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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-5439
DEL LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 13-1953103
(State or other jurisdiction of (I.R.S. Employer I.D. Number)
incorporation or organization)
178 EAB PLAZA, UNIONDALE, NY 11556
(Address of Principal Executive Offices) (Zip Code)
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(516) 844-2020
Registrant's telephone number, including area code:
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, $1 par value American Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the Common Stock held by non-affiliates of the
Registrant on March 23, 2000 was $29,021,724. On such date, the average bid and
asked price for the Common Stock was $8.1875 per share.
The number of shares of Common Stock outstanding as of March 23, 2000 was
7,543,726 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
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<CAPTION>
DOCUMENT PART OF THE FORM 10-K INTO WHICH THE DOCUMENT IS INCORPORATED
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Definitive Proxy Statement for 2000 Annual Part III, Items 10, 11, 12 and 13
Meeting of Stockholders
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PART I
ITEM 1--BUSINESS
Del Laboratories, Inc. (the "Company") manufactures, markets and distributes
cosmetics and proprietary over-the-counter pharmaceuticals. The Company's
principal cosmetics products are nail care products, nail color, color
cosmetics, beauty implements, bleaches and depilatories, personal care products,
and other related cosmetic items. The Company's cosmetics products are marketed
under such well-known brand names as Sally Hansen Hard as Nails and Sally Hansen
Professional Nail (nail care and nail color products), CornSilk (face make-up),
Naturistics (color cosmetics and bath and body care), LaCross (beauty
implements), and N.Y.C. New York Color (color cosmetics). The Company's
proprietary pharmaceutical products include oral analgesics, acne treatment
products, first aid products and eye/ear medications. The Company's
pharmaceutical products are marketed under such well-known brand names as Orajel
and Tanac (oral analgesics), Propa pH (acne treatment), Pronto (pediculicides),
Arthricare (topical arthritis treatment), Stye (ophthalmic ointment) and
Auro-Dri (ear remedy). The Company's products are sold principally in the United
States and Canada to wholesalers and independent and chain drug, mass
merchandisers and food stores.
The Company seeks to increase sales by aggressively marketing its products
under established brand names. The Company targets the mass market, which
accounts for a major portion of the decorative color cosmetics market and the
majority of the over-the-counter pharmaceuticals market. The Company's customers
in the mass market channel include Walgreens, Rite Aid, CVS, and Eckerd, major
drug store chains; Wal-Mart, K-Mart and Target, major national chain mass
merchandisers; and numerous regional chain drug stores and mass merchandisers.
The Company also distributes its pharmaceutical products to drug wholesalers,
including McKesson Drug and Bergen Brunswig and national food chains, including
Kroger and Albertson's. Other than Wal-Mart Stores, Inc., which accounted for
25.4%, 21.5% and 22.7% of the Company's total net sales for 1999, 1998 and 1997,
respectively, and Walgreens which accounted for 10.4% and 10.3% of the Company's
total net sales in 1999 and 1998, respectively, no single customer accounted for
more than 10% of the Company's total net sales.
The Company advertises its products on television and radio and in
magazines. In-store displays and promotional activities are also utilized to
attract consumer attention and to inform them of the products available under
the Company's various brands. Cooperative advertising programs with retailers
are also employed to further enhance consumer awareness of the Company's
products and brands. Advertising expenditures were $29.0 million in 1999, or
10.8% as a percentage of total net sales.
The Company utilizes two in-house national sales organizations, one for its
cosmetics product lines and one for its pharmaceutical product lines. The
Company also employs independent manufacturers' representatives in selected
geographic areas where a full-time sales employee would not be economically
justified.
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Certain financial information regarding the Company's industry segments is
set forth in the table below:
INDUSTRY SEGMENTS
(IN THOUSANDS OF DOLLARS)
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1999 1998 1997
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Net sales to unaffiliated customers:
Cosmetics............................................... $203,484 $213,714 $207,260
Pharmaceuticals......................................... 63,863 61,148 55,750
Operating income (loss):
Cosmetics............................................... (11,938) 10,381 15,424
Pharmaceuticals......................................... 9,313 12,513 9,828
Identifiable assets:
Cosmetics............................................... 122,417 120,664 87,449
Pharmaceuticals......................................... 22,674 20,205 16,635
Corporate (unallocated assets).......................... 35,470 36,605 45,230
</TABLE>
The Company was incorporated in Delaware in 1961. The Company's cosmetics
business is conducted primarily by the Company and its wholly-owned subsidiary,
Del Laboratories (Canada) Inc., which sells the Company's cosmetics products to
the Canadian market. The Company's pharmaceuticals business is conducted
primarily by the Company's wholly-owned subsidiary, Del Pharmaceuticals, Inc.,
and its indirect wholly-owned subsidiary, Del Pharmaceutics (Canada) Inc., which
sells the Company's pharmaceutical products to the Canadian market.
The Company's products are sold in a limited number of foreign countries.
Export net sales (which exclude sales in Canada and Puerto Rico) have
historically not exceeded 5.0% of the Company's total net sales in any year. In
1999, export net sales represented approximately 1.7% of the Company's total net
sales. The Company has formed a limited number of subsidiaries to conduct its
business in certain foreign countries. In certain other foreign countries, the
Company licenses local representatives and appoints local distributors to sell
the Company's products.
The Company sells standard packaged cosmetic and over-the-counter
pharmaceutical products. The Company's customers expect quick response on
standard merchandise orders. The Company does not have a material amount of
order backlog. Consistent with the packaged goods industry, the Company accepts
authorized returns of unmerchantable, defective or discontinued products.
The Company purchases raw materials used in its manufacturing processes from
various other manufacturers, paperboard suppliers and bottle distributors. The
Company has not experienced any difficulty obtaining raw materials and believes
that such materials are readily available.
The Company expended approximately $5,219,000, $4,927,000 and $5,038,000 in
1999, 1998 and 1997, respectively, on research activities relating to the
development of new products, clinical and regulatory affairs and quality
control, all of which activities are conducted internally by the Company.
Competition in both the cosmetics and over-the-counter pharmaceuticals
markets is intense. Many of the principal competitors in each of the Company's
industry segments are well-established firms with greater financial and
marketing resources. Frequent new product introductions and attendant
advertising characterize both industry segments in which the Company operates.
Consumer brand preferences in the Company's industry segments are generally
influenced by advertising, promotional support and price. The cosmetics industry
is sensitive to consumer purchasing power. The Company's competitors in the
cosmetics market include Revlon, Inc., Procter and Gamble (Cover Girl, Oil of
Olay), Cosmair (Maybelline) and L'Oreal and, in the over-the-counter
pharmaceuticals market, include Whitehall-Robbins Division of American Home
Products Corp., Warner-Lambert Company, Pfizer, Block Drug, Thompson Medical,
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Procter and Gamble Co., SmithKline Beecham, Bristol Myers Squibb, Colgate
Palmolive and Johnson and Johnson.
The Company has registered its principal trademarks in each segment of its
business both in the United States and in many countries throughout the world.
The Company considers its trademarks to be material assets, and the registration
and protection of its trademarks in the aggregate to be important to its
business, in that the success of certain of the products is due at least in part
to the goodwill associated with the Company's primary brand names. The Company
has also been issued several United States patents, expiring at various times
through 2015, and has licensed certain intellectual property from third parties.
While the Company believes its patents and licenses to be important, it does not
consider its business as a whole to be dependent on such licenses or patent
protection.
The Company currently has approximately 1,500 employees. Approximately 440
of the Company's employees are represented by two labor unions. The Company has
not experienced any work stoppages and considers its employee and labor
relations to be satisfactory.
ITEM 2--PROPERTIES
The Company's corporate offices are located in 44,000 square feet of leased
space in Uniondale, New York.
The Company's principal manufacturing facilities for both the cosmetics and
pharmaceutical segments are located in two buildings at 565 Broad Hollow Road,
Farmingdale, New York. One building is a brick faced concrete block structure
containing approximately 120,000 square feet of floor space. The other is a
steel beamed and brick faced concrete block building, adjacent to the
Farmingdale facility described above, containing approximately 20,000 square
feet of floor space. Both buildings are owned by the Company.
The Company also owns certain property used for manufacturing facilities for
its cosmetics segment in Newark, New Jersey. The Newark buildings are brick
faced concrete block and contain approximately 90,000 square feet of floor
space.
The Company owns property located in Canajoharie, New York, consisting of a
two-story brick and steel building with approximately 50,000 square feet of
floor space. This building is used by the cosmetics segment.
In February 2000, the Company acquired property located in the City of
Barrie, Province of Ontario, Canada, consisting of a building with approximately
68,000 square feet of floor space. The facility is used for manufacturing and
shipping and contains the administrative offices of its Canadian subsidiaries.
In addition, the Company owns a 39,000 square foot facility which prior to
February 2000 was used by its Canadian subsidiaries and is in contract for sale.
The Company also owns property located in the City of Little Falls, New
York, consisting of a building with approximately 63,000 square feet of floor
space. The facility is used for production and warehousing. The Company owns a
second building located in close proximity to the Little Falls facility
described above. This 100,000 square foot facility is a one-story steel and
masonry industrial plant built in 1974 and is used for production and
warehousing.
The Company's distribution center is located in two owned buildings
containing approximately 225,000 square feet, in Rocky Point, North Carolina.
Both buildings are of insulated metal construction. The buildings and land are
subject to a first mortgage. The distribution center services both the cosmetics
and pharmaceutical segments.
The Company also has short-term leases for space in public warehouses. The
space is primarily used for the cosmetics segment.
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The Company believes that its facilities are adequate to meet the needs of
the Company, operating at reasonable levels of production.
ITEM 3--LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings, other
than ordinary routine litigation incidental to its business.
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5--MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the American Stock Exchange under
the symbol "DLI". The range of high and low sales prices as reported in the
consolidated transaction reporting system of such exchange for each quarterly
period during the past two years is as follows:
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1999 1998
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HIGH LOW HIGH LOW
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First Quarter............................................... $25.00 $17.75 $33.19 $27.28
Second Quarter.............................................. $19.00 $13.75 $32.75 $21.75
Third Quarter............................................... $17.25 $13.00 $28.50 $19.50
Fourth Quarter.............................................. $14.06 $ 7.50 $26.38 $16.00
</TABLE>
There were 490 holders of record of the Company's common stock at
December 31, 1999. This does not include beneficial holders whose shares are
held of record by nominees. The Company paid regular quarterly dividends of
$.026 from January 1997 through December 1997; $.035 from January 1998 through
September 1999 and a 2% stock dividend in December 1999. The Company has paid
uninterrupted dividends for the past twenty-five years. The per share
information set forth above has been adjusted for a 4-for-3 stock split on
February 20, 1998, effected in the form of a stock dividend.
The terms of the Company's various borrowing agreements provide, among other
things, for restrictions on the payment of cash dividends and certain other
expenditures. At December 31, 1999, no amounts were available for cash dividends
or the repurchase of treasury stock.
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ITEM 6--SELECTED FINANCIAL DATA
(Amounts in Thousands Except Per Share and Employee Data)
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<CAPTION>
1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
Operating data:
Net sales....................................... $267,347 $274,862 $263,010 $232,951 $212,048
Net earnings (loss)............................. (4,002) 11,077 13,127 9,278 7,025
Earnings (loss) per common share: (a)
Basic......................................... (0.53) 1.43 1.69 1.22 .92
Diluted....................................... (0.53) 1.34 1.56 1.12 .84
Dividends per share: (a)
Cash.......................................... .105 .14 .105 .079 .079
Stock......................................... 2% -- -- -- --
Weighted average common shares outstanding: (a)
Basic......................................... 7,530 7,733 7,745 7,597 7,614
Diluted....................................... 7,530 8,288 8,415 8,320 8,328
Balance sheet data:
Total assets.................................. $180,561 $177,474 $149,314 $122,382 $114,717
Long-term debt................................ 75,750 59,400 43,879 40,000 40,000
Working capital............................... 74,472 62,728 53,576 51,266 42,034
Shareholders' equity.......................... 50,873 59,097 54,530 44,842 38,021
Other data:
Capital additions............................. $ 7,288 $ 7,224 $ 15,230 $ 5,327 $ 7,569
Approximate # of employees.................... 1,500 1,560 1,390 1,329 1,243
</TABLE>
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(a) Adjusted to reflect a 2% stock dividend effective November 30, 1999, 4-for-3
stock splits effective February 20, 1998 and November 8, 1996 and a 2-for-1
stock split effective June 16, 1995.
ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
NET SALES. Net sales were $267.3 million and $274.9 million for 1999 and
1998, respectively, a decrease of $7.6 million or 2.8%. Cosmetics net sales were
$203.5 million and $213.7 million for 1999 and 1998, respectively, a decrease of
$10.2 million or 4.8%. The net sales decrease is due primarily to lower
shipments of the Naturistics cosmetics and bath & body care line, as a result of
the previously disclosed market repositioning of the line and, an increase in
product returns, partially offset by shipments of N.Y.C. New York Color
cosmetics introduced in 1999.
Pharmaceutical net sales were $63.9 and $61.1 million for the 1999 and 1998,
respectively, an increase of $2.8 million or 4.6%. The increase is primarily due
to volume growth in the Orajel family of products.
COST OF SALES. Cost of sales were $124.9 million or 46.7% of net sales in
1999, compared to $115.8 million or 42.1% of net sales in 1998, an increase of
$9.1 million or 7.9%. The increase in cost of sales, as a percentage of net
sales, is due primarily to a change in Cosmetics sales mix, increased returns
and, an increase in the inventory valuation reserve to reflect the estimated
market value of the Naturistics inventory pursuant to the Company's plan to
reduce excess and slow moving inventory of this brand.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
were $145.0 million, or 54.2% of net sales in 1999 compared to $136.2 million or
49.5% of net sales in 1998. The increase as a
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percentage of net sales is primarily attributable to higher promotional costs,
increases in information technology expenses and the impact of product returns
on net sales.
GAINS ON SALES OF FACILITY AND LAND. In February 1999, the Company sold a
warehouse facility in Plainview, New York for $2.7 million, resulting in a gain
before income taxes of $1.7 million. At December 31, 1998, this facility was
included in property, plant and equipment and was accounted for as a held for
sale asset. On December 8, 1999, the Company sold a parcel of land in
Farmingdale, New York for $2.3 million, resulting in a gain before income taxes
of $1.3 million.
NET INTEREST EXPENSE. Net interest expense was $5.9 million in 1999
compared to $4.4 million in 1998. The increase is due to higher average
borrowings in 1999 as compared to 1998 due principally to the financing of the
acquisition of intellectual property rights and other assets of the CornSilk
brand of facial make-up in May 1998, higher working capital requirements and,
increased borrowing rates.
INCOME TAXES. The Company recorded a tax benefit of $1.5 million in 1999
based on an estimated 27% tax benefit for the year ended December 31, 1999,
compared to an effective annual tax rate of 41% in 1998.
NET EARNINGS (LOSS). As a result of the above, the Company incurred a net
loss of $4.0 million in 1999 compared to net earnings of $11.1 million or 4.0%
of net sales in 1998.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
NET SALES. Net sales were $274.9 million and $263.0 million for 1998 and
1997, respectively, an increase of $11.9 million or 4.5%. Cosmetic net sales
were $213.7 million and $207.3 million for 1998 and 1997, respectively, an
increase of $6.4 million or 3.1%. The increase in cosmetic net sales resulted
primarily from volume growth in existing products and new product introductions
in the Sally Hansen, LaCross and CornSilk brands. The cosmetic net sales
increase in 1998 was partially offset in the fourth quarter by incremental sales
returns of approximately $4.0 million associated with the acceleration of a
program to reposition and repackage the Naturistics cosmetics line.
Pharmaceutical net sales were $61.2 million and $55.8 million for 1998 and
1997, respectively, an increase of $5.4 million or 9.5%. The increase in
pharmaceutical net sales resulted primarily from volume growth in the Orajel
family of products and the Pronto line of pediculicides.
COST OF SALES. Cost of sales were $115.8 million, or 42.1% of net sales in
1998, compared to $101.1 million, or 38.4% of net sales in 1997, an increase of
$14.7 million, or 14.6%. The increase in cost of sales, as a percentage of net
sales, is primarily due to higher product returns, inventory write-downs of the
Naturistics cosmetics and bath & body care line of $1.5 million in the fourth
quarter of 1998, higher manufacturing costs and a change in the mix of business
compared to prior year.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
were $136.2 million in 1998 compared to $136.7 million in 1997, a decrease of
$.5 million. The increase in net sales together with a reduction in advertising
and promotional expenditures are the primary reasons for the decrease in selling
and administrative expenses as a percentage of net sales to 49.5% in 1998 from
52.0% in 1997.
OPERATING INCOME. As a result of the above, operating income decreased by
9.3% to $22.9 million or 8.3% of net sales in 1998 compared to $25.3 million or
9.6% of net sales in 1997.
NET INTEREST EXPENSE. Net interest expense was $4.4 million in 1998
compared to $3.4 million in 1997. Interest expense increased $.7 million to
$4.7 million in 1998 from $4.0 million in 1997 due primarily to borrowings
related to the acquisition of intellectual property rights and other assets of
the Corn Silk brand
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of facial make-up in May 1998 and to imputed interest (non-cash expense) related
to the purchase of land and buildings in North Carolina in May 1997.
INCOME TAXES. The Company's effective tax rate was 40% in both 1998 and
1997. In the fourth quarter of 1998, the Company revised its 1998 projected
effective tax rate from 41% to 40% resulting in an additional tax benefit of $.2
million.
NET EARNINGS. As a result of the above, net earnings decreased to
$11.1 million or 4.0% of net sales compared to $13.1 million or 5.0% of net
sales in 1997.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, the Company had cash and cash equivalents of
$3.6 million as compared to $3.7 million at December 31, 1998.
Net cash used in operating activities was $8.0 million and $2.5 million for
the years ended December 31, 1999 and December 31, 1998, respectively. Net cash
provided by operating activities was $17.9 million for the year ended 1997. The
increase of $5.5 million in net cash used in operating activities for 1999
compared to 1998 resulted primarily from lower earnings, decreases in accounts
payable and accrued liabilities, partially offset by decreased cash used in
accounts receivable and inventories.
Cash of $4.6 million was provided by the sales of land and a facility in
1999. Cash used for property, plant and equipment additions was $7.3 million,
$7.2 million and $10.8 million for 1999, 1998 and 1997, respectively. Capital
expenditures for 1999 and 1998 were primarily for manufacturing machinery and
equipment. Cash used for capital expenditures in 1997 included $2.0 million of
equipment for the Company's new distribution facility. In 1997, the Company
exchanged a non-interest bearing purchase money promissory note discounted to
$4.4 million for land and buildings in North Carolina to be used for a new
distribution facility.
Net cash provided by (used in) financing activities was $10.5 million,
$10.5 million, and ($6.6 million) for 1999, 1998 and 1997, respectively. In 1999
and 1998, cash was provided by proceeds received under the revolving credit
agreement with a bank and short-term borrowings under lines of credit with
banks. Cash was used primarily for acquisition of shares of the Company's common
stock aggregating $4.5 million, $7.3 million, and $5.9 million in 1999, 1998 and
1997, respectively, repayments of short-term borrowings of $3.5 million and
$15.7 million in 1999 and 1998, respectively, and dividend payments of
$1.0 million, $1.0 million and $0.7 million in 1999, 1998 and 1997,
respectively. As of December 31, 1999, the Company was authorized to purchase up
to 211,255 additional shares based on the existing Board authorization. At
December 31, 1999, no amounts were available for cash dividends or the
repurchase of treasury stock.
On February 25, 2000, the senior notes were amended and restated primarily
to reduce the $8,000,000 principal repayments due on May 31, 2001 and May 31,
2002. The amended notes require annual principal repayments of $4,000,000 on
May 31, 2001 and May 31, 2002; $8,000,000 on May 31, 2003 and May 31, 2004 and
the balance on May 31, 2005. The terms of the amended agreement include
covenants, which provide among other things, for the maintenance of financial
covenants and ratios relating to consolidated net worth, restrictions on cash
dividends, the purchase of treasury stock, and certain other expenditures.
On February 25, 2000, the Company amended the revolving credit agreement
entered into in December 1998. The amendment increased the facility to
$47,500,000 from $20,000,000 and extended the expiration to February 25, 2003.
In addition, the notes under lines of credit were paid and cancelled as part of
this amendment. After giving effect to the refinancing of the lines of credit
this amended revolving credit agreement increased the Company's borrowing
capacity by $10,000,000. Under the terms of the agreement, interest rates on
borrowings are based on, at the Company's option, LIBOR, prime or federal funds
rates. The terms of the agreement include a commitment fee based on unutilized
amounts, an annual agency fee and covenants which provide among other things,
for the maintenance of financial covenants and ratios relating to consolidated
net worth, restrictions on cash dividends, the purchase of treasury stock,
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and certain other expenditures. The revolving credit facility, as amended, is
collateralized by the Company's trademarks and accounts receivable until such
time as the borrowings under the revolving credit agreement are less than
$22,500,000 and a certain financial ratio is achieved. The senior note holder
and the lenders under the revolving credit agreement have entered into an
intercreditor agreement which includes the pro rata sharing of such collateral.
No compensating balances are required.
Under the Company's purchase money promissory note for its property in North
Carolina, the final payment of $3,850,000 is due on May 15, 2000. The Company
has received a commitment to refinance this note through a mortgage on land and
buildings and anticipates completing the refinancing prior to May 15, 2000.
On February 22, 2000, the Company purchased a 68,000 square foot
manufacturing, warehousing and office facility in Barrie, Ontario for
$1,828,000. The purchase was financed with a combination of a mortgage bridge
loan and a five year mortgage. The existing 39,000 square foot manufacturing,
warehousing and office facility in Barrie, Ontario, was included in property,
plant and equipment as of December 31, 1999, with a net book value of
approximately $458,000 and is currently in contract for sale with estimated
proceeds of $790,000. Approximately $631,000 of the proceeds will be used to
satisfy the mortgage bridge loan.
Estimated cash flow from operations and available working capital lines of
credit along with leasing transactions, are expected to be adequate to fund the
Company's anticipated working capital and property, plant and equipment
requirements in the foreseeable future.
The Company believes that general inflation has had no significant impact on
its earnings (loss) from operations during the last three years.
YEAR 2000 CONVERSION
The Company addressed the issue of computers potentially misinterpreting
dates after the turn of the century. If not corrected, computer applications
could have failed or created erroneous results. A committee specifically created
to resolve Year 2000 issues met regularly. It was led by a member of the Board
of Directors and comprised of senior corporate executives, a cross section of
key departmental personnel and an outside expert.
The Company's efforts to identify and address issues relating to its
readiness for Year 2000 included four phases: Identification, Assessment,
Remediation and Testing. The identification phase consisted of an inventory of
computer-based systems, software, third party programs and hardware including
embedded microprocessors. The assessment phase focused on the identification of
those applications most critical to the business including examination of all
coding used for date calculations. The remediation phase consisted of systems
changes by replacement, modification or upgrade. The testing phase included unit
tests of each application followed by fully integrated systems tests with dates
rolled forward on test machines to check performance and computational accuracy.
All significant suppliers, customers, financial institutions and any other
organization doing business electronically with the Company were contacted in
order to identify potential areas of concern. All phases of the project are 100%
complete.
The Company estimates that remediation costs of approximately $1,000,000
were incurred for replacement systems, discovery tools and expenses necessary to
achieve Year 2000 compliance.
Based upon the Company's review as indicated above and the results of
confirmatory testing after the changeover to 2000, no problems related to Y2K
have resulted which have any material impact on the Company's results of
operations, liquidity or financial position. The Company will continue to
monitor any Y2K issues for the remainder of 2000.
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FORWARD-LOOKING STATEMENTS
Management's Discussion and Analysis of the Results of Operations and
Financial Condition and other sections of this Annual Report include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities and Exchange Act of 1934 (the
"Exchange Act"). All statements other than statements of historical information
provided herein are forward-looking statements and may contain information about
financial results, economic conditions, trends and known uncertainties. The
forward-looking statements contained herein are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
reflected in the forward-looking statements. Factors that might cause such a
difference include, but are not limited to, delays in introducing new products
or failure of consumers to accept new products, actions by competitors which may
result in mergers, technology improvement or new product introductions, the
dependence on certain national chain drug stores, food stores and mass
merchandiser relationships due to the concentration of sales generated by such
chains, changes in fashion oriented color cosmetic trends, and trends in the
general economy.
Readers are cautioned not to place undo reliance on these forward-looking
statements, which reflect management's analysis, judgement, belief or
expectation only as of the date hereof. The Company undertakes no obligation to
publicly revise these forward-looking statements to reflect events or
circumstances that arise after the date hereof. In addition to the disclosure
contained herein, readers should carefully review any disclosure of risks and
uncertainties contained in other documents the Company files or has filed from
time to time with the Securities and Exchange Commission pursuant to the
Exchange Act.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No, 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 133) as amended by SFAS 137, which is effective for
quarters of fiscal years beginning after June 15, 2000. SFAS No. 133 provides
guidance for accounting for all derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
The Company does not believe that the implementation of SFAS No. 133 will have a
significant impact on its financial position or results of operations.
ITEM 7A--MARKET RISK SENSITIVE INSTRUMENTS
The market risk inherent in the Company's market risk sensitive instruments
is the potential loss arising from adverse changes in interest rates and foreign
currency exchange rates.
INTEREST RATE RISK
The Company's borrowings at December 31, 1999 under the revolving credit
agreement and lines of credit expose earnings to changes in short-term interest
rates since interest rates on the underlying obligations are either variable or
fixed for such a short period of time as to effectively become variable. The
Company believes that a hypothetical 10% change in interest rates amounts to
approximately $0.3 million and could have a material effect on earnings.
FOREIGN EXCHANGE RISK
The Company is subject to risk from changes in the foreign exchange rate for
its foreign subsidiaries which use a foreign currency as their functional
currency and is translated into U.S. dollars. Such changes result in cumulative
translation adjustments which are included in shareholders' equity and in the
determination of other comprehensive income. Intercompany transactions between
the Company and its foreign subsidiaries are recorded by the foreign
subsidiaries in their functional currency. The potential loss
10
<PAGE>
resulting from a hypothetical 10% adverse change in the quoted foreign currency
exchange rate amounts to approximately $0.5 million. Actual results may differ.
ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Consolidated Financial Statements and Schedule included separately
herein.
ITEM 9--CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
(a) The information required with respect to Directors is set forth under the
captions "Election of Directors--Information Concerning Directors" and
"Security Ownership of Certain Beneficial Owners--Section 16 (a) Beneficial
Ownership Reporting Compliance" in the Company's definitive Proxy Statement
for the 2000 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A and incorporated herein by reference.
(b) The executive officers of the Company, the positions held by them, their
ages and the years in which they began to serve in the position or office
held as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
YEAR IN
WHICH BEGAN
TO SERVE IN
POSITION OR AS
NAME POSITION AGE EXECUTIVE OFFICER
- ---- -------- -------- -----------------
<S> <C> <C> <C>
Dan K. Wassong....................... Chairman, President and Chief Executive 69 1969
Officer, Director
Charles J. Hinkaty................... Vice President, President of Del 50 1985
Pharmaceuticals, Inc., Director
Enzo J. Vialardi..................... Executive Vice President, Chief Financial 63 1998
Officer
William H. McMenemy.................. Executive Vice President of Marketing, 53 1980
Cosmetics Division, North America
Harvey P. Alstodt.................... Executive Vice President of Sales, 60 1988
Cosmetics Division, North America
James F. Lawrence.................... Group Vice President--Operations 65 1993
Gene L. Wexler....................... Vice President, General Counsel and 44 1999
Secretary
Thomas Redder........................ Vice President--Chief Information Officer 52 1996
</TABLE>
There is no arrangement or understanding between any executive officer and
any other person pursuant to which he was selected as an officer. The executive
officers of the Company are elected annually at the meeting of the Board of
Directors immediately following the Annual Meeting of Stockholders. No family
relationship exists among any of the executive officers and directors of the
Company.
11
<PAGE>
During the past five years, the principal occupation and employment of each
of the Company's executive officers has been his service in the respective
position shown in the above table, except as follows:
Enzo J. Vialardi has been Executive Vice President and Chief Financial
Officer of the Company since August 1998. Prior to that time, he served as an
independent consultant from January 1995 to August 1998.
Gene L. Wexler has been Vice President, General Counsel and Secretary of the
Company since September 1999. From January 1994 through March 1999, he was Vice
President, General Counsel and Assistant Secretary at Genovese Drug
Stores, Inc.
Thomas Redder has served as Vice President-Chief Information Officer of the
Company since February 1996. From 1986 through 1995, he was employed by Newsday
as Vice President, Information Systems
ITEM 11--EXECUTIVE COMPENSATION
The information required is set forth under the caption "Executive
Compensation" in the Company's definitive Proxy Statement for the 2000 Annual
Meeting of Stockholders to be filed pursuant to Regulation 14A and is
incorporated herein by reference.
ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required is set forth under the captions "Securities
Ownership of Certain Beneficial Owners" and "Election of Directors--Information
Concerning Directors" in the Company's definitive Proxy Statement for the 2000
Annual Meeting of Stockholders to be filed pursuant to Regulation 14A and is
incorporated herein by reference.
ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required is set forth under the caption "Executive
Compensation" in the Company's definitive Proxy Statement for the 2000 Annual
Meeting of Stockholders to be filed pursuant to Regulation 14A and is
incorporated herein by reference.
PART IV
ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a) Documents filed as part of this report:
(1) and (2) See Consolidated Financial Statements and Schedule included
herein.
(3) Exhibit Index
b) There were no reports on Form 8-K filed during the quarter ended
December 31, 1999.
12
<PAGE>
<TABLE>
<CAPTION>
ITEM TITLE EXHIBIT NO. DESCRIPTION
- ---------- ----------- -----------
<S> <C> <C>
Articles of Incorporation and 3.1 (a) Restated Certificate of Incorporation as filed with
By-Laws the Delaware Secretary of State on March 29, 1996.
3.2 (b) Certificate of Amendment filed with the Delaware
Secretary of State on June 4, 1996.
3.3 Certificate of Amendment of the Restated Certificate
of Incorporation filed with the Delaware Secretary of
State on June 3, 1998.
3.4 (a) By-Laws as amended through December 14, 1995.
Material Contracts 10.1 (c) Employee Pension Plan, effective January 1, 1989
(amended and restated).
10.2 (d) Employee's Stock Ownership Plan, effective January 1,
1989.
10.3 (e) Amendment No. 1 to Employee's Stock Ownership Plan.
10.4 (c) Amendment No. 2 to Employee's Stock Ownership Plan.
10.5 (c) 401(k) Plan effective January 1, 1989 (amended and
restated).
10.6 Amendment No. 1 to 401(k) Plan adopted December 21,
1995.
10.7 Amendment No. 2 to 401(k) Plan adopted March 16, 2000.
10.8 (c) Supplemental Executive Retirement Plan (amended and
restated).
10.9 (i) Amendment No. 1 effective January 1, 1997 to
Supplemental Executive Retirement Plan.
10.10(j) Amendment No. 3 to Supplemental Executive Retirement
Plan.
10.11(e) 1984 Stock Option Plan, as amended to date.
10.12(f) 1994 Stock Plan, as amended as of May 27, 1999.
10.13(f) Annual Incentive Plan, as amended as of May 27, 1999.
10.14 Amended and Restated Employment Agreement dated as of
July 1, 1999 between the Registrant and Dan K.
Wassong.
10.15(e) Loan Agreement with Dan K. Wassong, dated as of
August 22, 1984 and related promissory notes.
10.16(c) Loan Agreement with Dan K. Wassong, dated as of April
9, 1988.
10.17(g) Loan Agreement with Dan K. Wassong, dated as of
November 14, 1990.
10.18(e) Employment Agreement with Charles J. Hinkaty, as
amended.
10.19(i) Amendment to Employment Agreement with Charles J.
Hinkaty, dated April 22, 1996.
10.20(e) Employment Agreement with Harvey P. Alstodt, as
amended.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
ITEM TITLE EXHIBIT NO. DESCRIPTION
- ---------- ----------- -----------
<S> <C> <C>
10.21(i) Amendment to Employment Agreement with Harvey P.
Alstodt, dated April 22, 1996.
10.22 Amendment to Employment Agreement with Harvey P.
Alstodt dated December 30, 1997.
10.23(e) Employment Agreement with William H. McMenemy, as
amended.
10.24(i) Amendment to Employment Agreement with William H.
McMenemy, dated April 22, 1996.
10.25(j) Employment Agreement with Enzo J. Vialardi, dated
December 30, 1998.
10.26(j) Employment Agreement with James Lawrence, dated March
1993.
10.27(j) Amendment to Employment Agreement with James Lawrence,
dated July 12, 1995.
10.28(j) Second Amendment and Employment Agreement with James
Lawrence, dated March 31, 1998.
10.29(e) Life Insurance Agreement with Robert H. Haines, as
trustee, dated as of February 18, 1993.
10.30(h) Lease between Registrant and Coliseum Towers
Associates.
10.31(h) Purchase Money Promissory Note with Carver Boat
Corporation.
10.32 Amended and Restated Loan Agreement dated as of
February 25, 2000 among the Registrant, as borrower,
Del Pharmaceuticals, Inc. ("DPI"), Parfums
Schiaperlli, Inc. ("Parfums"), Royce & Rader, Inc.
("Royce") and 565 Broad Hollow Realty Corp. ("565"),
as guarantors, The Chase Manhattan Bank, as agent for
the lenders, and The Chase Manhattan Bank and European
American Bank, as lenders.
10.33 Form of Trademark Collateral Assignment and Security
Agreement dated as of February 25, 2000, between the
Registrant and The Chase Manhattan Bank, as Collateral
Agent. Similar agreements were executed by DPI and
Parfums.
10.34 Form of Security Agreement dated as of February 25,
2000 between the Registrant and The Chase Manhattan
Bank, as Collateral Agent. Similar agreements were
executed by DPI, Parfums, Royce and 565.
10.35 Form of General Guaranty dated as of February 25, 2000
by DPI in favor of The Chase Manhattan Bank, as
Collateral Agent. Similar agreements were executed by
Parfums, Royce and 565.
10.36 Amended and Restated Loan Agreement dated as of
February 25, 2000 among the Registrant, DPI, Parfums,
Royce, 565 and Jackson National Life Insurance
Company.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
ITEM TITLE EXHIBIT NO. DESCRIPTION
- ---------- ----------- -----------
<S> <C> <C>
Subsidiaries of Registrant 21.1 List of Subsidiaries.
Consents of Experts and Counsel 23.1 Consent of KPMG LLP dated March 27, 2000.
27 Financial Data Schedule
</TABLE>
- ------------------------
(a) These exhibits were filed as exhibits to the Registrant's Form 10-K for the
year ended December 31, 1995. The exhibit numbers in such Form 10-K are as
follows: Restated Certificate, Exhibit 1; and By-Laws, Exhibit 2.
(b) This exhibit was filed as an exhibit to the Registrant's Form 10-Q for the
quarter ended June 30, 1996. The exhibit number in such Form 10-Q is
Exhibit 1.
(c) These exhibits were filed as exhibits to the Registrant's Form 10-K for the
year ended December 31, 1994. The exhibit numbers in such Form 10-K are as
follows: Employee Pension Plan, Exhibit 2; Amendment No. 2 to Employee's
Stock Ownership Plan, Exhibit 3; Loan Agreement with Dan K. Wassong,
Exhibit 4; 401(k) Plan, Exhibit 5; Supplemental Executive Retirement Plan,
Exhibit 6.
