and powers of
Collateral Agent and the Secured Parties shall continue as if no such proceeding
had been instituted.
Section 14. Collateral Agent. Collateral Agent has been
appointed as collateral agent pursuant to the Credit Agreement. The
actions of Collateral Agent hereunder are subject to the provisions of the
Credit Agreement. Collateral Agent shall have the right hereunder to make
demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking action (including, without
limitation, the release or substitution of Pledged Collateral), in
accordance with this Agreement and the Credit Agreement. Collateral Agent
may resign and a successor Collateral Agent may be appointed in the manner
provided in the Credit Agreement. Upon the acceptance of any appointment
as Collateral Agent by a successor Collateral Agent, that successor
Collateral Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Collateral Agent
under this Agreement, and the retiring Collateral Agent shall thereupon be
discharged from its duties and obligations under this Agreement. After any
retiring Collateral Agent's resignation, the provisions of this Agreement
shall inure to its benefit as to any actions taken or omitted to be taken
by it under this Agreement while it was Collateral Agent.
Section 15. Collateral Agent May Perform; Collateral Agent
Appointed Attorney-in-Fact. If Pledgor shall fail to do any act or thing
that it has covenanted to do hereunder or if any warranty on the part of
Pledgor contained herein shall be breached, Collateral Agent or any Secured
Party may (but shall not be obligated to) do the same or cause it to be
done or remedy any such breach, and may, following five Business Days'
prior written notice to Pledgor of its intention to do so, expend funds
for such purpose. Any and all amounts so expended by Collateral Agent or
such Secured Party shall be paid by Pledgor within ten Business Days after
demand therefor, with interest at the highest rate then in effect under the
Credit Agreement during the period from and including the date on which
such funds were so expended to the date of repayment. Pledgor's
obligations under this Section 15 shall survive the termination of this
Agreement and the discharge of Pledgor's other obligations under this
Agreement, the Credit Agreement,
<PAGE>
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any Interest Rate Agreement and the other Credit Documents. Pledgor hereby
appoints Collateral Agent its attorney-in-fact, with full authority in the place
and stead of Pledgor and in the name of Pledgor, or otherwise, from time to time
in Collateral Agent's reasonable discretion to take any action and to execute
any instrument consistent with the terms of this Agreement and the other Credit
Documents which Collateral Agent may deem reasonably necessary or advisable to
accomplish the purposes of this Agreement. The foregoing grant of authority is a
power of attorney coupled with an interest and such appointment shall be
irrevocable for the term of this Agreement. Pledgor hereby ratifies all that
such attorney shall lawfully do or cause to be done by virtue hereof.
Section 16. Modification in Writing. No amendment,
modification, supplement, termination or waiver of or to any provision of
this Agreement, nor consent to any departure by Pledgor therefrom, shall be
effective unless the same shall be made in accordance with the terms of the
Credit Agreement and unless in writing and signed by Collateral Agent. Any
amendment, modification or supplement of or to any provision of this
Agreement, any waiver of any provision of this Agreement and any consent to
any departure by Pledgor from the terms of any provision of this Agreement
shall be effective only in the specific instance and for the specific
purpose for which made or given. Except where notice is specifically
required by this Agreement or any other Credit Document, no notice to or
demand on Pledgor in any case shall entitle Pledgor to any other or further
notice or demand in similar or other circumstances.
Section 17. Termination; Release. When all the Secured
Obligations have been paid in full and the Commitments of the Banks to make
any Loan or to issue any Letter of Credit under the Credit Agreement shall
have expired or been sooner terminated, this Agreement shall terminate.
Upon termination of this Agreement or any release of Pledged Collateral in
accordance with the provisions of the Credit Agreement, Collateral Agent
shall, upon the request and at the sole cost and expense of Pledgor,
forthwith assign, transfer and deliver to Pledgor, against receipt and
without recourse to or warranty by Collateral Agent, such of the Pledged
Collateral to be released (in the case of a release) as may be in
possession of Collateral Agent and as shall not have been sold or otherwise
applied pursuant to the terms hereof, and, with respect to any other
Pledged Collateral, proper instruments (including UCC termination
statements on Form UCC-3) acknowledging the termination of
<PAGE>
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this Agreement or the release of such Pledged Collateral, as the case may be.
Section 18. Definitions. The following terms shall have the
following meanings. All such definitions shall be equally applicable to
the singular and plural forms of the terms defined.
"Contracts" shall mean all right, title and interest of Pledgor in,
to and under, or derived from, any and all sale, service, performance and
equipment lease contracts, agreements and grants (whether written or oral), and
any other contract (whether written or oral) between Pledgor and third parties.
"Documents" shall have the meaning assigned to that term under
the UCC.
"Equipment" shall mean "equipment", as such term is defined in
the UCC.
"Instrument" shall have the meaning assigned that term under
the UCC.
"Intangibles" shall mean "general intangibles", as such term is
defined in the UCC.
"Insurance Policies" shall mean all insurance policies held by
Pledgor or naming Pledgor as insured, additional insured or loss payee
(including, without limitation, casualty insurance, liability insurance,
property insurance and business interruption insurance) and all such
insurance policies entered into after the date hereof other than insurance
policies (or certificates of insurance evidencing such insurance policies)
relating to health and welfare insurance and life insurance policies in
which Pledgor is not named as beneficiary (i.e., insurance policies that
are not "Key Man" insurance policies).
"Inventory" shall mean, all "inventory", as such term is
defined in the UCC.
"Pension Plan Reversions" shall mean Pledgor's right to receive
the surplus funds, if any, which are payable to Pledgor following the
termination of any employee pension plan and the satisfaction of all
liabilities of participants and beneficiaries under such plan in accordance
with applicable law.
<PAGE>
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"Proceeds" shall mean all "proceeds", as such term is defined
in the UCC or under other relevant law.
"Receivables" shall mean all of Pledgor's rights to payment for
goods sold or leased or services performed by Pledgor or any other party,
whether now in existence or arising from time to time hereafter, including
any "account", as such term is defined in the UCC, and all rights evidenced
by an account, contract, security agreement, chattel paper, or other
evidence of indebtedness or security together with (i) all security
pledged, assigned, hypothecated or granted to or held by Pledgor to secure the
foregoing, (ii) general intangibles arising out of Pledgor's rights in any
goods, the sale of which gave rise thereto, (iii) all guarantees, endorsements
and indemnifications on, or of, any of the foregoing, (iv) all powers of
attorney for the execution of any evidence of indebtedness or security or other
writing in connection therewith, and (v) all evidences of the filing of
financing statements and other statements and the registration of other
instruments in connection therewith and amendments thereto, notices to other
creditors or secured parties, and certificates from filing or other registration
officers.
Section 19. Notices. Unless otherwise provided herein or in
the Credit Agreement, any notice or other communication herein required or
permitted to be given shall be given in the manner set forth in the Credit
Agreement, as to either party, addressed to it at the address set forth in
the Credit Agreement or at such other address as shall be designated by
such party in a written notice to the other party complying as to delivery
with the terms of this Section 19; provided that notices to Collateral
Agent shall not be effective until received by Collateral Agent.
Section 20. Continuing Security Interest; Assignment. This
Agreement shall create a continuing security interest in the Pledged
Collateral and shall (i) be binding upon Pledgor, its successors and
assigns and (ii) inure, together with the rights and remedies of Collateral
Agent hereunder, to the benefit of Collateral Agent and the other Secured
Parties and each of their respective successors, transferees and assigns;
no other Persons (including, without limitation, any other creditor of
Pledgor) shall have any interest herein or any right or benefit with
respect hereto. Without limiting the generality of the foregoing
clause (ii), any Bank may assign or otherwise transfer any indebtedness
held by it secured by this Agreement to any other Person, and such other
Person shall
<PAGE>
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thereupon become vested with all the benefits in respect thereof granted to such
Bank, herein or otherwise, subject however, to the provisions of the Credit
Agreement and any applicable Interest Rate Agreement.
Section 21. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN,
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK.