(d) This exhibit was filed as an exhibit to the Registrant's Form 10-K for the
year ended December 31, 1989. The exhibit number in such Form 10-K is
Exhibit 2.
(e) These exhibits were filed as exhibits to the Registrant's Form 10-K for the
year ended December 31, 1993. The exhibit numbers in such Form 10-K are as
follows: Amendment No. 1 to Employee's Stock Ownership Plan, Exhibit 2; 1984
Stock Option Plan, Exhibit 3; Loan Agreement with Dan K. Wassong dated
August 22, 1984, Exhibit 4; Employment Agreement with Charles J. Hinkaty,
Exhibit 5; Employment Agreement with Harvey P. Alstodt, Exhibit 6;
Employment Agreement with William H. McMenemy, Exhibit 7; Life Insurance
Agreement with Robert H. Haines, as trustee, Exhibit 9.
(f) These exhibits were filed as exhibits to the Registrant's Definitive Proxy
Statement dated May 27, 1999, relating to the Registrant's 1999 Annual
Meeting of Stockholders. The exhibit numbers in such Proxy Statement are as
follows: 1994 Stock Plan, as amended and restated, Exhibit A; Annual
Incentive Plan, as amended and restated, Exhibit B.
(g) This exhibit was filed on April 1, 1991, as an exhibit to the Registrant's
Form 10-K for the year ended December 31, 1990. The exhibit number in such
Form 10-K is Exhibit 2.
(h) These exhibits were filed as exhibits to the Registrant's Form 10-Q for the
quarter ended September 30, 1997. The exhibit numbers in such Form 10-Q are
as follows: Lease between Registrant and Coliseum Towers Associates,
Exhibit 10.1; Purchase Money Promissory Note with Carver Boat Corporation,
Exhibit 10.2.
(i) These exhibits were filed as exhibits to the Registrant's Form 10-K for the
year ended December 31, 1996, as follows: 10.9 above was filed as Exhibit 1
to the 1996 10-K; 10.19 above was filed as Exhibit 2 to the 1996 10-K; 10.21
above was filed as Exhibit 3 to the 1996 10-K; and 10.24 above was filed as
Exhibit 4 to the 1996 10-K.
(j) These exhibits were filed as exhibits to the Registrant's Form 10-K for the
year ended December 31, 1998, as follows: 10.10 above was filed as
Exhibit 10.32 to the 1998 10-K; 10.25 above as filed as Exhibit 10.29 to the
1998 10-K; 10.26 above was filed as Exhibit 10.30 to the 1998 10-K; and
10.27 above was filed as Exhibit 10.31 to the 1998 10-K.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused the report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
DEL LABORATORIES, INC.
(REGISTRANT)
By /s/ DAN K. WASSONG
----------------------------------------------
Dan K. Wassong
CHAIRMAN, PRESIDENT & CHIEF EXECUTIVE OFFICER
</TABLE>
March 23, 2000
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C> <C>
Chairman, President & Chief
By /s/ DAN K. WASSONG Executive Officer
-------------------------------------- (Principal Executive March 23, 2000
Dan K. Wassong Officer)
By /s/ CHARLES HINKATY
-------------------------------------- Director, Vice President March 23, 2000
Charles Hinkaty
By /s/ MARTIN E. REVSON
-------------------------------------- Director March 23, 2000
Martin E. Revson
By /s/ JACK FUTTERMAN
-------------------------------------- Director March 23, 2000
Jack Futterman
By /s/ ROBERT A. KAVESH
-------------------------------------- Director March 23, 2000
Robert A. Kavesh
By /s/ STEVEN KOTLER
-------------------------------------- Director March 23, 2000
Steven Kotler
By /s/ GEORGE LINDEMANN
-------------------------------------- Director March 23, 2000
George Lindemann
By /s/ MARCELLA MAXWELL
-------------------------------------- Director March 23, 2000
Marcella Maxwell
By /s/ ENZO J. VIALARDI
-------------------------------------- Executive Vice President, March 23, 2000
Enzo J. Vialardi Chief Financial Officer
</TABLE>
16
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<S> <C>
Independent Auditors' Report................................ F-2
Financial Statements:
Consolidated Balance Sheets as of December 31, 1999 and
1998.................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997........................ F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997........................ F-5
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1999, 1998 and 1997............ F-6
Notes to Consolidated Financial Statements................ F-7
Schedule:
II Valuation and Qualifying Accounts for the years ended
December 31, 1999, 1998 and 1997........................ F-27
</TABLE>
All other schedules are omitted as the required information is inapplicable
or the information is presented in the consolidated financial statements or
related notes.
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Del Laboratories, Inc.:
We have audited the accompanying consolidated balance sheets of Del
Laboratories, Inc. and subsidiaries (the Company) as of December 31, 1999 and
1998, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1999. In connection with our audits of the consolidated financial
statements, we also have audited the financial statement schedule as listed in
the accompanying index. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Del
Laboratories, Inc. and subsidiaries at December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles. Also in our opinion, the related 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/ KPMG LLP
Melville, New York
March 6, 2000
F-2
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
- ------ ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 3,585,294 $ 3,730,557
Accounts receivable--less allowance for doubtful accounts
of $1,300,000 in 1999 and 1998.......................... 45,941,959 47,115,818
Income taxes receivable................................... 1,962,448 --
Inventories............................................... 59,155,209 55,619,832
Deferred income taxes, net................................ 5,272,000 3,649,565
Prepaid expenses and other current assets................. 2,455,155 2,975,378
------------ ------------
Total current assets................................ 118,372,065 113,091,150
------------ ------------
Property, plant and equipment, at cost...................... 57,722,795 57,178,427
Less accumulated depreciation and amortization.............. (20,532,169) (19,263,190)
------------ ------------
Net property, plant and equipment......................... 37,190,626 37,915,237
Intangibles arising from acquisitions, net.................. 17,100,974 18,449,664
Other assets................................................ 7,896,911 8,017,854
------------ ------------
Total assets........................................ $180,560,576 $177,473,905
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------------------
Current liabilities:
Notes payable to bank..................................... $ -- $ 3,500,000
Current portion of long-term debt......................... 3,888,461 485,610
Accounts payable.......................................... 27,174,668 35,781,224
Accrued liabilities....................................... 12,836,531 10,023,943
Income taxes payable...................................... -- 572,109
------------ ------------
Total current liabilities........................... 43,899,660 50,362,886
Long-term pension liability, less current portion........... 9,051,757 7,895,044
Deferred income taxes, net.................................. 986,000 718,500
Long-term debt, less current portion........................ 75,750,000 59,400,401
------------ ------------
Total liabilities................................... 129,687,417 118,376,831
------------ ------------
Shareholders' equity:
Preferred stock $.01 par value, authorized 1,000,000
shares; no shares issued................................ -- --
Common stock $1 par value, authorized 20,000,000 shares;
issued 10,000,000 shares................................ 10,000,000 10,000,000
Additional paid-in capital................................ 126,899 1,850,617
Accumulated other comprehensive loss...................... (1,029,106) (1,465,750)
Retained earnings......................................... 75,136,416 81,203,670
------------ ------------
84,234,209 91,588,537
Less: Treasury stock at cost, 2,455,420 shares in 1999 and
2,340,639 shares in 1998................................ (32,119,800) (31,097,213)
Receivables for stock options exercised................... (1,241,250) (1,394,250)
------------ ------------
Total shareholders' equity.......................... 50,873,159 59,097,074
------------ ------------
Total liabilities and shareholders' equity.......... $180,560,576 $177,473,905
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net sales.......................................... $267,346,457 $274,861,637 $263,010,452
Cost of goods sold................................. 124,920,810 115,809,582 101,089,472
Selling and administrative expenses................ 145,050,663 136,158,135 136,668,570
------------ ------------ ------------
Operating income (loss).......................... (2,625,016) 22,893,920 25,252,410
Other income (expense):
Gains on sales of facility and land.............. 3,042,817 -- --
Interest expense................................. (5,961,276) (4,655,016) (3,998,057)
Interest income.................................. 60,456 222,040 623,287
------------ ------------ ------------
Earnings (loss) before income taxes................ (5,483,019) 18,460,944 21,877,640
Income taxes expense (benefit)..................... (1,481,000) 7,384,000 8,751,000
------------ ------------ ------------
Net earnings (loss).............................. (4,002,019) 11,076,944 13,126,640
============ ============ ============
Earnings (loss) per common share:
Basic............................................ $ (0.53) $ 1.43 $ 1.69
============ ============ ============
Diluted.......................................... $ (0.53) $ 1.34 $ 1.56
============ ============ ============
Weighted average common shares outstanding:
Basic............................................ 7,530,000 7,733,000 7,745,000
============ ============ ============
Diluted.......................................... 7,530,000 8,288,000 8,415,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)................................ $(4,002,019) $ 11,076,944 $ 13,126,640
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization.................... 7,353,450 6,393,597 5,819,437
Deferred income taxes............................ (1,354,935) (2,062,000) 269,125
Provision for doubtful accounts.................. 112,410 174,000 65,000
Gains on sales of land and facility.............. (3,042,817) -- --
Other non-cash operating items................... 679,248 (131,975) 67,679
Changes in operating assets and liabilities:
Accounts receivable............................ 953,608 (16,581,735) 8,511
Inventories.................................... (3,648,871) (6,718,080) (13,899,407)
Prepaid expenses and other current assets...... 520,223 (1,117,010) (54,611)
Other assets and other liabilities............. 1,338,444 1,326,292 (1,992,349)
Accounts payable............................... (7,639,603) 6,966,581 11,109,182
Accrued liabilities............................ 2,812,588 (3,943,516) (927,171)
Income taxes, net.............................. (2,033,397) 2,088,944 4,259,815
----------- ------------ ------------
Net cash provided by (used in) operating
activities................................. (7,951,671) (2,527,958) 17,851,851
----------- ------------ ------------
Cash flows used in investing activities:
Proceeds from sales of land and facility........... 4,606,460 -- --
Additions to intangibles and other assets.......... (40,138) (11,964,598) --
Property, plant and equipment additions............ (7,288,175) (7,223,537) (10,827,246)
----------- ------------ ------------
Net cash used in investing activities........ (2,721,853) (19,188,135) (10,827,246)
----------- ------------ ------------
Cash flows provided by (used in) financing
activities:
Borrowings under long-term debt.................... 4,250,000 15,750,000 --
Principal payments under long-term debt............ (433,956) (487,076) (219,572)
Borrowings under short-term lines of credit........ 15,750,000 19,250,000 --
Repayments of short-term lines of credit........... (3,500,000) (15,750,000) --
Decrease in receivables for stock options
exercised........................................ 13,000 13,000 15,672
Exercise of stock options.......................... -- 38,203 264,507
Acquisition of treasury stock...................... (4,538,799) (7,323,295) (5,875,068)
Dividends paid..................................... (1,037,618) (996,911) (740,308)
Other financing activities......................... -- (4,434) --
----------- ------------ ------------
Net cash provided by (used in) financing
activities................................. 10,502,627 10,489,487 (6,554,769)
----------- ------------ ------------
Effect of exchange rate changes on cash.............. 25,634 (21,453) (7,167)
----------- ------------ ------------
Net increase (decrease) in cash and cash
equivalents........................................ (145,263) (11,248,059) 462,669
Cash and cash equivalents at beginning of year....... 3,730,557 14,978,616 14,515,947
----------- ------------ ------------
Cash and cash equivalents at end of period........... $ 3,585,294 $ 3,730,557 $ 14,978,616
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
ADDITIONAL ACCUMULATED OTHER RECEIVABLES FOR
COMMON PAID-IN COMPREHENSIVE RETAINED TREASURY STOCK OPTIONS
STOCK CAPITAL INCOME EARNINGS STOCK EXERCISED
----------- ----------- ----------------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996...... $ 8,784,514 $ 4,321,131 $ (547,028) $61,353,458 $(27,333,714) $(1,736,320)
Issuance of treasury stock upon
exercise of stock options
(354,586 shares)................. -- (592,898) -- -- 3,282,807 --
Purchase of treasury stock (282,171
shares).......................... -- -- -- -- (8,370,111) --
Income tax benefit arising from
stock options exercised.......... -- 3,118,206 -- -- -- --
Repayment of receivables........... -- -- -- -- -- 189,070
Dividends declared ($.14 per
share)........................... -- -- -- (793,915) -- --
Four-for-three stock split
(note 1(k))...................... 1,215,486 (6,147,439) -- (2,498,406) 7,430,359 --
Net earnings....................... -- -- -- 13,126,640 -- --
Foreign currency translation
adjustment....................... -- -- (272,118) -- -- --
Total comprehensive income....... -- -- -- -- -- --
----------- ----------- ----------- ----------- ------------ -----------
Balances at December 31, 1997...... 10,000,000 699,000 (819,146) 71,187,777 (24,990,659) (1,547,250)
Issuance of treasury stock upon
exercise of stock options
(247,012 shares)................. -- (1,178,537) -- -- 2,686,943 --
Purchase of treasury stock (362,027
shares).......................... -- -- -- (8,793,497) --
Income tax benefit arising from
stock options exercised.......... -- 2,334,588 -- -- -- --
Repayment of receivables........... -- -- -- -- -- 153,000
Dividends declared ($.14 per
share)........................... -- -- -- (1,061,051) -- --
Four-for-three stock split--cash in
lieu of fractional shares........ -- (4,434) -- -- -- --
Net earnings....................... -- -- -- 11,076,944 -- --
Foreign currency translation
adjustment....................... -- -- (540,742) -- -- --
Minimum pension liability
adjustment, net.................. -- -- (105,862) -- -- --
Total comprehensive income....... -- -- -- -- -- --
----------- ----------- ----------- ----------- ------------ -----------
Balances at December 31, 1998...... 10,000,000 1,850,617 (1,465,750) 81,203,670 (31,097,213) (1,394,250)
Issuance of treasury stock upon
exercise of stock options
(209,130 shares)................. -- (1,582,842) -- -- 2,608,140 --
Purchase of treasury stock (323,552
shares).......................... -- -- -- -- (5,564,097) --
Income tax benefit arising from
stock options exercised.......... -- 501,160 -- -- -- --
Repayment of receivables........... -- -- -- -- -- 153,000
Dividends declared ($.105 per
share)........................... -- -- -- (773,901) -- --
Stock dividend declared............ -- (642,036) -- (1,291,334) 1,933,370 --
Net loss........................... -- -- -- (4,002,019) -- --
Foreign currency translation
adjustment....................... -- -- 375,856 -- -- --
Minimum pension liability
adjustment, net.................. -- -- 60,788 -- -- --
Total comprehensive income....... -- -- -- -- -- --
----------- ----------- ----------- ----------- ------------ -----------
Balances at December 31, 1999...... $10,000,000 $ 126,899 $(1,029,106) $75,136,416 $(32,119,800) $(1,241,250)
=========== =========== =========== =========== ============ ===========
<CAPTION>
SHAREHOLDERS'
EQUITY
-------------
<S> <C>
Balances at December 31, 1996...... $44,842,041
Issuance of treasury stock upon
exercise of stock options
(354,586 shares)................. 2,689,909
Purchase of treasury stock (282,171
shares).......................... (8,370,111)
Income tax benefit arising from
stock options exercised.......... 3,118,206
Repayment of receivables........... 189,070
Dividends declared ($.14 per
share)........................... (793,915)
Four-for-three stock split
(note 1(k))...................... --
Net earnings....................... --
Foreign currency translation
adjustment....................... --
Total comprehensive income....... 12,854,522
-----------
Balances at December 31, 1997...... 54,529,722
Issuance of treasury stock upon
exercise of stock options
(247,012 shares)................. 1,508,406
Purchase of treasury stock (362,027
shares).......................... (8,793,497)
Income tax benefit arising from
stock options exercised.......... 2,334,588
Repayment of receivables........... 153,000
Dividends declared ($.14 per
share)........................... (1,061,051)
Four-for-three stock split--cash in
lieu of fractional shares........ (4,434)
Net earnings....................... --
Foreign currency translation
adjustment....................... --
Minimum pension liability
adjustment, net.................. --
Total comprehensive income....... 10,430,340
-----------
Balances at December 31, 1998...... 59,097,074
Issuance of treasury stock upon
exercise of stock options
(209,130 shares)................. 1,025,298
Purchase of treasury stock (323,552
shares).......................... (5,564,097)
Income tax benefit arising from
stock options exercised.......... 501,160
Repayment of receivables........... 153,000
Dividends declared ($.105 per
share)........................... (773,901)
Stock dividend declared............ --
Net loss........................... --
Foreign currency translation
adjustment....................... --
Minimum pension liability
adjustment, net.................. --
Total comprehensive income....... (3,565,375)
-----------
Balances at December 31, 1999...... $50,873,159
===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF ACCOUNTING POLICIES
(A) DESCRIPTION OF BUSINESS
Del Laboratories, Inc. and subsidiaries (the Company) is a manufacturer and
distributor of cosmetics and proprietary pharmaceuticals. The principal products
in the cosmetics segment are nail care, nail color, color cosmetics, beauty
implements, bleaches and depilatories, personal care products and other related
cosmetic items. The principal products in the pharmaceutical segment are of a
proprietary nature and range from oral analgesics to acne treatment products and
first aid products.
(B) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
all wholly-owned domestic and foreign subsidiaries. The net assets and results
of foreign operations are not significant to the consolidated financial
statements. The accounts of foreign subsidiaries are translated in accordance
with the provisions of Statement of Financial Accounting Standards (SFAS)
No. 52, "Foreign Currency Translation." As such, balance sheet accounts are
translated at the exchange rate as of December 31 of each year and income
statement accounts are translated at average exchange rates during the period.
The resulting translation adjustments are recorded as a component of
shareholders' equity. Gains or losses resulting from foreign currency
transactions are included in other income. All intercompany accounts and
transactions have been eliminated in consolidation.
(C) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include deposits in banks, short term commercial
paper, United States Treasury bills and money market funds with an initial term
of less than three months. Cash equivalents were $150,000 and $695,000 as of
December 31, 1999 and 1998, respectively. For purposes of the consolidated
statements of cash flows, the Company considers all highly liquid debt
instruments with original maturities of three months or less to be cash
equivalents.
(D) REVENUE RECOGNITION
The Company sells its products to chain drug stores, mass volume retailers,
supermarkets and wholesalers. Sales of such products are principally denominated
in U.S. dollars. The Company's accounts receivable reflect the granting of
credit to these customers. Revenues are recognized and product discounts are
recorded when merchandise is shipped. Net sales are comprised of gross revenues
less returns, trade discounts and customer allowances. Merchandise returns are
accrued at the earlier of customer deduction or receipt of goods. Net sales are
reduced for the net impact of expected returns. The Company generally grants
credit based upon analysis of the customer's financial position and previously
established buying and selling patterns.
F-7
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
(E) INVENTORIES
Inventories are valued at the lower of cost (principally first-in/first-out)
or market value. The components of inventories are as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Raw materials...................................... 27,936,005 $26,911,795
Work in process.................................... 6,225,866 6,247,489
Finished goods..................................... 24,993,338 22,460,548
----------- -----------
$59,155,209 $55,619,832
=========== ===========
</TABLE>
Included in cost of sales for 1999 is an increase in the inventory valuation
reserve for $4,500,000 to reflect the estimated market value of the Naturistics
inventory pursuant to the Company's plan to reduce excess and slow moving
inventory of this brand.
(F) PROPERTY, PLANT AND EQUIPMENT
The Company provides for depreciation on the straight-line method over the
estimated useful lives of the assets. The range of estimated lives applicable to
the assets are as follows:
<TABLE>
<S> <C>
Building and building improvements.......................... 10 to 50 years
Machinery and equipment..................................... 3 to 15 years
Furniture and fixtures...................................... 3 to 10 years
</TABLE>
(G) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(H) RESEARCH AND DEVELOPMENT
The Company has expended $5,219,000, $4,927,000 and $5,038,000 during 1999,
1998 and 1997, respectively, for research and development relating to the
development of new products, clinical and regulatory affairs, and quality
control/assurance of the Company's product lines. All costs associated with
research and development are expensed as incurred and included in selling and
administrative expenses in the accompanying consolidated statements of
operations.
(I) ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expenses were
approximately $29,000,000, $31,000,000 and $33,000,000 in 1999, 1998 and 1997,
respectively.
F-8
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
(J) EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing income available to
common shareholders (which for the Company equals its recorded net income
(loss)) by the weighted average number of common shares outstanding during the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock, such as stock
options, were exercised, converted into common stock or otherwise resulted in
the issuance of common stock.
(K) STOCK SPLITS AND DIVIDENDS
On November 15, 1999, the Company's Board of Directors approved a 2% stock
dividend. As a result, 147,581 shares of treasury stock were issued on
December 28, 1999 to shareholders of record on November 30, 1999. Accordingly,
the effect of the 2% stock dividend has been reflected in the consolidated
balance sheets as of December 31, 1999 and 1998, and the consolidated statements
of shareholders' equity for 1999, 1998 and 1997.
On February 6, 1998, the Company's Board of Directors approved a
four-for-three common stock split to be distributed in the form of a stock
dividend. As a result, 1,908,377 shares were issued on March 10, 1998 to
shareholders of record on February 20, 1998, of which 692,891 shares represented
treasury stock of the Company. Accordingly, the effect of the four-for-three
stock split has been reflected on the consolidated balance sheet and
consolidated statement of shareholders' equity as of December 31, 1997. In
addition, all references to number of shares, per share amounts and stock option
data, excluding share and per share amounts reflected on the consolidated
statement of shareholders' equity for the year ended December 31, 1997, have
been restated. In connection with the stock dividend, treasury stock was reduced
by $7,430,359, with a corresponding reduction in retained earnings of $2,498,406
and a reduction in additional paid-in-capital of $6,147,439 as of December 31,
1997.
(L) STOCK OPTION PLAN
The Company applies the intrinsic value-based method of accounting
prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees", and related interpretations, in accounting for
its fixed plan stock options. As such, compensation expense would be recorded on
the date of grant only if the current market price of the underlying stock
exceeded the exercise price.
(M) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company accounts for long-lived assets in accordance with the provisions
of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of". This Statement requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amounts of an asset to future undiscounted net
cash flows expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceed the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell.
F-9
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
The recoverability of the excess cost over fair value of assets acquired is
assessed by determining whether the amortization over its remaining life can be
recovered through undiscounted future operating cash flows of the acquired
operation. The amount of impairment, if any, is measured based on projected
discounted future operating cash flows using a discount rate reflecting the
Company's average cost of funds. The assessment of the recoverability of the
excess cost over fair value of assets acquired will be impacted if estimated
future operating cash flows are not achieved.
(N) RECLASSIFICATIONS
Certain reclassifications were made to prior year amounts to conform with
the 1999 presentation.
(O) 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 the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
(2) SUPPLEMENTAL CASH FLOW INFORMATION
The following is supplemental information relating to the consolidated
statements of cash flows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Cash transactions:
Interest................................................. $6,026,000 $4,591,000 $3,805,000
========== ========== ==========
Income taxes............................................. $1,938,000 $7,630,000 $4,171,000
========== ========== ==========
Non-cash transactions:
Income tax benefit arising from stock options
exercised.............................................. $ 501,000 $2,335,000 $3,118,000
========== ========== ==========
Purchase of North Carolina property...................... -- -- $4,403,000
========== ========== ==========
Shares tendered to exercise stock options................ $1,025,000 $1,470,000 $2,495,000
========== ========== ==========
</TABLE>
(3) PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment, at cost, are as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Land............................................... $ 1,916,151 $ 2,829,295
Building and building improvements................. 16,472,792 17,175,319
Machinery and equipment............................ 32,318,533 30,031,476
Furniture and fixtures............................. 7,015,319 7,142,337
----------- -----------
$57,722,795 $57,178,427
=========== ===========
</TABLE>
Depreciation expense for 1999, 1998 and 1997 was $6,446,523, $5,700,053 and
$5,466,462, respectively.
F-10
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) INTANGIBLES ARISING FROM ACQUISITIONS
Intangibles represent the excess of the purchase prices paid for companies
and product lines over amounts assigned to fair value of the net tangible
assets. Total intangibles related to acquisitions prior to 1971 amount to
$6,660,000, of which $378,000 was written off in 1995 due to a diminution in
value. The remaining $6,282,000 has been determined to be recoverable under the
provisions of SFAS No. 121, therefore, no amortization has been provided for
this amount. The portion of intangibles, $3,350,000, acquired in 1980,
attributable to Propa pH, had been amortized using the straight-line method over
30 years. In 1996, the Company reduced the carrying value of goodwill associated
with the Propa pH brand by $500,000, which is included in amortization expense,
and accelerated amortization of the remaining net book value ($1,015,000 at
December 31, 1996) over a five-year period. The trademarks acquired in 1984,
$3,000,000, are being amortized using the straight-line method over 20 years. In
1998, the Company acquired the intellectual property rights and other assets of
the Corn Silk brand of facial make-up for approximately $10.9 million and
$1.0 million in cash, respectively. The intellectual property rights are being
amortized over 20 years. In September 1999, the Company entered into an
agreement with the former owner of CornSilk, related to its 1998 acquisition of
the CornSilk brand of facial make-up. Under the provisions of this agreement
adjustments to the original purchase price were negotiated. As a result, the
intangible assets arising from this acquisition were reduced by approximately
$482,000.
Accumulated amortization amounted to $6,466,700, $5,559,773 and $4,866,229
at December 31, 1999, 1998 and 1997, respectively. Amortization expense amounted
to $906,927, $693,544 and $352,975 for 1999, 1998 and 1997, respectively.
(5) INCOME TAXES
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
FEDERAL STATE FOREIGN TOTAL
----------- ---------- -------- -----------
<S> <C> <C> <C> <C>
1999
Current tax................................. $ (421,000) $ 102,000 $193,000 $ (126,000)
Deferred tax................................ (1,199,000) (156,000) -- (1,355,000)
----------- ---------- -------- -----------
$(1,620,000) $ (54,000) $193,000 $(1,481,000)
=========== ========== ======== ===========
1998
Current tax................................. $ 8,107,000 $1,011,000 $328,000 $ 9,446,000
Deferred tax................................ (1,780,000) (282,000) -- (2,062,000)
----------- ---------- -------- -----------
$ 6,327,000 $ 729,000 $328,000 7,384,000
=========== ========== ======== ===========
1997
Current tax................................. $ 7,206,000 $ 988,000 $288,000 $ 8,482,000
Deferred tax................................ 241,000 28,000 -- 269,000
----------- ---------- -------- -----------
$ 7,447,000 $1,016,000 $288,000 8,751,000
=========== ========== ======== ===========
</TABLE>
F-11
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) INCOME TAXES (CONTINUED)
Total income tax expense (benefit) differed from the statutory United States
Federal income tax rate of 35% for 1999, 1998 and 1997 of earnings before income
taxes as a result of the following items:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ---------- ----------
<S> <C> <C> <C>
Tax provision at statutory rate.......................... $(1,919,000) $6,461,000 $7,658,000
Increases (decreases) in taxes resulting from:
State income taxes, net of Federal income tax
benefit.............................................. (35,000) 474,000 661,000
Amortization of intangibles............................ 124,000 124,000 124,000
Officers life Insurance................................ 86,000 82,000 60,000
Meals and entertainment................................ 114,000 102,000 104,000
Other, net............................................. 149,000 141,000 144,000
----------- ---------- ----------
Actual provision (benefit) for income taxes.............. $(1,481,000) $7,384,000 $8,751,000
=========== ========== ==========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. For presentation
purposes, certain of such tax assets and liabilities are shown net on the
accompanying balance sheets. Significant components of the Company's deferred
tax assets and liabilities as of December 31, are as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance for
doubtful accounts....................................... $ 315,000 $ 470,000
Supplemental Executive Retirement Plan (SERP) expense,
principally due to accrual for financial statement
purposes................................................ 1,540,000 1,291,000
Inventory, principally due to reserves.................... 3,969,000 2,442,000
Pension accrual for financial reporting purposes.......... 1,461,000 1,233,000
Sales discounts and returns, coupon redemptions and
other................................................... 1,190,000 1,043,000
----------- -----------
Total gross deferred tax assets............................. 8,475,000 6,479,000
Less valuation allowance.................................... -- --
----------- -----------
Deferred tax assets......................................... 8,475,000 6,479,000
Deferred tax liabilities:
Property, plant and equipment, principally due to
differences in depreciation methods..................... (3,987,000) (3,243,000)
Other..................................................... (202,000) (305,000)
----------- -----------
Deferred tax liabilities.................................... (4,189,000) (3,548,000)
----------- -----------
Net deferred tax assets..................................... $ 4,286,000 $ 2,931,000
=========== ===========
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
F-12
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) INCOME TAXES (CONTINUED)
periods which the deferred tax assets are deductible, management believes it is
more likely than not the Company will realize the benefits of these deductible
differences.
(6) LONG-TERM DEBT
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
9.5% senior notes.................................. $40,000,000 $40,000,000
Notes payable under lines of credit................ 15,750,000 --
Notes payable under revolving credit agreement..... 20,000,000 15,750,000
Purchase money promissory note..................... 3,888,461 4,136,011
----------- -----------
$79,638,461 $59,886,011
Less current portion............................... 3,888,461 485,610
----------- -----------
$75,750,000 $59,400,401
=========== ===========
</TABLE>
On February 25, 2000, the senior notes were amended and restated primarily
to reduce the $8,000,000 principal repayments due on May 31, 2001 and May 31,
2002. The amended notes require annual principal repayments of $4,000,000 on
May 31, 2001 and May 31, 2002; $8,000,000 on May 31, 2003 and May 31, 2004 and
the balance on May 31, 2005. The terms of the amended agreement include
covenants, which provide among other things, for the maintenance of financial
covenants and ratios relating to consolidated net worth, restrictions on cash
dividends, the purchase of treasury stock, and certain other expenditures.
On February 25, 2000, the Company amended the revolving credit agreement
entered into in December 1998. The amendment increased the facility to
$47,500,000 from $20,000,000 and extended the expiration to February 25, 2003.
After giving effect to the refinancing of the lines of credit (note 7), this
amended revolving credit agreement increased the Company's borrowing capacity by
$10,000,000. Under the terms of the agreement, interest rates on borrowings are
based on, at the Company's option, LIBOR, prime or federal funds rates. The
terms of the agreement include a commitment fee based on unutilized amounts, an
annual agency fee and covenants which provide among other things, for the
maintenance of financial covenants and ratios relating to consolidated net
worth, restrictions on cash dividends, the purchase of treasury stock, and
certain other expenditures. The revolving credit facility, as amended, is
collateralized by the Company's trademarks and accounts receivable until such
time as the borrowings under the revolving credit agreement are less than
$22,500,000 and a certain financial ratio is achieved. The senior note holder
and the lenders under the revolving credit agreement have entered into an
intercreditor agreement which includes the pro rata sharing of such collateral.
No compensating balances are required. The weighted-average interest rate at
December 31, 1999 was 9.06%.
In conjunction with the 1997 purchase of land and buildings in North
Carolina, the Company issued a non-interest bearing purchase money promissory
note to the seller of the property for $5,225,000 which is collateralized by the
land and buildings in North Carolina. The Company recorded the note payable at
its present value using an interest rate of 7.3%, which approximated the
Company's incremental borrowing rate. Interest expense is being recognized over
the term of the note based upon the effective yield method. The final payment of
$3,850,000 is due on May 15, 2000. The Company is currently in the process of
refinancing this note through a new mortgage on the land and buildings with a
different lender.
F-13
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) LONG-TERM DEBT (CONTINUED)
The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 1999, including amounts outstanding under the amended
revolving credit agreement, are as follows: 2000, $3,888,461; 2001, $8,000,000;
2002, $8,000,000; 2003, $35,750,000; and 2004, $8,000,000.
(7) FINANCING ARRANGEMENTS
At December 31, 1999 and 1998, the Company had arrangements with banks
providing for $17,500,000 of lines of credit. These lines were renewable
annually. Borrowings under these lines at December 31, 1999 and 1998 were
$15,750,000 and $3,500,000, respectively. On February 25, 2000, the lines were
cancelled and refinanced (note 6) as part of the amended and restated revolving
credit facility and therefore have been classified as long-term debt in the
accompanying consolidated balance sheet as of December 31, 1999.
(8) EMPLOYEE RETIREMENT PLANS
(A) PENSION PLANS
The Company maintains two non-contributory defined benefit pension plans
covering all U.S. eligible employees. The Del Non-Union Plan formula is based on
years of service and the employee's compensation during the five years before
retirement. The Del LaCross Union Plan formula is based on years of service. The
Company made contributions to these plans of $166,000, $519,000 and $606,000 for
the years 1999, 1998 and 1997. Assets held by these plans consist of cash and
cash equivalents, fixed income securities, consisting of U.S. government and
corporate bonds, and common stocks. The Company also has a defined benefit
supplemental executive retirement plan (SERP) for certain of its executives. The
SERP is a non-qualified plan under the Internal Revenue Code. The plan assets of
the SERP, which were approximately $2,333,000 and $2,105,000 as of December 31,
1999 and 1998, are considered assets of the Company and, as such, are included
in other assets on the accompanying consolidated balance sheets. The assets of
the SERP, which consist of cash and cash equivalents and U.S. government bonds,
are held-to-maturity securities and, as such, are carried at cost plus accrued
interest. The Company did not contribute to the SERP in 1999; a contribution of
$265,000 and $750,000 was made in 1998 and 1997, respectively.
Total pension expense for the years ended December 31, 1999, 1998 and 1997
amounted to approximately $1,696,000, $1,736,000 and $1,826,000, respectively.