Section 22. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
(a) Any legal action or proceeding with respect to this Agreement may be
brought in the courts of the State of New York or of the United States for
the Southern District of New York, and, by execution and delivery of this
Agreement, Pledgor hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts. Pledgor further irrevocably consents to the service of process
out of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
Pledgor at its address for notices pursuant to the Credit Agreement, such
service to become effective 30 days after such mailing. Pledgor hereby
irrevocably appoints CT Corporation System having an address at 1633 Broadway,
New York, New York 10019 and such other persons as may hereafter be selected by
Borrower irrevocably agreeing in writing to serve as its agent for service of
process in respect of any such action or proceeding. Nothing herein shall affect
the right of Collateral Agent to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against Pledgor in any
other jurisdiction.
(b) Pledgor hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement
brought in the courts referred to in clause (a) above and hereby further
irrevocably waives and agrees not to plead or claim in any such court that
any such action or proceeding brought in any such court has been brought in
an inconvenient forum.
<PAGE>
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Section 23. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 24. Execution in Counterparts. This Agreement and any
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed
to be an original, but all such counterparts together shall constitute one
and the same agreement.
Section 25. Headings. The Section headings used in this
Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
Section 26. Obligations Absolute. All obligations of Pledgor
hereunder shall be absolute and unconditional irrespective of:
(i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of either of
Pledgor or any other Credit Party;
(ii) any lack of validity or enforceability of the Credit
Agreement, any Interest Rate Agreement, any Letter of Credit or any
other Credit Document, or any other agreement or instrument relating
thereto;
(iii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Secured Obligations, or any
other amendment or waiver of or any consent to any departure from the
Credit Agreement, any Interest Rate Agreement, any Letter of Credit
or any other Credit Document, or any other agreement or instrument
relating thereto;
(iv) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
any departure from any guarantee, for all or any of the Secured
Obligations;
<PAGE>
-25-
(v) any exercise or non-exercise, or any waiver of any right,
remedy, power or privilege under or in respect of this Agreement, any
Interest Rate Agreement or any other Credit Document except as
specifically set forth in a waiver granted pursuant to the provisions
of Section 16 hereof; or
(vi) any other circumstance or happening whatsoever that is
similar to any of the foregoing.
Section 27. Collateral Agent's Right to Sever Indebtedness.
(a) Pledgor acknowledges that (i) the Pledged Collateral does not
constitute the sole source of security for the payment and performance of
the Secured Obligations and that the Secured Obligations are also secured
by other types of property of Pledgor and its Affiliates in other
jurisdictions (all such property, collectively, the "Collateral"), (ii) the
number of such jurisdictions and the nature of the transaction of which
this instrument is a part are such that it would have been impracticable
for the parties to allocate to each item of Collateral a specific loan
amount and to execute in respect of such item a separate credit agreement,
and (iii) Pledgor intends that Collateral Agent have the same rights with
respect to the Pledged Collateral, in any judicial proceeding relating to
the exercise of any right or remedy hereunder or otherwise, that Collateral
Agent would have had if each item of Collateral had been pledged or
encumbered pursuant to a separate credit agreement and security instrument.
In furtherance of such intent, Pledgor agrees to the greatest extent
permitted by law that Collateral Agent may at any time by notice (an
"Allocation Notice") to Pledgor allocate a portion of the Secured
Obligations (the "Allocated Indebtedness") to all or a specified portion of
the Pledged Collateral and sever from the remaining Secured Obligations the
Allocated Indebtedness. From and after the giving of an Allocation Notice with
respect to any of the Pledged Collateral, the Secured Obligations hereunder
shall be limited to the extent set forth in the Allocation Notice and (as so
limited) shall, for all purposes, be construed as a separate credit obligation
of Pledgor unrelated to the other transactions contemplated by the Credit
Agreement, any Interest Rate Agreement, any other Credit Document or any
document related to any thereof. To the extent that the proceeds of any judicial
proceeding relating to the exercise of any right or remedy hereunder of the
Pledged Collateral shall exceed the Allocated Indebtedness, such proceeds shall
belong to Pledgor and shall not be available hereunder to satisfy any Secured
Obligations of Pledgor other than the Allocated Indebtedness.
<PAGE>
-27-
In any action or proceeding to exercise any right or remedy under this Agreement
which is commenced after the giving by Collateral Agent of an Allocation Notice,
the Allocation Notice shall be conclusive proof of the limits of the Secured
Obligations hereby secured, and Pledgor may introduce, by way of defense or
counterclaim, evidence thereof in any such action or proceeding. Notwithstanding
any provision of this Section 27, the proceeds received by Collateral Agent
pursuant to this Agreement shall be applied by Collateral Agent in accordance
with the provisions of Section 11 hereof.
(b) Pledgor hereby waives to the greatest extent permitted
under law the right to a discharge of any of the Secured Obligations under
any statute or rule of law now or hereafter in effect which provides that
the exercise of any particular right or remedy as provided for herein (by
judicial proceedings or otherwise) constitutes the exclusive means for
satisfaction of the Secured Obligations or which makes unavailable any
further judgment or any other right or remedy provided for herein because
Collateral Agent elected to proceed with the exercise of such initial right
or remedy or because of any failure by Collateral Agent to comply with laws
that prescribe conditions to the entitlement to such subsequent judgment or
the availability of such subsequent right or remedy. In the event that,
notwithstanding the foregoing waiver, any court shall for any reason hold
that such subsequent judgment or action is not available to Collateral
Agent, Pledgor shall not (i) introduce in any other jurisdiction any
judgment so holding as a defense to enforcement against Pledgor of any
remedy in the Credit Agreement, any Interest Rate Agreement or any other
Credit Document or (ii) seek to have such judgment recognized or entered in
any other jurisdiction, and any such judgment shall in all events be
limited in application only to the state or jurisdiction where rendered and
only with respect to the collateral referred to in such judgment.
(c) In the event any instrument in addition to the Allocation
Notice is necessary to effectuate the provisions of this Section 27, including,
without limitation, any amendment to this Agreement, any substitute promissory
note or affidavit or certificate of any kind, Collateral Agent may execute and
deliver such instrument as the attorney-in-fact of Pledgor. Such power of
attorney is coupled with an interest and is irrevocable.
<PAGE>
-28-
(d) Notwithstanding anything set forth herein to the
contrary, the provisions of this Section 27 shall be effective only to the
maximum extent permitted by law.
Section 28. Future Advances. This Agreement shall secure the
payment of any amounts advanced from time to time pursuant to the Credit
Agreement.
Section 29. Borrower Intellectual Property Security Agreement.
To the extent that the terms and provisions of this Agreement conflict with
the terms and provisions of the Borrower Intellectual Property Security
Agreement with respect to any Pledged Collateral (as such term is defined
in the Borrower Intellectual Property Security Agreement), the terms and
provisions of the Borrower Intellectual Property Security Agreement shall
govern.
<PAGE>
IN WITNESS WHEREOF, Pledgor and Collateral Agent have caused
this Agreement to be duly executed and delivered by their duly authorized
officers as of the date first above written.
CARSON PRODUCTS COMPANY,
as Pledgor
By: ____________________________
Name:
Title:
BANQUE INDOSUEZ, NEW YORK BRANCH,
as Collateral Agent
By: ____________________________
Name:
Title:
By: ____________________________
Name:
Title:
<PAGE>
Schedule A
PRIOR LIENS
Secured Party Location Date Number Comment
NONE
<PAGE>
Schedule B
LOCATION OF INVENTORY
64 Ross Road
Savannah, Georgia 31405
<PAGE>
Schedule C
LOCATION OF EQUIPMENT
64 Ross Road
Savannah, Georgia 31405
<PAGE>
Exhibit I-1 to the
Credit Agreement
FORM OF NOTICE OF ASSIGNMENT
[DATE]
Banque Indosuez, New York Branch, as Agent
1211 Avenue of the Americas, 7th Floor
New York, New York 10036
Carson Products Company
65 Ross Road
Savannah, Georgia 31405
Attention:
Re: Credit Agreement dated as of October [ ],
1996 among Carson Products Company, the
Agent and the lending institutions
named therein.
1. Reference is made to the above-referenced Credit
Agreement (herein the "Credit Agreement"); all terms defined in
the Credit Agreement shall have the same meanings when used
herein.
2. [NAME OF ASSIGNOR] ("Assignor") has assigned its
rights and obligations to [NAME OF ASSIGNEE] ("Assignee") with
respect to the aggregate amount of $ representing [a
pro rata assignment of each of the Commitments of Assignor] [an
assignment of -- identify specific Commitments -- in such
amounts as set forth on Annex I]1 (the "Assigned Interest").
3. The Assignee hereby agrees to become party to,
and be bound by each of the provisions of, the Credit Agreement
as a "Bank," as defined in the Credit Agreement, with a
Commitment as set forth in clause 2 above and agrees to assume
all the obligations of the Assignor thereunder with respect to
the Assigned Interest.
4. Assignee hereby confirms, as to itself, that (i)
it has received a copy of the Credit Agreement and such other
information that it has deemed appropriate to make its own
credit analysis and decision to purchase its assignment, (ii)
it will independently and without reliance upon the Agent or
any other Bank and based on such documents and other
_________________________
1 Utilize only first bracketed language unless assignee is
purchasing an assignment with respect only to a specific
Commitment, in which case utilize only second bracketed
language.
<PAGE>
-2-
information as it deems appropriate at the time, continue to
make its own credit decisions in taking or not taking action
under the Credit Agreement, (iii) it has purchased its
assignment without recourse or warranty to the Agent or any of
the other Banks and that all such Persons have made no
representations or warranties, and have no responsibility, to
the Assignee with respect to any representation or warranty in
the Credit Documents, or the legality, enforceability or
sufficiency of any thereof, the financial condition of any
Credit Party or the performance or non-performance of any
Credit Party of any of its obligations or duties under the
Credit Documents, and (iv) effective on the Assignment
Effective Date (as defined in the Assignment and Assumption
Agreement) Assignor shall be released from all of its
obligations under the Credit Agreement and relating to
Assignee's Share (as defined in the Assignment and Assumption
Agreement) pursuant to the terms of the Credit Agreement.
5. The Assignee's address for purposes of notices
under the Credit Agreement is listed on Schedule I hereto.
6. The recordation fee referred to in Section 11.04
of the Credit Agreement is delivered herewith to the Agent.
Very truly yours,
[NAME OF ASSIGNOR]
By:
---------------------------
[NAME OF ASSIGNEE]
By:
---------------------------
ACCEPTED AND ACKNOWLEDGED:
BANQUE INDOSUEZ, NEW YORK BRANCH
By:
------------------------
Date:
---------------------
AGREED TO:
<PAGE>
-3-
CARSON PRODUCTS COMPANY
By:
---------------------
Date:
-------------------
<PAGE>
ANNEX I
NOTICE OF ASSIGNMENT
Re: Carson Products Company Credit Agreement
Assignee:
Assignor:
Commitment:
Assignee's Commitment Component
Revolving A Term B Term
Loan Loan Loan
Commitment Commitment Commitment
Dollar Amount . . . . . . . . . . . $ $ $
Commitment component as a
Percentage of relevant portion
of Loan Facility* . . . . . . . . . % % %
__________________
* expressed to ten decimals.
Payment Instructions
for Assignee:
______________________
______________________
______________________
Notice Instructions
for Assignee:
______________________
______________________
______________________
<PAGE>
Exhibit I-2 to the
Credit Agreement
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Assignment
Agreement") dated as of , 19 among
("Assignor") and ("Assignee"). All
capitalized terms used herein and not otherwise defined shall
have the respective meanings provided such terms in the Credit
Agreement (as defined below).
W I T N E S S E T H :
WHEREAS, Assignor is a party to a Credit Agreement,
dated as of October [ ], 1996 (as amended, amended and
restated, supplemented, or otherwise modified from time to time
in accordance with the terms thereof in effect, the "Credit
Agreement"), by and among Carson Products Company (the
"Borrower") and the various financial institutions party
thereto;
WHEREAS, from and after the Assignment Effective Date
(as defined below) the Assignee shall be deemed a "Bank," as
defined in the Credit Agreement, for all purposes under the
Credit Agreement and shall benefit from all of the rights and
obligations of a "Bank" under the Credit Agreement;
WHEREAS, Assignor initially had a $ Revolving
Loan Commitment under the Credit Agreement pursuant to which
Assignor may have made, or may from time to time be required to
make, to the Borrower, Revolving Loans or issue on the
Borrower's behalf, Letters of Credit; and
WHEREAS, Assignor and Assignee wish Assignor to
assign to Assignee its rights and obligations under the Credit
Agreement with respect to all or a portion of its Revolving
Loan Commitment under the Credit Agreement (collectively,
"Assignor's Commitment") and of any outstanding A Term Loans,
B Term Loans and Revolving Loans (collectively, the "Loans");
NOW, THEREFORE, in consideration of the mutual
agreements herein contained, the parties hereto agree as
follows:
1. Assignment
Effective on the Assignment Effective Date, Assignor
hereby assigns to Assignee, without recourse, or representation
or warranty (other than as expressly provided herein), that
<PAGE>
-2-
portion described on Annex I hereto as the Assignee's share
("Assignee's Share") of all of Assignor's rights, title and
interest arising under the Credit Agreement relating to
Assignor's Commitment including, without limitation, all rights
with respect to the Loans attributable to Assignee's Share (in
each case without giving effect to any assignments or
participations thereof by the Assignor). The dollar amount of
Assignee's Share is listed on Annex I hereto.
2. Assumption
Effective on the Assignment Effective Date, Assignee
hereby assumes from Assignor all of Assignor's obligations
arising under the Credit Agreement relating to Assignee's Share
and of any outstanding Loans attributable to Assignee's Share.
It is the intent of the parties hereto that effective on the
Assignment Effective Date Assignor shall be released from all
of its obligations under the Credit Agreement relating to
Assignee's Share pursuant to the terms of the Credit Agreement.
3. Effectiveness
This Assignment Agreement shall become effective five
Business Days after the date (the "Assignment Effective Date")
on which Assignor and Assignee (whether the same or different
copies) shall have signed and delivered to the Agent a written
notice of the assignment in the form of Exhibit I-1 to the
Credit Agreement (the "Notice of Assignment") and the Agent and
the Borrower shall have agreed thereto, and the Assignor shall
have delivered the recordation fee referred to in Section 11.04
of the Credit Agreement, if required.
4. Payment of Interest and Fees to Assignee
(a) Interest is payable by the Borrower in respect
of the Assigned Share of the Loans at the rates set forth in
Section 1.08 of the Credit Agreement and Commitment Commission
is payable by the Borrower in respect of the Assigned Share of
the Unutilized Commitment at the rate set forth in Section 2.03
of the Credit Agreement.
(b) It is agreed that Assignee shall be entitled to
all interest on any Loan attributable to Assignee's Share and
all Commitment Commission attributable to Assignee's Share,
which, in each case, accrues on and after the Assignment
Effective Date and such interest and Commitment Commission
shall be
<PAGE>
-3-
paid directly to the Assignee by the Borrower as set
forth in clause (a) above.
(c) Notwithstanding anything to the contrary
contained in this Assignment Agreement, if and when Assignor
receives or collects any payment of interest on any Loan
attributable to Assignee's Share or any payment of Commitment
Commission attributable to Assignee's Share which, in any such
case, is required to be paid to Assignee pursuant to clauses
(a) and (b) above, Assignor shall distribute to Assignee such
payment.
(d) Notwithstanding anything to the contrary
contained in this Assignment Agreement, if and when Assignee
receives or collects any payment of interest on any Loan or any
payment of Commitment Commission which in any such case is
required to be paid to Assignor pursuant to clauses (a) and (b)
above, Assignee shall distribute to Assignor such payment.