The change in benefit obligation, change in plan assets and funded status as of
December 31, 1999 and 1998 and components of net periodic cost for 1999, 1998
and 1997 of the Company's domestic plans are set forth in the following tables:
F-14
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) EMPLOYEE RETIREMENT PLANS (CONTINUED)
<TABLE>
<CAPTION>
1999
---------------------------------------
DEL NON- DEL LACROSS
UNION PLAN UNION PLAN SERP
----------- ----------- -----------
<S> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at the beginning of the year....... $16,394,731 $1,109,657 $ 5,047,886
Service cost.......................................... 1,131,964 24,396 56,629
Interest cost......................................... 1,087,135 72,145 340,732
Actuarial (gain) loss................................. (2,800,609) (137,774) 10,482
Benefits paid......................................... (540,000) (60,000) (7,790)
----------- ---------- -----------
Benefit obligation at the end of the year............. $15,273,221 $1,008,424 $ 5,447,939
----------- ---------- -----------
Change in plan assets:
Fair value of assets at the beginning of the year..... $14,571,545 $ 519,036 $ --
Actual return on plan assets.......................... 1,137,624 27,117 --
Employer contributions................................ 20,000 146,000 --
Benefits paid......................................... (796,203) (70,621) --
----------- ---------- -----------
Fair value of assets at the end of the year........... $14,932,966 $ 621,532 $ --
----------- ---------- -----------
Funded status........................................... $ (340,255) $ (386,892) $(5,447,939)
Unrecognized transition (assets) obligation............. (189,665) 49,553 --
Unamortized prior service cost.......................... 373,571 43,565 1,561,433
Unrecognized net actuarial (gain) loss.................. (3,303,186) 72,074 94,746
----------- ---------- -----------
Net amount recognized................................... $(3,459,535) $ (221,700) $(3,791,760)
=========== ========== ===========
Amounts recognized in the balance sheet consist of:
Accrued benefit liability............................. $(3,459,535) $ (386,892) $(5,302,833)
Intangible assets (included in other long-term
assets)............................................. -- 93,118 1,511,073
Accumulated other comprehensive income................ -- 72,074 --
----------- ---------- -----------
Net amount recognized................................... $(3,459,535) $ (221,700) $(3,791,760)
=========== ========== ===========
</TABLE>
F-15
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) EMPLOYEE RETIREMENT PLANS (CONTINUED)
<TABLE>
<CAPTION>
1998
---------------------------------------
DEL NON- DEL LACROSS
UNION PLAN UNION PLAN SERP
----------- ----------- -----------
<S> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at the beginning of the year....... $14,271,480 $1,044,667 $ 3,475,818
Service cost.......................................... 963,336 21,418 49,694
Interest cost......................................... 996,031 71,603 316,291
Plan amendments....................................... -- 9,786 938,546
Actuarial loss........................................ 729,738 21,816 275,327
Benefits paid......................................... (565,854) (59,633) (7,790)
----------- ---------- -----------
Benefit obligation at the end of the year............. $16,394,731 $1,109,657 $ 5,047,886
----------- ---------- -----------
Change in plan assets:
Fair value of assets at the beginning of the year..... $12,190,109 $ 508,921 $ --
Actual return on plan assets.......................... 2,478,540 19,748 --
Employer contributions................................ 468,750 50,000 --
Benefits paid......................................... (565,854) (59,633) --
----------- ---------- -----------
Fair value of assets at the end of the year........... $14,571,545 $ 519,036 $ --
----------- ---------- -----------
Funded status........................................... $(1,823,186) $ (590,621) $(5,047,886)
Unrecognized transition (assets) obligation............. (252,241) 74,329 --
Unamortized prior service cost.......................... 429,727 53,233 1,826,539
Unrecognized net actuarial (gain) loss.................. (908,745) 168,862 119,813
----------- ---------- -----------
Net amount recognized................................... $(2,554,445) $ (294,197) $(3,101,534)
=========== ========== ===========
Amounts recognized in the balance sheet consist of:
Accrued benefit liability............................. $(2,554,445) $ (590,621) $(4,912,188)
Intangible assets..................................... -- 127,562 1,810,654
Accumulated other comprehensive income................ -- 168,862 --
----------- ---------- -----------
Net amount recognized................................... $(2,554,445) $ (294,197) $(3,101,534)
=========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
1999
------------------------------------
DEL NON- DEL LACROSS
UNION PLAN UNION PLAN SERP
----------- ----------- --------
<S> <C> <C> <C>
Components of net periodic cost:
Service cost............................................ $ 1,131,964 $ 24,396 $ 56,629
Interest cost........................................... 1,087,135 72,145 340,732
Expected return on plan assets.......................... (1,287,589) (47,298) --
Amortization of unrecognized transition (assets)
obligations........................................... (62,576) 24,776 --
Recognized prior service cost........................... 56,156 9,668 265,106
Recognized net losses................................... -- 4,816 19,969
----------- -------- --------
Net periodic cost....................................... $ 925,090 $ 88,503 $682,436
=========== ======== ========
</TABLE>
F-16
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) EMPLOYEE RETIREMENT PLANS (CONTINUED)
<TABLE>
<CAPTION>
1998
-----------------------------------
DEL NON- DEL LACROSS
UNION PLAN UNION PLAN SERP
---------- ----------- --------
<S> <C> <C> <C>
Components of net periodic cost:
Service cost.............................................. $963,336 $21,418 $ 48,767
Interest cost............................................. 996,031 71,603 327,482
Expected return on plan assets............................ (968,889) (39,994) --
Amortization of unrecognized transition (assets)
obligations............................................. (62,576) 24,776 --
Recognized prior service cost............................. 56,156 10,185 265,106
Recognized net losses..................................... -- 1,817 20,769
-------- ------- --------
Net periodic cost......................................... $984,058 $89,805 $662,124
======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
1997
-----------------------------------
DEL NON- DEL LACROSS
UNION PLAN UNION PLAN SERP
---------- ----------- --------
<S> <C> <C> <C>
Components of net periodic cost:
Service cost............................................. $1,020,529 $ 22,419 $ 53,381
Interest cost............................................ 888,092 70,859 207,823
Expected return on plan assets........................... (828,793) (40,069) --
Amortization of unrecognized transition (assets)
obligations............................................ (62,576) 24,776 --
Recognized prior service cost............................ 56,156 9,206 171,251
Recognized net losses.................................... 191,386 20,789 20,769
---------- -------- --------
Net periodic cost........................................ $1,264,794 $107,980 $453,224
========== ======== ========
</TABLE>
The weighted-average actuarial assumptions used as of December 31, 1999,
1998 and 1997 were:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Discount rates.............................................. 8.00% 6.75% 7.00%
Rate of compensation increase............................... 5.50% 5.50% 5.50%
Expected long-term rate of return on plan assets............ 9.00% 9.00% 8.00%
</TABLE>
The Company contributes to a multi-employer pension plan for the benefit of
its union employees. This plan is a defined benefit plan based on years of
service and the costs recognized for 1999, 1998 and 1997 were approximately
$463,000, $430,000 and $447,000, respectively.
The Company maintains a defined contribution plan for the benefit of its
Canadian employees. The costs recognized for 1999, 1998 and 1997 were
approximately $72,000, $60,000 and $57,000 in U.S. dollars, respectively.
(B) EMPLOYEE STOCK OWNERSHIP PLAN
The Company has an employee stock ownership plan and related trust, covering
substantially all full-time non-union employees. Under the terms of the plan,
the Company may make contributions to the trust in cash, shares of Company stock
or other property in amounts as may be determined by the Board of Directors. The
Board of Directors authorized contributions of $525,000 for 1997. Contributions
were not made for 1999 or 1998. At December 31, 1999 the trust held 481,000
shares of Company common stock.
F-17
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) EMPLOYEE RETIREMENT PLANS (CONTINUED)
(C) EMPLOYEE 401(K) SAVINGS PLAN
The Company maintains an Employee 401(k) Savings Plan. The plan is a defined
contribution plan which is administered by the Company. All regular, full-time
employees are eligible for voluntary participation upon completing six months of
service and having attained the age of twenty-one. The plan provides for growth
in savings through contributions and income from investments. It is subject to
the provisions of the Employee Retirement Income Security Act of 1974 (ERISA),
as amended. Plan participants are allowed to contribute a specified percentage
of their base salary. However, the Company retains the right to make optional
contributions for any plan year. Optional contributions were not made in 1999,
1998 and 1997.
(9) SHAREHOLDERS' EQUITY
(A) STOCK OPTION PLANS
The 1994 Stock Plan, as amended (the 1994 Plan) provides for the granting of
incentive and non-incentive options and other stock-based awards. A total of
1,921,978 shares have been authorized for issuance under the 1994 Plan. At
December 31, 1999, non-incentive options have been the only awards issued under
the 1994 Plan. The exercise price of options granted under the 1994 Plan shall
not be less than the fair market value of the common stock at the date of the
grant. The Compensation Committee of the Board of Directors (the Committee)
determines the persons to whom options will be granted, the prices at which
options may be exercised, the vesting period and whether the options will be
incentive or non-incentive. Incentive options, if granted, are exercisable for a
period of up to ten years from the date of the grant. The exercise price of the
shares to be purchased shall be paid either in cash, delivery (i.e., surrender)
of shares of common stock owned by the optionee at the time of exercise of the
option, in installments payable in cash if permitted by the Committee or in any
combination of the foregoing.
Shares received by an optionee upon exercise of a non-incentive option may
not be sold or otherwise disposed of for a period (restricted period) determined
by the Committee upon grant of the option, which shall be not less than six
months or more than three years from the date of the exercise, during which
period the Company is entitled, in the event the employment of the optionee with
the Company terminates, to repurchase the shares at the exercise price.
Following the restricted period, the Company shall have a right of first refusal
to purchase the shares at fair market value. Shares issuable upon exercise of
options granted to date under the 1994 Plan are subject to a six month
restricted period. At December 31, 1999, 981,117 of the 1,356,869 options
outstanding were exercisable under the 1994 Plan, at a weighted-average exercise
price of $14.94.
The 1984 Stock Option Plan, as amended (the 1984 Plan), provided for the
granting of incentive and non-incentive options to purchase shares of the
Company's common stock at prices which are not less than the fair market value
of the common stock at the dates of grant. Options are exercisable as determined
by the Committee for a period up to ten years and one day from the date of
grant. Incentive options granted to a 10% stockholder must be granted at 110% of
fair market value and may be exercised up to five years from the date of grant.
Payment of the exercise price of options may be made in the same manner as
provided by the 1994 Plan, and shares issued upon exercise are subject to a
restricted period similar to that provided under the 1994 Plan. At December 31,
1999, all 316,115 options outstanding under the 1984 Plan were exercisable at a
weighted-average exercise price of $5.22. No further options will be granted
under the 1984 Plan.
F-18
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) SHAREHOLDERS' EQUITY (CONTINUED)
Limited stock appreciation rights also may be granted under the 1994 Plan
and 1984 Plan, which will be effective only upon a change in control of the
Company (as defined). These plans also accelerate the exercisability of all
unexercised options or stock appreciation rights immediately in the event of a
change in control of the Company.
Shares outstanding, option prices and option transactions during the last
three years, are summarized below:
1994 STOCK PLAN
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding December 31, 1996...................... 966,207 $12.37
Granted.......................................... 309,750 23.30
Exercised........................................ (81,917) 9.62
Forfeited........................................ (88,579) 18.03
---------
Outstanding December 31, 1997...................... 1,105,461 15.18
Granted.......................................... 198,961 23.98
Exercised........................................ (28,830) 13.77
Forfeited........................................ (27,874) 25.97
---------
Outstanding December 31, 1998...................... 1,247,718 16.38
Granted.......................................... 174,454 13.88
Exercised........................................ (27,650) 6.96
Forfeited........................................ (37,653) 22.36
---------
Outstanding December 31, 1999...................... 1,356,869 $16.08
=========
</TABLE>
1984 STOCK OPTION PLAN
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding December 31, 1996...................... 1,106,642 $4.97
Granted.......................................... -- --
Exercised........................................ (390,864) 4.87
Forfeited........................................ -- --
---------
Outstanding December 31, 1997...................... 715,778 5.02
Granted.......................................... -- --
Exercised........................................ (218,181) 5.09
Forfeited........................................ (3) 4.58
---------
Outstanding December 31, 1998...................... 497,594 4.99
Granted.......................................... -- --
Exercised........................................ (181,479) 4.59
Forfeited........................................ -- --
---------
Outstanding December 31, 1999...................... 316,115 $5.22
=========
</TABLE>
F-19
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) SHAREHOLDERS' EQUITY (CONTINUED)
At December 31, 1999, a total of 1,672,984 shares of common stock were
subject to outstanding options under all stock option plans.
The Company applies APB Opinion No. 25 and interpretations in accounting for
stock option plans. Accordingly, no compensation cost has been recognized. Had
compensation cost for the stock option plans been determined based on the fair
value at the grant dates for awards under the plans, consistent with the
alternative method set forth under SFAS No. 123, "Accounting for Stock-Based
Compensation", the Company's net earnings and net earnings per share would have
been reduced. The pro forma amounts are indicated below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1999 1998 1997
- ---------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Net earnings (loss)
As reported.......................................... $(4,002,000) $11,077,000 $13,127,000
Pro forma............................................ $(5,065,000) $10,076,000 $12,488,000
Basic net earnings (loss) per share
As reported.......................................... $ (0.53) $ 1.43 $ 1.69
Pro forma............................................ $ (0.67) $ 1.30 $ 1.61
Diluted net earnings (loss) per share
As reported.......................................... $ (0.53) $ 1.34 $ 1.56
Pro forma............................................ $ (0.67) $ 1.22 $ 1.48
</TABLE>
The fair value of each option grant was estimated at the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions for 1999, 1998 and 1997, respectively: dividend yields 1.01%, .58%,
and .46%; expected lives of 5.7,5.5 and 5.3 years; risk-free interest rates of
5.89%, 5.02% and 6.40%; and expected volatility of 42.2%, 39.0% and 26.6%. The
weighted-average fair value of options granted during 1999, 1998 and 1997 were
$6.15, $10.06 and $8.44, respectively.
The following table summarizes information about stock options at
December 31, 1999:
<TABLE>
<CAPTION>
OUTSTANDING STOCK OPTIONS
----------------------------------------------- EXERCISABLE STOCK OPTIONS
WEIGHTED- ----------------------------
AVERAGE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
REMAINING EXERCISE EXERCISE
RANGE OF EXERCISE PRICES SHARES CONTRACTUAL LIFE PRICE SHARES PRICE
------------------------ --------- ---------------- ---------------- --------- ----------------
<S> <C> <C> <C> <C> <C>
$ 0.01 to $ 4.00............. 89,658 1.21 $ 2.99 89,658 $ 2.99
$ 4.01 to $ 8.00............. 306,698 2.64 $ 6.40 306,697 $ 6.40
$ 8.01 to $12.00............. 248,477 3.00 $11.25 232,549 $11.39
$12.01 to $16.00............. 596,030 4.88 $14.13 437,504 $14.05
$16.01 to $20.00............. 87,492 4.45 $18.25 56,466 $17.96
$20.01 to $24.00............. 161,257 4.78 $21.65 89,888 $21.67
$24.01 to $28.00............. 106,721 6.84 $25.04 38,218 $24.95
$28.01 to $32.00............. 76,651 5.87 $29.39 46,252 $29.46
--------- ---------
$ 0.01 to $32.00............. 1,672,984 4.13 $14.02 1,297,232 $12.57
========= =========
</TABLE>
F-20
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) SHAREHOLDERS' EQUITY (CONTINUED)
(B) RECEIVABLES FOR STOCK OPTIONS EXERCISED
In 1984, the Company loaned an officer $367,000 in connection with the
payment of taxes arising from the exercise of stock options (the 1984 Loan). The
Company also loaned the officer $1,065,313 in 1988 (the 1988 Loan) and
$1,100,000 in 1990 (the 1990 Loan), each in connection with the exercise of
stock options and the tax liability arising therefrom. These loans were payable
in annual installments. In addition, the 1988 Loan and the 1990 Loan agreements
provided that, if the officer was employed by the Company at the time any
interest or debt payments were due, such payment would be forgiven.
Pursuant to an amendment to this officer's employment agreement, the 1984
Loan, the 1988 Loan and the 1990 Loan were consolidated, effective as of
July 1, 1999, with the aggregate principal balance to be repaid, with interest
at the rate of 6.0% per annum, in annual amounts of $140,000 for each year
during the period from 2000 through 2007 and a final payment of $82,250 on
January 20, 2008, provided that each payment of interest and principal will be
forgiven when due so long as the officer is then employed by, or then serves as
a consultant to the Company and, provided further, that the Company may (but is
not required to) forgive, during any year until 2007, in excess of $140,000 of
principal. Whenever the Company forgives any principal or interest owed by the
officer to the Company, the Company has agreed to pay to the officer such
additional payment (a "Gross-Up Payment") in an amount such that, after payment
by the officer of all federal, state and local taxes and excise taxes if any,
including any such taxes imposed on the Gross-Up Payment, the officer retains an
amount of the Gross-Up Payment equal to such taxes imposed on the principal and
interest forgiven. This loan must be secured by collateral with a fair value of
110% of the unpaid principal. The loan balance at December 31, 1999 was
$1,202,250 and was collateralized by 168,961 shares of the Company's common
stock.
During 1992, the Company loaned another officer $130,000 to enable him to
exercise an option for 9,719 shares. The loan bears interest at the prime rate
and is payable in quarterly installments. The loan balance at December 31, 1999
was $39,000 and was secured by a pledge of 8,500 shares of the Company's common
stock.
The balance of all loans made to officers is reflected as a reduction of
shareholders' equity in the accompanying consolidated financial statements.
(10) ACCRUED LIABILITIES
Accrued liabilities at December 31, 1999 and 1998 consisted of the
following:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Salaries, wages, commissions & employee benefits... $ 1,829,365 $ 2,432,968
Interest........................................... 502,069 381,036
Advertising and promotion costs.................... 7,273,833 3,994,744
Other.............................................. 3,231,264 3,215,195
----------- -----------
$12,836,531 $10,023,943
=========== ===========
</TABLE>
F-21
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(11) EARNINGS (LOSS) PER SHARE
A reconciliation between the numerators and denominators of the basic and
diluted income (loss) per common share is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(AMOUNTS IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Net earnings (loss) (numerator)............................. $(4,002) $11,077 $13,127
------- ------- -------
Weighted-average common shares
(denominator for basic earnings (loss) per share)......... 7,530 7,733 7,745
Effect of dilutive securities:
Employee stock options.................................... -- 555 670
Weighted-average common and potential common shares
outstanding
(denominator for diluted earnings (loss) per share)....... 7,530 8,288 8,415
------- ------- -------
Basic earnings (loss) per share............................. $ (0.53) $ 1.43 $ 1.69
------- ------- -------
Diluted earnings (loss) per share........................... $ (0.53) $ 1.34 $ 1.56
------- ------- -------
</TABLE>
Employee stock options for 1,673,000, 126,000 and 109,000 shares for 1999,
1998 and 1997, respectively, were not included in the net earnings (loss) per
share because their effect would have been anti-dilutive.
(12) COMMITMENTS AND CONTINGENCIES
In June 1997, the Company entered into a settlement agreement with respect
to a shareholders' derivative action against members of the Company's Board of
Directors in which, among other things, the Company's insurance carrier agreed
to pay $400,000 to the Company on behalf of the individual defendants, and the
Company paid $150,000 in connection with plaintiff's attorney's fees. The
stipulation of settlement expressly acknowledges that the settlement does not
constitute an admission by the defendants of any liability or wrongdoing by
them, but was entered into by the defendants to avoid the burden and costs of
further litigation.
The Company is involved in various other claims and legal actions arising in
the ordinary course of business, including environmental matters. The final
resolution of these matters on the Company's results of operations or liquidity
in a particular reporting period is not known. Management is of the opinion that
the ultimate disposition of these matters will not have a material adverse
effect on the Company's consolidated financial position.
The Company leases executive office space, furniture, data processing
equipment, transportation equipment and warehouse space under terms of leases
expiring through 2004. Rent expense under these
F-22
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) COMMITMENTS AND CONTINGENCIES (CONTINUED)
operating leases aggregated approximately $2,496,000, $2,439,000 and $2,491,000
in 1999, 1998 and 1997, respectively. The Company's obligations under
non-cancelable leases are summarized as follows:
<TABLE>
<S> <C>
2000........................................................ 2,301,949
2001........................................................ 2,148,413
2002........................................................ 1,929,902
2003........................................................ 1,394,071
2004........................................................ 664,448
Thereafter.................................................. --
----------
$8,438,783
==========
</TABLE>
(13) FINANCIAL INSTRUMENTS
The carrying value of all financial instruments classified as a current
asset or current liability are deemed to approximate fair value because of the
short maturity of these instruments.
The difference between the fair value of the senior notes and the carrying
value at December 31, 1999 is approximately $0.8 million. The fair value of the
senior notes is based upon discounted cash flows using rates available to the
Company for debt with similar terms and maturities. The Company continually
evaluates the benefits of refinancing versus the related prepayment penalties.
The carrying value of the Company's borrowings under the long-term revolving
credit agreement approximates fair value as such borrowings bear variable
interest rates which fluctuate with market conditions. Because considerable
judgement is required in interpreting market data to develop estimates of fair
value, the estimates are not necessarily indicative of the amounts that could be
realized or would be paid in a current market exchange. The effect of using
different market assumptions or estimation methodologies may be material to the
estimated fair value amount.
(14) COMPREHENSIVE INCOME (LOSS)
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". This Statement requires that all items recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. Other comprehensive income may include foreign currency
translation adjustments, minimum pension liability adjustments and unrealized
gains and losses on marketable securities classified as available for sale. The
Company's items of other comprehensive income (loss) include foreign currency
F-23
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(14) COMPREHENSIVE INCOME (LOSS) (CONTINUED)
translation adjustments and minimum pension liability adjustments. The
components of other comprehensive loss for 1999, 1998 and 1997 are as follows:
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
FOREIGN CURRENCY MINIMUM PENSION
TRANSLATION ADJUSTMENT LIABILITY TOTAL
---------------------- --------------- -----------
<S> <C> <C> <C>
Balance at December 31, 1996................. $ (547,028) $ -- $ (547,028)
Foreign currency translation adjustment...... (272,118) -- (272,118)
----------- --------- -----------
Balance at December 31, 1997................. (819,146) -- (819,146)
Foreign currency translation adjustment...... (540,742) -- (540,742)
Minimum pension liability, net of taxes of
$63,000.................................... -- (105,862) (105,862)
----------- --------- -----------
Balance at December 31,1998.................. (1,359,888) (105,862) (1,465,750)
Foreign currency translation adjustment...... 375,856 -- 375,856
Minimum pension liability, net of taxes of
$27,000.................................... -- 60,788 60,788
----------- --------- -----------
Balance at December 31, 1999................. $ (984,032) $ (45,074) $(1,029,106)
=========== ========= ===========
</TABLE>
(15) SEGMENT INFORMATION
At December 31, 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". This statement established
standards for reporting information about operating segments and related
disclosure about products and services and geographic areas. The Company
operates in two segments, Cosmetic and Pharmaceutical, that have been organized
by the products and services they offer. The Cosmetic segment's principal
products are nail care, nail color, color cosmetics, beauty implements, bleaches
and depilatories, personal care products and other related cosmetic items. The
Pharmaceutical segment's principal products are proprietary oral analgesics,
acne treatment products and first aid products. The accounting policies of the
segments are the same as those described in the summary of significant
accounting policies. The Company evaluates the performance of its operating
segments based on operating income. Certain assets, including property, plant
and equipment and deferred tax assets, are not allocated to the identifiable
segments; depreciation of unallocated assets is charged to the Cosmetic segment.
F-24
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(15) SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net sales
Cosmetic.................................................. $203,484 $213,714 $207,260
Pharmaceutical............................................ 63,863 61,148 55,750
-------- -------- --------
Consolidated.............................................. $267,347 $274,862 $263,010
======== ======== ========
Operating income (loss)
Cosmetic.................................................. $(11,938) $ 10,381 $ 15,424
Pharmaceutical............................................ 9,313 12,513 9,828
-------- -------- --------
Consolidated.............................................. $ (2,625) $ 22,894 $ 25,252
======== ======== ========
Gains on sales of facility and land......................... $ 3,043 $ -- $ --
-------- -------- --------
Interest expense, net....................................... $ 5,901 $ 4,433 $ 3,375
-------- -------- --------
Earnings (loss) before taxes................................ $ (5,483) $ 18,461 $ 21,878
-------- -------- --------
Identifiable assets
Cosmetic.................................................. $122,417 $120,664 $ 87,449
Pharmaceutical............................................ 22,674 20,205 16,635
Corporate (unallocated assets)............................ 35,470 36,605 45,230
-------- -------- --------
Consolidated.............................................. $180,561 $177,474 $149,314
======== ======== ========
Depreciation and amortization
Cosmetic.................................................. $ 6,903 $ 5,966 $ 5,418
Pharmaceutical............................................ 450 428 401
-------- -------- --------
Consolidated.............................................. $ 7,353 $ 6,394 $ 5,819
======== ======== ========
Expenditures for property, plant and equipment and
long-lived assets
Cosmetic.................................................. $ 2,294 $ 14,167 $ 2,282
Pharmaceutical............................................ 288 320 253
Corporate (unallocated assets)............................ 4,706 4,702 12,695
-------- -------- --------
Consolidated.............................................. $ 7,288 $ 19,189 $ 15,230
======== ======== ========
</TABLE>
Sales to one customer by the cosmetic and pharmaceutical segments combined
were 25.4%, 21.5% and 22.7% of consolidated net sales for 1999, 1998 and 1997,
respectively and combined sales to another customer were 10.4% of consolidated
net sales in 1999 and 10.3% in 1998.
Three customers accounted for 34.2% and two customers accounted for 35.4% of
the Company's net accounts receivable at December 31, 1999 and 1998,
respectively.
(16) SUBSEQUENT EVENT
On February 22, 2000, the Company purchased a 68,000 square foot
manufacturing, warehousing and office facility in Barrie, Ontario for
$1,828,000. The purchase was financed with a combination of a mortgage bridge
loan and a five year mortgage. The existing 39,000 square foot manufacturing,
warehousing and office facility in Barrie, Ontario, was included in property,
plant and equipment as of December 31, 1999, with a net book value of
approximately $458,000 and is currently in contract for sale with
F-25
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(16) SUBSEQUENT EVENT (CONTINUED)
estimated proceeds of $790,000. Approximately $631,000 of the proceeds will be
used to satisfy the mortgage bridge loan.
(17) UNAUDITED QUARTERLY FINANCIAL DATA
The following is a summary of quarterly operating results (in thousands of
dollars except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
-----------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales............................... $61,756 $70,557 $64,586 $70,448
Cost of goods sold...................... 27,774 30,723 34,748 31,676
Net earnings (loss)..................... 366 1,567 (6,066) 131
Earnings (loss) per common share:
Basic................................. $ .05 $ .21 $ (.81) $ .02
======= ======= ======= =======
Diluted............................... $ .05 $ .20 $ (.81) $ .02
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-----------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales............................... $65,416 $73,971 $70,663 $64,812
Cost of goods sold...................... 25,438 29,420 30,527 30,425
Net earnings (loss)..................... 3,251 4,405 3,784 (363)
Earnings (loss) per common share:
Basic................................. $ .42 $ .57 $ .49 $ (.05)
======= ======= ======= =======
Diluted............................... $ .38 $ .53 $ .46 $ (.05)
======= ======= ======= =======
</TABLE>
Earnings (loss) per share calculations for each of the quarters are based on
weighted-average number of shares outstanding in each period. Therefore, the sum
of the quarters in a year does not necessarily equal the year's earnings per
share.
F-26
<PAGE>
SCHEDULE II
DEL LABORATORIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS(1) OF PERIOD
- ----------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1997 allowances for
doubtful accounts............................ $1,500,000 $ 65,000 $265,000 $1,300,000
========== ======== ======== ==========
Year ended December 31, 1998 allowances for
doubtful accounts............................ $1,300,000 $174,000 $174,000 $1,300,000
========== ======== ======== ==========
Year ended December 31, 1999 allowances for
doubtful accounts............................ $1,300,000 $112,000 $112,000 $1,300,000
========== ======== ======== ==========
</TABLE>
- ------------------------
(1) Uncollectible accounts written off, net of recoveries.
F-27
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------
<C> <S>
3.1 (a) Restated Certificate of Incorporation as filed with the
Delaware Secretary of State on March 29, 1996.
3.2 (b) Certificate of Amendment filed with the Delaware Secretary
of State on June 4, 1996.
3.3 Certificate of Amendment of the Restated Certificate of
Incorporation filed with the Delaware Secretary of State on
June 3, 1998.
3.4 (a) By-Laws as amended through December 14, 1995.
10.1 (c) Employee Pension Plan, effective January 1, 1989 (amended
and restated).
10.2 (d) Employee's Stock Ownership Plan, effective January 1, 1989.
10.3 (e) Amendment No. 1 to Employee's Stock Ownership Plan.
10.4 (c) Amendment No. 2 to Employee's Stock Ownership Plan.
10.5 (c) 401(k) Plan effective January 1, 1989 (amended and
restated).
10.6 Amendment No. 1 to 401(k) Plan adopted December 21, 1995.
10.7 Amendment No. 2 to 401(k) Plan adopted March 16, 2000.
10.8 (c) Supplemental Executive Retirement Plan (amended and
restated).
10.9 (i) Amendment No. 1 effective January 1, 1997 to Supplemental
Executive Retirement Plan.
10.10(j) Amendment No. 3 to Supplemental Executive Retirement Plan.
10.11(e) 1984 Stock Option Plan, as amended to date.
10.12(f) 1994 Stock Plan, as amended as of May 27, 1999.
10.13(f) Annual Incentive Plan, as amended as of May 27, 1999.
10.14 Amended and Restated Employment Agreement dated as of July
1, 1999 between the Registrant and Dan K. Wassong.
10.15(e) Loan Agreement with Dan K. Wassong, dated as of August 22,
1984 and related promissory notes.
10.16(c) Loan Agreement with Dan K. Wassong, dated as of April 9,
1988.
10.17(g) Loan Agreement with Dan K. Wassong, dated as of November 14,
1990.
10.18(e) Employment Agreement with Charles J. Hinkaty, as amended.
10.19(i) Amendment to Employment Agreement with Charles J. Hinkaty,
dated April 22, 1996.
10.20(e) Employment Agreement with Harvey P. Alstodt, as amended.
10.21(i) Amendment to Employment Agreement with Harvey P. Alstodt,
dated April 22, 1996.
10.22 Amendment to Employment Agreement with Harvey P. Alstodt
dated December 30, 1997.
10.23(e) Employment Agreement with William H. McMenemy, as amended.
10.24(i) Amendment to Employment Agreement with William H. McMenemy,
dated April 22, 1996.
10.25(j) Employment Agreement with Enzo J. Vialardi, dated December
30, 1998.
10.26(j) Employment Agreement with James Lawrence, dated March 1993.
10.27(j) Amendment to Employment Agreement with James Lawrence, dated
July 12, 1995.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------
<C> <S>
10.28(j) Second Amendment and Employment Agreement with James
Lawrence, dated March 31, 1998.
10.29(e) Life Insurance Agreement with Robert H. Haines, as trustee,
dated as of February 18, 1993.
10.30(h) Lease between Registrant and Coliseum Towers Associates.
10.31(h) Purchase Money Promissory Note with Carver Boat Corporation.
10.32 Amended and Restated Loan Agreement dated as of February 25,
2000 among the Registrant, as borrower, Del Pharmaceuticals,
Inc. ("DPI"), Parfums Schiaperlli, Inc. ("Parfums"), Royce &
Rader, Inc. ("Royce") and 565 Broad Hollow Realty Corp.
("565"), as guarantors, The Chase Manhattan Bank, as agent
for the lenders, and The Chase Manhattan Bank and European
American Bank, as lenders.
10.33 Form of Trademark Collateral Assignment and Security
Agreement dated as of February 25, 2000, between the
Registrant and The Chase Manhattan Bank, as Collateral
Agent. Similar agreements were executed by DPI and Parfums.
10.34 Form of Security Agreement dated as of February 25, 2000
between the Registrant and The Chase Manhattan Bank, as
Collateral Agent. Similar agreements were executed by DPI,
Parfums, Royce and 565.
10.35 Form of General Guaranty dated as of February 25, 2000 by
DPI in favor of The Chase Manhattan Bank, as Collateral
Agent. Similar agreements were executed by Parfums, Royce
and 565.
10.36 Amended and Restated Loan Agreement dated as of February 25,
2000 among the Registrant, DPI, Parfums, Royce, 565 and
Jackson National Life Insurance Company.
21.1 List of Subsidiaries.
23.1 Consent of KPMG LLP dated March 27, 2000.
27 Financial Data Schedule
</TABLE>
- ------------------------
(a) These exhibits were filed as exhibits to the Registrant's Form 10-K for the
year ended December 31, 1995. The exhibit numbers in such Form 10-K are as
follows: Restated Certificate, Exhibit 1; and By-Laws, Exhibit 2.
(b) This exhibit was filed as an exhibit to the Registrant's Form 10-Q for the
quarter ended June 30, 1996. The exhibit number in such Form 10-Q is
Exhibit 1.
(c) These exhibits were filed as exhibits to the Registrant's Form 10-K for the
year ended December 31, 1994. The exhibit numbers in such Form 10-K are as
follows: Employee Pension Plan, Exhibit 2; Amendment No. 2 to Employee's
Stock Ownership Plan, Exhibit 3; Loan Agreement with Dan K. Wassong,
Exhibit 4; 401(k) Plan, Exhibit 5; Supplemental Executive Retirement Plan,
Exhibit 6.
(d) This exhibit was filed as an exhibit to the Registrant's Form 10-K for the
year ended December 31, 1989. The exhibit number in such Form 10-K is
Exhibit 2.
(e) These exhibits were filed as exhibits to the Registrant's Form 10-K for the
year ended December 31, 1993. The exhibit numbers in such Form 10-K are as
follows: Amendment No. 1 to Employee's Stock Ownership Plan, Exhibit 2; 1984
Stock Option Plan, Exhibit 3; Loan Agreement with Dan K. Wassong dated
August 22, 1984, Exhibit 4; Employment Agreement with Charles J. Hinkaty,
Exhibit 5; Employment Agreement with Harvey P. Alstodt, Exhibit 6;
Employment Agreement with William H. McMenemy, Exhibit 7; Life Insurance
Agreement with Robert H. Haines, as trustee, Exhibit 9.
(f) These exhibits were filed as exhibits to the Registrant's Definitive Proxy
Statement dated May 27, 1999, relating to the Registrant's 1999 Annual
Meeting of Stockholders. The exhibit numbers in such
<PAGE>
Proxy Statement are as follows: 1994 Stock Plan, as amended and restated,
Exhibit A; Annual Incentive Plan, as amended and restated, Exhibit B.
(g) This exhibit was filed on April 1, 1991, as an exhibit to the Registrant's
Form 10-K for the year ended December 31, 1990. The exhibit number in such
Form 10-K is Exhibit 2.
(h) These exhibits were filed as exhibits to the Registrant's Form 10-Q for the
quarter ended September 30, 1997. The exhibit numbers in such Form 10-Q are
as follows: Lease between Registrant and Coliseum Towers Associates,
Exhibit 10.1; Purchase Money Promissory Note with Carver Boat Corporation,
Exhibit 10.2.
(i) These exhibits were filed as exhibits to the Registrant's Form 10-K for the
year ended December 31, 1996, as follows: 10.9 above was filed as Exhibit 1
to the 1996 10-K; 10.19 above was filed as Exhibit 2 to the 1996 10-K; 10.21
above was filed as Exhibit 3 to the 1996 10-K; and 10.24 above was filed as
Exhibit 4 to the 1996 10-K.
(j) These exhibits were filed as exhibits to the Registrant's Form 10-K for the
year ended December 31, 1998, as follows: 10.10 above was filed as
Exhibit 10.32 to the 1998 10-K; 10.25 above as filed as Exhibit 10.29 to the
1998 10-K; 10.26 above was filed as Exhibit 10.30 to the 1998 10-K; and
10.27 above was filed as Exhibit 10.31 to the 1998 10-K.
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF DEL LABORATORIES, INC.
(PURSUANT TO SECTION 242 OF THE DELAWARE GENERAL CORPORATION LAW)
The undersigned, being the Vice President and Secretary of Del
Laboratories, Inc., a corporation duly authorized and existing under the laws of
the State of Delaware (the "Corporation") hereby certify as follows:
1. Article Fourth, Section A of the Restated Certificate of
Incorporation is hereby amended so that such Section reads in
its entirety as follows:
"A. AUTHORIZED CAPITAL STOCK. The total number of
shares of all classes of stock which this Corporation shall
have authority to issue is TWENTY ONE MILLION (21,000,000)
shares, consisting of TWENTY MILLION (20,000,000) shares of
Common Stock, par value $1.00 per share (hereinafter the
"Common Stock") and ONE MILLION (1,000,000) shares of
Preferred Stock, par value $.01 per share (hereinafter, the
"Preferred Stock")."
2. The foregoing amendment was duly adopted by the Board of
Directors and the Stockholders of the Corporation, pursuant to
Section 242(b) of the Delaware General Corporation Law.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 1st day
of June, 1998, and acknowledge under penalty of perjury, that this instrument is
the act and deed of the Corporation, and that the facts stated herein are true.