(e) To the extent payments of funds payable to
Assignee under clause (c) above or to Assignor under clause (d)
above, as the case may be, are not made within two Business
Days of receipt, each of the Assignee or Assignor, as the case
may be, shall be entitled to recover such amount together with
interest thereon at the Federal Funds Rate per annum accruing
from the date of receipt of such funds by the other party.
(f) The Agent by acceptance of the Notice of
Assignment consents to the assignments described above and
agrees to make payments in respect of interest and Commitment
Commission as described in clause (a) above.
5. Payments on Assignment Effective Date
(a) In consideration of the assignment by Assignor
to Assignee of Assignee's Share and the Loans attributable to
Assignee's Share as set forth above, (i) Assignee agrees to pay
to Assignor on the Assignment Effective Date an amount in U.S.
Dollars which represents the principal amount of the Loans
attributable to Assignee's Share made by Assignor pursuant to
the Credit Agreement and outstanding on the Assignment
Effective Date and (ii) Assignor agrees to pay to Assignee the
assignment fee (if any) specified in Annex I hereto on the
Assignment Effective Date.
<PAGE>
-4-
(b) The Agent shall have received, along with the
Notice of Assignment, a recordation fee of $2500 if required
pursuant to Section 11.04 of the Credit Agreement.
6. Representations and Warranties
(a) Each of Assignor and Assignee represents and
warrants to the other party as follows:
(i) it has full power and authority, and has taken
all action necessary, to execute and deliver this
Assignment Agreement and to fulfill its obligations under,
and to consummate the transactions contemplated by, this
Assignment Agreement;
(ii) the making and performance by it of this
Assignment Agreement and all documents required to be
executed and delivered by it hereunder do not and will not
violate any law or regulation of the jurisdiction of its
incorporation or any other law or regulation applicable to
it;
(iii) this Assignment Agreement has been duly executed
and delivered by it and constitutes its legal, valid and
binding obligation, enforceable in accordance with its
terms; and
(iv) all approvals, authorizations, or other actions
by, or filing with, any governmental authority necessary
for the validity or enforceability of its obligations
under this Assignment Agreement have been obtained.
(b) Assignor represents and warrants to Assignee
that Assignor owns the Commitment and the Loans that are the
subject of this Assignment Agreement and that Assignee's Share
and the Loans attributable to Assignee's Share are subject to
no liens or security interests created by Assignor.
(c) Assignee represents and warrants that it has
made its own independent investigation of the financial
condition and affairs of the Credit Parties (as defined below)
in connection with the making of the Loans and the assignment
of Assignee's Share and of the Loans attributable to Assignee's
Share to Assignee hereunder and has made and shall continue to
make its own appraisal of the creditworthiness of the Credit
Parties.
<PAGE>
-5-
(d) Assignee represents and warrants that it has
entered into a confidentiality agreement with Assignor pursuant
to Section 11.04 of the Credit Agreement, and such
confidentiality agreement remains in full force and effect as
of the date hereof.
7. Expenses
Assignor and Assignee agree that each party shall
bear its own expenses in connection with the preparation and
execution of this Assignment Agreement.
8. Miscellaneous
(a) Assignor shall not be responsible to Assignee
for the execution (by any party other than Assignor),
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of the Credit Agreement or any of the agreements, documents or
instruments referred to therein (collectively, the "Documents") or for any
representations, warranties, recitals or statements made therein or in any
written or oral statement or in any financial or other statements, instruments,
reports, certificates or any other documents made or furnished or made available
by Assignor to Assignee or by or on behalf of the Borrower or any other person
obligated under the Documents (collectively, the "Credit Parties") to Assignor
or Assignee in connection with the Documents and the transactions contemplated
thereby. Assignor shall not be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained in any of the Documents or as to the use of the proceeds
of the Loans or as to the existence or possible existence of any default or
event of default under the Documents.
(b) Assignor shall have no duty or responsibility
either initially or on a continuing basis to make any
investigation of the financial condition and affairs of the
Credit Parties in connection with the making of the Loans and
the assignment of Assignee's Share and the Loans attributable
to Assignee's Share to Assignee hereunder or to provide
Assignee with any credit or other information with respect
thereto, whether coming into its possession before the making
of the Loans or at any time or times thereafter and shall
further have no responsibility with respect to the accuracy of,
or the completeness of, any information provided to Assignee,
whether by Assignor or by or on behalf of any Credit Party.
<PAGE>
-6-
(c) The Assignee appoints and authorizes the Agent
to take such action on its behalf and to exercise such powers
under the Credit Agreement and the other Credit Documents as
are delegated to the Agent by the terms thereof, together with
such powers as are reasonably incidental thereto.
(d) THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF
THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS
OF LAW.
(e) No term or provision of this Assignment
Agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the
parties to this Assignment Agreement.
(f) This Assignment Agreement may be executed in one
or more counterparts, each of which shall be an original but
all of which, taken together, shall constitute one and the same
instrument.
(g) Assignor may at any time or from time to time
grant to others assignments or participations in Assignor's
Commitment or the Loans but not in the portions thereof
assigned to Assignee pursuant to this Assignment Agreement.
(h) All payments hereunder or in connection herewith
shall be made in U.S. Dollars and in immediately available
funds, if payable to Assignor, to the account of Assignor at
its office as designated in Annex I hereto, and, if payable to
Assignee, to the account of Assignee, as designated in Annex I
hereto. The address of the Assignee for notice purposes under
the Credit Agreement shall be as set forth in Annex I hereto.
(i) This Assignment Agreement shall be binding upon
and inure to the benefit of the parties hereto and their
respective successors and assigns. Neither Assignee nor
Assignor may assign or transfer any of its rights or
obligations under this Assignment Agreement without the prior
consent of the other party. The preceding sentence shall not
limit the right of the Assignee to assign all or part of
Assignee's Share and any outstanding Loans attributable to
Assignee's Share in the manner contemplated by the Credit
Agreement or to any affiliate of the Assignee.
<PAGE>
-7-
(j) All representations and warranties made herein
and indemnities provided for herein shall survive the
consummation of the transactions contemplated hereby.
(k) It is agreed that except as may be required by
law, the parties hereto will not disclose the existence of any
term of this Assignment Agreement to the Borrower or any other
person or entity; provided that disclosure may be made to any
regulatory authority having or asserting jurisdiction upon
request or to any representative of each party (including
without limitation attorneys and accountants) who needs to know
of such information.
(l) In case any provision in this Assignment
Agreement shall be held invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining
provisions hereof will not in any way be affected or impaired
thereby.
IN WITNESS WHEREOF, the parties hereto have executed
this Assignment Agreement as of the date first above written.
[NAME OF ASSIGNOR]
By
------------------------------
Title:
Date:
[NAME OF ASSIGNEE]
By
------------------------------
Title:
<PAGE>
ANNEX I
to
Assignment Agreement
1. Borrower: Carson Products Company
2. Date of Credit Agreement: October [ ], 1996
3. Assignor:
4. Assignee:
5. Date of Assignment Agreement: , 19
6. Assignee's Share: Revolving
A Term Loan B Term Loan Loan
Commitment_ Commitment Commitment
(a) Total Commitment
(in ) $ $ $
(b) Assignee's
Assigned
Percentage % % %
(c) Assigned Amount $ $ $
7. Commitment Commission:
(i) Commitment
Commission
8. Interest Rates:
(i) Base Rate Loan Base Rate*
(ii) Reserve Adjusted Eurodollar Rate*
Eurodollar Loan
_________________________
* Plus the applicable margins described in the definition of
Interest Margin in the Credit Agreement.