/s/ Shawn A. Smith
Shawn A. Smith
Vice-President, Secretary
1
<PAGE>
EXHIBIT 10.6
AMENDMENT NO. 1
TO THE
DEL LABORATORIES, INC.
EMPLOYEE 401(K) SAVINGS PLAN
W I T N E S S E T H
WHEREAS, by the provisions of Article X of the Del Laboratories, Inc.
Employee 401(k) Savings Plan ("Plan"), the Employer has the right to amend the
Plan; and
WHEREAS, the Employer wishes to amend and clarify certain provisions of
the January 1, 1989, restatement of the Plan;
NOW THEREFORE, the Plan shall be and it is hereby amended as follows:
FIRST CHANGE
Article 12.02(a) shall be clarified by substituting the following, effective
January 1, 1989:
(a) The highest rate of Profit Sharing Contributions and forfeitures
(determined as a percentage of compensation) allocated to the account of
any Key Employee. However, if the highest rate allocated to a Key Employee
is less than three percent (3%), amounts contributed as a result of a
salary reduction agreement must be included in determining contributions
made on behalf of Key Employees.
SECOND CHANGE
Article 3.03(d) shall be amended by complete deletion.
IN WITNESS WHEREOF, the Employer has executed this amendment to the
Plan this 21st day of December, 1995.
Signed, sealed and delivered in the presence of:
DEL LABORATORIES, INC.
By: s/ Melvyn C. Goldstein
Employer
<PAGE>
EXHIBIT 10.7
AMENDMENT NO. 2
TO THE
DEL LABORATORIES, INC.
EMPLOYEE 401(K) SAVINGS PLAN
WHEREAS, by the provisions of Article X of the Del Laboratories, Inc.
Employee 401(k) Savings Plan ("Plan"), the Employer has the right to amend the
Plan; and
WHEREAS, the Employer wishes to amend certain provisions of the Plan;
NOW THEREFORE, the Plan shall be and it is hereby amended as follows:
FIRST CHANGE
Effective April 1, 2000, Article 1.13 shall be amended to read as follows:
"1.13 "Entry Date" shall mean January 1, April 1, July 1 and October 1."
SECOND CHANGE
Effective April 1, 2000, Article 2.01 shall be amended to read as follows:
"2.01 INITIAL ELIGIBILITY
Each Employee other than Leased Employees or collectively-bargained
employees shall be eligible to become a Participant on the Entry Date following
such Employee's date of hire and attainment of age twenty-one (21) provided he
is still an Employee on the date as of which admission to participate becomes
effective."
THIRD CHANGE
Effective April 1, 2000, Article 3.02(a) shall be amended to read as follows:
"3.02 SALARY REDUCTION CONTRIBUTIONS.
(a) Each Participant may elect to accept a reduction in salary
from the Employer equal to any whole percentage of his
Compensation, from one percent (1%) to twenty percent (20%) of
such Compensation without
<PAGE>
regard to the salary reduction, subject to the right of the
Employer to amend or revoke the Participant's election as
provided in subsection (b) below. The Employer will contribute
to the Trust the amount of each Participant's Salary Reduction
Contribution to be held in the Participant's Account."
IN WITNESS WHEREOF, the Employer has executed this amendment to the
Plan this 16th day of March, 2000.
DEL LABORATORIES, INC.
By s/ Gene Wexler
Authorized Officer of the Employer
<PAGE>
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of July, 1999 by and between
DEL LABORATORIES, INC., a Delaware corporation (the "Corporation"), with
principal offices at 178 EAB Plaza, West Tower, Uniondale, New York, and DAN K.
WASSONG (the "Executive"), residing at 35 East 76th Street, New York, New York.
W I T N E S S E T H:
WHEREAS, the Executive has been and is now in the employ of
the Corporation as its President and Chief Executive Officer and Chairman of the
Board of Directors of the Corporation pursuant to an employment agreement dated
November 13, 1992, and amendments thereto dated March 21, 1994, March 31, 1997
and April 20, 1999 (the "Agreement");
WHEREAS, the Board of Directors of the Corporation has
concluded that the Corporation will be benefited by securing the service of the
Executive; and
WHEREAS, the Corporation and the Executive desire to amend and
restate the Agreement to reflect certain changes to the Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual promises and agreements hereinafter set forth, it is agreed as follows:
<PAGE>
1. EMPLOYMENT.
(a) The Corporation hereby employs the Executive
as its Chairman of the Board of Directors, President and Chief Executive Officer
and the Executive hereby accepts such employment with the Corporation for a term
commencing on the date of this Agreement and expiring on December 31, 2008.
During the term hereof, the Executive will devote his best efforts to such
employment and all of his business time and attention to the performance of his
duties hereunder; provided, however, that the Executive may devote reasonable
periods required for serving as a director or member of any organization
involving no conflict of interest with the interests of the Corporation, so long
as the same does not interfere with the performance of his duties hereunder.
(b) The Executive shall have all of the duties,
responsibilities and authority inherent in the positions of a president, chief
executive officer and chairman of the board of directors. All executives of the
Corporation, its divisions and subsidiaries shall report, directly or
indirectly, to the Executive and shall be subordinate to the Executive. Services
by the Executive shall be rendered in the Greater Metropolitan Area of New York
City, except that the Executive will continue to travel as required by the
business of the Corporation.
(c) The Executive will serve as director of the
Corporation and, at his option, of each of its subsidiaries, and the Executive
will be a member of the executive committee of each such board on which he
serves if an executive committee is created. The Executive will be a member of
all other committees of the Board of Directors of the Corporation, other than
the Stock Option Committee and the Audit Committee or any other committee on
which an officer of the Corporation is not eligible to serve.
2
<PAGE>
(d) Upon the termination of Executive's
employment, except for death, disability or Cause (as hereinafter defined), the
Executive shall have the right, but not the obligation, to serve for a period of
up to five years as a consultant to the Corporation in accordance with the terms
of this Section. During the period of consultancy, the Executive shall be paid,
not less frequently than monthly, an annual amount equal to 60% of his Minimum
Salary (as hereinafter defined) at the time of such termination; to the extent
eligible, he, his spouse, and members of his immediate family under the age of
21 shall continue to be part of the medical reimbursement program of the
Corporation or shall be furnished substantially equivalent coverage; and he
shall be provided with a suitable office with normal support services (including
secretarial services equivalent to those provided on the date of this Agreement)
in the Greater Metropolitan Area of New York City, which office may be at the
Corporation's headquarters, or such other location in the said Area as Executive
may select. During such time that Executive serves as a consultant pursuant to
the provisions hereof, he shall be entitled to the benefits provided under
Section 3 of this Agreement, and, at his election, Executive shall be entitled
to security services as may be appropriately required during the period of
consultancy. The Executive shall be available for consultation during regular
business hours, on adequate notice, in the Greater Metropolitan Area of New York
City, and the Executive shall not be required to travel. The Executive shall
also serve as a director of the Corporation, if requested by the Corporation.
The Executive shall not be required to devote more than 10 business days per
month to the consulting services, and availability by telephone shall constitute
availability for purposes hereof. The consulting services shall be scheduled so
as not to interfere with reasonable vacation and personal plans of the
Executive. During this period, the Executive's services shall be nonexclusive,
but the Executive shall continue to be subject to the provisions of Sections 16
and 17 of this Agreement as if he were continuing in the employ of the
Corporation.
3
<PAGE>
(e) It is understood that Executive may retire
at any time (hereinafter, "Voluntary Retirement").
2. COMPENSATION.
In consideration of his employment hereunder,
(a) The Corporation shall pay to the Executive,
not less frequently than monthly, an annual salary (the "Minimum Salary") as
fixed from time to time by the Board of Directors or its Compensation Committee
during the term of his employment hereunder and, as adjusted in accordance with
the provisions of Section 1(d) above, during any term he serves as a consultant.
The Minimum Salary shall be $723,000 as of January 1, 1999. The Minimum Salary
may be increased from time to time by the Board of Directors or its Compensation
Committee but shall not be decreased thereafter. References to the Minimum
Salary in this Agreement are to the Minimum Salary, as adjusted, in the year in
which the event requiring such reference occurs.
(b) As of the date hereof, the Executive is
indebted to the Corporation as follows:
(i) As of July 1, 1999, the Executive is
indebted to the Corporation in the principal amount
of $1,202,250 (the "Existing Balance"), which is the
remaining principal
4
<PAGE>
balance, as of that date, of loans made by the
Corporation to the Executive in 1984, 1988 and 1990.
Subject to the provisions of subparagraph (iii)
below, the Existing Balance is to be repaid as
follows:
<TABLE>
<CAPTION>
Principal Due Date Amount Due
------------------ ----------
<S> <C>
January 20, 2000 140,000.00
January 20, 2001 140,000.00
January 20, 2002 140,000.00
January 20, 2003 140,000.00
January 20, 2004 140,000.00
January 20, 2005 140,000.00
January 20, 2006 140,000.00
January 20, 2007 140,000.00
January 20, 2008 82,250.00
</TABLE>
(ii) The interest rate applicable to the
Existing Balance shall be 6% per annum. All interest
accrued through any Principal Due Date shall be
payable on such date.
(iii) Notwithstanding anything to the
contrary set forth in (i) above, the Corporation
agrees to forgive any principal and interest payments
required to be made in respect of the Existing
Balance as provided in (i) above so
5
<PAGE>
long as the Executive is employed by the Corporation
under this Agreement at the time any such payment is
due or he is serving as a consultant to the
Corporation pursuant to Section 1(d) hereof, or if he
is neither employed by the Corporation under this
Agreement nor serving as a consultant, his employment
was not terminated for Cause. Furthermore, the
Corporation may, but is not required to, forgive in
any calendar year amounts in excess of the principal
and interest payments due during that year. In the
event the Corporation forgives in any year any
principal amount in excess of the principal required
to paid in that year as set forth in subparagraph (i)
above, such excess amount shall be applied to the
principal payments in the inverse order in which they
are due. In the event the Corporation forgives any
principal or interest in accordance with the
provisions of this subparagraph, the Corporation
shall also pay to the Executive such additional
payment or payments (a "Gross-Up Payment") in an
amount such that, after payment by the Executive of
all federal, state and local income and excise taxes,
if any, including any such taxes imposed on the
Gross-Up Payment, Executive retains an amount of the
Gross-Up Payment equal to such taxes imposed on the
principal and interest forgiven.
6
<PAGE>
(iv) If the Executive's employment is
terminated for Cause, the then outstanding principal
amount of the Existing Balance plus all accrued
interest thereon, to the extent not previously
forgiven, shall be repaid in accordance with the
schedule of payments set forth in (b)(i) hereof.
(v) As collateral security for the due and
punctual payment of the Existing Balance, interest
thereon and costs and expenses, if any, incurred by
the Corporation in the collection of amounts due from
the Executive, Executive has pledged a total of
87,077 shares of Common Stock of the Corporation (the
"Collateral Security"), which Collateral Security has
a fair value of not less than 110% of the Existing
Balance. So long as Executive is in compliance with
all terms and provisions of this Agreement and any
loan agreements or other documents applicable to any
of the loans comprising the Existing Balance, it will
release to Executive, at Executive's request, as much
of the Collateral Security in exchange for other
collateral or, upon reduction of the unpaid
principal, so much of the Collateral Security it then
holds as will continue to provide the Corporation
with Collateral Security having a fair value at the
time of release or exchange of not less than 110% of
the then Existing Balance. In the event the fair
value of the Collateral Security is at any time less
than 110% of the
7
<PAGE>
then Existing Balance, the Executive will, upon
demand made by the Corporation, deliver additional
collateral security, in form reasonably satisfactory
to the Corporation (which may be shares of Common
Stock of the Corporation), such that the Collateral
Security will have a fair value of not less than 110%
of the then Existing Balance.
(vi) In the event of any conflict between
the terms and provisions of this paragraph (b) of
Section 2 of this Agreement and the terms and
provisions of any loan document or other agreement or
document concerning the above-discussed indebtedness
of the Executive to the Corporation, the terms and
provisions of this paragraph (b) shall be
controlling.
3. BENEFITS AND EXPENSES.
(a) The Corporation will reimburse the Executive
for all reasonable and necessary business and entertainment expenses incurred by
him in connection with the performance of his duties hereunder. To the extent
such expenses include air travel by the Executive, such travel will be at
business class or better. In the event that any Federal, state or local
government agency or authority determines that any such expenses which are
reimbursed to
8
<PAGE>
the Executive constitute taxable income to the Executive, the Corporation
agrees, to the extent that such determination involves the Executive and
provided the Audit Committee of the Board of Directors approves, to reimburse
the Executive (i) for all costs in disputing such action, including counsel
fees, and (ii) for all taxes and penalties incurred by the Executive in
connection with such action.
(b) The Corporation shall furnish to the
Executive, for his sole use in connection with company business, a suitable
automobile comparable to the automobile heretofore furnished to the Executive.
The Corporation shall pay for all of the operating costs, including a chauffeur,
maintenance and storage costs of such automobile comparable to the automobile
heretofore furnished to the Executive. The Corporation shall keep both the
automobile and the chauffeur fully insured against any and all liabilities for
injuries to passengers or other persons and damages to property, including the
automobile.
(c) The Corporation shall reimburse Executive
for reasonable legal and accounting fees which he may incur in connection with
the preparation and periodic review of: his estate plan; tax planning; tax
returns; and this Employment Agreement and related employment arrangements.
4. BENEFIT PLANS.
The Executive shall be eligible to participate in any employee
benefit programs generally made available to senior executives of the
Corporation which are now or may hereafter be placed in effect.
9
<PAGE>
5 STOCK OPTIONS OR OTHER SIMILAR BENEFITS.
(a) With respect to shares of Common Stock of
the Corporation which may be acquired by the Executive pursuant to options or
rights heretofore or hereafter granted to him, the Corporation agrees that, to
the extent permitted by applicable law, at the Executive's request, the
Corporation will lend or cause to be lent to the Executive funds sufficient to
enable him to pay (i) the exercise price on such options or rights from time to
time up to the total number of shares covered by said options or rights and (ii)
any applicable federal, state and local income taxes incurred by the Executive
as a result of the exercise of such options and rights. Such loans may be
secured or unsecured, at the Corporation's discretion, but if secured, the
Corporation agrees that shares of its Common Stock, taken at market value at the
time, will be accepted by the Corporation as adequate security, subject to
applicable Federal, state or local governmental or agency laws, rules or
regulations. The term of each loan shall be for a term to be fixed by the Board
of Directors. Interest on any such loan, if charged by the Corporation, shall be
at an appropriate rate as determined by the Board of Directors, not exceeding
the prime rate of the Corporation's principal banking institution prevailing at
the time and from time to time thereafter. All of the other terms of such loan
or loan shall be as mutually agreed.
(b) The Corporation also agrees, at the
Executive's request, to use its best efforts to cause a registration statement
to become effective with respect to shares which the Executive may purchase
pursuant to said options or rights in order that the Executive may sell such
shares to the public, provided (i) the Executive shall not request such
registration statement with respect to shares subject to restrictions on sale or
transfer imposed by the terms of any stock
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options or rights until such restrictions shall have ceased to be effective,
(ii) at the Corporation's election, such registration statement may include, as
well, other securities of the Corporation and the securities of other persons
employed by the Corporation, (iii) such request shall not be made more
frequently than once in any 12 months period, and (iv) the Executive's request
for such registration statement shall not require the Corporation to use audited
financial statements other than those regularly prepared for it by its
independent public accountants and auditors unless the Executive agrees to bear
the cost of auditing such statements PRO RATA with other persons selling
securities. Except as set forth in (iv) above, the Corporation shall bear all
expenses in connection with such registration statement.
(c) In addition to the foregoing and any other
rights which Executive may have under each of the 1984 Stock Option Plan and the
1994 Stock Option Plan, and in addition to any other options granted to replace
shares of stock of the Corporation sold to pay the exercise price and
withholding taxes on options exercised, and any other plan in which Executive
may be entitled to participate, the Executive shall receive options to purchase
40,000 shares of stock of the Corporation during each calendar year, the first
such grant to be made on the date of the ratification of this Agreement by the
Board of Directors of the Corporation, July 29, 1999, and each subsequent grant
each calendar year to be made at such time and on such terms as may be
determined by the Board of Directors. The Executive's right under the foregoing
sentence to receive options shall apply only so long as the Executive is
employed by the Corporation under this Agreement. Furthermore, any such options,
as well as any options held by the Executive pursuant to the 1994 Stock Option
Plan shall be made transferrable pursuant to whatever actions are required to be
taken by the Compensation Committee.
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(d) This section shall apply to the executors,
heirs or legal representatives of the Executive to the extent such executors,
heirs or legal representatives succeed to the right of Executive to acquire
shares of Common Stock of the Corporation.
6. VACATIONS.
The Executive shall be entitled to such vacations, at such
times and for such periods, as are in accordance with the vacation policies of
the Corporation then in effect for senior executives employed by the
Corporation, but in no event shall Executive be entitled to fewer than five
weeks of vacation per year. The Executive shall not be required to take any
vacation time to which he is entitled in a given year. In the event the
Executive does not take all of the vacation time to which he is entitled in a
given year, such vacation time will be deferred and accumulated for use by the
Executive in a subsequent year up to a total of ten weeks of vacation time.
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7. INSURANCE.
(a) The Corporation has assisted in obtaining
and shall during the Executive's employment hereunder, keep in effect and pay
premiums upon insurance on the life of the Executive (the "Insurance") as
described herein. The Insurance, Massachusetts Mutual Policy Number 8853985 and
New York Life Insurance Policy Number 44864449, is owned by, and payable to
Robert H. Haines, Trustee (or his Successors) under a Trust Agreement dated
2/18/93 established by the Executive. The Corporation has paid since 1993 and
will continue to pay sufficient premiums in substantially equal installments
over a ten year period to fund the Insurance to the point that no further
premiums shall thereafter be necessary, provided that, if it is determined at
any time that such premiums are insufficient to provide the required death
benefit as set forth below, then additional premiums shall be paid by the
Corporation to maintain the required death benefit. The Insurance has been
purchased on a "split dollar" basis, so that upon the death of the Executive,
the Corporation, pursuant to Split Dollar and Collateral Assignment Agreements,
will be entitled to receive out of the proceeds of insurance the amount which it
has spent on premiums. The Insurance will have a death benefit of no less than
$4,000,000, provided that the Corporation will pay such additional premiums as
may be necessary to provide a net death benefit payable to the aforesaid Trust
of no less than $2,000,000 after subtraction of the amount which must be repaid
to the Corporation. The Corporation will be required to make premium payments
irrespective of whether the Executive is employed by the Corporation, except if
Executive's employment has been terminated for Cause.
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(b) Amounts payable upon the Executive's death
pursuant to this Section 7 are in addition to benefits payable pursuant to a
Group Life Insurance program which is or may be established and maintained by
the Corporation for which the Executive is eligible.
(c) The Executive agrees to submit to any
physical examination required by any prospective insurer, and will otherwise
cooperate with the Corporation in connection with any life insurance on the
Executive's life the Corporation may wish to obtain.
8. TERMINATION OF EMPLOYMENT.
(a) The Executive's employment shall terminate
hereunder upon any of the following events:
(i) Voluntarily termination by the
Executive, including Voluntary Retirement;
(ii) Termination for Cause
(as hereinafter defined);
(iii) Termination by reason of the
Executive's mental or physical disability (as
hereinafter defined);
(iv) Termination by reason of the
Executive's death; or
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(v) Termination upon expiration of the
term of employment set forth in Section 1(a) of this
Agreement or any renewal term.
(b) "Cause" for purposes hereof shall be deemed
to exist if:
(i) The Executive is convicted of, or
pleads NOLO CONTENDERE to, any crime or offense
involving theft or diversion of monies or other
property of the Corporation which conviction or
plea, through lapse of time or otherwise, is not
subject to appeal and which constitutes a felony in
the jurisdiction involved; or
(ii) Material breach by the Executive of
any provision of this Agreement, provided that such
breach continues for thirty business days after
delivery of notice to him of the facts on which the
Corporation bases a claim for a material breach.
Such notice shall be given only if approved by a
majority of the members of the Board of Directors,
not including the Executive for determining a
majority.
(iii) If the Executive is indicted for a
crime or offense, the conviction or NOLO CONTENDERE
plea of which
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would be grounds for termination for Cause, his
employment may be suspended until the charges are
dropped or he is acquitted. Such suspension and its
term shall be determined by a majority of the
members of the Board of Directors, not including the
Executive for determining a majority. During such
period of suspension all of the provisions of this
Agreement, including those relating to the
compensation of the Executive, shall continue in
full force and effect, except that the Executive
shall not act as Chairman of the Board of Directors,
President or Chief Executive Officer, and he shall
be available on reasonable notice at reasonable
times for consultation on the business and affairs
of the Corporation.
(c) The Executive may elect, by notice to the
Corporation in accordance with the provisions of paragraph (f) of this
Section 8, to treat the following acts or omissions by the Corporation to which
he has not given his express consent as termination of Executive's employment
without Cause:
(i) Subject to the provisions of the
foregoing Section 8(b)(iii), if he is not elected
and continued as a director of the Corporation and
appointed Chairman of the Board of Directors,
President and Chief Executive Officer.
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(ii) With respect to acts or omissions
other than those specifically stated in this
paragraph (c), if the Corporation shall not
substantially comply with its obligations under this
Agreement and such failure shall not be corrected
within ten business days after delivery of notice to
the Corporation of the facts on which the Executive
bases a claim of non-compliance.
(iii) The assignment to the Executive of
any duties inconsistent with his position as
Chairman of the Board of Directors, President and
Chief Executive Officer.
(iv) A relocation of the Executive's
office to a place other than the Greater
Metropolitan Area of New York City.
(v) A charge of material breach by the
Corporation under Section 8(b)(ii) hereof which is
determined by final judgment to have been made
without adequate basis in law or fact.
(vi) The sale by the Corporation of all
or substantially all of its assets and business or a
merger or consolidation of the Corporation with a
company other than
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a subsidiary of the Corporation in which the
shareholders of the Corporation, prior to the merger
or consolidation, own less than a majority of the
company surviving such merger or consolidation.
(vii) A change in control (as hereinafter
defined) of the Corporation.
(d) "Mental or physical disability" shall be
deemed to exist if, in the judgment of a physician licensed to practice in the
State of New York, mutually selected by the Board of Directors and the Executive
(or his representative), the Executive has been unable or will be unable, due to
mental or physical incapacity, disease or injury, to perform the duties or
services specified herein for a period of not fewer than 180 consecutive
calendar days. For purposes of this Agreement, the date of such disability shall
be the date of the determination by such physician.
(e) For purposes hereof, a "change in control"
shall be deemed to have occurred if, at any time prior to the expiration or
termination of this Agreement, voting power representing more than 40% of the
Corporation's outstanding Common Stock (or equivalent in voting power of any
class or classes of outstanding securities of the Corporation ordinarily
entitled to vote in elections of directors) shall be acquired, directly or
indirectly, by any individual, corporation or group, other than persons who are
members of the Board of Directors at the date hereof or who succeed to the
ownership of securities of the Corporation of any such members of the Board as
executor, administrator, heir or intestate distributee of such persons.
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"Group" shall mean persons who act in concert as described in Section 14(d) (2)
of the Securities Exchange Act of 1934, as amended. "Change in control" shall
not include increases in the percentage of voting power of persons who
beneficially own or control stock on the date of this Agreement which occur
solely as a result of a reduction in the amount of stock outstanding.
(f) The notice required by paragraph (c) of
this Section 8 shall be given within 60 days of the occurrence of a described
event which is not required to be reported on a Schedule 13D or Schedule 14D or
equivalent, or within 90 days after the filing of a report on Schedule 13D or
Schedule 14D or equivalent, reporting the event on which the Executive elects to
claim a termination without Cause.
9. COMPENSATION AFTER TERMINATION OF EMPLOYMENT.
(a) In the event the term of Executive's
employment expires pursuant to Section 1(a) hereof or in the event the
Executive's employment is terminated hereunder prior thereto for any reason, the
Corporation shall have no further obligations or duties to the Executive, except
as provided in Sections 1(d), 2(b), 3, 5, and 7 hereof and except that the
Executive shall be entitled to receive:
(i) All salary due and owing to the
Executive up to the termination or expiration date,
as the case may be (hereinafter collectively referred
to as the "Termination Date"), and any bonus or
incentive compensation for any year prior to the
Termination Date which has not been paid,
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and any bonus or incentive compensation for the year
of termination, prorated to the Termination Date,
provided that, if such bonus or incentive
compensation is discretionary in amount, the
Executive shall receive a payment for any year at
least equal to the last previous bonus or incentive
compensation payment made to him, which amount
shall, in the case of a bonus or incentive
compensation for the year of termination, be
prorated to the Termination Date. Any bonus payable
to the Executive over a number of years shall be
accelerated and paid in full on the Termination
Date,
(ii) Expense reimbursements due and owing
to the Executive as of the Termination Date, plus
payment for accrued vacation as of the Termination
Date at the Minimum Salary,
(iii) Payment, in accordance with prior
Corporation practice, and subject to the provisions
of Section 7, of life insurance premiums through the
Termination Date and of all benefits accrued for the
account of the Executive under the Corporation's
Employee Stock Ownership Plan, Pension Plan, Annual
Incentive
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Bonus Plan and Supplemental Executive Retirement
Plan as of the Termination Date,
(iv) Unless termination of Executive's
employment is for Cause, the Corporation shall
continue to pay during Executive's lifetime premiums
for health insurance which is substantially the same
as the health insurance provided to Executive of the
Termination Date, and
(v) Any monies owing to the Executive
pursuant to subsection (b) below.
(b) (i) In the event that the Executive's employment
under this Agreement is terminated other than for
Cause, he shall be entitled to receive for a number
of months equal to one month for each year he was
employed by the Corporation and its predecessors,
compensation at the Adjusted Compensation Rate, as
hereinafter defined. Such amount shall be paid
semi-monthly in equal installments over the same
number of months as determined in the preceding
sentence. "Adjusted Compensation Rate" shall mean the
sum of the Minimum Salary on the Termination Date and
110% of the amount of the bonus paid during the year
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preceding the Termination Date, excluding the amount,
if any, of loans forgiven during the year. Any such
payment is hereinafter referred to in this Agreement
as the "Deferred Compensation". Payment shall begin
on the first regular salary payment date during the
month after the month in which the Executive elects
Voluntary Retirement.
(ii) In the event of the termination of
employment due to the Executive's death, the
Corporation shall pay to his designated beneficiary
(as hereinafter defined) the Deferred Compensation,
provided that such Deferred Compensation shall not be
paid over the period set forth in (i) above, but
shall be paid semi-monthly in twelve equal
installments, commencing on the Termination Date.
(iii) In addition to the Deferred
Compensation, in the event the Executive's employment
under this Agreement is terminated other than for
Cause, in consideration of Executive's services and
obligations hereunder, including, where applicable,
his covenant not to compete with the Corporation set
forth in Section 17, the Corporation shall pay to the
Executive or his designated beneficiary, on the
Termination Date, a lump sum equal to
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his annual Minimum Salary on the Termination Date
multiplied by the greater of (i) the number of years
remaining in the balance of the term of Executive's
employment under this Agreement or any renewal or
extension hereof, or (ii) four years. Executive or
his designated beneficiary shall also be entitled to
receive the Deferred Compensation commencing on the
Termination Date. For purposes of this subsection
(iii), years remaining in the balance of the term of
Executive's employment shall be calculated on a
calendar year basis, and part of a calendar year
shall be deemed to be a full year.
(iv) Notwithstanding anything in this
Agreement or in any stock option agreement between
the Company and the Executive to the contrary, if the
Executive's employment under this Agreement is
terminated other than for Cause, then, at the
Executive's election (or the election of his
designated beneficiaries), Corporation will pay to
the Executive (or his designated beneficiaries) as
additional compensation the excess of the market
value at the close of business on the Termination
Date of up to all shares of stock which the Executive
had an option to acquire from the Corporation on such
date over the option price for such shares; and such
options shall terminate.
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(v) In the event the term of Executive's
employment under this Agreement expires without the
execution of a new agreement of employment (or
extension of this Agreement), or his employment
continues after December 31, 2008, without the
execution of a new agreement of employment (or the
extension of this Agreement) and thereafter
terminates at any time and for any reason, such
termination shall be deemed, for purposes of this
Section 9(b) to be a termination of Executive's
employment under this Agreement without Cause
entitling him or his designated beneficiary to
payments hereunder.
(vi) For purposes of calculating the
Deferred Compensation under this Section 9(b), the
number of years the Executive will be deemed to have
been employed by the Corporation and its predecessors
shall be calculated on a calendar year basis
commencing with the year 1965. For purposes of
computing the Deferred Compensation, if Executive is
employed for part of a calendar year, he shall be
credited with a full year's employment with the
Corporation for each such year. For purposes of any
calculation set forth above, the Executive shall not
be deemed to be in the employ of the Corporation for
any
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period during which he is paid pursuant to this
Section 9(b).
(vii) In the event the Executive dies
during the period he is receiving any monies
pursuant to this Section 9(b), or in the event any
monies are payable pursuant to this Section 9(b)
commencing upon the Executive's death, the monies
due shall be paid by the Corporation to such person
or persons as may be designated in writing from time
to time by the Executive, or in the absence of any
such designation to the personal representatives of
his estate. (For purposes of this Section 9(b), any
such payee shall be referred to as the "designated
beneficiary").
10. APPLICABLE LAW.
This Agreement is to be governed by and interpreted
in accordance with the laws of the State of New York applicable to agreements
made and to be performed wholly within such State, except with respect to the
powers of the Corporation, which are governed by Delaware law.
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11. AMENDMENT OF PLANS.
Notwithstanding anything to the contrary herein, nothing
herein is intended to or shall operate to restrict the right of the Corporation
to amend, terminate or modify, in accordance with the terms hereof, any employee
benefit programs or practices heretofore or hereafter adopted by the
Corporation.
12. ASSIGNMENT.
This Agreement shall be binding upon the parties hereto, their
heirs, successors and assigns, except as otherwise set forth herein. This
Agreement is personal in nature and may not be assigned by either party except
that, subject to the provisions of Section 8(c) herein, the Corporation will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Corporation to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform as if no such succession had taken place. Notwithstanding
the foregoing sentence, the Corporation shall not by virtue of any such
succession be relieved of any obligations hereunder.
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13. INDEMNIFICATION.
To the fullest extent not inconsistent with applicable law, in
the event that the Executive is a 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, by reason of the fact that he is or
was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, the Corporation shall indemnify the Executive and hold him harmless,
against all expenses (including costs and 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 the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the Executive did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interest of the
Corporation, or that, with respect to any criminal action or proceeding, the
Executive had reasonable cause to believe that his conduct was unlawful. The
provisions of this Section 13 shall not be deemed exclusive of any other rights
of indemnification to which the Executive maybe entitled or which may be granted
to him, and it shall be in addition to any rights of indemnification to which he
may be entitled under any policy of insurance. These provisions shall continue
in effect after the Executive has ceased to be a director, officer, employee or
agent of the Corporation and shall inure to the benefit of Executive's heirs,
executors, administrators and intestate distributees.
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All litigation or inquiries by third parties (for example, but
not limited to, those by shareholders - direct or derivative - or government
agencies) arising out of or in connection with this Agreement or Executive's
performance hereunder, against either the Corporation or the Executive or both,
shall be defended or opposed by the parties hereto, as the case may be, to
support this Agreement, and the costs, fees and expenses thereof, including fees
of counsel for the parties, shall be borne by the Corporation.
Notwithstanding the foregoing provisions of this Section 13,
during the term of Executive's employment hereunder and during such time he
continues as an officer or member of the Board of Directors, the Corporation
agrees to maintain substantially the same Directors' and Officers' liability
insurance in place on the date hereof.
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14. ARBITRATION.
Any controversy or claim between the Corporation and
Executive, their representatives, heirs, successors and assigns, arising out of
or relating to this Agreement or any breach or asserted breach hereof or
questioning the validity and binding effect hereof shall be determined by
arbitration conducted in New York City in accordance with the Rules of the
American Arbitration Association then obtaining, and judgment upon any award
rendered may be entered in any court having jurisdiction thereof. The decision
of the arbitrators shall be final and binding upon the parties hereto. All of
the Executive's costs and expenses (including attorneys, fees) arising out of or
in connection with any matters submitted to arbitration pursuant to this Section
14 shall be paid by the Corporation, unless the award of the arbitrators shall
explicitly find that the Executive's claim or his defense against a claim by the
Corporation was frivolous and completely without merit, in which case the
Executive shall pay the costs and expenses (including, without limitation,
reasonable attorneys, fees) incurred by the Corporation in such connection.
15. NOTICES.
Any notice or other communication required to or which may be
given to any party hereunder shall be in writing and shall be deemed given
effectively if delivered personally to such party (or any officer thereof in the
case of the Corporation except that any notice to be given by the Executive to
the Corporation shall be to an officer other than himself) or if mailed, by
registered or certified mail, postage prepaid, return receipt requested,
addressed to such other
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party at the address first set forth above. Any party may change the address to
which notices are to be sent by giving written notice of any such change in the
manner provided herein.
16. CONFIDENTIAL INFORMATION.
(a) The Executive recognizes that as an
executive of the Corporation he has had and will have access to secret and
confidential information regarding the Corporation, its products, customers and
plans. The Executive acknowledges that such information is of great value to the
Corporation, and is the sole property of the Corporation and that such
information has been and will be acquired by him in confidence. In consideration
of the obligations undertaken by the Corporation as set forth herein, the
Executive will not, at any time, during or after his employment hereunder,
reveal, divulge or make known, except as authorized by the Corporation or
required on its behalf or required pursuant to legal or administrative
processes, any information of a confidential nature concerning the Corporation
acquired by the Executive during the course of his employment.
(b) The Executive agrees that any breach or
threatened breach by him of any provisions of this Section 16 shall entitle the
Corporation, in addition to any other legal and equitable remedies available to
it, to apply to any court of competent jurisdiction to enjoin such breach or
threatened breach without the posting of any bond or any security.
(c) This Section 16 shall survive the
termination of the Executive's employment hereunder.
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17. COVENANT NOT TO COMPETE.
(a) The Executive recognizes that the services
to be performed by him hereunder are special, unique and extraordinary. The
parties confirm that it is reasonably necessary for the protection of the
Corporation that the Executive agree, and accordingly, the Executive does hereby
agree that he will not, directly or indirectly, except for the benefit of the
Corporation, at any time during his employment hereunder and thereafter during
the Restricted Period, as hereinafter defined, provided the Corporation shall
duly perform its obligations to the Executive pursuant to this Agreement:
(i) Become an officer, director,
stockholder, partner, associate, employee, owner,
agent, creditor, independent contractor, co-venturer
or otherwise, or be interested in or associated with
any other corporation, firm or business engaged, in
any geographical area in which the Corporation is
engaged, in making or selling one or more products
competitive with a product or products made or sold
by Corporation now or during the term of this
Agreement, which products made or sold by the
Corporation accounted for at least 5% of
Corporation's annual sales for any year during such
period;
(ii) Solicit, cause or authorize,
directly or indirectly, to be solicited for or on
behalf of himself or third
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parties, from parties who were customers of the
Corporation at any time within one year prior to the
cessation of his employment hereunder, any business
competitive to the business transacted by the
Corporation with such customer,
(iii) Accept or cause or authorize,
directly or indirectly, to be accepted for or on
behalf of himself or third parties, any such
business from any such customers of the Corporation
as defined in the preceding subsection;
(iv) Solicit, or cause or authorize,
directly or indirectly, to be solicited for
employment for or on behalf of himself or third
parties, any persons who were at any time within one
year prior to the cessation of his employment
hereunder, employees of the Corporation;
(v) Employ or cause or authorize,
directly or indirectly, to be employed for or on
behalf of himself or third parties, any such
employees of the Corporation; or (vi) Take any
public position contrary to a public position taken
by the Board of Directors of Corporation, provided
that the foregoing shall not apply to actions taken
by the Executive to enforce his rights under this
Agreement
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or to testimony or the production of documents by
the Executive which may be required by legal
process.