<PAGE>
-2-
9. Payment Instructions:
Assignor: __________________
__________________
__________________
Assignee: __________________
__________________
__________________
10. Assignee's Notice
Instructions
__________________
__________________
__________________
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
_______________________ _______________________
By:____________________ By:____________________
____________________ ____________________
(Title) (Title)
<PAGE>
Exhibit J to the
Credit Agreement
FORM OF NOTICE OF BORROWING
Pursuant to that certain Credit Agreement dated as of
October [ ], 1996 (as amended, amended and restated,
supplemented or other wise modified from time to time in
accordance with the terms thereof in effect) (the "Credit
Agreement") among Carson Products Company, the Banks named
therein, and Banque Indosuez, New York Branch, as Agent
("Agent"), this represents the Borrower's request to borrow on
, 19 from the Banks on a pro rata basis $
as [Base Rate/Reserve Adjusted Eurodollar [A Term/B
Term/Revolving Loans.]] [The Interest Period for such Reserve
Adjusted Eurodollar Loan is requested to be a
period.] The proceeds of such Loans are to be deposited in the
Borrower's account with Banque Indosuez, New York Branch, as
Agent.
The undersigned officer on behalf of the Borrower, to
the best of his knowledge, after due inquiry, and the Borrower
certify that (i) the representations and warranties contained
in the Credit Agreement and the other Credit Documents are
true, correct and complete in all material respects on and as
of the date hereof to the same extent as though made on and as
of the date hereof, except to the extent that the same
expressly are made only as of a different date; and (ii) no
Default or Event of Default has occurred and is continuing
under the Credit Agreement or will result from the proposed
borrowing. Capitalized terms used herein without definition
shall have the meanings set forth in the Credit Agreement.
DATED: __________________
CARSON PRODUCTS COMPANY
By:
--------------------------
Name:
Title:
<PAGE>
Exhibit K to the
Credit Agreement
FORM OF NOTICE OF CONVERSION/CONTINUATION
Pursuant to that certain Credit Agreement dated as of
October [ ], 1996 (as amended, amended and restated,
supplemented or otherwise modified from time to time in
accordance with the terms thereof in effect) (the "Credit
Agreement") among Carson Products Company (the "Borrower"), the
Banks named therein, and Banque Indosuez, New York Branch, as
Agent, this represents [the Borrower's request [A: to convert
$ in principal amount of presently outstanding [Base
Rate/Reserve Adjusted Eurodollar [A Term/B Term/Revolving]] Loans
to [Base Rate/Reserve Adjusted Eurodollar] Loans on ,
19 .] [B: to continue as Reserve Adjusted Eurodollar [A Term/B
Term/Revolving] Loans $ in principal amount of presently
outstanding Reserve Adjusted Eurodollar Loans.] [The Interest
Period for such Reserve Adjusted Eurodollar Loans commencing on
such Interest Payment Date is requested to be a
period.]
The undersigned officer, to the best of his knowledge,
after due inquiry, and the Borrower certify that no Default or
Event of Default has occurred and is continuing under the Credit
Agreement. Capitalized terms used herein without definition
shall have the meanings set forth in the Credit Agreement.
DATED: __________________
CARSON PRODUCTS COMPANY
By:
-------------------------
Name:
Title:
<PAGE>
Exhibit L to the
Credit Agreement
FORM OF OFFICER'S SOLVENCY CERTIFICATE
, 1996
Banque Indosuez, New York Branch
1211 Avenue of the Americas, 7th Floor
New York, New York 10036
and
The Banks Party to the Credit
Agreement Referenced Below
Ladies and Gentlemen:
Pursuant to Section 4.01(H) of the Credit Agreement
dated as of October [ ], 1996 (the "Credit Agreement") among
Carson Products Company, a Delaware corporation (the "Bor-
rower"), the banks listed therein, and Banque Indosuez, New
York Branch, as Agent (the "Agent"), I, ,
hereby certify on behalf of the Borrower as follows (unless
otherwise defined herein, capitalized terms used herein have
the meanings assigned to them in the Credit Agreement):
129. I have reviewed and participated in the prepara-
tion of the financial projections prepared by management of the
Borrower and delivered to the Agent (the "Projected Financial
Statements"). All assumptions with respect to the Projected
Financial Statements are set forth therein and the Projected
good faith estimation of future performance of the Borrower.
The assumptions on which the Projected Financial Statements are
based are reasonable and are based on the best information
available, although any assumption and any forecast by neces-
sity involve uncertainty and approximation.
2. For purposes of delivering this certificate, I have:
(a) consulted with other officers of the Borrower
responsible for financial and accounting functions concerning
contingent liabilities other than those related to litigation;
and
<PAGE>
-2-
(b) made such other investigation and inquiries as I have
deemed appropriate.
3. Based upon the foregoing (including the Projected
Financial Statements), I have concluded that, as of the date hereof, after
giving effect to the Refinancing and the incurrence of the Loans by the
Borrower in an amount equal to the sum of the Total Term Loan Commitments
and Total Revolving Loan Commitments and the grant of the security
interests in the Collateral (the "Transaction"):
(a) each of the Fair Value and Present Fair Saleable Value of
the assets of the Borrower exceeds its stated liabilities and identified
contingent liabilities;
(b) each of the Fair Value and Present Fair Saleable Value of
the assets of the Borrower exceeds the probable liability on its debts
(including identified contingent liabilities) as such debts become absolute
and mature;
(c) the Borrower will be able to pay its debts as they
mature; and
(d) the Borrower will not have unreasonably small capital for
the business in which it is engaged and is proposed to be engaged following
the consummation of the Refinancing.
4. For purposes of this letter, the terms below have been
agreed upon by you to have the following definitions:
(a) "Fair Value"
The amount at which an entity's aggregate assets would change
hands between a willing buyer and a willing seller, each having reasonable
knowledge of the relevant facts, with neither being under any compulsion to
act, with equity to both.
(b) "Present Fair Saleable Value"
The amount that may be realized if an entity's aggregate assets
are sold with reasonable promptness in an arm's-length transaction under
present conditions for the sale of comparable business enterprises.
(c) "will be able to pay its debts as they mature"
<PAGE>
-3-
That, as of the date hereof, both immediately before and after
giving effect to the Refinancing, the Fair Value and Present Fair Saleable
Value of such entity's aggregate assets would exceed its stated liabilities
and identified contingent liabilities, the Fair Value and Present Fair
Saleable Value of its current assets would exceed its current stated
liabilities and current identified contingent liabilities, and such entity
would have a positive cash flow for the period from the date hereof to
, 200 , including (after giving effect to) the payment of
installments due under loans made pursuant to the indebtedness incurred in
the Refinancing as such installments are scheduled at the close of the
Refinancing, and including funds available under the entities' revolving
credit facilities.
5. To the best of my knowledge, no Credit Party is entering
into the arrangements contemplated by the Credit Agreement or the other
Credit Documents or intends to make any transfer or incur any obligations
thereunder, with actual intent to hinder, delay or defraud either present
or future creditors.
6. To the best of my knowledge, no Credit Party intends to
incur, or believes, that such Credit Party will incur, debts beyond such
Credit Party's ability to pay as they become due.
<PAGE>
- 4
This Certificate is being delivered by the undersigned only in
his capacity as an officer of the Borrower and not individually. The
undersigned shall have no liability in connection herewith so long as this
Certificate is true and correct to the best of his knowledge, after due
inquiry, as of the date hereof.