(b) The Executive agrees that any breach or
threatened breach by him of any provisions of this Section 17 shall entitle the
Corporation, in addition to any other legal or equitable remedies available to
it, to apply to any court of competent jurisdiction to enjoin such breach or
threatened breach without the posting of any bond or any security. If any of the
restrictions contained herein shall be deemed to be unenforceable by reason of
the extent, duration or geographical scope thereof, or otherwise, then the court
making such determination shall have the right to reduce such extent, duration,
geographical scope, or other provisions hereof, and in its reduced form this
paragraph shall then be enforceable in the manner contemplated hereby.
(c) This Section 17 shall not be construed to
prevent the Executive from owning in the aggregate an amount not exceeding three
per cent (3%) of the issued and outstanding voting securities of any class of
any corporation whose voting capital stock is traded on a national securities
exchange or in the over-the-counter market. For this purpose "outstanding voting
securities" shall be deemed to include the voting securities issuable upon
conversion of a corporation's outstanding convertible securities, whether or not
immediately convertible, and the voting securities of a corporation issuable
upon exercise of outstanding warrants and options to acquire voting securities,
whether or not immediately exercisable, and "voting securities" of a corporation
shall be deemed to include securities convertible into or exercisable for voting
capital stock, valued at the number of shares such securities are
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convertible into or exercisable for the purpose of determining percentage
ownership of outstanding voting securities.
(d) The term "Restricted Period" as used in this
Section 17 shall mean the longer of (i) one year, and (ii) any period during
which the Executive is entitled to compensation hereunder pursuant to the
provisions of Section 1(d) or 2(a) hereof, including compensation payable while
Executive serves as a consultant to the Corporation pursuant to Section 1(d)
hereof, or would be so entitled but for action on the Executive's part which
relieves the Corporation of its obligations.
(e) This Section 17 shall survive the termination
of the Executive's employment hereunder for the period provided in
paragraph (d).
(f) Notwithstanding anything in this Agreement
to the contrary, if the Executive violates any of the provisions of paragraph
(a) hereof during the Restricted Period and fails to cease such violation and to
remedy the consequences of such violation within ten days after notice from the
Corporation specifying such violation and if the Corporation obtains a final
judgment from a court of competent jurisdiction to the effect that the Executive
has violated a provision of paragraph (a) and has failed to cease such violation
and to remedy the consequences of such violation within ten days after notice
from the Corporation, all obligations of the Corporation to compensate the
Executive and forgive indebtedness of the Executive to the Corporation shall
cease, and the Corporation shall be entitled to recover from the Executive
compensation received by the Executive and any indebtedness forgiven while such
violation existed.
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18. MODIFICATION.
The foregoing is the entire agreement between the parties
relating to the subject matter hereof and supersedes all prior agreements. This
Agreement may not be altered, modified, changed or discharged and none of the
provisions hereof may be waived except in writing, signed by the party to be
charged therewith. A failure strictly to enforce any of the terms of this
Agreement shall not be deemed to be a waiver of the right to enforce any such
term at any subsequent time.
19. MISCELLANEOUS.
(a) The Executive acknowledges that the remedy
at law for any material breach or threatened material breach by him of the
performance of his obligations hereunder will be inadequate and that the
Corporation shall be entitled to injunctive relief therefor.
(b) The Corporation recognizes that a
termination without Cause will subject the Executive to losses and damages, the
amount of which might not readily be determined, and that there exist only a
limited number of employment opportunities comparable in stature, compensation
and opportunity to employment as the Chief Executive Officer of the Corporation.
Therefore, the Executive shall not be required to seek or accept employment in
mitigation of any obligations of the Corporation arising by reason of his
termination without cause.
35
<PAGE>
20. SECTION HEADINGS.
The headings or titles of the sections of this Agreement are
not a part of this Agreement and are not intended to aid in the construction of
any provision thereof.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals the day and year first above written.
ATTEST: DEL LABORATORIES, INC.
/s/ Shawn A. Smith By: /s/ Steven Kotler
- --------------------------- ---------------------------------
, Chairman
Compensation Committee
WITNESS:
/s/ Shawn A. Smith /s/ Dan K. Wassong
- --------------------------- -------------------------------------
Dan K. Wassong
36
<PAGE>
EXHIBIT 10.22
DEL LABORATORIES, INC.
565 Broad Hollow Road
Farmingdale, NY 11735
516-844-2000
December 30, 1997
Mr. Harvey P. Alstodt
c/o Del Laboratories, Inc.
565 Broad Hollow Road
Farmingdale, NY 11735
Dear Harvey:
This will confirm that your Employment Agreement, as amended, is hereby
further amended and extended as follows:
1. The term of the Agreement is hereby extended to March 31, 2001.
2. Your annual base salary shall not be less than $250,000 per year.
3. You agree that you will give Del at least one hundred twenty (120) days'
notice prior to any voluntary termination of your employment hereunder.
4. The following new paragraph 16 is hereby added to the Agreement:
Except as set forth in Paragraphs 6 and 7 of this Agreement, any claim or
controversy arising out of or relating to this Agreement, or any breach
thereof, or otherwise relating to your employment, compensation and
benefits with the Company, or the termination thereof, shall be settled by
arbitration in New York, New York in accordance with the rules established
by the American Arbitration Association; provided, however, that you and
Del agree that (i) the arbitrator shall be prohibited from disregarding,
adding to or modifying the terms of this Agreement; (ii) the arbitrator
shall be required to follow established principles of substantive law and
the law governing burdens of proof; (iii) only legally protected rights may
be enforced in arbitration; (iv) the arbitrator shall be without authority
to award punitive or exemplary damages; (v) the arbitrator shall be an
attorney licensed to practice law in New York who has experience in similar
matters; and (vi) any demand for arbitration must be filed and served, if
at all, within 180 days of the occurrence of the act or omission complained
of. Any claim or controversy not submitted to arbitration in accordance
with this Paragraph 18 shall be considered waived and, thereafter, no
arbitration panel or tribunal or court shall have the power to rule or make
any award on any such
<PAGE>
claim or controversy. The award rendered in any arbitration proceeding held
under this Agreement shall be final and binding, and judgment upon the
award may be entered in any court having jurisdiction thereof, provided it
conforms to established principles of law and is supported by substantial
record evidence.
Please indicate your acceptance of the foregoing by signing a copy of this
letter in the space indicated below and returning it to me.
Very truly yours,
Dan K. Wassong
Chairman of the Board, President
and Chief Executive Officer
AGREED AND ACCEPTED:
- -------------------------
Harvey P. Alstodt
<PAGE>
EXHIBIT 10.32
AMENDMENT TO LOAN AGREEMENT
THIS AMENDMENT AGREEMENT ("Amendment") made this 25th day of February,
2000 among DEL LABORATORIES, INC., a Delaware corporation, having its principal
place of business at 178 EAB Plaza, Uniondale, New York 11556 (the "Borrower"),
DEL PHARMACEUTICALS, INC., a Delaware corporation, having its principal place of
business at 178 EAB Plaza, Uniondale, New York 11556 ("DPI"), PARFUMS
SCHIAPARELLI, INC., a New York corporation, having its principal place of
business at 178 EAB Plaza, Uniondale, New York 11556 ("Parfums"), ROYCE & RADER,
INC., a Delaware corporation, having its principal place of business at 178 EAB
Plaza, Uniondale, New York 11556 ("Royce"), 565 BROAD HOLLOW REALTY CORP., a New
York corporation, having its principal place of business at 178 EAB Plaza,
Uniondale, New York 11556 ("565"), (DPI, Parfums, Royce and 565, individually a
"Guarantor" and collectively, the "Guarantors") and THE CHASE MANHATTAN BANK, as
agent for the Lenders (as defined herein), a New York banking corporation,
having an office at 395 North Service Road, Suite 302, Melville, New York 11747
(the "Agent"), THE CHASE MANHATTAN BANK, a New York banking corporation, having
an office at 395 North Service Road, Suite 302, Melville, New York 11747
("Chase" or a "Lender") and EUROPEAN AMERICAN BANK, a New York banking
corporation, having an office at 730 Veterans Memorial Highway, Hauppauge, New
York 11787 ("EAB" or a "Lender") hereby agree as follows:
W I T N E S S E T H :
WHEREAS, the Borrower, the Guarantors and Chase had entered into a Loan
Agreement dated as of the 30th day of December, 1998 as amended by certain
amendments thereto dated June 10, 1999 and November 12, 1999 (hereinafter the
"Agreement"); and
WHEREAS, the Borrower, the Guarantors and Chase desire to amend the
Agreement to among other things, (i) add EAB as a lender, (ii) provide for Chase
to act as the Agent (as defined in the Agreement), (iii) increase the amounts
available under the Agreement, (iv) provide the Lenders with certain Collateral
(as defined in the Agreement) and (v) other changes as the parties may agree.
NOW, THEREFORE, in consideration of Ten ($10.00) Dollars and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower, the Guarantors, the Agent and the Lenders do hereby
agree to amend and restate the Agreement to read in its entirety as follows:
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT
Dated as of February 25, 2000
DEL LABORATORIES, INC., a Delaware corporation, having its principal
place of business at 178 EAB Plaza, Uniondale, New York 11556 (the "Borrower"),
DEL PHARMACEUTICALS, INC., a Delaware corporation, having its principal place of
business at 178 EAB Plaza, Uniondale, New York 11556 ("DPI"), PARFUMS
SCHIAPARELLI, INC., a New York corporation, having its principal place of
business at 178 EAB Plaza, Uniondale, New York 11556 ("Parfums"), ROYCE & RADER,
INC., a Delaware corporation, having its principal place of business at 178 EAB
Plaza, Uniondale, New York 11556 ("Royce"), 565 BROAD HOLLOW REALTY CORP., a New
York corporation, having its principal place of business at 178 EAB Plaza,
Uniondale, New York 11556 ("565"), (DPI, Parfums, Royce and 565, individually a
"Guarantor" and collectively, the "Guarantors") and THE CHASE MANHATTAN BANK, as
agent for the Lenders (as defined herein), a New York banking corporation,
having an office at 395 North Service Road, Suite 302, Melville, New York 11747
(the "Agent"), THE CHASE MANHATTAN BANK, a New York banking corporation, having
an office at 395 North Service Road, Suite 302, Melville, New York 11747
("Chase" or a "Lender") and EUROPEAN AMERICAN BANK, a New York banking
corporation, having an office at 730 Veterans Memorial Highway, Hauppauge, New
York 11787 ("EAB" or a "Lender") hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ADJUSTED LIBOR RATE" means, with respect to any Eurodollar Loan for
any Interest Period, an interest rate per annum (rounded, if not already a whole
multiple of 1/16th of one (.01%) percent to the nearest 1/16th of one (.01%)
percent) equal to the product of (a) the LIBOR Rate and (b) Statutory Reserves.
"AFFILIATE" means, as to any Person (i) a Person which directly or
indirectly controls, or is controlled by, or is under common control with, such
Person; (ii) a Person which directly or indirectly beneficially owns or holds
twenty (20%) percent or more of any class of voting stock of, or twenty (20%)
percent or more of the equity interest in, such Person; or (iii) a Person twenty
(20%)
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percent or more of the voting stock of which, or twenty (20%) or more of the
equity interest of which, is directly or indirectly beneficially owned or
held by such Person. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities,
by contract, or otherwise.
"AGENT" means The Chase Manhattan Bank, or such other Lender as may
succeed to the position of Agent, as provided in this Agreement.
"AGGREGATE OUTSTANDINGS" means, at any time the sum of (i) outstanding
Revolving Credit Loans plus (ii) Outstanding L/C Exposure.
"AGREEMENT" means this Loan Agreement, as amended, supplemented or
modified from time to time.
"ALTERNATE BASE RATE" means, for any day, the higher of (a) the Prime
Rate (computed on the basis of the actual number of days elapsed over a year of
360 days) in effect on such day or (b) the Federal Funds Effective Rate in
effect on such day plus one-half of one (1/2%) percent (computed on the basis of
the actual number of days elapsed over a year of 360 days). For purposes of this
Agreement any change in the Alternate Base Rate due to a change in the Prime
Rate or the Federal Funds Effective Rate shall be effective on the effective
date of such change in the Prime Rate or the Federal Funds Effective Rate,
respectively. If for any reason the Agent shall have reasonably determined
(which determination shall be conclusive absent manifest error) that it is
unable to ascertain the Federal Funds Effective Rate for any reason, including,
without limitation, the inability or failure of the Agent to obtain sufficient
bids or publications in accordance with the terms thereof, the Alternate Base
Rate shall be determined without regard to clause (b) of the first sentence of
this definition, as appropriate, until the circumstances giving rise to such
inability no longer exist.
"ALTERNATE BASE RATE LOAN" means a Loan bearing interest at the
Alternate Base Rate in accordance with the provisions of Article II hereof.
"APPLICABLE MARGIN" means the amount of basis points to be added to the
Alternate Base Rate or the Adjusted LIBOR Rate as provided in Section 2.04 of
this Agreement and as determined pursuant to Section 2.05 of this Agreement.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" means the agreement by which a
Lender assigns all or part of its Commitment and its
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interests in the Loans to another Lender, as provided in Section 8.08 of this
Agreement.
"B/As" means bankers acceptances created by the Issuing Bank pursuant
to Section 2A.03 hereof, and subject to the conditions of this Agreement, by the
acceptance, for the account of the Borrower, of drafts drawn upon it by the
Borrower having not more than 180 days' sight to run, exclusive of days of
grace, which grow out of transactions involving the importation, exportation or
the domestic shipment of goods. All such drafts shall be subject to the
provisions of the Federal Reserve Act, as amended, and the rules and regulations
thereunder. In addition, all such drafts shall be eligible for purchase by,
discount with and pledge to, the Federal Reserve Bank of New York and each
request for the creation of a B/A shall be accompanied by any certification
required by the Issuing Bank as to the necessary elements supporting such
eligibility.
"BA RATE" means the rate per annum established by the Issuing Bank from
time to time as its acceptance rate for B/As.
"BOARD OF GOVERNORS" means the Board of Governors of the Federal
Reserve System of the United States of America.
"BUSINESS DAY" means a day of the year on which banks are not required
or authorized to close in New York City, provided that, if the relevant day
relates to a Eurodollar Loan, a Eurodollar Interest Period, or notice with
respect to a Eurodollar Loan, the term "Business Day" shall mean a day on which
dealings in dollar deposits are also carried on in the London interbank market
and banks are open for business in London.
"CANADIAN BRIDGE LOAN" means a short term loan to be incurred by the
Borrower in an amount not in excess of $2,650,000.00 (Canadian) for the purchase
of the real property and the improvements thereon at 316 Bayview Drive, Barrie,
Ontario Canada.
"CANADIAN BRIDGE LOAN MORTGAGES" means the mortgages or similar Liens
on the Borrower's real property and the improvements thereon at 316 Bayview
Drive, Barrie, Ontario, Canada and 25 Morrow Road, Barrie, Ontario, Canada,
which mortgages secure the Canadian Bridge Loan.
"CANADIAN MORTGAGE" means a mortgage or similar Lien on the Borrower's
real property and the improvements thereon at 316 Bayview Drive, Barrie,
Ontario, Canada.
"CAPITAL EXPENDITURES" means as to any Person, the aggregate amount of
any expenditures (including purchase money debt and purchase money liens) by
such Person for assets (including fixed
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assets acquired under Capital Leases) which it is contemplated will be used or
usable in fiscal years subsequent to the year of acquisition and that are
required to be capitalized in accordance with GAAP.
"CAPITAL LEASE" means a lease which has been, or should be, in
accordance with GAAP, capitalized on the books of the lessee.
"CHASE LINE OF CREDIT" means the line of credit made available to the
Borrower by Chase, pursuant to that certain line letter dated July 6, 1999.
"CLOSING DATE" means the date on which the conditions precedent to the
making of the initial Loans, the issuance of the initial Letter of Credit and
the creation of the initial B/A, all as set forth in Section 3.01 of this
Agreement, are satisfied.
"COLLATERAL" means all property which is subject or is to be subject to
the Liens granted by the Security Agreements and/or the Trademark Security
Agreements.
"COLLATERAL AGENT" means Chase, in its capacity as Collateral Agent
under the Security Agreements, the Trademark Security Agreements and the
Intercreditor Agreement, or any successor thereto.
"COMMITMENT" means, with respect to each Lender, the obligation of such
Lender (i) to make Revolving Credit Loans to the Borrower pursuant to the terms
and subject to the conditions of this Agreement and (ii) in the case of the L/C
Issuer, to issue Letters of Credit for the account of the Borrower or in the
case of the other Lenders, to take risk participations in the Letters of Credit
issued by the Issuing Bank, each pursuant to the terms and subject to the
conditions of this Agreement, in the aggregate Dollar amount and Pro Rata Share
set forth in Schedule 1.01 annexed hereto, as modified by any reductions in the
Total Commitment or by any assignments of all or any part of such Lender's
Commitment.
"CONSOLIDATED CAPITAL EXPENDITURES" means, as to any Person, the
aggregate amount of the Capital Expenditures by such Person and its Consolidated
Subsidiaries, computed and consolidated in accordance with GAAP.
"CONSOLIDATED EBITDA" means, as to any Person, for any period, the
EBITDA of such Person and its Consolidated Subsidiaries, computed and
consolidated in accordance with GAAP.
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"CONSOLIDATED FIXED CHARGE RATIO" means, as to the Borrower and its
Consolidated Subsidiaries, the ratio of (i) the sum of net income PLUS interest
expense PLUS income tax expense for the period measured PLUS depreciation
expense PLUS amortization of intangible assets MINUS Consolidated Unfunded
Capital Expenditures MINUS Permitted Dividends paid in cash during such period
MINUS Permitted Stock Repurchases to (ii) the sum of the current portion of
Consolidated Funded Debt, computed and consolidated in accordance with GAAP
(excluding Debt described in clauses (ii), (v) and (vi) of the definition of
"Consolidated Funded Debt") PLUS, whether or not included as Current Debt under
GAAP (but without duplication), the amount of the Mandatory Reductions required
to be made within twelve (12) months of the date of determination and the
$4,000,000.00 repayments of the Senior Notes required to be made within twelve
(12) months of the date of determination PLUS interest expense. The Consolidated
Fixed Charge Coverage Ratio shall be measured for the four (4) fiscal quarters
then ended, except for the current portion of Consolidated Funded Debt and the
Mandatory Reductions, which shall be measured for the next succeeding four (4)
fiscal quarters.
"CONSOLIDATED FUNDED DEBT" means, as to any Person, at any date, any Debt
of such Person and its Consolidated Subsidiaries which is (i) indebtedness or
liability for borrowed money having an original maturity of one (1) year or more
(including the current portion thereof) or which is extendable at the option of
the obligor to a date more than one year from the date of such extension,
including, in any event, all of the outstanding Revolving Credit Loans; (ii)
indebtedness or liability for borrowed money under lines of credit extended to
such Person or any of its Consolidated Subsidiaries; (iii) the deferred purchase
price of property (excluding trade obligations); (iv) obligations as a lessee
under Capital Leases; (v) obligations to reimburse a letter of credit issuer for
draws under letters of credit; and (vi) all liabilities under any preferred
stock which, at the option of the holder or upon the occurrence of one or more
certain events, is redeemable by such holder, or which, at the option of such
holder is convertible into Debt.
"CONSOLIDATED INTEREST COVERAGE RATIO" means, as to any Person, for any
period, the ratio of (i) Consolidated EBITDA MINUS Consolidated Unfunded Capital
Expenditures to (ii) consolidated interest expense. The Consolidated Interest
Coverage Ratio shall be measured for the four (4) fiscal quarters then ended.
"CONSOLIDATED NET INCOME" means, with respect to the Borrower and its
Consolidated Subsidiaries, net income for a fiscal year, computed and
consolidated in accordance with GAAP.
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"CONSOLIDATED SUBORDINATED DEBT" means, as to any Person, all of the
Subordinated Debt of such Person and its Consolidated Subsidiaries, computed and
consolidated in accordance with GAAP.
"CONSOLIDATED SUBSIDIARIES" means, as to any Person, those Subsidiaries of
such Person which are consolidated with such Person in the financial statements
delivered pursuant to Section 5.01(b).
"CONSOLIDATED TANGIBLE NET WORTH" means, as to any Person, (excluding
the effect (positive or negative) of the "Accumulated Other Comprehensive Income
(Loss)" as reflected on the consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of any date of determination) the excess of (i)
such Person's Consolidated Total Assets, less all intangible assets properly
classified as such in accordance with GAAP, including, but without limitation,
patents, patent rights, trademarks, trade names, franchises, copyrights,
licenses, permits and goodwill, over (ii) such Person's Consolidated Total
Liabilities.
"CONSOLIDATED TOTAL ASSETS" means, as to any Person, at any date, the
aggregate net book value of the assets of such Person and its Consolidated
Subsidiaries at such date, after all appropriate adjustments in accordance with
GAAP (including without limitation, reserves for doubtful receivables,
obsolescence, depreciation and amortization and excluding the amount of any
write-up or revaluation of any asset, other than those permitted under standard
cost accounting procedures), computed and consolidated in accordance with GAAP.
"CONSOLIDATED TOTAL LIABILITIES" means, as to any Person, at any date,
all of the liabilities of such Person and its Consolidated Subsidiaries at such
date, including all items which, in accordance with GAAP would be included on
the liability side of the balance sheet (other than capital stock, treasury
stock, capital surplus and retained earnings) computed and consolidated in
accordance with GAAP.
"CONSOLIDATED TOTAL UNSUBORDINATED LIABILITIES" means, as to any
Person, the excess of (i) such Person's Consolidated Total Liabilities over (ii)
such Person's Consolidated Subordinated Debt.
"CONSOLIDATED UNFUNDED CAPITAL EXPENDITURES" means, as to any Person,
the aggregate amount of the Unfunded Capital Expenditures by such Person and its
Consolidated Subsidiaries, computed and consolidated in accordance with GAAP.
"DEBT" means, as to any Person, all (i) indebtedness or liability of
such Person for borrowed money; (ii) indebtedness of such Person for the
deferred purchase price of property or services (including trade obligations);
(iii) obligations of such Person as
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a lessee under Capital Leases; (iv) current liabilities of such Person in
respect of unfunded vested benefits under any Plan; (v) obligations of such
Person under letters of credit issued for the account of such Person; (vi)
obligations of such Person arising under acceptance facilities; (vii)
guaranties, endorsements (other than for collection or deposit in the ordinary
course of business) and other contingent obligations to purchase, to provide
funds for payment, to supply funds to invest in any other Person, or otherwise
to assure a creditor against loss; (viii) obligations secured by any Lien on
property owned by such Person whether or not the obligations have been assumed;
(ix) liabilities of such Person under any preferred stock or other preferred
equity instrument which, at the option of the holder or upon the occurrence of
one or more events, is redeemable by such holder, or which, at the option of
such holder is convertible into Debt; and (x) all other liabilities recorded as
such, or which should be recorded as such, on such Person's financial statements
in accordance with GAAP.
"DEFAULT" means any of the events specified in Section 6.01 of this
Agreement, whether or not any requirement for notice or lapse of time or any
other condition has been satisfied.
"DOLLARS" AND THE SIGN "$" mean lawful money of the United States of
America.
"EAB LINE OF CREDIT" means that certain line of credit made available
to the Borrower by EAB pursuant to that certain line letter dated June 24, 1999.
"EBITDA" means, as to any Person, for any period, the sum of (i) net
income PLUS (ii) interest expense PLUS (iii) income tax expense PLUS (iv)
depreciation expense PLUS (v) amortization of intangible assets, all measured
and/or calculated for the four (4) fiscal quarters then ended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, the regulations promulgated thereunder and the
published interpretations thereof as in effect from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) which together with any other Person would be treated, with such
Person, as a single employer under Section 4001 of ERISA.
"EURODOLLAR LOAN" means a Loan bearing interest at a rate based on the
Adjusted LIBOR Rate in accordance with the provisions of Article II hereof.
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"EVENT OF DEFAULT" means any of the events specified in Section 6.01 of
this Agreement, provided that any requirement for notice or lapse of time or any
other condition has been satisfied.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Agent from three (3) federal funds brokers
of recognized standing selected by it.
"FEE LETTER" means the letter dated February 25, 2000 from the Agent to
the Borrower pursuant to which the Borrower agrees to pay certain administrative
and other fees to the Agent.
"FIELD EXAMINATION" means an examination of (i) the Collateral subject
to the Lien of the Security Agreements and/or the Trademark Security Agreements,
including the books and records relating thereto and (ii) the accounts
receivable, inventory, payables and other aspects of the Borrower's and the
Guarantors' financial and operating condition, to be conducted by the Agent or
its authorized representatives.
"FOREIGN SUBSIDIARIES" means, with respect to the Borrower, those
Subsidiaries of the Borrower which are incorporated, formed or organized outside
of the United States.
"FUNDED DEBT TO EBITDA RATIO" means, as to the Borrower and its
Consolidated Subsidiaries for any period, the ratio of (i) Consolidated Funded
Debt (as of the last day of such period) to (ii) Consolidated EBITDA for such
period. The Funded Debt to EBITDA Ratio shall be measured for a period covering
the four (4) fiscal quarters then ended.
"GAAP" means Generally Accepted Accounting Principles.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means those generally
accepted accounting principles and practices which are recognized as such by the
American Institute of Certified Public Accountants acting through the Financial
Accounting Standards Board ("FASB") or through other appropriate boards or
committees thereof and which are consistently applied for all periods so as to
properly reflect the financial condition, operations and cash flows of a Person,
except that any accounting principle or practice required to be changed by the
FASB (or other appropriate board or
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committee of the FASB) in order to continue as a generally accepted accounting
principle or practice may be so changed. Any dispute or disagreement between the
Borrower and the Agent relating to the determination of Generally Accepted
Accounting Principles shall, in the absence of manifest error, be conclusively
resolved for all purposes hereof by the written opinion with respect thereto,
delivered to the Agent, of the independent accountants selected by the Borrower
and reasonably satisfactory to the Agent for the purpose of auditing the
periodic financial statements of the Borrower.
"GUARANTEEING FOREIGN SUBSIDIARIES" means those Foreign Subsidiaries of
the Borrower required to become a Guarantor pursuant to Section 5.01(l) of this
Agreement.
"GUARANTOR" OR GUARANTORS" means those Persons identified as Guarantors
in the preamble to this Agreement, and any other Person required to guarantee
the obligations of the Borrower in accordance with Section 5.01(l) of this
Agreement.
"GUARANTY" OR "GUARANTIES" means the guaranty or guaranties executed
and delivered by one or more Guarantors pursuant to Section 3.01(h) or Section
5.01 (l) of this Agreement.
"HAZARDOUS MATERIALS" includes, without limitation, any flammable
explosives, radioactive materials, hazardous materials, hazardous wastes,
hazardous or toxic substances, or related materials defined in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. Sections 9601, et seq.), the Hazardous Materials Transportation Act, as
amended (49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery
Act, as amended (42 U.S.C. Sections 6901 et. seq.), and in the regulations
adopted and publications promulgated pursuant thereto, or any other federal,
state or local environmental law, ordinance, rule or regulation.
"INTERCOMPANY DEBT" means Debt owing by the Borrower to any Guarantor
or from any Guarantor to the Borrower or from any Guarantor to any other
Guarantor.
"INTERCREDITOR AGREEMENT" means the Intercreditor and Collateral Agency
Agreement of even date herewith among the Collateral Agent, the Agent, the
Lenders and the Senior Note Holders, and acknowledged by the Borrower.
"INTEREST DETERMINATION DATE" means the date on which an Alternate Base
Rate Loan is converted to a Eurodollar Loan and, in the case of a Eurodollar
Loan, the last day of the applicable Interest Period.
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"INTEREST PAYMENT DATE" means (i) as to each Eurodollar Loan, the last
Business Day of each calendar quarter during the applicable Interest Period and
the last day of each Interest Period and (ii) as to each Alternate Base Rate
Loan, the last Business Day of each calendar quarter.
"INTEREST PERIOD" means the period commencing on the date of any
Eurodollar Loan and ending on the numerically corresponding day in the calendar
month that is one, two, three, six or twelve months thereafter (subject to
availability), as the Borrower may elect (or, if there is no numerically
corresponding day, on the last Business Day of such month); provided, however,
(i) no Interest Period shall end later than the Maturity Date, (ii) if any
Interest Period would end on a day which shall not be a Business Day, such
Interest Period shall be extended to the next succeeding Business Day unless
such next succeeding Business Day would fall in the next calendar month, in
which case such Interest Period shall end on the next preceding Business Day,
(iii) interest shall accrue from and including the first day of such Interest
Period to but excluding the date of payment of such interest pursuant to Section
2.04, (iv) no Interest Period for all or any part of a requested Loan which is
required to be paid as a result of the Mandatory Reduction in the Total
Commitment pursuant to Section 2.08(b) of this Agreement may be selected unless
the outstanding Loans accruing interest at a rate based on the Alternate Base
Rate and Eurodollar Loans for which the relevant Interest Periods end on or
prior to the date of such Mandatory Reduction are in an aggregate amount which
will be sufficient to make such payment, and (v) no Interest Period of
particular duration may be selected by the Borrower if the Agent determines, in
its sole discretion, that Eurodollar Loans with such maturities are not
generally available.
"INVESTMENT" means any stock, evidence of Debt or other security of any
Person, any loan, advance, contribution of capital, extension of credit or
commitment therefor, including without limitation the guaranty of loans made to
others (except for current trade and customer accounts receivable for services
rendered in the ordinary course of business and payable in accordance with
customary trade terms in the ordinary course of business) and any purchase of
(i) any security of another Person or (ii) any business or undertaking of any
Person or any commitment or option to make any such purchase, or any other
investment.
"ISSUING BANK" means Chase, or such other Lender that may succeed Chase
as the issuer of Letters of Credit or B/As pursuant to this Agreement.
"L/C DOCUMENTS" means all documents required to be executed and
delivered by the Borrower in connection with the issuance of
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Letters of Credit in accordance with the usual and customary practices of the
Issuing Bank.
"L/C SUBLIMIT" means $1,000,000.00.
"LENDER" OR "LENDERS" means one or more of the lenders that are, or
become, lenders under, and parties to, this Agreement.
"LETTERS OF CREDIT" means trade letters of credit issued by the Issuing
Bank for the account of the Borrower in a maximum amount equal to the L/C
Sublimit and issued pursuant to the terms and conditions of this Agreement.
"LIBOR RATE" means the rate (rounded upwards, if not already a whole
multiple of 1/16th of one (1%) percent, to the next higher of 1/16th of one (1%)
percent) at which dollar deposits approximately equal in principal amount to the
requested Eurodollar Loan and for a maturity equal to the requested Interest
Period are offered in immediately available funds to the London office of the
Agent by leading banks in the London interbank market for Eurodollars at
approximately 11:00 a.m., London time, two (2) Business Days prior to the
commencement of such Interest Period.
"LIEN" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever, including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing.
"LOAN" OR LOANS" means the Revolving Credit Loans or any or all of the
same as the context may require and includes Alternate Base Rate Loans and
Eurodollar Loans, as the context may require.
"LOAN DOCUMENTS" means this Agreement, the Note, the Guaranties, the
Security Agreements, the Trademark Security Agreements, the L/C Documents and
any other document executed or delivered pursuant to this Agreement.
"MANDATORY REDUCTION" means the permanent reduction in the Total
Commitment required pursuant to Section 2.08(b) of this Agreement in an amount
equal to the greater of (i) $4,000,000.00 less any reductions (not reinstated)
in the Total Commitment made since the date of the prior Mandatory Reduction or
(ii) the principal amount of the Senior Notes paid on May 31, 2001 and May 31,
2002.
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"MATERIAL ADVERSE CHANGE" means, as to the Borrower alone, DPI alone,
any other Guarantor which has revenues or assets representing more than ten
(10%) percent of the Borrower's consolidated revenues or assets (a "Material
Guarantor")or the Borrower and its Consolidated Subsidiaries taken as a whole,
(i) a material adverse change in the financial condition, business, operations,
properties, prospects or results of operations of the Borrower alone, DPI alone,
a Material Guarantor alone or the Borrower and its Consolidated Subsidiaries
taken as a whole (provided that the elimination of the inter-company payable
between the Borrower and DPI shall not, by virtue of such elimination alone, be
deemed a Material Adverse Change in either the Borrower or DPI) or (ii) any
event or occurrence which could have a material adverse effect on the ability of
the Borrower alone, DPI alone, a Material Guarantor alone or the Borrower and
its Consolidated Subsidiaries taken as a whole to perform its or their
obligations under the Loan Documents.
"MATURITY DATE" means the third anniversary of the Closing Date.
"MULTIEMPLOYER PLAN" means a Plan described in Section 4001(a)(3) of
ERISA which covers employees of the Borrower or any ERISA Affiliate.
"NORTH CAROLINA MORTGAGE" means the mortgage Lien existing on the date
of this Agreement on the Borrower's real property and the improvements thereon
at 1830 Carver Drive, Rocky Point, North Carolina.
"NOTE" or "NOTES" means the Revolving Credit Notes or any or all of the
same as the context may require.
"OUTSTANDING L/C EXPOSURE" means, at any time, the aggregate of (i) the
amount available to be drawn on all outstanding Letters of Credit, (ii) the
aggregate amount of all unmatured B/As, other drafts accepted and deferred
payment obligations incurred by the Issuing Bank under any Letters of Credit and
(iii) the amount of any payments made by the Issuing Bank under any Letters of
Credit that has not been reimbursed by the Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED DIVIDENDS" means, with respect to the Borrower, the payment
of (i) any dividend payable in stock of the Borrower or (ii) subject to the
proviso at the conclusion hereof, cash dividends which, in any fiscal year of
the Borrower, do not exceed, in the aggregate, fifteen (15%) percent of the
Borrower's consolidated net income for such fiscal year; provided, however,
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(x) no Default or Event of Default shall have occurred and be continuing or
shall result from the payment of such cash dividend and (y) the Borrower shall
have provided to the Agent and the Lenders evidence that its Funded Debt to
EBITDA Ratio as of the end of the immediately preceding fiscal quarter, and
after giving effect to the paying of such cash dividend, does not, and will not,
exceed 3.50 to 1.00.
"PERMITTED EQUIPMENT SALES" means sales by the Borrower or its
Consolidated Subsidiaries of equipment in an aggregate principal amount not
exceeding $500,000.00 during any fiscal year.