CARSON PRODUCTS COMPANY
By:
-----------------------------------
Name:
Title:
<PAGE>
Exhibit M to the
Credit Agreement
BORROWING BASE CERTIFICATE
Computation of Availability as of ___[date]___
ACCOUNTS RECEIVABLE
Gross accounts receivable per aging
(as of last month-end)
Credits, returns, discounts, claims, credits, charges, rebates,
offsets and allowances not yet booked
Other adjustments
Sub-total _______
Ineligibles and Deductions:
Borrower does not have legal and valid title
Unenforceable obligations of account debtor
Intercompany Invoices
61 day or less invoices past due over 91 days
$ value of all invoices providing for payment
more than 60 days from invoice, other than
those which are not past due over 30 days
and which, in the aggregate, do not exceed
7>% of all Eligible Accounts of Borrower and its Sub-
sidiaries then outstanding
Accounts from same account debtor exceeding
20% in face value of all Accounts of
Borrower and its Subsidiaries then outstanding
Accounts payable to account debtors
Accounts from account debtors in bankruptcy
No first priority lien
Contingent sales
Accounts from account debtors for whom
more than 50% of accounts are ineligible
Foreign Government invoices
U.S. Government invoices, other than those which (i) together
with all other U.S. Government invoices, do not exceed 7>%
of all other Eligible Accounts of the Borrower or its
Subsidiaries then outstanding or (ii) are assigned to the
Agent
Foreign invoices, unless on letter of credit, guaranty or
acceptance terms and not exceeding $500,000 at any time
outstanding
Insecure Accounts
Accounts for undelivered goods
Non-complying Accounts
<PAGE>
BORROWING BASE CERTIFICATE (continued)
Other reserves and deductions
Total Ineligibles/Deductions _______
Eligible Accounts Receivable _______
Accounts Receivable Advance Rate 80%
Available Accounts Receivable _______
<PAGE>
BORROWING BASE CERTIFICATE (continued)
INVENTORY
Finished Goods (as of last month-end)
Work-in-Process (as of last month-end)
Raw Materials (as of last month-end)
Total Inventory before Ineligibles and Deductions _______
Ineligibles and Deductions:
Returns and Rejections
Obsolete and slow moving goods
Reserve for special order goods and market value declines
Other reserves and deductions
Total Ineligibles/Deductions _______
Eligible Inventory _______
Inventory Advance Rate 50%
Available Inventory _______
Borrowing Base
(Available Inventory
plus Available Accounts
Receivable)
Total Availability
Less: Outstanding Revolving Loans
NET AVAILABILITY _______
<PAGE>
Exhibit N to the
Credit Agreement
FORM OF OFFICERS' CERTIFICATE
REGARDING ENVIRONMENTAL REVIEW
This Certificate is delivered pursuant to Section
4.01(B) of the Credit Agreement dated as of October [ ], 1996
(the "Credit Agreement") among Carson Products Company, a
Delaware corporation (the "Borrower"), the lenders listed
therein and Banque Indosuez, New York Branch, as Agent (the
"Agent"). Unless otherwise defined herein, capitalized terms
used herein have the meanings assigned to them in the Credit
Agreement.
We, the undersigned, hereby certify that
is the of the Borrower, and
is the of the Borrower, and that to
the best of our knowledge:
1. After giving effect to the Refinancing, the
Borrower is in compliance with all Environmental Laws to the
extent contemplated by Sections 5.22 and 5.23 of the Credit
Agreement; and
2. All information including any and all memoranda
and reports furnished to the Agent through its attorneys Cahill
Gordon & Reindel, by or on behalf of the Borrower is true and
accurate in all material respects nor did the Borrower withhold
any material information from the Agent.
We have read all relevant environmental materials
including the information referenced above and have read the
Credit Agreement and made all other investigations and
examinations that we deem necessary to make the foregoing
certifications.
This Certificate is being delivered by the
undersigned only in their capacities as officers of the
Borrower and the undersigned shall have no personal liability
in connection herewith, it being understood that none of the
undersigned has any greater knowledge with respect to the
statements made herein in his personal capacity than in his
capacity as an officer.
<PAGE>
-2-
IN WITNESS WHEREOF, each of the undersigned has
caused this Certificate to be duly executed and delivered on
this day of , 1996.
_______________________________
Name:
Title: of
Carson Products Company
_______________________________
Name:
Title: of
Carson Products Company
<PAGE>
Exhibit Q to the
Credit Agreement
Form of Non-U.S. Lender Certificate
Reference is hereby made to the Credit Agreement (the
"Credit Agreement"), dated as of October [ ], 1996, among Carson
Products Company, a Delaware corporation ("Borrower"), Banque
Indosuez, New York Branch, as Agent, and the lenders listed
therein. Pursuant to the provisions of Section 3.04(c) of the
Credit Agreement, the undersigned hereby certifies (i) that it is
not a bank described in Section 881(c)(3)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"); (ii) that it is
not a 10-percent shareholder, as described in Section
881(c)(3)(B) of the Code, of the Borrower; (iii) that it is not a
controlled foreign corporation described in Section 881(c)(3)(C)
of the Code; and (iv) that it is entitled to receive payments of
interest without deduction or withholding of any United States
federal income tax pursuant to Section 881(c)(1) of the Code.
[NAME OF FOREIGN BANK]
By:
--------------------------
Name:
Title:
Date:
-------------------------
<PAGE>
Exhibit R to the
Credit Agreement
FORM OF SUBSIDIARY GUARANTEE
GUARANTEE, dated as of , 199_
("Guarantee"), by [NAME OF SUBSIDIARY], a [ ]
corporation ("Guarantor"), in favor and for the benefit of the
Banks under the Credit Agreement (each as hereinafter defined).
R E C I T A L S:
A. Pursuant to a certain credit agreement dated as
of October [ ], 1996 (as amended, amended and restated,
supplemented or otherwise modified from time to time in
accordance with the terms thereof in effect, the "Credit
Agreement"; capitalized terms not defined herein have the
meanings ascribed to them in the Credit Agreement) by and among
Carson Products Company (the "Borrower"), the lending
institutions identified therein (collectively, the "Banks") and
Banque Indosuez, New York Branch, as agent (the "Agent"), the
Banks have agreed to make certain Loans to the Borrower and to
issue Letters of Credit for the accounts of the Borrower.
B. It is a requirement under Section 6.16 of the
Credit Agreement that the Guarantor shall execute and deliver
this Guarantee and that this Guarantee shall be in full force
and effect.
C. This Guarantee is given by the Guarantor in
favor of the Banks to guarantee all of the Obligations of the
Borrower in accordance with the terms of the Credit Agreement.
NOW, THEREFORE, in consideration of the foregoing
premises and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Guarantor
hereby agrees as follows:
1. Guarantee. (a) To induce the Banks to make the
Loans and to issue the Letters of Credit upon the terms and
conditions set forth in the Credit Agreement, and in
consideration thereof, the Guarantor hereby unconditionally and
irrevocably (i) guarantees to the Banks and their respective
successors, transferees and assigns, the prompt and complete
payment and performance when due (whether at the stated
maturity, by
<PAGE>
-2-
acceleration or otherwise) and at all times thereafter of the
Obligations of the Borrower (including amounts which would become
due but for the operation of the automatic stay under Section 362(a)
of the Bankruptcy Code, or similar provisions under the bankruptcy
laws of foreign jurisdictions); and (ii) agrees to pay any and all
reasonable expenses (including reasonable attorneys' fees and
disbursements) which may be paid or incurred by the Banks, the Agent
or Collateral Agent in enforcing any rights with respect to, or collecting,
any or all of the Obligations and/or enforcing any rights with respect
to, or collecting against, the Guarantor under this Guarantee provided,
that this Guarantee is limited as set forth in Section 5 hereof (as so limited,
collectively, the "Guaranteed Obligations").
(b) The Guarantor agrees that this Guarantee
constitutes a guarantee of payment when due and not of
collection and waives any right to require that any resort be
had by the Collateral Agent, the Agent or any Bank to any of
the security held for payment of any of the Guaranteed
Obligations or to any balance of any deposit account or credit
on the books of the Agent, the Collateral Agent or any Bank in
favor of the Borrower or any other Person.
(c) No payment or payments made by the Borrower or
any other Person or received or collected by the Banks (or the
Collateral Agent or Agent on behalf of the Banks) from any
other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from
time to time in reduction of or in payment of the Guaranteed
Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of the Guarantor hereunder which
shall, notwithstanding any such payment or payments other than
payments made to the Banks (or the Collateral Agent or Agent on
behalf of the Banks) by the Guarantor or payments received or
collected by the Banks (or the Collateral Agent or Agent on
behalf of the Banks) from the Guarantor, remain liable for the
Guaranteed Obligations until the Guaranteed Obligations are
indefeasibly paid in full in Cash or Cash Equivalents, subject
to the provisions of Section 1(d) hereof.