"PERMITTED INVESTMENTS" means, (i) direct obligations of the United
States of America or any governmental agency thereof, or obligations guaranteed
by the United States of America, provided that such obligations mature within
one year from the date of acquisition thereof; (ii) time certificates of deposit
having a maturity of one year or less issued by any commercial bank organized
and existing under the laws of the United States or any state thereof and having
aggregate capital and surplus in excess of $500,000,000.00; (iii) money market
mutual funds having assets in excess of $2,500,000,000; (iv) commercial paper
rated not less than P-1 or A-1 or their equivalent by Moody's Investor Services,
Inc. or Standard & Poor's Corporation, respectively; (v) tax exempt securities
rated Prime 2 or better by Moody's Investor Services, Inc. or A-1 or better by
Standard & Poor's Corporation; (vi) loans or advances between the Borrower and a
Guarantor or between Guarantors; (vii) deposits in, and other investments made
available by any Lender; (viii) investments in, or loans or advances to, wholly
owned domestic Subsidiaries, provided that any such investment, loan or advance
made after the date of this Agreement shall be made only in a domestic
Subsidiary which is a Guarantor; (ix) investments in, or loans or advances to,
Foreign Subsidiaries, provided any such single investment (valued at cost), loan
or advance shall not exceed $10,000,000.00 and all such investments (valued at
cost), loans and advances shall not exceed $12,500,000.00; and (x) loans or
advances to employees of the Borrower or a Guarantor which do not exceed
$2,000,000.00 in the aggregate at any time.
"PERMITTED REAL ESTATE SALE" means the sale by the Borrower of its real
property and the improvements thereon located at 25 Morrow Road, Barrie,
Ontario, Canada, provided that the gross sale price shall be approximately
$1,000,000.00 (Canadian) and provided further that the net proceeds of such sale
shall be applied to partially repay the Canadian Bridge Loan.
"PERMITTED STOCK REPURCHASES" means, with respect to the Borrower, (i)
transactions in which (x) the Borrower's common stock is transferred to the
Borrower by a current or former employee of the Borrower or any of its
Subsidiaries in an amount equal to the
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consideration payable to such employee upon the exercise of stock options held
by such employee or (y) the Borrower's common stock is transferred to the
Borrower by an employee in an amount equal to the withholding tax liability for
such employee resulting from the exercise of such stock option rights by such
employee, provided that the amount paid by the Borrower for transactions
described in clause (y) (net of the related tax benefit received by the Borrower
for such transaction) shall not exceed $250,000.00 in the aggregate during any
fiscal year of the Borrower or (ii) the repurchase of common stock of the
Borrower from participants in the Del Laboratories, Inc. Employee Stock
Ownership Trust (the "ESOT") and from the ESOT.
"PERSON" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity or a federal, state or
local government, or a political subdivision thereof or any agency of such
government or subdivision.
"PLAN" means any employee benefit plan established, maintained, or to
which contributions have been made by the Borrower or any ERISA Affiliate.
"PRIME RATE" means the rate per annum announced by the Agent from time
to time as its prime rate in effect at its principal office on a 360-day basis;
each change in the Prime Rate shall be effective on the date such change is
announced to become effective.
"PROHIBITED TRANSACTION" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended from
time to time.
"PRO RATA SHARE" means, with respect to each Lender, its pro rata share
of the initial Total Commitment, as set forth in Schedule 1.01 annexed hereto as
the same may be modified by any assignment of all or any part of such Lender's
Commitment.
"REGULATION D" means Regulation D of the Board of Governors, as the
same may be amended and in effect from time to time.
"REGULATION T" means Regulation T of the Board of Governors, as the
same may be amended and in effect from time to time.
"REGULATION U" means Regulation U of the Board of Governors, as the
same may be amended and in effect from time to time.
"REGULATION X" means Regulation X of the Board of Governors, as the
same may be amended and in effect from time to time.
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"REPORTABLE EVENT" means any of the events set forth in Section 4043 of
ERISA.
"REQUIRED LENDERS" means (i) at any time there are Loans outstanding,
those Lenders having, in the aggregate, sixty six and two thirds (66-2/3%)
percent of such Loans and (ii) at any time when there are no Loans outstanding
those Lenders having, in the aggregate, sixty six and two thirds (66-2/3%)
percent of the Total Commitment, provided, however, as long as EAB is a Lender,
it shall be one of the "Required Lenders".
"REVOLVING CREDIT LOANS" shall have the meaning assigned to such term
in Section 2.01 of this Agreement.
"REVOLVING CREDIT NOTE" OR "REVOLVING CREDIT NOTES" means one or more,
as the context requires, of the promissory notes of the Borrower payable to the
order of each of the Lenders, in substantially the form of Exhibit A annexed
hereto, evidencing the aggregate indebtedness of the Borrower to each such
Lender resulting from Revolving Credit Loans made by such Lender to the Borrower
pursuant to this Agreement.
"SECURITY AGREEMENT" OR "SECURITY AGREEMENTS" means, one or more, as
the context requires, of the security agreement or security agreements to be
executed and delivered pursuant to Section 3.01(p) or Section 5.01(l) of this
Agreement.
"SENIOR NOTE AGREEMENT" means that certain Amended and Restated Loan
Agreement dated as of the date hereof between the Borrower and the Senior Note
Holders pursuant to which the Senior Note Holders have lent $40,000,000.00 to
the Borrower, as such agreement may be further amended, modified or extended
from time to time.
"SENIOR NOTE HOLDERS" means Jackson National Life Insurance Company,
and its successors and assigns, which is, or are, a party or parties to, and a
lender or lenders under, the Senior Note Agreement.
"SENIOR NOTES" means those promissory notes, executed and delivered by
the Borrower and evidencing the loans made to the Borrower, in the original and
current principal amount of $40,000,000.00, pursuant to the Senior Note
Agreement.
"STATUTORY RESERVES" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including, without
limitation, any marginal, special, emergency, or supplemental reserves)
expressed
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as a decimal established by the Board of Governors or any other
banking authority to which the Agent is subject with respect to the Adjusted
LIBOR Rate for Eurocurrency Liabilities (as defined in Regulation D). Such
reserve percentages shall include, without limitation, those imposed under such
Regulation D. Eurodollar Loans shall be deemed to constitute Eurocurrency
Liabilities and as such shall be deemed to be subject to such reserve
requirements without benefit of or credit for proration, exceptions or offsets
which may be available from time to time to the Agent under such Regulation D.
Statutory Reserves shall be adjusted automatically on and as of the effective
date of any change in any reserve percentage.
"SUBORDINATED DEBT" means Debt of any Person, the repayment of which
the obligee has agreed in writing, on terms which have been approved by the
Agent and the Required Lenders in advance in writing, shall be subordinate and
junior to the rights of the Agent and the Lenders with respect to Debt owing
from such Person to the Agent and the Lenders.
"SUBSIDIARY" means, as to any Person, any corporation, partnership,
limited liability company or joint venture whether now existing or hereafter
organized or acquired (i) in the case of a corporation, of which a majority of
the securities having ordinary voting power for the election of directors (other
than securities having such power only by reason of the happening of a
contingency) are at the time owned by such Person and/or one or more
Subsidiaries of such Person or (ii) in the case of a partnership, limited
liability company or joint venture or similar entity, of which a majority of the
partnership, membership or other ownership interests are at the time owned by
such Person and/or one or more Subsidiaries of such Person.
"TRADEMARK SECURITY AGREEMENT" or "TRADEMARK SECURITY AGREEMENTS" means
one or more, as the context requires, of the trademark security agreements to be
executed and delivered pursuant to Section 3.01(q), Section 5.01(k)(ii) and
Section 5.01(l)(iii) of this Agreement.
"TOTAL COMMITMENT" means the aggregate of the Commitments of each of
the Lenders, which, on the date of this Agreement, is $47,500,000.00.
"UNFUNDED CAPITAL EXPENDITURES" means Capital Expenditures financed
other than by the incurrence of Debt.
"YEAR 2000 ISSUE" means the risk of failure of computer software,
hardware and firmware systems and equipment containing embedded computer chips
to properly receive, transmit, process, manipulate, store, retrieve, re-transmit
or in any other way
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utilize data and information due to the occurrence of the year 2000 or the
inclusion of dates on or after January 1, 2000.
SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to and including".
SECTION 1.03. ACCOUNTING TERMS. Except as otherwise herein specifically
provided, each accounting term used herein shall have the meaning given to it
under GAAP. For purposes of determining compliance with the financial covenants
set forth in Sections 5.02(k) and 5.03, such financial covenants shall be
calculated, excluding the impact of the adoption of Proposed Statement of
Financial Accounting Standards entitled "Business Combinations and Intangible
Assets", which, if issued as a final Statement, would require the Company to
write-off the carrying value of goodwill (which is currently approximately $6.3
million) that is currently being accounted for in accordance with Accounting
Research Bulletin No. 43, Chapter 5, "Intangible Assets", in the first interim
or annual period ending after the issuance date of the Statement. The effect of
the write-off would be reported as a cumulative effect of a change in accounting
principle in the Company's statement of operations.
(THE BALANCE OF THIS PAGE IS INTENTIONALLY BLANK)
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ARTICLE II
AMOUNT AND TERMS OF THE LOANS
SECTION 2.01. THE REVOLVING CREDIT LOANS. (a) The Lenders agree,
severally, but not jointly, on the date of this Agreement, on the terms and
conditions of this Agreement and in reliance upon the representations and
warranties of the Borrower and the Guarantors set forth in this Agreement, to
lend to the Borrower prior to the Maturity Date such amounts as the Borrower may
request from time to time (individually, a "Revolving Credit Loan" or
collectively, the "Revolving Credit Loans"), which amounts may be borrowed,
repaid and reborrowed, provided that (i) the aggregate amount of such Revolving
Credit Loans outstanding at any one time shall not exceed the Total Commitment,
or such lesser amount of the Total Commitment as may be reduced pursuant to
Section 2.08 (a) hereof, or as shall be reduced by Mandatory Reductions pursuant
to Section 2.08(b) hereof, (ii) Aggregate Outstandings shall not at any one time
exceed the Total Commitment as in effect at such time and (iii) each Lender's
Pro Rata Share of Aggregate Outstandings shall not exceed such Lender's
Commitment. On the date of this Agreement, all letters of credit set forth on
Schedule 2.01 annexed hereto and which are outstanding under the Chase Line of
Credit or the EAB Line of Credit shall be deemed to be Outstanding L/C Exposure
under this Agreement.
(b) Each Revolving Credit Loan shall be an Alternate Base Rate Loan or
a Eurodollar Loan (or a combination thereof) as the Borrower may request subject
to and in accordance with Section 2.02. Any Lender may at its option make any
Eurodollar Loan by causing a foreign branch or affiliate to make such Loan,
provided that any exercise of such option shall not affect the obligation of the
Borrower to repay such Loan in accordance with the terms of the applicable
Revolving Credit Note. Subject to the other provisions of this Agreement,
Revolving Credit Loans of more than one type may be outstanding at the same
time, provided not more than seven (7) Eurodollar Loans may be outstanding at
the same time.
SECTION 2.02. REVOLVING CREDIT LOANS; NOTICE, CONTINUATION AND
CONVERSION.
(a) Each Revolving Credit Loan shall be (i) in the case of each
Alternate Base Rate Loan in the minimum principal amount of $500,000.00 and (ii)
in the case of each Eurodollar Loan in the minimum principal amount of
$2,000,000.00 and in increased integral multiples of $100,000.00 (except that,
if any such Alternate Base Rate Loan so requested shall exhaust the remaining
available Total Commitment, such Alternate Base Rate Loan may be in an amount
equal to the amount of the remaining available Total Commitment).
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(b) The Borrower shall give the Agent irrevocable written, telex,
telephonic (immediately confirmed in writing) or facsimile notice (i) at least
three (3) Business Days prior to each Revolving Credit Loan comprised in whole
or in part of one or more Eurodollar Loans (subject to availability, including,
without limitation, the conditions set forth in (c) below) or (ii) prior to
11:00 a.m. on the day of each Revolving Credit Loan consisting solely of an
Alternate Base Rate Loan. Such notice shall specify the date of such borrowing,
the amount thereof and whether such Loan is to be (or what portion or portions
thereof are to be) an Alternate Base Rate Loan or a Eurodollar Loan and, if such
Loan or any portion thereof is to consist of one or more Eurodollar Loans, the
principal amounts thereof and Interest Period or Interest Periods with respect
thereto. If no election as to the Interest Period is specified in such notice
with respect to any Eurodollar Loan, the Borrower shall be deemed to have
selected an Interest Period of one month's duration and if a Eurodollar Loan is
requested when such Loans are not available, the Borrower shall be deemed to
have requested an Alternate Base Rate Loan.
(c) The Borrower shall have the right, on such notice to the Agent as
is required pursuant to (b) above, (i) to continue any Eurodollar Loan or a
portion thereof into a subsequent Interest Period (subject to availability) or
(ii) to convert an Alternate Base Rate Loan into a Eurodollar Loan (subject to
availability) subject to the following:
(1) if an Event of Default shall have occurred and be
continuing at the time of any proposed conversion or continuation only Alternate
Base Rate Loans shall be available;
(2) in the case of a continuation or conversion of fewer than
all Loans, the aggregate principal amount of each Eurodollar Loan continued or
into which a Loan is converted shall be in the minimum principal amount of
$2,000,000.00 and in increased integral multiples of $100,000.00;
(3) each continuation or conversion of a Eurodollar Loan shall
be effected by the new Loan replacing the Loan (or portion thereof) being
continued or converted;
(4) if the new Loan made as a result of a continuation or
conversion shall be a Eurodollar Loan, the first Interest Period with respect
thereto shall commence on the date of continuation or conversion;
(5) each request for a Eurodollar Loan which shall fail to
state an applicable Interest Period shall be deemed to be a request for an
Interest Period of one month and each request for a Eurodollar Loan made when
such Loans are not available shall be deemed to be a request for an Alternate
Base Rate Loan; and
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(6) in the event that the Borrower shall not give notice to
continue a Eurodollar Loan as provided above, such Loan shall automatically be
converted into an Alternate Base Rate Loan at the expiration of the then current
Interest Period.
(d) Upon receipt of such notice, the Agent shall promptly notify each
Lender of the contents thereof and of the amount, type and other relevant
information regarding the Loan requested. Thereupon, each Lender shall, not
later than 2:00 p.m. (New York time), transfer immediately available funds equal
to such Lender's Pro Rata Share of the requested Loan to the Agent, which,
provided the conditions of Sections 3.01 and 3.02 of this Agreement have been
met, and provided the Lenders have made such transfers, shall thereupon transfer
immediately available funds equal to the requested Loan to the Borrower's
account with the Agent. If a notice of borrowing is received by the Agent after
11:00 a.m. on a Business Day, such notice shall be deemed to have been given on
the next succeeding Business Day. Any Lender's failure to make any requested
Loan shall not relieve any other Lender of its obligation to make such Loan, but
such other Lender shall not be liable for such failure of the first Lender.
(e) Unless the Agent shall have received notice from a Lender prior to
2:00 p.m. (New York time) on the requested date, that such Lender will not make
available to the Agent the Loan requested to be made on such date, the Agent may
assume that such Lender has made such Loan available to the Agent on such date
in accordance with Section 2.02(d) hereof and the Agent in its sole discretion
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount on behalf of such Lender. If and to the extent such
Lender shall not have so made available to the Agent the Loan requested to be
made on such date and the Agent shall have so made available to the Borrower a
corresponding amount on behalf of such Lender, such Lender shall, on demand, pay
to the Agent such corresponding amount together with interest thereon, at the
Federal Funds Effective Rate, for each day from the date such amount shall have
been so made available by the Agent to the Borrower until the date such amount
shall have been repaid to the Agent. If such Lender does not pay such
corresponding amount promptly upon the Agent's demand therefor, the Agent shall
promptly notify the Borrower and the Borrower shall, with reservation of rights
against such Lender, not later than one (1) Business Day following such notice,
repay such corresponding amount to the Agent together with accrued interest
thereon at the applicable rate or rates provided (i) in Section 2.04 hereof or
(ii) if the Borrower fails to repay such corresponding amount within three (3)
Business Days after such notice, in Section 2.18 hereof.
SECTION 2.03. REVOLVING CREDIT NOTES. Revolving Credit Loans shall be
evidenced by the Revolving Credit Notes of the Borrower.
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Each Lender's Revolving Credit Note shall be dated the date hereof and be in the
principal amount of such Lender's Pro Rata Share of the Total Commitment, and
shall mature on the Maturity Date, at which time the entire outstanding
principal balance and all interest thereon shall be due and payable and the
Commitment shall be terminated. The Revolving Credit Notes shall be entitled to
the benefits and subject to the provisions of this Agreement.
At the time of the making of each Revolving Credit Loan and at the time
of each payment of principal thereon, the holder of each Revolving Credit Note
is hereby authorized by the Borrower to make a notation on the schedule annexed
to the Revolving Credit Note of the date and amount, and the type and Interest
Period of the Revolving Credit Loan or payment, as the case may be. Failure to
make a notation with respect to any Revolving Credit Loan shall not limit or
otherwise affect the obligation of the Borrower hereunder or under the Revolving
Credit Notes with respect to such Revolving Credit Loan, and any payment of
principal on the Revolving Credit Notes by the Borrower shall not be affected by
the failure to make a notation thereof on said schedule.
SECTION 2.04. PAYMENT OF INTEREST ON THE REVOLVING CREDIT NOTES.
(a) In the case of an Alternate Base Rate Loan, interest shall be
payable at a rate per annum (computed on the basis of the actual number of days
elapsed over a year of 360 days) equal to the Alternate Base Rate plus the
Applicable Margin. Such interest shall be payable on each Interest Payment Date,
commencing with the first Interest Payment Date after the date of such Alternate
Base Rate Loan, on each Interest Determination Date and on the Maturity Date.
Any change in the rate of interest on the Revolving Credit Note due to a change
in the Alternate Base Rate shall take effect as of the date of such change in
the Alternate Base Rate.
(b) In the case of a Eurodollar Loan, interest shall be payable at a
rate per annum (computed on the basis of the actual number of days elapsed over
a year of 360 days) equal to the Adjusted LIBOR Rate plus the Applicable Margin.
Such interest shall be payable on each Interest Payment Date, commencing with
the first Interest Payment Date after the date of such Eurodollar Loan, on each
Interest Determination Date and on the Maturity Date. In the event Eurodollar
Loans are available, the Agent shall determine the rate of interest applicable
to each requested Eurodollar Loan for each Interest Period at 11:00 a.m., New
York City time, or as soon as practicable thereafter, two (2) Business Days
prior to the commencement of such Interest Period and shall notify the Lenders
and the Borrower of the rate of interest so determined. Such determination shall
be conclusive absent manifest error.
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(c) All interest on the Revolving Credit Notes shall be paid to the
Agent for the pro rata distribution to the Lenders.
SECTION 2.05. APPLICABLE MARGIN. The Applicable Margin for Revolving
Credit Loans shall be determined on the basis of the Borrower's Funded Debt to
EBITDA Ratio, as calculated based on the Borrower's consolidated financial
statements for its most recent fiscal year or quarter. The Agent shall determine
the Applicable Margin within five (5) Business Days after it has received the
financial statements of the Borrower as required by Section 5.01(b)(i) or (ii),
as applicable. The Agent shall promptly notify the Borrower and the Lenders of
such determination, which shall be conclusive, in the absence of manifest error.
The Applicable Margin shall be determined as follows:
(i) The initial Applicable Margin shall be 75 basis points for
Alternate Base Rate Loans and 375 basis points for Eurodollar Loans and shall be
applicable until five (5) Business Days after delivery of the Borrower's
consolidated financial statements for its fiscal year ending December 31, 1999
pursuant to Section 5.01(b) hereof.
Beginning five (5) Business Days after delivery of the Borrower's
consolidated financial statements for the fiscal year ending December 31, 1999,
and for each fiscal year or quarter thereafter:
(ii) If the Borrower's Funded Debt to EBITDA Ratio as of the end of
such fiscal year or quarter is equal to or less than 3.00 to 1.00, the
Applicable Margin shall be -0- basis points for Alternate Base Rate Loans and
275 basis points for Eurodollar Loans.
(iii) If the Borrower's Funded Debt to EBITDA Ratio as of the end of
such fiscal year or quarter is greater than 3.00 to 1.00 but less than 4.00 to
1.00, the Applicable Margin shall be 50 basis points for Alternate Base Rate
Loans and 325 basis points for Eurodollar Loans.
(iv) If the Borrower's Funded Debt to EBITDA Ratio as of the end of
such fiscal year or quarter is equal to or greater than 4.00 to 1.00, the
Applicable Margin shall be 75 basis points for Alternate Base Rate Loans and 375
basis points for Eurodollar Loans.
The Applicable Margin for any Eurodollar Loan shall change during the
term of such Eurodollar Loan as a result of this Section 2.05.
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In the event that the Borrower fails to deliver any financial
statements and the related certificate on the due date therefor set forth in
Section 5.01(b)(i) or (ii) hereof, unless an Event of Default is declared as a
result of such failure, the Applicable Margin shall be 75 basis points for
Alternate Base Rate Loans and 375 basis points for Eurodollar Loans until the
Borrower delivers all required financial statements and certificates at which
time the Applicable Margin shall be redetermined as provided for in this Section
2.05.
Upon the occurrence and during the continuance of a Default or an Event
of Default the Applicable Margin may, as a result of changes in the Borrower's
Funded Debt to EBITDA Ratio, increase but will not decrease. The Borrower and
the Guarantors acknowledge and agree that (i) the provisions of this Section
2.05 and the Funded Debt to EBITDA Ratios used for pricing purposes shall not
be, or result in, a waiver of any Default or Event of Default which may occur by
virtue of the Borrower breaching the requirements of Section 5.03(d) of this
Agreement and (ii) if such a Default or Event of Default should occur, the Agent
and the Lenders reserve all rights under Section 2.18(b) of this Agreement.
SECTION 2.06 USE OF PROCEEDS. The proceeds of the Revolving Credit
Loans shall be used by the Borrower (i) to refinance (subject to the last
sentence of Section 2.01(a) of this Agreement) existing Debt owing to Chase and
EAB, (ii) for working capital needs of the Borrower and its Consolidated
Subsidiaries, including the issuance of Letters of Credit in accordance with the
terms and subject to the provisions of this Agreement or (iii) to finance
Capital Expenditures of the Borrower and its Consolidated Subsidiaries. No part
of the proceeds of any Loan may be used for any purpose that directly or
indirectly violates or is inconsistent with, the provisions or Regulations T, U
or X.
SECTION 2.07. COMMITMENT FEE; OTHER FEES. (a) The Borrower agrees to
pay to the Agent, for the pro rata distribution to the Lenders, from the date of
this Agreement and for so long as the Total Commitment remains in effect, on the
last Business Day of each calendar quarter, a commitment fee computed at the
rate of one quarter of one (1/4%) percent per annum (computed on the basis of
the actual number of days elapsed over 360 days) on the average daily unused
amount of the Total Commitment, such commitment fee being payable for the
calendar quarter, or part thereof, preceding the payment date.
(b) The Borrower agrees to pay to the Agent the fees set forth in the
Fee Letter, at the times and in the amounts set forth in the Fee Letter.
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SECTION 2.08. REDUCTIONS OF TOTAL COMMITMENT.
(a) Upon at least three (3) Business Days' written notice to the Agent,
the Borrower may irrevocably elect to have the Total Commitment terminated in
whole or reduced in part provided, however, that any such partial reduction
shall be in a minimum amount of $1,000,000.00, or whole multiples thereof. The
Total Commitment, once terminated or reduced, shall not be reinstated without
the express written approval of the Agent and the Lenders. Any reduction of the
Total Commitment shall be applied pro rata to the respective Commitments of the
Lenders. On the date any reduction in the Total Commitment becomes effective,
the Borrower shall, without notice or demand from the Agent or the Lenders,
prepay Revolving Credit Loans, subject to the provisions of Section 2.10 of this
Agreement, such that, following such prepayment, the Aggregate Outstandings
shall not exceed the Total Commitment, as reduced.
(b) On each of May 31, 2001 and May 31, 2002, the Total Commitment
shall permanently reduce by the Mandatory Reduction required on each such date.
On the date of each Mandatory Reduction, the Borrower shall, without notice or
demand from the Agent or the Lenders, prepay Revolving Credit Loans, subject to
the provisions of Section 2.10 of this Agreement, such that, following such
prepayment, Aggregate Outstandings shall not exceed the Total Commitment, as
reduced by the Mandatory Reduction. Each Mandatory Reduction shall reduce each
Lender's Commitment pro-rata.
SECTION 2.09. PREPAYMENT. (a) The Borrower shall have the right at any
time and from time to time to prepay any Alternate Base Rate Loan, in whole or
in part, without premium or penalty on the same day on which telephonic notice
is given to the Agent (immediately confirmed in writing) of such prepayment
provided, however, that each such prepayment shall be on a Business Day and
shall be in a minimum principal amount of $250,000.00.
(b) The Borrower shall have the right at any time and from time to
time, subject to the provisions of this Agreement, to prepay any Eurodollar
Loan, in whole or in part, on three (3) Business Days' prior irrevocable written
notice to the Agent, provided, however, that (i) each such prepayment shall be
on a Business Day and shall be in a minimum principal amount of $500,000.00 and
in increased integral multiples of $100,000.00 and (ii) each such prepayment
shall be subject to the provisions of Section 2.10 of this Agreement.
(c) The notice of prepayment under this Section 2.09 shall set forth
the prepayment date and the principal amount of the Loan being prepaid and shall
be irrevocable and shall commit the Borrower to prepay such Loan by the amount
and on the date stated therein. All prepayments shall be accompanied by accrued
interest
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on the principal amount being prepaid to the date of prepayment. Each prepayment
under this Section 2.09 shall be applied first towards unpaid interest on the
amount being prepaid and then towards the principal in whole or partial
prepayment of Loans by the Borrower. In the absence of such specification,
amounts being prepaid shall be applied first to any Alternate Base Rate Loan
then outstanding and then to Eurodollar Loans in the order of the expiration of
their respective Interest Periods. All prepayments shall be applied pro rata
among the Lenders.
SECTION 2.10. REIMBURSEMENT BY BORROWER. The Borrower shall reimburse
the Agent, on behalf of a Lender, upon the Agent's demand, for any loss, cost or
expense incurred or to be incurred by such Lender (in such Lender's sole
determination) as a result of any prepayment or conversion (whether voluntarily
or by acceleration) of any Eurodollar Loan other than on the last day of the
Interest Period for such Loan, or if the Borrower fails to borrow the Eurodollar
Loan (or is not able to borrow because of a Default or an Event of Default or
for any other reason hereunder) after having given the irrevocable notice of
borrowing required by this Agreement. Such reimbursement shall include, but not
be limited to, any loss, cost or expense incurred by such Lender in obtaining,
liquidating or redeploying any funds used or to be used in making or maintaining
the Eurodollar Loan.
SECTION 2.11. STATUTORY RESERVES. It is understood that the cost to the
Lenders of making or maintaining Eurodollar Loans may fluctuate as a result of
the applicability of, or change in, Statutory Reserves. The Borrower agrees to
pay to the Agent, on behalf of the Lenders from time to time, as provided in
Section 2.12 below, such amounts as shall be necessary to compensate each Lender
for the portion of the cost of making or maintaining any Eurodollar Loans made
by it resulting from any such Statutory Reserves, or change therein, it being
understood that the rates of interest applicable to Eurodollar Loans hereunder
have been determined on the basis of Statutory Reserves in effect at the time of
determination of the Adjusted LIBOR Rate, and that such rate does not reflect
costs imposed on such Lender in connection with any change to such Statutory
Reserves. It is agreed that, for purposes of this paragraph, the Eurodollar
Loans made hereunder shall be deemed to constitute Eurocurrency Liabilities as
defined in Regulation D and to be subject to the reserve requirements of
Regulation D without benefit or credit of proration, exemptions or offsets which
might otherwise be available to a Lender from time to time under Regulation D.
SECTION 2.12. INCREASED COSTS. If, after the date of this Agreement,
the adoption of, or any change in, any applicable law, regulation, rule or
directive, or any interpretation thereof by any authority charged with the
administration or interpretation thereof:
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(i) subjects the Agent, the Issuing Bank or any Lender to any
tax with respect to its Commitment, the Loans, the Notes, the Letters of Credit,
Outstanding L/C Exposure or on any amount paid or to be paid under or pursuant
to this Agreement, its Commitment, the Loans, the Notes, the Letters of Credit
or Outstanding L/C Exposure (other than any tax measured by or based upon the
overall net income of the Agent, the Issuing Bank or such Lender);
(ii) changes the basis of taxation of payments to the Agent,
the Issuing Bank or a Lender of any amounts payable hereunder (other than any
tax measured by or based upon the overall net income of the Agent, the Issuing
Bank or such Lender);
(iii) imposes, modifies or deems applicable any reserve,
capital adequacy or deposit requirements against any assets held by, deposits
with or for the account of, loans made by, or letters of credit issued by, the
Issuing Bank or a Lender; or
(iv) imposes on the Agent, the Issuing Bank or a Lender any
other condition affecting its Commitment, the Loans, the Notes, the Letters of
Credit, Outstanding L/C Exposure or this Agreement; and the result of any of the
foregoing is to increase the cost to the Agent, the Issuing Bank or such Lender
of maintaining this Agreement or its Commitment or making the Loans, or issuing
the Letter of Credit or creating B/As or to reduce the amount of any payment
(whether of principal, interest or otherwise) receivable by the Agent, the
Issuing Bank or such Lender or to require the Agent, the Issuing Bank or such
Lender to make any payment on or calculated by reference to the gross amount of
any sum received by it, in each case by an amount which the Agent, the Issuing
Bank or such Lender in its reasonable judgment deems material, then and in any
such case:
(a) the Issuing Bank or the Lender shall promptly advise the Agent and
the Borrower of such event, together with the date thereof, the amount of such
increased cost or reduction or payment and the way in which such amount has been
calculated; and
(b) the Borrower shall pay to the Agent, on behalf of itself, the
Issuing Bank or such Lender, as applicable, within ten (10) days after the
advice referred to in subsection (a) hereinabove, such an amount or amounts as
will compensate the Agent, the Issuing Bank or such Lender, as applicable, for
such additional cost, reduction or payment for so long as the same shall remain
in effect.
The determination of the Agent, the Issuing Bank or a Lender
as to additional amounts payable pursuant to this Section 2.12 shall be
conclusive evidence of such amounts absent manifest error.
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SECTION 2.13. CAPITAL ADEQUACY. If the Agent, the Issuing Bank or any
Lender shall have determined that the applicability of any law, rule, regulation
or guideline, or the adoption after the date hereof of any other law, rule,
regulation or guideline regarding capital adequacy, or any change in any of the
foregoing or in the interpretation or administration of any of the foregoing by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Agent, the
Issuing Bank or such Lender (or any lending office of such Lender) or the
Agent's, the Issuing Bank's or such Lender's holding company 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, has or would have the
effect of reducing the rate of return on the Agent's, the Issuing Bank's or such
Lender's capital or on the capital of the Agent's, the Issuing Bank's or such
Lender's holding company, if any, as a consequence of its obligations hereunder
to a level below that which the Agent, the Issuing Bank or such Lender or the
Agent's, the Issuing Bank's or such Lender's holding company could have achieved
but for such adoption, change or compliance (taking into consideration the
Agent's, the Issuing Bank's or such Lender's policies and the policies of the
Agent's, the Issuing Bank's or such Lender's holding company with respect to
capital adequacy) by an amount reasonably deemed by the Agent, the Issuing Bank
or such Lender to be material, then and in any such case:
(a) the Agent, the Issuing Bank or such Lender shall promptly advise
the Borrower of such event, together with the date thereof, the amount of such
reduction and the way in which such amount has been calculated; and
(b) the Borrower shall pay to the Agent, on behalf of the Agent, the
Issuing Bank or such Lender, as applicable, within ten (10) days after the
advice referred to in subsection (a) hereinabove, such an amount or amounts as
will compensate the Agent, the Issuing Bank or such Lender or the Agent's, the
Issuing Bank's or such Lender's holding company for such reduction for so long
as the same shall remain in effect.
The determination of the Agent, the Issuing Bank or a Lender as to
additional amounts payable pursuant to this Section 2.13 shall be conclusive
evidence of such amounts absent manifest error.
SECTION 2.14. CHANGE IN LEGALITY. (a) Notwithstanding anything to the
contrary contained elsewhere in this Agreement, if any change after the date
hereof in law, rule, regulation, guideline or order, or in the interpretation
thereof by any governmental authority charged with the administration thereof,
shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or
to give effect to its obligations as
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contemplated hereby with respect to a Eurodollar Loan, then, by written notice
to the Agent and the Borrower, such Lender may:
(i) declare that it will not thereafter make Eurodollar Loans
hereunder, whereupon the Borrower shall be prohibited from requesting such
Eurodollar Loans from such Lender unless such declaration is subsequently
withdrawn; and
(ii) require that, subject to the provisions of Section 2.10,
all outstanding Eurodollar Loans made by such Lender be converted to an
Alternate Base Rate Loan, whereupon all of such Eurodollar Loans shall be
automatically converted to an Alternate Base Rate Loan as of the effective date
of such notice as provided in paragraph (b) below.
(b) For purposes of this Section 2.14, a notice to
the Borrower by a Lender pursuant to paragraph (a) above shall be effective, for
the purposes of paragraph (a) above, if lawful, and if any Eurodollar Loans
shall then be outstanding, on the last day of the then current Interest Period;
otherwise, such notice shall be effective on the date of receipt by the
Borrower.
SECTION 2.15. INDEMNITY. The Borrower will indemnify each of the
Lenders against any loss or expense which any Lender may sustain or incur as a
consequence of any default in payment or prepayment of the principal amount of
any Eurodollar Loan or any part thereof or interest accrued thereon, as and when
due and payable (at the due date thereof, by notice of prepayment or otherwise),
or the occurrence of any Event of Default, including but not limited to any loss
or expense sustained or incurred in liquidating or re-employing deposits from
third parties acquired to affect or maintain such Eurodollar Loan or any part
thereof. When claiming under this Section 2.15, a Lender shall provide to the
Borrower a statement, signed by an officer of such Lender, explaining the amount
of any such loss or expense (including the calculation of such amount), which
statement shall, in the absence of manifest error, be conclusive with respect to
the parties hereto.
SECTION 2.16. CHANGE IN LIBOR; AVAILABILITY OF RATES. In the event, and
on each occasion, that, on the day the interest rate for any Eurodollar Loan is
to be determined, the Agent shall have reasonably determined (which
determination, absent manifest error, shall be conclusive and binding upon the
Borrower) that dollar deposits in the amount of the principal amount of the
requested Eurodollar Loan are not generally available in the London interbank
market, or that the rate at which such dollar deposits are being offered will
not adequately and fairly reflect the cost to the Lenders of making or
maintaining the principal amount of such Eurodollar Loan during such Interest
Period, such Eurodollar Loan shall be unavailable. The Agent shall, as soon as
practicable
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thereafter, given written, telex or telephonic notice of such determination of
unavailability to the Borrower. Any request by the Borrower for an unavailable
Eurodollar Loan shall be deemed to have been a request for an Alternate Base
Rate Loan. After such notice shall have been given and until the Agent shall
have notified the Borrower that the circumstances giving rise to such notice no
longer exist, each subsequent request for an unavailable Eurodollar Loan shall
be deemed to be a request for an Alternate Base Rate Loan.
SECTION 2.17. AUTHORIZATION TO DEBIT BORROWER'S ACCOUNT. The Agent is
hereby authorized to debit the Borrower's account maintained with the Agent for
(i) all scheduled payments of principal and/or interest under the Notes, (ii)
all required reimbursements and other payments due in connection with Letters of
Credit, (iii) the Agent's fees and (iv) the commitment fee and all other amounts
due hereunder; all such debits to be made on the days such payments are due in
accordance with the terms hereof.