(d) The Guarantor understands, agrees and confirms
that this is a guarantee of payment when due and not of
collection and that each Bank may, from time to time, enforce
this Guarantee up to the full amount of the Guaranteed
Obligations owed to such Bank without proceeding against any
other Credit Party, against any security for the Guaranteed
Obligations,
<PAGE>
-3-
against any other guarantor or under any other guarantee covering
the Guaranteed Obligations.
2. Waiver by Guarantor. Until the payment and
satisfaction in full of all Guaranteed Obligations and the
expiration or termination of the Commitments and all Letters of
Credit Usage of the Banks under the Credit Agreement, the
Guarantor hereby waives absolutely and irrevocably any claim
which it may have against the Borrower or any of their
respective Affiliates by reason of any payment to the Agent,
Collateral Agent or any Bank, or to any other Person pursuant
to or in respect of this Guarantee, including any claims by way
of subrogation, contribution, reimbursement, indemnity or
otherwise.
3. Consent by Guarantor. The Guarantor hereby
consents and agrees that, without the necessity of any
reservation of rights against the Guarantor and without notice
to or further assent by the Guarantor, any demand for payment
of any of the Guaranteed Obligations made by the Agent, the
Collateral Agent or any Bank may be rescinded by the Banks (or
the Agent or Collateral Agent on behalf of the Banks) and any
of the Guaranteed Obligations continued, and the Guaranteed
Obligations, or the liability of any other party upon or for
any part thereof, or any collateral security or guarantee
therefor or right of offset with respect thereto, may, from
time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived,
surrendered or released by the Banks (or the Agent or the
Collateral Agent on behalf of the Banks); and the Credit
Agreement or any other Credit Document, or other guarantee or
documents in connection therewith, or any of them, may be
amended, modified, supplemented or terminated, in whole or in
part, as the Banks (or the Agent or Collateral Agent on behalf
of the Banks) may deem advisable from time to time; and any
Guarantee (subject to Section 11.04 of the Credit Agreement) or
right of offset or any Collateral may be sold, exchanged,
waived, surrendered or released, all without the necessity of
any reservation of rights against the Guarantor and without
notice to or further assent by the Guarantor, which will remain
bound hereunder, notwithstanding any such renewal, extension,
modification, acceleration, compromise, amendment, supplement,
termination, sale, exchange, waiver, surrender or release.
Neither the Banks nor the Agent or the Collateral Agent shall
have any obligation to protect, secure, perfect or insure any
Collateral or property at any time held as security for the
Guaranteed Obligations (other than the exercise of reasonable
care in the custody and preservation of collateral as provided
in any of the Credit
<PAGE>
-4-
Documents). When making any demand hereunder against the Guarantor, the Agent,
the Collateral Agent or the Banks may, but shall be under no obligation to, make
a similar demand on any other Credit Party or any such other guarantor, and any
failure by the Agent, the Collateral Agent or the Banks to make any such demand
or to collect any payments from such other Credit Party or any such other
guarantor or any release of such other Credit Party or any such other guarantor
or of the Guarantor's obligations or liabilities hereunder shall not impair or
affect the rights and remedies, express or implied, or as a matter of law, of
the Banks against the Guarantor hereunder. For the purposes hereof "demand"
shall include the commencement and continuance of any legal proceedings.
4. Waivers; Successors and Assigns. The Guarantor waives any and all
notice of the creation, renewal, extension or accrual of any of the Guaranteed
Obligations and notice of or proof of reliance by the Banks upon this Guarantee
or acceptance of this Guarantee, and the Guaranteed Obligations shall
conclusively be deemed to have been created, contracted or incurred in reliance
upon this Guarantee, and all dealings between the Guarantor and any other Credit
Party, on the one hand, and the Banks, on the other hand, shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Guarantee. The Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or non-payment to or upon any Credit Party or the
Guarantor with respect to the Guaranteed Obligations. This Guarantee shall be
construed as a continuing, absolute and unconditional guarantee of payment
without regard to the validity, regularity or enforceability of the Credit
Agreement, the other Credit Documents, any of the Guaranteed Obligations or any
guarantee therefor or right of offset with respect thereto at any time or from
time to time held by the Banks and without regard to any defense (other than the
defense of payment), set-off or counterclaim which may at any time be available
to or be asserted by any Credit Party against the Banks, or by any other
circumstance whatsoever (with or without notice to or knowledge of the
Guarantor) which constitutes, or might be construed to constitute, an equitable
or legal discharge of the Guaranteed Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance, and the obligations and
liabilities of the Guarantor hereunder shall not be conditioned or contingent
upon the pursuit by the Banks or any other Person at any time of any right or
remedy against any Credit Party or against any other Person which may be or
become liable in respect of all or any part of the Guaranteed Obligations or
<PAGE>
-5-
against any collateral security or guarantee therefor or right of offset with
respect thereto. This Guarantee shall remain in full force and effect and be
binding in accordance with and to the extent of its terms upon the Guarantor and
the successors and assigns thereof, and shall inure to the benefit of the Banks,
and their respective successors, transferees and assigns (including each holder
from time to time of Guaranteed Obligations), until all of the Guaranteed
Obligations and the obligations of the Guarantor under this Guarantee shall have
been satisfied by indefeasible payment in full in cash or cash equivalents,
notwithstanding that from time to time during the term of the Credit Agreement
any Credit Party may be released from all of its Guaranteed Obligations
thereunder.
5. Limited Liability. Notwithstanding any contrary provision of this
Agreement or the Credit Agreement, it is hereby expressly agreed that no
partner, officer, employee, servant, controlling Person, executive, director,
agent, authorized representative of affiliate (herein referred to as
"operatives") of any of the Guarantor, DNL Group, L.L.C. or DNL Partners,
Limited Partnership (collectively, the "Guarantor and Equity Entities") shall be
personally liable for payments due under this Agreement for the performance of
any obligation hereunder. Nothing contained in this Section shall prevent the
Banks, or the Agent or the Collateral Agent on behalf of the Banks, from
exercising any rights or remedies against the Borrower or its Subsidiaries, the
Mortgaged Real Property or the Pledged Collateral pursuant to the Credit
Agreement, the Security Documents or this Agreement.
6. Effectiveness; Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Guaranteed Obligations is rescinded or must
otherwise be restored or returned by the Banks upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of any Credit Party, or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, any Credit Party or any substantial part of its
property, or otherwise, all as though such payments had not been made.
7. Payments of Guaranteed Obligations. The Guarantor hereby
guarantees that the Guaranteed Obligations will be paid for the ratable benefit
of the Banks without set-off or counterclaim in lawful currency of the United
States of America at the office of Agent located at 1211 Avenue of the Americas,
<PAGE>
-6-
7th Floor, New York, New York 10036. The Guarantor shall make any payments
required hereunder upon receipt of written notice thereof from the Agent or
Collateral Agent or any Bank; provided, however, that the failure of the Agent
or Collateral Agent or any Bank to give such notice shall not affect the
Guarantor's obligations hereunder.
8. Representations and Warranties. To induce the Banks to enter into
the Credit Agreement and to make the Loans thereunder and to issue the Letters
of Credit, the Guarantor represents and warrants to each Bank that the following
statements are true, correct and complete on and as of the date hereof:
A. Organization and Powers. The Guarantor is a duly organized,
validly existing corporation in good standing under the laws of the jurisdiction
of its organization and has the corporate power and authority to own its
property and assets and to transact the business in which it is engaged and
currently proposes to engage. The Guarantor has duly qualified and is authorized
to do business and is in good standing in all jurisdictions in which the conduct
of its business or the ownership of its properties requires such qualification,
except where the failure to be so qualified would not have a Materially Adverse
Effect. The Guarantor has all requisite governmental licenses, authorizations,
consents and approvals to own and carry on its business as now conducted and as
presently contemplated to be conducted by the Guarantor, other than such
licenses, authorizations, consents and approvals the failure to obtain which has
not had and will not have a Materially Adverse Effect. The Guarantor has all
corporate authority to enter into each of the Credit Documents to which it is or
is to be a party and to carry out the transactions contemplated thereby and to
execute and deliver this Guarantee.