SECTION 2.18. LATE CHARGES, DEFAULT INTEREST. (a) If the Borrower shall
default in the payment of any principal installment of or interest on any Loan
or any other amount becoming due hereunder, the Borrower shall pay interest, to
the extent permitted by law, on such defaulted amount up to the date of actual
payment (after as well as before judgment) at a rate per annum (computed on the
basis of the actual number of days elapsed over a year of 360 days) equal to (i)
the amount of principal, interest, fees and/or other amounts due (the "Past Due
Amount") TIMES (ii) two (2%) percent in excess of the interest rate otherwise in
effect with respect to the type of Loan in connection with which the required
payments have not been made, or, if no such interest rate is in effect, two (2%)
percent in excess of the Alternate Base Rate plus the Applicable Margin for
Alternate Base Rate Loans, TIMES (ii) the number of days the Past Due Amount is
delinquent.
(b) Upon the occurrence and during the continuation of an Event of
Default, the Borrower shall, at the demand of the Agent and the Required
Lenders, pay interest on all amounts owing under the Notes and this Agreement
(after as well as before judgment) at a rate per annum (computed on the basis of
the actual number of days elapsed over a year of 360 days) equal to two (2%)
percent in excess of the interest rate otherwise in effect hereunder.
SECTION 2.19. PAYMENTS. All payments by the Borrower hereunder or under
the Notes shall be made in Dollars in immediately available funds at the office
of the Agent by 12:00 noon, New York City time on the date on which such payment
shall be due. Interest on the Notes shall accrue from and including the date of
each Loan to but excluding the date on which such Loan is paid in full or
refinanced with a Loan of a different type.
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SECTION 2.20. INTEREST ADJUSTMENTS. (a) If the provisions of this
Agreement or the Notes would at any time otherwise require payment by the
Borrower to the Lenders of any amount of interest in excess of the maximum
amount then permitted by applicable law the interest payments shall be reduced
to the extent necessary so that the Lenders shall not receive interest in excess
of such maximum amount. To the extent that, pursuant to the foregoing sentence,
the Lenders shall receive interest payments hereunder or under the Notes in an
amount less than the amount otherwise provided, such deficit (hereinafter called
the "Interest Deficit") will cumulate and will be carried forward (without
interest) until the termination of this Agreement. Interest otherwise payable to
the Lenders hereunder and under the Notes for any subsequent period shall be
increased by such maximum amount of the Interest Deficit that may be so added
without causing the Lenders to receive interest in excess of the maximum amount
then permitted by applicable law.
(b) The amount of the Interest Deficit on the Maturity Date shall be
cancelled and not paid.
(THE BALANCE OF THIS PAGE IS INTENTIONALLY BLANK)
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ARTICLE IIA
THE LETTERS OF CREDIT
SECTION 2A.01. LETTERS OF CREDIT. (a) On the terms and conditions set
forth herein, (i) the Issuing Bank agrees, from time to time on any Business Day
during the period from the date of this Agreement to the day which is thirty
(30) days prior to the Maturity Date to issue Letters of Credit for the account
of the Borrower or DPI and (ii) the Lenders severally agree to participate in
Letters of Credit issued for the account of the Borrower or DPI. Within the
foregoing limits, and subject to the other terms and conditions hereof, the
Borrower's ability to obtain Letters of Credit shall be fully revolving, and,
accordingly, the Borrower may, during the foregoing period, obtain Letters of
Credit to replace Letters of Credit which have expired or which have been drawn
upon and reimbursed, provided that in no event shall the Outstanding L/C
Exposure exceed the L/C Sublimit.
(b) The Issuing Bank has no obligation to issue any Letter of
Credit if:
(i) any order, judgment or decree of any governmental
authority or arbitrator purports by its terms to enjoin or restrain the Issuing
Bank from issuing such Letter of Credit or any requirement of law applicable to
the Issuing Bank or any request or directive (whether or not having the force of
law) from any governmental authority with jurisdiction over the Issuing Bank
prohibits, or requests that the Issuing Bank refrain from, the issuance of
commercial letters of credit generally or such Letter of Credit in particular or
imposes upon such Issuing Bank with respect to such Letter of Credit any
restriction, reserve or capital requirement (for which such Issuing Bank is not
otherwise compensated hereunder) not in effect on the date of this Agreement, or
imposes upon the Issuing Bank any unreimbursed loss, cost or expense which was
not applicable on the date of this Agreement and which the Issuing Bank in good
faith deems material to it;
(ii) the Issuing Bank has received written notice
from any Lender, the Agent or the Borrower, on or prior to the Business Day
prior to the requested date of issuance of such Letter of Credit, that one or
more of the applicable conditions contained in Article III is not then
satisfied;
(iii) the expiry date of any requested Letter of
Credit is (x) more than one (1) year from its date of issuance or (y) later than
thirty (30) Business Days prior to the Maturity Date;
(iv) Aggregate Outstandings, after giving effect to
the requested Letter of Credit shall exceed the Total Commitment;
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(v) the L/C Documents are not in form and substance
satisfactory to the Issuing Bank; or
(vi) any requested Letter of Credit is not in form
and substance acceptable to the Issuing Bank, or the issuance of a Letter of
Credit violates any applicable policies of the Issuing Bank.
SECTION 2A.02. ISSUANCE OF LETTERS OF CREDIT. Each Letter of Credit
shall be issued upon the request of the Borrower (which request shall be
irrevocable), received by the Issuing Bank in accordance with arrangements
between the Issuing Bank and the Borrower to provide the Issuing Bank
electronically with the information necessary to issue, amend or renew Letters
of Credit. The arrangements between the Borrower and the Issuing Bank are set
forth in the L/C Documents (other than the Letters of Credit) between the
Issuing Bank and the Borrower. To the extent any term in any such L/C Documents
(other than a Letter of Credit) conflicts with or is inconsistent with the terms
of this Agreement, the term most favorable to the Issuing Bank shall apply, and
an Issuing Bank may exercise its rights under either such L/C Document or this
Agreement, but subject in any event to the provisions herein with respect to
sharing and notification. If any such inconsistency exists, the Agent and the
Lenders shall not be deemed to have waived any rights hereunder, nor shall the
Issuing Bank be deemed to have waived any rights under such L/C Document, by
reason of such inconsistency.
SECTION 2A.03. PARTICIPATIONS OF LENDERS. (a) Immediately upon the
issuance of each Letter of Credit, each Lender shall be deemed to, and hereby
irrevocably unconditionally agrees to, purchase from the Issuing Bank a
participation in such Letter of Credit, each drawing thereunder in any amount
and each draft accepted or deferred payment obligation incurred in any amount
under such Letter of Credit equal in each case to the product of (i) the Pro
Rata Share of each Lender, times (ii) the maximum amount available to be drawn
under such Letter of Credit and the amount of such drawing, accepted draft or
deferred payment obligation, respectively. Each issuance of a Letter of Credit
shall be deemed to utilize the Commitment of each Lender by an amount equal to
the amount of such participation.
(b) The Issuing Bank will promptly notify the Borrower of any drawing
under a Letter of Credit. The Borrower shall reimburse the Issuing Bank on each
date that any amount is paid by the Issuing Bank under any Letter of Credit
(each such date, an "Honor Date") at such time(s) as are agreed upon by the
Borrower and the Issuing Bank, in an amount equal to the amount so paid by the
Issuing Bank. The Borrower may request, and the Issuing Bank, in its sole
discretion may issue, a B/A in satisfaction of the Borrower's obligation to
reimburse the Issuing Bank for draws under a Letter
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of Credit. In such event, the Lenders shall each be deemed to have purchased a
participation in such B/A in the same pro rata percentage as each Lender's
participation in the related Letter of Credit. The Borrower agrees to pay to the
Issuing Bank, on the date of maturity of each B/A, an amount equal to the face
amount of such B/A plus an amount sufficient to reimburse the Issuing Bank in
full for all principal, interest, fees and charges payable to the Issuing Bank
on account of such B/A, pursuant to any applicable agreement or otherwise. If
the Borrower fails to reimburse the Issuing Bank for the full amount of any
drawing under any Letter of Credit at such agreed upon time on the Honor Date,
or fails to pay a B/A on its maturity date, the Issuing Bank will promptly
notify the Agent and the Agent will promptly notify each Lender thereof.
(c) Upon receipt of any notice from the Agent of any failure by the
Borrower to reimburse or pay the Issuing Bank, each Lender shall make available
to the Agent for the account of the Issuing Bank its pro rata share of the
amount of such reimbursement or payment. If, after receipt of such notice, any
Lender fails to transfer its pro rata share of the amount of such reimbursement
or payment to the Agent, interest shall accrue on such Lender's obligation to
make such reimbursement or payment from the Honor Date or the maturity date, as
applicable, to the date such Lender makes such payment, at a rate per annum
equal to the Federal Funds Effective Rate in effect from time to time during
such period. Any failure of the Agent to give notice to the Lenders on an Honor
Date or a maturity date, as applicable, or in sufficient time to enable any
Lender to effect such payment on such date shall not relieve such Lender from
its obligations under this subsection (c).
(d) Each Lender's payment to the Issuing Bank pursuant to Section
2A.03(c) shall be deemed payment in respect of and in satisfaction of its
participation in such Letter of Credit or B/A.
(e) Each Lender's obligation to make payment in respect of its
participation in Letters of Credit or B/As, shall be absolute and unconditional
and without recourse to the Issuing Bank and shall not be affected by any
circumstance, including (i) any setoff, counterclaim, recoupment, defense or
other right which such Bank may have against the Issuing Bank, the Borrower or
any other Person for any reason whatsoever; (ii) the occurrence or continuance
of a Default or any Event of Default; or (iii) any other circumstance, happening
or event whatsoever, whether or not similar to any of the foregoing.
SECTION 2A.04. REPAYMENT OF PARTICIPATIONS. (a) Upon receipt by the
Issuing Bank of (i) reimbursement from the Borrower for any payment made by the
Issuing Bank under a Letter of Credit or a B/A with respect to which any Lender
has paid for its participation in such Letter of Credit or B/A or (ii) payment
of interest thereon, the Issuing Bank will pay such amounts to the Agent in the
same
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funds as those received by the Issuing Bank. The Agent shall promptly distribute
to each Lender its pro rata share thereof.
(b) If the Agent or any Issuing Bank is required at any time to return to
the Borrower, or to a trustee, receiver, liquidator, custodian, or any official
in any insolvency proceeding, any portion of the payments made by the Borrower
to the Agent or to the Issuing Bank pursuant to Section 2A.04(a) in
reimbursement of a payment made under a Letter of Credit or a B/A or interest
thereon or fees relating thereto or as a result of a setoff, each Lender shall,
on demand of the Agent or the Issuing Bank, as the case may be, forthwith return
to the Agent or the Issuing Bank, as the case may be, the amount of its pro rata
share of any amounts so returned by the Agent or the Issuing Bank plus interest
thereon from the date such demand is made to the date such amounts are returned
by such Lender to the Agent or the Issuing Bank, at a rate per annum equal to
the Federal Funds Effective Rate in effect from time to time.
(c) If any event described in subsection (b) above occurs, the
obligation of the Borrower in respect of the payment or setoff required to be
returned shall be revived and continued in full force and effect as if such
payment had not been make or such setoff had not been effected.
SECTION 2A.05. ROLE OF THE ISSUING BANK. (a) The Issuing Bank shall
not have any responsibility to obtain any document in connection with paying
any draw under a Letter of Credit (other than any required sight or time draft,
certificate and other documents expressly required by the Letter of Credit) or
to ascertain or inquire as to the validity or accuracy of any such document or
the authority of the Person executing or delivering any such document.
(b) Neither the Issuing Bank nor any of its correspondents or assignees
shall be liable to any Lender for: (i) any action taken or omitted in connection
herewith at the request or with the approval of the Lenders (including the
Required Lenders, as applicable); (ii) any action taken or omitted in the
absence of gross negligence or willful misconduct; or (iii) the due execution,
effectiveness, validity or enforceability of any L/C Document.
(c) The Borrower hereby assumes all risks of the acts or omissions of
any beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not,
preclude the Borrower's pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. Neither the
Agent, nor any of its officers, directors or employees, nor any of the
respective correspondents, participants or assignees of the Issuing Bank, shall
be liable or responsible for any of the matters
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described in clauses (i) through (vii) of Section 2A.06; provided, however, that
the Borrower may have a claim against the Issuing Bank, and the Issuing Bank may
be liable to the Borrower, to the extent of any direct, as opposed to
consequential or exemplary, damages suffered by the Borrower which the Borrower
proves were caused by the Issuing Bank's willful misconduct or gross negligence
or the Issuing Bank's willful failure to pay under any Letter of Credit after
the presentation to it by the beneficiary of a required sight or time draft and
certificate(s) strictly complying with the terms and conditions of a Letter of
Credit. In furtherance and not in limitation of the foregoing: (i) the Issuing
Bank may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) the Issuing Bank shall not be responsible
for the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reasons.
SECTION 2A.06. OBLIGATIONS ABSOLUTE. The obligations of the Borrower
under this Agreement and any L/C Documents to reimburse the Issuing Bank for a
drawing under a Letter of Credit shall be unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this Agreement and the
L/C Documents under all circumstances, including the following:
(i) any lack of validity or enforceability of this Agreement
or any L/C Document;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the obligations of the Borrower in respect
of any Letter of Credit or any other amendment or waiver of or any consent to
departure from all or any of the L/C Documents;
(iii) the existence of any claim, setoff, defense or other
right that the Borrower may have at any time against any beneficiary or any
transferee of any Letter of Credit (or any Person for whom any such beneficiary
or any such transferee may be acting), the Issuing Bank or any other Person,
whether in connection with this Agreement, the transactions contemplated hereby
or by the L/C Documents or any unrelated transaction;
(iv) any draft, demand, certificate or 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; or any loss or delay in the transmission or otherwise
of any document required in order to make a drawing under any Letter of Credit;
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(v) any payment by the Issuing Bank under a Letter of Credit
against presentation of a draft or certificate that does not strictly comply
with the terms of any Letter of Credit; or any payment made by the Issuing Bank
under any Letter of Credit to any Person purporting to be a trustee in
bankruptcy, debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to any beneficiary
or any transferee of any Letter of Credit, including any arising in connection
with any insolvency proceeding;
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to departure
from any other guarantee, for all or any of the obligations of the Borrower in
respect of any Letter of Credit; or
(vii) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing, including any other circumstance that
might otherwise constitute a defense available to, or a discharge of, the
Borrower.
SECTION 2A.07. UNIFORM CUSTOMS AND PRACTICES. The Uniform Customs and
Practices for Documentary Credits as published by the International Chamber of
Commerce most recently at the time of issuance of any Letter of Credit shall
(unless otherwise expressly provided in the Letters of Credit) apply to the
Letters of Credit.
SECTION 2A.08. FEES AND COMMISSIONS. (a) In the case of trade Letters
of Credit payable on sight, the Borrower shall pay to the Agent a payment
commission equal to the greater of (i) $75.00 or (ii) one quarter of one (1/4%)
percent of the amount drawn, payable on the date of presentment of thE required
documents under the Letter of Credit.
(b) In the case of trade Letters of Credit payable at a stated time,
the Borrower shall pay to the Agent a per annum commission on the average amount
of B/As and other deferred payment obligations as outstanding from the date of
presentment of required documents under the Letter of Credit to the date of
payment, equal to the greater of (i) $150.00 or (ii) three (3%) percent.
(c) In the case of all Letters of Credit, the Borrower shall pay to the
Issuing Bank its usual and customary letter of credit fees as established from
time to time, including without limitation, fees, commissions and charges for
issuance, payment, processing amendment and expiration.
(d) In the case of the fees and commissions set forth in (a) and (b)
above, same shall be paid to the Agent for the pro rata distribution to the
Lenders.
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ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. CONDITIONS PRECEDENT TO THE MAKING OF THE INITIAL
REVOLVING CREDIT LOAN, THE ISSUANCE OF THE INITIAL LETTER OF CREDIT AND THE
CREATION OF THE INITIAL B/A. The obligation of the Lenders to make the initial
Revolving Credit Loans contemplated by this Agreement and the obligation of the
Issuing Bank to issue the initial Letter of Credit or create the initial B/A
contemplated by this Agreement is subject to the following conditions precedent,
the satisfaction of which shall be, and each of which shall be in form and
substance, satisfactory to the Agent, the Lenders and their counsel:
(a) The Agent shall have received the Revolving Credit Notes duly
executed and payable to the order of each of the Lenders.
(b) The Agent shall have received certified (as of the date of this
Agreement) copies of the resolutions of the Board of Directors of the Borrower
authorizing the Loans and authorizing and approving this Agreement and the other
Loan Documents and the execution, delivery and performance thereof and certified
copies of all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this Agreement and the other
Loan Documents.
(c) The Agent shall have received certified (as of the date of this
Agreement) copies of the resolutions of the Board of Directors and, if required
under applicable law, the shareholders of each of the Guarantors, authorizing
and approving this Agreement, its Guaranty and any other Loan Document
applicable to such Guarantors, and the execution, delivery and performance
thereof and certified copies of all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect to this
Agreement, its Guaranty and the other Loan Documents.
(d) The Agent shall have received a certificate of the Secretary or an
Assistant Secretary (attested to by another officer) of the Borrower certifying:
(i) the names and true signatures of the officer or officers of the Borrower
authorized to sign this Agreement, the Notes and the other Loan Documents to be
delivered hereunder on behalf of the Borrower; and (ii) a copy of the Borrower's
by-laws as complete and correct on the date of this Agreement.
(e) The Agent shall have received a Certificate of the Secretary or an
Assistant Secretary (attested to by another officer) of each of the Guarantors
certifying (i) the names and true signatures of the officer or officers of such
Guarantor
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authorized to sign this Agreement, its Guaranty and any other Loan Documents to
be delivered hereunder on behalf of such Guarantor; (ii) a copy of such
Guarantor's by-laws as complete and correct on the date of this Agreement; and
(iii) the stock ownership of such Guarantor.
(f) The Agent shall have received copies of the certificate of
incorporation and all amendments thereto of the Borrower and each Guarantor,
certified in each case by the Secretary of State (or equivalent officer) of the
state of incorporation of the Borrower and each Guarantor and a certificate of
existence and good standing with respect to the Borrower and each Guarantor from
the Secretary of State (or equivalent officer) of the state of incorporation of
the Borrower and each Guarantor and from the Secretary of State (or equivalent
officer) of any state in which the Borrower or each Guarantor is authorized to
do business.
(g) The Agent shall have received an opinion, addressed to the Agent
and each of the Lenders, of O'Sullivan, Graev and Karabell, LLP, counsel for the
Borrower and the Guarantors as to certain matters referred to in Article IV
hereof and as to such other matters as the Agent or its counsel may reasonably
request.
(h) The Agent shall have received from each Guarantor, an executed
Guaranty.
(i) The Agent shall have received evidence that the Borrower and each
Guarantor maintain adequate casualty and liability insurance, with financially
sound and reputable insurance companies or associations, in such amounts and
covering such risks as are usually carried by companies engaged in similar
businesses and owning properties and doing business in the same general areas in
which the Borrower and the Guarantors operate.
(j) The Agent shall have received and satisfactorily reviewed all
credit agreements and other similar agreements described in Section 4.01(t) of
this Agreement.
(k) The Agent shall have received and satisfactorily reviewed Schedule
4.01(k) to this Agreement which shall disclose all intellectual property of the
Borrower and its Subsidiaries including domestic trademarks, tradenames and
related product names, and including all registration numbers, serial numbers,
classifications and other information relating to any trademarks or tradenames
registered with the United States Patent and Trademark Office.
(l) The Agent and the Lenders shall have received and satisfactorily
reviewed the Senior Note Agreement Amendment.
(m) The Agent shall have received letters evidencing the cancellation
of the Chase Line of Credit and the EAB Line of Credit
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and any other lines of credit or similar borrowing facilities available to the
Borrower or any Guarantor.
(n) The Agent shall have received and satisfactorily reviewed the
management letter issued in connection with the audit of the Borrower's
consolidated financial statements for the year ended December 31, 1998.
(o) Intentionally Omitted.
(p) The Borrower and each Guarantor shall each have executed and
delivered to the Collateral Agent a Security Agreement or Security Agreements,
together with other agreements, instruments and documents (including, without
limitation, UCC financing statements) pursuant to which the Collateral Agent
shall have received, for the benefit of itself, the Agent, the Lenders and the
Senior Note Holders a first priority perfected security interest in (i) with
respect to the Borrower and all Guarantors, all accounts and accounts receivable
of the Borrower and the Guarantors, and (ii) with respect to the Borrower, DPI
and Parfums, all trade names and trademarks, trademark registrations, trademark
applications and trademark licenses of the Borrower, DPI and Parfums and all
product names related thereto (the "Collateral").
(q) The Borrower, DPI and Parfums as applicable, shall each have
executed and delivered to the Collateral Agent, a Trademark Collateral
Assignment and Security Agreement pursuant to which the Borrower, DPI and
Parfums assign, to the Collateral Agent for the benefit of itself, the Agent,
the Lenders and the Senior Note Holders, all of their rights to each of their
trademarks which have been registered at the United States Patent and Trademark
Office, such assignments to be registered at such office.
(r) The Collateral Agent, the Agent, the Lenders and the Senior Note
Holders shall have entered into the Intercreditor Agreement.
(s) The Borrower will have engaged the Agent to conduct a Field
Examination, to commence not later than March 6, 2000.
(t) The following statements shall be true and the Agent shall have
received a certificate signed by the President or the Chief Financial Officer of
the Borrower dated the date hereof, stating that:
(i) After giving effect to the execution and delivery of this
Agreement and the Senior Note Agreement, the representations and warranties
contained in Article IV of this Agreement and in the Loan Documents are true and
correct in all material respects on and as of such date, except for those
relating to an earlier date, which shall remain true and correct as of such
earlier date; and
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(ii) No Default or Event of Default has occurred and is
continuing, or would result from the making of the initial Revolving Credit
Loans.
(u) Receipt by the Agent of (i) the facility fees payable to the
Lenders, (ii) its administrative fee together with all other fees payable
pursuant to the Fee Letter.
(v) All schedules, documents, certificates and other information
provided to the Agent or any Lender pursuant to or in connection with this
Agreement shall be reasonably satisfactory to the Agent and its counsel in all
respects.
(w) All legal matters incident to this Agreement and the transactions
contemplated hereby shall be satisfactory to Cullen and Dykman, counsel to the
Agent.
(x) Receipt by the Agent of such other approvals, opinions or documents
as the Agent or its counsel may reasonably request.
(y) Payment by the Borrower of the reasonable fees and expenses of
counsel to the Agent.
SECTION 3.02. CONDITIONS PRECEDENT TO ALL REVOLVING CREDIT LOANS. The
obligations of the Lenders to make each subsequent Revolving Credit Loan shall
be subject to the further condition precedent that on the date of such Revolving
Credit Loan:
(a) The following statements shall be true and each request for a
Revolving Credit Loan shall be deemed a certification by the Borrowers and the
Guarantors that such statements are true, and the Agent shall have received, if
requested by the Agent, a certificate signed by the President or the Chief
Financial Officer of the Borrower dated the date of such Revolving Credit Loan,
stating that:
(i) The representations and warranties contained in Article IV
of this Agreement and in the Loan Documents are true and correct in all material
respects on and as of such date as though made on and as of such date except for
those that relate to an earlier date which shall remain true and correct as of
such earlier date; and
(ii) No Default or Event of Default has occurred and is
continuing, or would result from such Revolving Credit Loan.
(b) The Agent shall have received such other approvals, opinions or
documents as the Agent may reasonably request.
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SECTION 3.03. CONDITIONS PRECEDENT TO ALL LETTERS OF CREDIT AND ALL
B/As. The obligation of the Issuing Bank to issue each Letter of Credit
(including the initial Letter of Credit) and to create each B/A (including the
initial B/A) shall be subject to the further condition precedent that on the
date of each request for a Letter of Credit or B/A:
(a) The following statements shall be true and each request for a
Letter of Credit or B/A shall be deemed a certification by the Borrowers and the
Guarantors that such statements are true, and the Agent shall have received, if
requested by the Agent, a certificate signed by the President or the Chief
Financial Officer of the Borrower dated the date of such request for a Letter of
Credit or B/A, stating that:
(i) The representations and warranties contained in Article IV
of this Agreement and in the Loan Documents are true and correct in all material
respects on and as of such date as though made on and as of such date except for
those that relate to an earlier date which shall remain true and correct as of
such earlier date; and
(ii) No Default or Event of Default has occurred and is
continuing, or would result from the issuance of such Letter of Credit or the
creation of such B/A.
(b) The Agent shall have received such other approvals, opinions or
documents as the Agent may reasonably request.
(THE BALANCE OF THIS PAGE IS INTENTIONALLY BLANK)
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES. On the date hereof and,
on each date that the Borrower requests a Revolving Credit Loan or a Letter of
Credit, the Borrower and the Guarantors each represent and warrant as follows:
(a) SUBSIDIARIES. On the date hereof, the only Subsidiaries of the
Borrower or the Guarantors are those set forth on Schedule 4.01(a) annexed
hereto, which Schedule accurately sets forth with respect to each such
Subsidiary, its name and address, any other addresses at which it conducts
business, its state of incorporation and each other jurisdiction in which it is
qualified to do business, other than jurisdictions where the failure to so
qualify would not be reasonably likely to result in a Material Adverse Change in
such Subsidiary, the identity and share holdings of its stockholders and whether
such Subsidiary is inactive and has no assets. Except as set forth on Schedule
4.01(a), all of the issued and outstanding shares of each Subsidiary which are
owned by the Borrower or any Guarantor are owned by the Borrower or such
Guarantor free and clear of any mortgage, pledge, lien or encumbrance, other
than Liens permitted by Section 5.02(a) of this Agreement. Except as set forth
on Schedule 4.01(a) and except for options granted under the 1984 Stock Option
Plan or the 1994 Stock Plan, there are no outstanding warrants, options,
contracts or commitments of any kind entitling any Person to purchase or
otherwise acquire any shares of common or capital stock or other equity interest
of the Borrower, any Guarantor or any Subsidiary of the Borrower or any
Guarantor, nor are there outstanding any securities which are convertible into
or exchangeable for any shares of the common or capital stock of the Borrower,
any Guarantor or any Subsidiary of the Borrower or any Guarantor.
(b) ORGANIZATION; GOOD STANDING. The Borrower, each Guarantor and each
Subsidiary of the Borrower or any Guarantor are each a corporation duly
incorporated, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation and each has the corporate power to
own its assets and to transact the business in which it is presently engaged and
is duly qualified and is in good standing in all other jurisdictions where the
failure to so qualify would be reasonably likely to result in a Material Adverse
Change.
(c) LOAN DOCUMENTS; NO CONSENTS OR VIOLATIONS. The execution, delivery
and performance by the Borrower and each Guarantor of the Loan Documents to
which they are a party are within the Borrower's and such Guarantor's corporate
power and have been duly authorized by all necessary corporate action and do not
and will not (i) require any consent or approval of the stockholders of the
Borrower
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or such Guarantor (other than those previously obtained and appropriate evidence
of which has been delivered to the Agent); (ii) do not contravene the Borrower's
or such Guarantor's certificate of incorporation, charter or by-laws; (iii)
violate any provision of or any law, rule, regulation, contractual restriction,
order, writ, judgment, injunction, or decree, determination or award binding on
or affecting the Borrower or such Guarantor; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement, or any
other material agreement, lease or instrument to which the Borrower or such
Guarantor is a party or by which it or its properties may be bound or affected;
and (v) result in, or require, the creation or imposition of any Lien upon or
with respect to any of the properties now owned or hereafter acquired by the
Borrower or such Guarantor, other than the Liens created pursuant to the Loan
Documents.
(d) AUTHORIZATION. No authorization or approval or other action by, and
no notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Borrower or any
Guarantor of any Loan Document to which it is a party, except authorizations,
approvals, actions, notices or filings which have been obtained, taken or made,
as the case may be.
(e) VALIDITY AND ENFORCEABILITY. The Loan Documents, when delivered
hereunder, will have been duly executed and delivered on behalf of the Borrower
and each Guarantor, as the case may be, and will be legal, valid and binding
obligations of the Borrower and each Guarantor, as the case may be, enforceable
against the Borrower or such Guarantor in accordance with their respective
terms.
(f) FINANCIAL STATEMENTS. The consolidated financial statements of the
Borrower and its Consolidated Subsidiaries for the fiscal year ended December
31, 1998, and for the nine (9) month period ended September 30, 1999 copies of
each of which have been furnished to the Agent and the Lenders, (i) fairly
present in all material respects the financial condition of the Borrower and its
Consolidated Subsidiaries as at such dates and the results of operations of the
Borrower and its Consolidated Subsidiaries for the periods ended on such dates,
all in accordance with GAAP, subject, in the case of the interim financial
statements, to year end adjustments and the absence of footnotes, (ii) between
December 31, 1998 and the date of this Agreement there has been (x) no material
increase in the consolidated liabilities of the Borrower and its Consolidated
Subsidiaries, other than increases in liabilities resulting solely from
increased borrowings under this Agreement, the Chase Line of Credit or the EAB
Line of Credit and (y) no Material Adverse Change and (iii) except as disclosed
on such financial statements or the notes thereto, there are no undisclosed
liabilities of the Borrower or any of its Consolidated
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Subsidiaries, contingent or otherwise required to be disclosed therein.
(g) LITIGATION. There is no pending or to the Borrower's or any
Guarantor's knowledge, threatened action, proceeding or investigation affecting
the Borrower, such Guarantor or any Subsidiary of the Borrower or any Guarantor,
before any court, governmental agency or arbitrator, which would either in one
case or in the aggregate, be reasonably likely to result in a Material Adverse
Change.
(h) TAXES. The Borrower, each Guarantor and each Subsidiary of the
Borrower or any Guarantor have filed all federal, state and local tax returns
required to be filed and have paid all taxes, assessments and governmental
charges and levies thereon to be due, including interest and penalties, unless
and only to the extent that (i) such taxes are being contested in good faith and
by appropriate proceedings by the Borrower, such Guarantor or any such
Subsidiary, as the case may be; (ii) there are adequate reserves therefor in
accordance with GAAP entered on the books of the Borrower, such Guarantor or any
such Subsidiary; and (iii) no enforcement proceedings against the Borrower, such
Guarantor or any such Subsidiary have been commenced.
(i) LICENSES, ETC. The Borrower, each Guarantor and each Subsidiary of
the Borrower or any Guarantor possess, or has the right to use, all material
licenses, permits, franchises, patents, copyrights, trademarks and trade names,
including, without limitation, those set forth on Schedule 4.01(v), or rights
thereto, to conduct their respective businesses substantially as now conducted
and as presently proposed to be conducted, and neither the Borrower, such
Guarantor nor any such Subsidiary are in violation of any similar rights of
others.
(j) NO ADVERSE AGREEMENTS. Neither the Borrower, nor any Guarantor nor
any Subsidiary of the Borrower or any Guarantor is a party to any indenture,
loan or credit agreement or any other agreement, lease or instrument or subject
to any charter or corporate restriction, the default or breach of which would be
reasonably likely to result in a Material Adverse Change. All material
agreements to which the Borrower, any Guarantor, or any Subsidiary of the
Borrower or any Guarantor is a party are in full force and effect and neither
the Borrower, such Guarantor nor any such Subsidiary are in default of any such
agreement.
(k) MARGIN STOCK. The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation T, U or X), and no proceeds of any Loan will be used
to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock or in any other way which
will cause the Borrower to violate the provisions of Regulations T, U or X.
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(l) COMPLIANCE WITH LAWS. The Borrower, each Guarantor and each
Subsidiary of the Borrower or any Guarantor are in all material respects in
compliance with all federal and state laws and regulations in all jurisdictions
where the failure to comply with such laws or regulations would be reasonably
likely to result in a Material Adverse Change.
(m) ERISA. The Borrower, each Guarantor, each Subsidiary of the
Borrower or any Guarantor and each ERISA Affiliate are in compliance in all
material respects with all applicable provisions of ERISA. Neither a Reportable
Event nor a Prohibited Transaction has occurred and is continuing with respect
to any Plan; no notice of intent to terminate a Plan has been filed nor has any
Plan been terminated; no circumstances exist which constitute grounds under
Section 4042 of ERISA entitling the PBGC to institute proceedings to terminate,
or appoint a trustee to administrate, a Plan, nor has the PBGC instituted any
such proceedings; neither the Borrower, any Guarantor, any Subsidiary of the
Borrower or any Guarantor, nor any ERISA Affiliate has completely or partially
withdrawn under Sections 4201 or 4204 of ERISA from a Multiemployer Plan; the
Borrower, each Guarantor, each Subsidiary of the Borrower or any Guarantor and
each ERISA Affiliate have met their minimum funding requirements under ERISA
with respect to all of their Plans and the present fair market value of all Plan
assets exceeds the present value of all vested benefits under each Plan, as
determined on the most recent valuation date of the Plan in accordance with the
provisions of ERISA for calculating the potential liability of the Borrower,
such Guarantor, any such Subsidiary or any ERISA Affiliate to PBGC or the Plan
under Title IV of ERISA; and neither the Borrower, such Guarantor, any such
Subsidiary nor any ERISA Affiliate has incurred any liability to the PBGC under
ERISA.
(n) HAZARDOUS MATERIALS. The Borrower, each Guarantor and each
Subsidiary of the Borrower or any Guarantor are in compliance in all material
respects with all federal, state or local laws, ordinances, rules, regulations
or policies governing Hazardous Materials and neither the Borrower, any
Guarantor nor any such Subsidiary has used Hazardous Materials on, from, or
affecting any property now owned or occupied or hereafter owned or occupied by
the Borrower, such Guarantor or any such Subsidiary in any manner which violates
federal, state or local laws, ordinances, rules, regulations or policies
governing the use, storage, treatment, transportation, manufacture, refinement,
handling, production or disposal of Hazardous Materials, and, to the Borrower's,
such Guarantor's and such Subsidiaries' knowledge, no prior owner of any such
property or any tenant, subtenant, prior tenant or prior subtenant have used
Hazardous Materials on, from or affecting such property in any manner which
violates federal, state or local laws, ordinances, rules, regulations, or
policies governing the use, storage, treatment, transportation, manufacture,
refinement, handling, production or disposal of Hazardous Materials.
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(o) USE OF PROCEEDS. The proceeds of the Revolving Credit Loans shall
be used exclusively for the purposes set forth in Sections 2.06 hereof.
(p) TITLE TO ASSETS; NO LIENS. The Borrower and each Guarantor have
good and marketable title to all of their properties and assets, subject only to
the Liens permitted by Section 5.02(a) of this Agreement.
(q) CASUALTIES, ETC. Neither the business nor the properties of the
Borrower, any Guarantor nor any Subsidiary of the Borrower or any Guarantor are
affected by any fire, explosion, accident, strike, hail, earthquake, embargo,
act of God or of the public enemy, or other casualty (whether or not covered by
insurance), which would be reasonably likely to result, in any one case or in
the aggregate, in a Material Adverse Change.