B. No Violations. Neither the execution, delivery or performance by
the Guarantor of any of the Credit Documents to which it is a party, nor
compliance with any of the terms and provisions thereof, nor the consummation of
any of the transactions contemplated therein, nor the grant and perfection of
the security interests pursuant to the Security Documents will (a) contravene
any applicable provision of any law, statute, rule, regulation, order, writ,
injunction or decree of any Governmental Authority, (b) conflict or be
inconsistent with or result in a breach of, any of the terms, covenants,
conditions or provisions of, or constitute (with notice or lapse of time or
both) a default under any material contractual obligation of
<PAGE>
-7-
the Guarantor or any of its Subsidiaries, or (other than as contemplated by the
Security Documents) result in the creation or imposition of (or the obligation
to create or impose), any Lien upon any of the property or assets of the
Guarantor or any of its Subsidiaries pursuant to any material contractual
obligation of the Guarantor or (c) violate any provision of the organizational
documents of the Guarantor or any of its Subsidiaries, except in each such case
where such contravention, conflict, breach, default, creation, imposition,
obligation or violation would not have a Materially Adverse Effect.
C. Approvals. The execution, delivery and performance by the
Guarantor of the Credit Documents to which it is a party do not and will not
require any registration with, consent or approval of, or notice to, or other
action to, with or by, any Governmental Authority or other Person (other than
those registrations, consents, waivers, approvals, notices or other actions
which, if not obtained or made, would not have a Materially Adverse Effect). All
consents and approvals from or notices to or filings with any Governmental
Authority or other Person required to be obtained by the Guarantor have been
obtained and are in full force and effect (other than those consents, waivers,
approvals, notices or filings which, if not obtained or made, would not have a
Materially Adverse Effect).
D. Binding Obligation. This Guarantee constitutes the legal, valid
and binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors'
rights generally and except as such enforceability may be limited by the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
E. Investment Company. The Guarantor is not an "investment company"
or a company "controlled" by an "investment company" (as each of such quoted
terms is defined or used in the Investment Company Act of 1940, as amended (the
"1940 Act")) or subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act or any foreign, federal or local statute or
regulation limiting its ability to incur Indebtedness for money borrowed or
guarantee such Indebtedness as contemplated hereby or by any other Credit
Document.
9. Ratable Sharing. The Banks by acceptance of
this Guarantee agree among themselves that with respect to all
<PAGE>
-8-
amounts received by them which are applicable to the payment of
obligations of the Guarantor under this Guarantee, if the
Banks, or the Agent or Collateral Agent on behalf of the Banks,
exercise their rights hereunder, including, without limitation,
acceleration of the obligations of the Guarantor hereunder,
equitable adjustment will be made so that, in effect, all such
amounts will be shared among the Banks pro rata based on the
relative outstanding Guaranteed Obligations.
10. Merger. If the Guarantor shall merge into or
consolidate with another corporation, or liquidate, wind up or
dissolve itself in a transaction not prohibited by the Credit
Agreement, or if all of the stock of the Guarantor shall be
sold or otherwise disposed of in a manner not prohibited by the
Credit Agreement, the Guarantor hereby covenants and agrees,
that upon any such merger, consolidation, liquidation, or
dissolution, the guarantee given in this Guarantee and the due
and punctual performance and observance of all of the covenants
and conditions of the Credit Agreement to be performed by the
Guarantor, shall be expressly assumed (in the event that the
Guarantor is not the surviving corporation in the merger) by
supplemental agreements reasonably satisfactory in form to the
Agent on behalf of the Banks by the corporation or corporations
formed by such consolidation, or into which the Guarantor shall
have been merged, or by the corporation or corporations which
shall have acquired such property. In addition, the Guarantor
shall deliver to the Agent an Officer's Certificate and an
opinion of counsel, each stating that such merger,
consolidation or transfer and such supplemental agreements
comply with this Guarantee and that all conditions precedent
herein provided relating to such transaction have been complied
with. In case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor corporation
or corporations, by supplemental agreements executed and
delivered to the Agent, and reasonably satisfactory in form to
the Agent on behalf of the Banks, of the guarantee given in
this Guarantee and the due and punctual performance of all of
the covenants and conditions of the Credit Agreement to be
performed by the Guarantor, such successor corporation or
corporations shall succeed to and be substituted for the
Guarantor, with the same effect as if it or they had been named
herein as a Guarantor.
11. No Waiver. No failure to exercise and no delay
in exercising, on the part of the Banks, or the Agent or
Collateral Agent on behalf of the Banks, any right, power or
privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or
privilege
<PAGE>
-9-
preclude any other or further exercise thereof, or
the exercise of any other power or right. The rights and
remedies herein provided are cumulative and not exclusive of
any rights or remedies provided by law.
12. Notices. All notices, demands, instructions or
other communications required or permitted to be given to or
made upon any party hereto shall be given in accordance with
the provisions of the Credit Agreement and at the address set
forth therein or as provided on the signature page hereof.
13. Amendments, Waivers, etc. No provision of this
Guarantee shall be waived, amended, terminated or supplemented
except by a written instrument executed by the Guarantor and
the Agent or Collateral Agent, on behalf of the Banks.
14. Notice of Exercise. Upon exercise of its rights
hereunder, each Bank, or the Agent or Collateral Agent on
behalf of the Banks, as the case may be, shall provide written
notice on the date of such exercise to the Banks, or the Agent
or Collateral Agent, as the case may be, of such exercise.
15. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS.
16. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE GUARANTOR WITH
RESPECT TO THIS GUARANTEE AGREEMENT MAY BE BROUGHT IN ANY STATE
OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW
YORK, AND BY EXECUTION AND DELIVERY OF THIS GUARANTEE AGREEMENT
THE GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS. THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT TO TRIAL BY JURY, AND THE GUARANTOR HEREBY
IRREVOCABLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR
PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THE GUARANTOR
DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, WITH AN ADDRESS
AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, AND SUCH OTHER
PERSONS AS MAY HEREAFTER BE SELECTED BY THE GUARANTOR
IRREVOCABLY AGREEING IN WRITING TO SERVE, AS ITS AGENT TO
RECEIVE ON ITS BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE GUARANTOR TO BE
<PAGE>
-10-
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF SUCH
PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE
GUARANTOR AS PROVIDED IN SECTION 12 HEREOF. IF ANY AGENT
APPOINTED BY THE GUARANTOR REFUSES TO ACCEPT SERVICE, THE GUARANTOR
HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT
NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF ANY
BANK TO BRING PROCEEDINGS AGAINST THE GUARANTOR IN THE COURTS
OF ANY OTHER JURISDICTION.
17. Counterparts. This Guarantee and any
amendments, waivers, consents or supplements may be executed in
any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same
instrument.
<PAGE>
-11-
IN WITNESS WHEREOF, the undersigned has caused this
Guarantee to be duly executed and delivered by its duly
authorized officer on the day and year first above written.
[SUBSIDIARY]
By: ________________________
Name:
Title:
Notice Address:
[SUBSIDIARY]
[ ]
[ ]
Attn: [ ]
<PAGE>
EXHIBIT 16
October 4, 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, dated
October 4, 1996, as amended, and are in agreement with the statements
contained therein.
Sincerely,
PRICE WATERHOUSE LLP
<PAGE>
EXHIBIT 21
The following entities are subsidiaries of the Registrant:
<TABLE>
<CAPTION>
STATE OR COUNTY
NAME OF INCORPORATION
---- ----------------
<S> <C>
Carson Products Company..................................... Delaware
Fine Products Company....................................... Georgia
Carson Products Company SA (Proprietary) Limited............ South Africa
Carson Holdings Limited..................................... South Africa
Carson Botswana Proprietary Limited......................... Botswana
</TABLE>
<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
October 4, 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.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Atlanta, Georgia
October 4, 1996
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EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
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We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 No. 333-10191 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
October 4, 1996