(r) SOLVENCY. After giving effect to the execution of this Agreement,
the availability of the Total Commitment and the Senior Note Agreement
Amendment, (i) the fair value of the assets of (x) the Borrower and its
Consolidated Subsidiaries, on a consolidated basis and (y) the Borrower and DPI,
each singularly, exceeds, in each case, their debts and liabilities
(subordinated, contingent or otherwise); (ii) the present fair saleable value of
the property of (x) the Borrower and its Consolidated Subsidiaries, on a
consolidated basis and (y) the Borrower and DPI, each singularly, is, in each
case, greater than the amount required to pay the probable liability of their
debts and other liabilities (subordinated, contingent or otherwise) as such
debts and other liabilities mature; (iii) (x) the Borrower and its Consolidated
Subsidiaries, on a consolidated basis and (y) the Borrower and each Guarantor
singularly, is, in each case, able to pay their debts and liabilities
(subordinated, contingent or otherwise) as such debts and liabilities mature;
and (iv) (x) the Borrower and its Consolidated Subsidiaries, on a consolidated
basis and (y) the Borrower and each Guarantor singularly, do not have, in each
case, unreasonably small capital to conduct the businesses in which they are
engaged; and (v) the Borrower and DPI each has a positive net worth.
(s) FINANCIAL ADVANTAGE. Each Guarantor acknowledges it has derived or
expects to derive a financial or other advantage from the Loans obtained by the
Borrower from the Lenders.
(t) CREDIT AGREEMENTS, ETC. Schedule 4.01(t) is a complete and correct
list of all credit agreements, indentures, purchase agreements, guaranties,
Capital Leases, and other agreements and arrangements presently in effect
providing for or relating to extensions of credit (including agreements and
arrangements for the issuance of letters of credit or for acceptance financing)
in the
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principal amount of $50,000.00 or more and in respect of which the Borrower or
any Guarantor is in any manner directly or contingently obligated, and the
maximum principal or face amounts of the credit in question, outstanding or to
be outstanding, are correctly stated, and all Liens of any nature given or
agreed to be given as security therefor are correctly described or indicated in
such Schedule.
(u) YEAR 2000 ISSUE. The Year 2000 date change has not resulted in
disruption of the Borrower's and its Subsidiaries' computer hardware, software,
databases, systems and other equipment containing embedded microchips (including
systems and equipment supplied by others or with which the Borrower's or its
Subsidiaries' systems interface), or to the Borrower's or its Subsidiaries'
operations or business systems, or to the best of the Borrower's and its
Subsidiaries' knowledge, to the operations or business systems of the Borrower's
major vendors, customers, suppliers and counterparties. The Borrower has no
reason to believe that liabilities and expenditures related to the Year 2000
date change (including, without limitation, costs caused by reprogramming
errors, the failure of others' systems or equipment, and the potential
liability, if any, of the Borrower or its Subsidiaries for Year 2000 related
costs incurred or disruption experienced by others) will result in a Default, or
an Event of Default or a Material Adverse Change.
(v) TRADEMARKS. Schedule 4.01(v) is a complete and correct list of all
trademarks, tradenames, trademark applications, trademark licenses and related
product names owned by the Borrower and its Subsidiaries, including, with
respect to those which have been registered with the United States Patent and
Trademark Office, all requisition numbers, serial numbers, dates of
registration, classifications and other relevant information.
(w) CONSOLIDATED TANGIBLE NET WORTH. The Borrower's Consolidated
Tangible Net Worth at December 31, 1999 is not less than $33,000,000.00.
(THE BALANCE OF THIS PAGE IS INTENTIONALLY BLANK)
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ARTICLE V
COVENANTS OF THE BORROWER AND THE GUARANTOR
SECTION 5.01. AFFIRMATIVE COVENANTS. So long as any amount shall remain
outstanding under the Revolving Credit Notes, or there is any Outstanding L/C
Exposure, or so long as the Commitments shall remain in effect, the Borrower and
each Guarantor will, unless the Agent and the Required Lenders shall otherwise
consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply, and cause each Subsidiary of the
Borrower or any Guarantor to comply, in all material respects with all
applicable laws, rules, regulations and orders, where the failure to so comply
would be reasonably likely to result in a Material Adverse Change.
(b) REPORTING REQUIREMENTS. Furnish to the Agent and the Lenders: (i)
ANNUAL FINANCIAL STATEMENTS. As soon as available and in any event within ninety
(90) days after the end of each fiscal year of the Borrower, a copy of the
audited consolidated and unaudited consolidating (such consolidating statements
to be prepared by management of the Borrower) financial statements of the
Borrower and its Consolidated Subsidiaries for such year, including balance
sheets with related statements of income and retained earnings and statements of
cash flows, all in reasonable detail and setting forth in comparative form the
figures for the previous fiscal year, together with an unqualified opinion,
prepared by independent certified public accountants selected by the Borrower
and reasonably satisfactory to the Agent, all such financial statements to be
prepared in accordance with GAAP.
(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in any
event within forty five (45) days after the end of each of the first three
fiscal quarters of each fiscal year of the Borrower, a copy of the consolidated
and consolidating financial statements of the Borrower and its Consolidated
Subsidiaries for such quarter, including balance sheets with related statements
of income and retained earnings and statements of cash flows, all in reasonable
detail and setting forth in comparative form the figures for the comparable
quarter for the previous fiscal year, all such financial statements to be
prepared by management of the Borrower in accordance with GAAP.
(iii) MANAGEMENT LETTERS. Promptly upon receipt thereof, copies of any
reports submitted to the Borrower or any Guarantor by independent certified
public accountants in connection with the examination of the financial
statements of the Borrower and the Guarantor made by such accountants.
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(iv) CERTIFICATE OF NO DEFAULT. Simultaneously with the
delivery of the financial statements referred to in Section 5.01(b)(i) and (ii),
a certificate of the President or the Chief Financial Officer of the Borrower,
(1) certifying that no Default or Event of Default has occurred and is
continuing, or if a Default or Event of Default has occurred and is continuing,
a statement as to the nature thereof and the action which is proposed to be
taken with respect thereto; and (2) with computations demonstrating compliance
with the covenants contained in Section 5.03.
(v) ACCOUNTANTS' REPORT. Simultaneously with the delivery of
the annual financial statements referred to in Section 5.01(b)(i), a certificate
of the independent certified public accountants who audited such statements to
the effect that, in making the examination necessary for the audit of such
statements, they have obtained no knowledge of any condition or event which
constitutes a Default or Event of Default, or if such accountants shall have
obtained knowledge of any such condition or event, specify in such certificate
each such condition or event of which they have knowledge and the nature and
status thereof.
(vi) NOTICE OF LITIGATION. Promptly after the commencement
thereof, notice of all actions, suits and proceedings before any court or
governmental department, commission, board, bureau, agency, or instrumentality,
domestic or foreign, affecting the Borrower, any Guarantor or any Subsidiary of
the Borrower or any Guarantor which, if determined adversely to the Borrower,
such Guarantor or any such Subsidiary would be reasonably likely to result in a
Material Adverse Change.
(vii) NOTICE OF DEFAULTS AND EVENTS OF DEFAULT. As soon as
possible and in any event within five (5) days after the occurrence of each
Default or Event of Default, a written notice setting forth the details of such
Default or Event of Default and the action which is proposed to be taken by the
Borrower with respect thereto.
(viii) ERISA REPORTS. Promptly after the filing or receiving
thereof, copies of all reports, including annual reports, and notices which the
Borrower, any Guarantor or any Subsidiary of the Borrower or any Guarantor,
files with or receives from the PBGC, the Internal Revenue Service or the U.S.
Department of Labor under ERISA; and as soon as possible after the Borrower, any
Guarantor or any such Subsidiary knows or has reason to know that any Reportable
Event or Prohibited Transaction has occurred with respect to any Plan or that
the PBGC or the Borrower, any Guarantor or any such Subsidiary has instituted or
will institute proceedings under Title IV of ERISA to terminate any Plan, the
Borrower or such Guarantor will deliver to the Agent and the Lenders a
certificate of the President or the Chief Financial Officer of the Borrower or
such Guarantor setting forth details as to such Reportable Event or
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Prohibited Transaction or Plan termination and the action the Borrower or such
Guarantor proposes to take with respect thereto;
(ix) ENVIRONMENTAL NOTICES. Promptly after the receipt
thereof, a copy of any claim, summons, charge or other notice to the Borrower,
any Guarantor or any Subsidiary of the Borrower or any Guarantor regarding
compliance (or failure to comply) with any federal, state or local laws
governing Hazardous Materials.
(x) MATERIAL ADVERSE CHANGE. Promptly, upon the occurrence
thereof, notice of a Material Adverse Change.
(xi) REPORTS TO OTHER CREDITORS. Promptly after the furnishing
thereof, copies of any statement or report furnished to any other party pursuant
to the terms of any indenture, loan, or credit or similar agreement and not
otherwise required to be furnished to the Agent and the Lenders pursuant to any
other clause of this Section 5.01(b).
(xii) PROXY STATEMENTS, ETC. Promptly after the sending or
filing thereof, copies of all proxy statements, financial statements and reports
which the Borrower, any Guarantor or any Subsidiary of the Borrower or any
Guarantor sends to its stockholders, and copies of all regular, periodic, and
special reports, and all registration statements which the Borrower or such
Guarantor or any such Subsidiary files with the Securities and Exchange
Commission or any governmental authority which may be substituted therefor, or
with any national securities exchange.
(xiii) NOTICE OF AFFILIATES. Promptly after any Person becomes
an Affiliate of the Borrower or any Guarantor (other than if such Person becomes
an Affiliate solely by virtue of a member of management of the Borrower making
an investment in such Person), notice to the Agent and the Lenders of such
Affiliate, provided that this clause (xiii) shall not require the Borrower or
any Guarantor to advise the Agent and the Lenders of any changes in officers
other than executive officers.
(xiv) GENERAL INFORMATION. Such other information respecting
the condition or operations, financial or otherwise, of the Borrower, any
Guarantor or any Subsidiary of the Borrower or any Guarantor as the Agent or any
Lender may from time to time reasonably request.
(c) TAXES. Pay and discharge, and cause each Subsidiary of the Borrower
or any Guarantor to pay and discharge, all taxes, assessments and governmental
charges upon it or them, its or their income and its or their properties prior
to the dates on which penalties are attached thereto, unless and only to the
extent that (i) such taxes shall be contested in good faith and by appropriate
proceedings by the Borrower, such Guarantor or any such Subsidiary,
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as the case may be; (ii) there be adequate reserves therefor in accordance with
GAAP entered on the books of the Borrower, such Guarantor or any such
Subsidiary; and (iii) no enforcement proceedings against the Borrower, such
Guarantor or any such Subsidiary have been commenced.
(d) CORPORATE EXISTENCE. Preserve and maintain, and cause each
Subsidiary of the Borrower or any Guarantor to preserve and maintain, their
corporate existence and good standing in the jurisdiction of their incorporation
and the rights, privileges and franchises of the Borrower, each Guarantor and
each such Subsidiary in each case where failure to so preserve or maintain would
be reasonably likely to result in a Material Adverse Change.
(e) MAINTENANCE OF PROPERTIES AND INSURANCE. (i) Keep, and cause each
Subsidiary of the Borrower and any Guarantor to keep, the respective properties
and assets (tangible or intangible) that are useful and necessary in its
business, in good working order and condition, reasonable wear and tear
excepted; and (ii) maintain, and cause any such Subsidiary to maintain,
insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in similar businesses and owning properties and doing business
in the same general areas in which the Borrower, any Guarantor and any such
Subsidiary may operate.
(f) BOOKS OF RECORD AND ACCOUNT. Keep, and cause each Subsidiary of the
Borrower and any Guarantor to keep, adequate records and proper books of record
and account in which complete entries will be made in a manner to enable the
preparation of financial statements in accordance with GAAP, reflecting all
financial transactions of the Borrower, such Guarantor, and any such Subsidiary.
(g) VISITATION; FIELD EXAMINATION. (i) At any reasonable time, and from
time to time, and upon prior notice, and, provided no Default or Event of
Default then exists, not more often than once during any calendar year, permit
the Agent or any agents or representatives thereof, to examine and make copies
of (except if such copies would result in the loss of any attorney-client or
other privilege) and abstracts from the financial and accounting books and
records of, and visit the properties of, the Borrower, the Guarantor or any
Subsidiary of the Borrower or the Guarantor to discuss the affairs, finances and
accounts of the Borrower, the Guarantor or any such Subsidiary with any of the
respective officers of the Borrower, the Guarantor or any such Subsidiary or the
Borrower's, the Guarantor's or such Subsidiary's independent accountants.
(ii) Not later than March 6, 2000, permit the Agent to begin
to conduct a Field Examination, and cooperate with the Agent to complete the
Field Examination within thirty (30) days, the
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reasonable cost of which, along with all other reasonable collateral monitoring
expenses will be paid by the Borrower.
(h) PERFORMANCE AND COMPLIANCE WITH OTHER AGREEMENTS. Perform and
comply in all material respects, and cause each Subsidiary of the Borrower or
any Guarantor to perform and comply in all material respects, with each of the
provisions of each and every agreement the failure to perform or comply with
which would be reasonably likely to result in a Material Adverse Change.
(i) CONTINUED PERFECTION OF LIENS. Record or file, or rerecord or
refile any Loan Document or financing statement or any other filing or recording
in each and every office where and when necessary to preserve and perfect the
security interests of the Loan Documents.
(j) PENSION FUNDING. Comply in all material respects, and cause each
Subsidiary of the Borrower or any Guarantor to comply in all material respects,
with the following and cause each ERISA Affiliate of the Borrower, any Guarantor
or any such Subsidiary to comply with the following:
(i) engage solely in transactions which would not subject any
of such entities to either a civil penalty assessed pursuant to Section 502(i)
of ERISA or a tax imposed by Section 4975 of the Internal Revenue Code in either
case in an amount in excess of $25,000.00;
(ii) make full payment when due of all amounts which, under
the provisions of any Plan or ERISA, the Borrower, any Guarantor, any such
Subsidiary or any ERISA Affiliate of any of same is required to pay as
contributions thereto;
(iii) all applicable provisions of the Internal Revenue Code
and the regulations promulgated thereunder, including but not limited to Section
412 thereof, and all applicable rules, regulations and interpretations of the
Accounting Principles Board and the Financial Accounting Standards Board;
(iv) not fail to make any payments in an aggregate amount
greater than $25,000.00 to any Multiemployer Plan that the Borrower, any
Guarantor, any such Subsidiary or any ERISA Affiliate may be required to make
under any agreement relating to such Multiemployer Plan, or any law pertaining
thereto; or
(v) not take any action regarding any Plan which could result
in the occurrence of a Prohibited Transaction.
(k) LICENSES; TRADEMARKS. (i) Maintain at all times, and cause each
Subsidiary of the Borrower or any Guarantor to maintain at all times, all
licenses or permits necessary to the conduct of its business or as may be
required by any governmental agency or
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instrumentality thereof, except for such licenses or permits where the failure
to so maintain would not be reasonably likely to result in a Material Adverse
Change and take all steps necessary to maintain the exclusive ownership of, and
the rights to, all trademarks and tradenames listed in Schedule 4.01(v) to this
Agreement, provided however that the Borrower and the Guarantors shall not be
required to take such steps, including, without limitation the renewal or
continuation of trademark or tradename registrations in the United States
Trademark Office, if the Borrower or the applicable Guarantor has provided the
Collateral Agent, the Agent, the Lenders and the Senior Note Holders with a
written statement giving the reasons why such steps are not necessary and why
such failure to maintain such trademark or tradename would not result in a
Material Adverse Change.
(ii) Promptly advise the Collateral Agent, the Agent and the
Lenders of the acquisition or creation, after the date of this Agreement, by the
Borrower or any of its Subsidiaries of any additional or new trademarks or
tradenames (the "New Trademarks") and upon the request of the Collateral Agent
or the Agent, take, and cause any Subsidiary to take, all steps necessary or
desirable to grant to the Collateral Agent, on behalf of itself, the Agent, the
Lenders and the Senior Note Holders, and perfect, a security interest in the New
Trademarks, including but without limitation, the filing of one or more
Trademark Collateral Assignment and Security Agreements in the United States
Patent and Trademark Office.
(l) NEW SUBSIDIARIES. (i) Cause any Subsidiary (other than a Foreign
Subsidiary) of the Borrower or any Guarantor formed after the date of this
Agreement to become a Guarantor and to become a party to this Agreement as a
Guarantor.
(ii) Cause any Foreign Subsidiary which, in the reasonable
determination of the Borrower and its professional advisors, if it became a
Guaranteeing Foreign Subsidiary would not result in adverse tax consequences to
the Borrower, to become a Guarantor and to become a party to this Agreement as a
Guarantor.
(iii) Cause each Subsidiary which delivers a Guaranty pursuant
to this Section 5.01(l) to secure the obligations thereunder by executing a
Security Agreement and such other documentation necessary in order to grant to
the Agent a Lien on all of its tradenames, trademarks, tradename registrations,
trademark registrations, trademark applications and trademark licenses.
(m) NORTH CAROLINA MORTGAGE. (a) Not later than the thirtieth (30th)
day following the Closing Date, deliver to the Agent and the Lenders a
commitment letter from the lender for the North Carolina Mortgage which shall
(i) provide for the refinance of the North Carolina Mortgage, (ii) have been
accepted by the Borrower, (iii)
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be in an amount not less than the then current principal balance of the North
Carolina Mortgage and not more than one hundred twenty (120%) percent of the
then current principal balance of the North Carolina Mortgage, (iv) be for a
term of not less than three (3) years, (v) have principal amortization on a
least a fifteen (15) year "mortgage style" amortization, (vi) be secured solely
by the property securing the North Carolina Mortgage and (vi) be otherwise
reasonably satisfactory to the Agent and the Lenders.
(b) Not later than ninety (90) days after the date of the
commitment referred to in (a) above, close the refinance of the North Carolina
Mortgage.
(n) CANADIAN MORTGAGE. Not later than thirty (30) days after the date
of this Agreement, close the Canadian Mortgage (i) in a principal amount of not
more than $1,722,500.00 (Canadian), (ii) with a term of five (5) years, (iii)
with principal amortization on a twenty (20) year "mortgage style" amortization
and (iv) on such other terms and conditions as are reasonably satisfactory to
the Agent and the Required Lenders.
SECTION 5.02. NEGATIVE COVENANTS. So long as any amount shall remain
outstanding under the Revolving Credit Note, or there is any Outstanding L/C
Exposure, or so long as the Commitment shall remain in effect, neither the
Borrower nor any Guarantor will, without the written consent of the Agent and
the Required Lenders:
(a) LIENS, ETC. Create, incur, assume or suffer to exist, any Lien,
upon or with respect to any of its properties, now owned or hereafter acquired,
except:
(i) Liens in favor of the Collateral Agent, for the benefit of
itself, the Agent, the Lenders and the Senior Note Holders;
(ii) Liens for taxes or assessments or other government
charges or levies if not yet due and payable or if due and payable if they are
being contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained;
(iii) Liens imposed by law, such as mechanics', materialmen's,
landlords', warehousemen's, and carriers' Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due or which are being contested in good faith by appropriate proceedings
and for which appropriate reserves have been established;
(iv) Liens under workers' compensation, unemployment
insurance, Social Security, or similar legislation;
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(v) Liens, deposits, or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement), public or statutory obligations,
surety, stay, appeal, indemnity, performance or other similar bonds, or other
similar obligations arising in the ordinary course of business;
(vi) Liens described in Schedule 5.02(a), which Liens may be
renewed, extended or refinanced, without securing any additional Debt and on
terms no less favorable to the Borrower or applicable Guarantor than the
original terms (except for the refinancing permitted by clause (xi) below, which
may be on the terms set forth therein);
(vii) Judgment and other similar Liens arising in connection
with court proceedings (other than those described in Section 6.01(f)), provided
the execution or other enforcement of such Liens is effectively stayed and the
claims secured thereby are being actively contested in good faith and by
appropriate proceedings;
(viii) Easements, rights-of-way, restrictions, and other
similar encumbrances which, in the aggregate, do not materially interfere with
the Borrower's or a Guarantor's occupation, use and enjoyment of the property or
assets encumbered thereby in the normal course of its business or materially
impair the value of the property subject thereto;
(ix) The Canadian Bridge Loan Mortgages, provided that such
mortgages shall be satisfied when the Canadian Bridge Loan is repaid;
(x) The Canadian Mortgage;
(xi) The North Carolina Mortgage which may be refinanced in
accordance with Section 5.01(m) of this Agreement; and
(xii) Purchase money Liens on any property hereafter acquired
or the assumption of any Lien on property existing at the time of such
acquisition, or a Lien incurred in connection with any conditional sale or other
title retention agreement or a Capital Lease, provided that:
(1) Any property subject to any of the foregoing is
acquired by the Borrower or a Guarantor in the ordinary course of its respective
business and the Lien on any such property is created contemporaneously with
such acquisition;
(2) The obligation secured by any Lien so created,
assumed, or existing shall not exceed one hundred (100%) percent of lesser of
cost or fair market value of the property acquired as of the time of the
Borrower or the Guarantor acquiring the same;
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(3) Each such Lien shall attach only to the property
so acquired and fixed improvements thereon; and
(4) The obligation secured by such Lien is permitted
by the provisions of Section 5.02(b) and the related expenditure is permitted by
the provisions of Section 5.03(b).
(b) DEBT. Create, incur, assume, or suffer to exist, any Debt, except:
(i) Debt of the Borrower under this Agreement or the Notes;
(ii) Debt described in Schedule 5.02(b),which Debt may be
renewed, extended or refinanced on terms no less favorable to the Borrower or
applicable Guarantor than the original terms (except for the refinancing
provided for in the Senior Note Agreement and as permitted by clause (x) below,
which each may be on the terms set forth therein);
(iii) Subordinated Debt;
(iv) Accounts payable to trade creditors for goods or services
and current operating liabilities (other than for borrowed money), in each case
incurred and paid in the ordinary course of business;
(v) Debt of the Borrower or any Guarantor secured by purchase
money Liens permitted by Section 5.02(a)(xii);
(vi) Debt evidenced by the Senior Notes;
(vii) Intercompany Debt;
(viii) the Canadian Bridge Loan;
(ix) Debt secured by the Canadian Mortgage; and
(x) Debt secured by the North Carolina Mortgage which may be
refinanced in accordance with the provisions of Section 5.01(m) of this
Agreement.
(c) MERGER. Merge into, or consolidate with or into, or have merged
into it, any Person; and, for the purpose of this subsection (c), the
acquisition or sale by the Borrower or any Guarantor by lease, purchase or
otherwise, of all, or substantially all, of the common stock or the assets of
any Person or of it shall be deemed a merger of such Person with the Borrower or
any Guarantor, provided that (i) the Borrower may merge with any Guarantor,
provided the Borrower is the surviving entity and (iii) any Guarantor may merge
with any other Guarantor.
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(d) SALE OF ASSETS, ETC. Sell, assign, transfer, lease or otherwise
dispose of any of its assets, (including a saleleaseback transaction) with or
without recourse, except for (i) inventory disposed of in the ordinary course of
business; (ii) the sale or other disposition of assets no longer used or useful
in the conduct of its business; (iii) Permitted Equipment Sales, (iv) the
Permitted Real Estate Sale and (v) sales of assets between the Borrower and a
Guarantor or between Guarantors.
(e) INVESTMENTS, ETC. Make any Investment other than Permitted
Investments.
(f) TRANSACTIONS WITH AFFILIATES. Except for transactions with the
current Chief Executive Officer of the Borrower, and except as otherwise
expressly permitted by this Agreement or except in the ordinary course of
business and pursuant to the reasonable requirements of the Borrower's, a
Guarantor's or a Subsidiary's business and upon fair and reasonable terms no
less favorable to the Borrower or a Guarantor or a Subsidiary than would be
obtained in a comparable arm's length transaction with a Person not an
Affiliate, enter into any transaction, including, without limitation, the
purchase, sale, or exchange of property or the rendering of any service, with
any Affiliate, provided however, in no event shall the Borrower or any Guarantor
engage in any transaction with a Subsidiary of the Borrower or a Guarantor which
Subsidiary is not a Guarantor.
(g) PREPAYMENT OF OUTSTANDING DEBT. Pay, in whole or in part, any
outstanding Debt of the Borrower or a Guarantor, which by its terms is not then
due and payable other than (i) Debt owing to the Lenders, (ii) Intercompany Debt
and (iii) accounts payable and other trade payables.
(h) GUARANTEES. Guaranty, or in any other way become directly or
contingently obligated for any Debt of any other Person (including any
agreements relating to working capital maintenance, take or pay contracts or
similar arrangements) other than (i) the endorsement of negotiable instruments
for deposit in the ordinary course of business; (ii) guarantees existing on the
date hereof and set forth in Schedule 5.02(i) annexed hereto; or (iii)
guarantees of any Debt permitted under Section 5.02(b) of this Agreement.
(i) CHANGE OF BUSINESS. Materially alter the nature of its business.
(j) FISCAL YEAR. Change the ending date of its fiscal year from
December 31.
(k) MAXIMUM LOSSES; MINIMUM NET INCOME. (i) Incur a consolidated net
loss (calculated exclusive of extraordinary gains but inclusive of extraordinary
losses as calculated in accordance
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with GAAP) greater than $500,000.00 for the fiscal quarter ending March 31,
2000; (ii) Incur a consolidated net loss (calculated exclusive of extraordinary
gains but inclusive of extraordinary losses as calculated in accordance with
GAAP) for the six (6) month period ending June 30, 2000; (iii) Incur a
consolidated net loss (calculated exclusive of extraordinary gains but inclusive
of extraordinary losses as calculated in accordance with GAAP) for any fiscal
year.
(l) ACCOUNTING POLICIES. Change any accounting policies, except as
permitted by GAAP.
(m) DIVIDENDS, ETC. Declare or pay any dividends, purchase, redeem,
retire or otherwise acquire for value any of its capital stock now or hereafter
outstanding, or make any distribution of assets to its stockholders as such,
whether in cash, assets, or in obligations of the Borrower or a Guarantor; or
allocate or otherwise set apart any sum for the payment of any dividend or
distribution on, or for the purchase, redemption or retirement of any shares of
its capital stock; or make any other distribution by reduction of capital or
otherwise in respect of any share of its capital stock, except (i) any
Subsidiary may pay dividends to its shareholder(s), (ii) the Borrower may pay
the Permitted Dividends described in clause (i) of the definition thereof, (iii)
the Borrower may make the Permitted Stock Repurchases described in clause (i) of
the definition thereof and (iv) provided no Default or Event of Default has
occurred and is continuing or would result therefrom the Borrower may pay
Permitted Dividends described in clause (ii) of the definition thereof and the
Borrower may make Permitted Stock Repurchases described in clause (ii) of the
definition thereof.
(n) CHANGE IN CONTROL. (a) Permit any Person or "group" (within the
meaning of Section 13(d)-3 under the Securities Exchange Act of 1934 and the
rules of the Securities and Exchange Commission as in effect on the date
hereof), other than the members of management of the Borrower and the directors
of the Borrower, each as in office on the date of this Agreement, to own more
than fifty (50%) percent of the outstanding voting securities of the Borrower.
(b) Permit any nominees other than nominees nominated by the existing board of
directors of the Borrower to hold a majority of the seats on the board of
directors of the Borrower.
(o) HAZARDOUS MATERIAL. The Borrower, each Guarantor and each
Subsidiary of the Borrower or a Guarantor shall not cause or permit any property
owned or occupied by the Borrower, a Guarantor or any such Subsidiary to be used
to generate, manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce or process Hazardous Materials, except in compliance with all
applicable federal, state and local laws or regulations; nor shall the Borrower,
a Guarantor or any such Subsidiary cause or permit, as a result of any
intentional or unintentional act or omission on
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the part of the Borrower, such Guarantor or any such Subsidiary or any tenant or
subtenant, a release of Hazardous Materials onto any property owned or occupied
by the Borrower, such Guarantor or any such Subsidiary or onto any other
property; nor shall the Borrower, the Guarantors and each such Subsidiary fail
to comply with all applicable federal, state and local laws, ordinances, rules
and regulations, whenever and by whomever triggered, nor fail to obtain and
comply with, any and all approvals, registrations or permits required
thereunder. The Borrower and the Guarantors shall execute any documentation
required by the Agent in connection with the representations, warranties and
covenants contained in this paragraph and Section 4.01 of this Agreement.
(p) LIMITATIONS ON CONSOLIDATED FOREIGN ASSETS AND REVENUES. (i) Have
more than fifteen (15%) percent of the consolidated assets or revenues of the
Borrower and its Consolidated Subsidiaries be located in, or derived from,
locations other than the United States.
(ii) Have more than ten (10%) percent of the consolidated
assets or revenues of the Borrower and its Consolidated Subsidiaries be held by,
or produced by, any Foreign Subsidiary.
SECTION 5.03. FINANCIAL REQUIREMENTS. So long as any amount shall
remain outstanding under the Revolving Credit Note, or there is any Outstanding
L/C Exposure, or so long as the Commitment shall remain in effect:
(a) MINIMUM CONSOLIDATED TANGIBLE NET WORTH. The Borrower will maintain
on the dates set forth below, Consolidated Tangible Net Worth ("CTNW") of not
less than the amounts set forth below for the periods set forth below:
<TABLE>
<CAPTION>
PERIOD MINIMUM CTNW
------ ------------
<S> <C>
9/30/00 The greater of (i) $34,000,000.00 or
(ii) $1,000,000.00 in excess of the
actual CTNW as of 12/31/99
12/31/00; 3/31/01; The actual CTNW as of 12/31/99 PLUS 80%
6/30/01 and 9/30/01 of the Borrower's Consolidated Net
Income for the fiscal year ending
12/31/00.
12/31/01; 3/31/02; The actual CTNW as of 12/31/00 PLUS 80%
6/30/02 and 9/30/02 of the Borrower's Consolidated Net
Income for the fiscal year ending
12/31/01.
</TABLE>
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<TABLE>
<CAPTION>
PERIOD MINIMUM CTNW
------ ------------
<S> <C>
12/31/02 to the The actual CTNW as of 12/31/01 PLUS 80%
Maturity Date of the Borrower's Consolidated Net
Income for the fiscal year ending
12/31/02.
</TABLE>
(b) CONSOLIDATED CAPITAL EXPENDITURES. The Borrower will not make
Consolidated Capital Expenditures in excess of: (i) $10,000,000.00 in the
aggregate during the fiscal year of the Borrower ending December 31, 2000; and
(ii) $8,000,000.00 in the aggregate during any fiscal year thereafter.
(c) CONSOLIDATED FIXED CHARGE RATIO. The Borrower will maintain at all
times a Consolidated Fixed Charge Ratio of not less than the ratios set forth
below for the periods set forth below (to be tested quarterly):
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
9/30/00 to 12/30/00 0.45 to 1.00
12/31/00 to 12/30/01 0.60 to 1.00
12/31/01 to 12/30/02 1.15 to 1.00
12/31/02 to the Maturity Date 1.25 to 1.00
</TABLE>
(d) FUNDED DEBT TO EBITDA RATIO. The Borrower will maintain at all
times a Funded Debt to EBITDA Ratio of not greater than the ratios set forth
below for the periods set forth below (to be tested quarterly):
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
9/30/00 to 12/30/00 5.15 to 1.00
12/31/00 to 12/30/01 4.65 to 1.00
12/31/01 to 12/30/02 3.00 to 1.00
12/31/02 to the Maturity Date 2.50 to 1.00
</TABLE>
(e) CONSOLIDATED INTEREST COVERAGE RATIO. The Borrower will maintain at
all times a Consolidated Interest Coverage Ratio of not less than the ratios set
forth below for the periods set forth below (to be tested quarterly):
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
9/30/00 to 12/30/00 0.90 to 1.00
12/31/00 to 12/30/01 1.25 to 1.00
12/31/01 to 12/30/02 2.25 to 1.00
12/31/02 to the Maturity Date 2.75 to 1.00
</TABLE>
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ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. EVENTS OF DEFAULT. If any of the following events
("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay (i) any installment of
principal of any Revolving Credit Note when due, (ii) any amounts due in
connection with any Letter of Credit or B/A when due or (iii) any interest, fees
or other amounts owed in connection with this Agreement within five (5) days of
when such payment is due; or
(b) Any representation or warranty made by the Borrower or a
Guarantor herein or in the Loan Documents or which is contained in any
certificate, document, opinion, or financial or other statement furnished at any
time under or in connection with any Loan Document shall prove to have been
incorrect in any material respect when made; or
(c) The Borrower or a Guarantor shall (i) fail to perform or
observe any term, covenant or agreement contained in Sections 5.01(a), (c), (e),
(f), (h), (j), or (k)(i) of this Agreement for twenty (20) days after such
performance or observation is required, or (ii) fail to perform or observe any
other term, covenant, or agreement contained in this Agreement in any other Loan
Document (other than the Notes) on its part to be performed or observed; or
(d) The Borrower, a Guarantor, or any Subsidiary of the
Borrower or a Guarantor shall fail to pay any Debt or Debts, or principal
installments thereon, which Debt or Debts are in the aggregate principal amount
of $500,000.00 or more (excluding Debt evidenced by the Notes) of the Borrower,
a Guarantor or any such Subsidiary (as the case may be), or any interest or
premium thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Debt; or any other default under any agreement or instrument
relating to any such Debt, or any other event shall occur and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such default or event is to accelerate, or to
permit the acceleration of, the maturity of such Debt; or any such Debt 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
(e) The Borrower, any Guarantor or any Subsidiary of the
Borrower or any Guarantor shall generally not pay its Debts as such Debts become
due, or shall admit in writing its inability to pay its Debts generally, or
shall make a general assignment for the
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benefit of creditors; or any proceeding shall be instituted by or against the
Borrower, any Guarantor or any such Subsidiary seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its Debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, or other similar official for it or for any substantial part
of its property and if instituted against the Borrower, any Guarantor or any
such Subsidiary shall remain undismissed for a period of 60 days; or the
Borrower, any Guarantor or any such Subsidiary shall take any action to
authorize any of the actions set forth above in this subsection (e); or
(f) Any judgment or order or combination of judgments or
orders for the payment of money, in excess of $500,000.00 in the aggregate,
which sum shall not be subject to full, complete and effective insurance
coverage (subject to deductibles), shall be rendered against the Borrower, any
Guarantor or any Subsidiary of the Borrower or any Guarantor and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 30 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
(g) Any Guarantor shall fail to perform or observe any term or
provision of its Guaranty or any representation or warranty made by such
Guarantor (or any of its officers) in connection with such Guarantor's Guaranty
shall prove to have been incorrect in any material respect when made; or
(h) Any of the following events occur or exist with respect to
the Borrower, any Guarantor, any Subsidiary of the Borrower or any Guarantor, or
any ERISA Affiliate: (i) any Prohibited Transaction involving any Plan; (ii) any
Reportable Event with respect to any Plan; (iii) the filing under Section 4041
of ERISA of a notice of intent to terminate any Plan or the termination of any
Plan; (iv) any event or circumstance that might constitute grounds entitling the
PBGC to institute proceedings under Section 4042 of ERISA for the termination
of, or for the appointment of a trustee to administer, any Plan, or the
institution of the PBGC of any such proceedings; (v) complete or partial
withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
reorganization insolvency, or termination of any Multiemployer Plan; and in each
case above, such event or condition, together with all other events or
conditions, if any, could in the opinion of the Agent subject the Borrower, any
Guarantor, any such Subsidiary or any ERISA Affiliate to any tax, penalty, or
other liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise (or any
combination thereof) which in the aggregate exceeds or may exceed $250,000.00;
or
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<PAGE>
(i) This Agreement or any other Loan Document, at any time
after its execution and delivery and for any reason, ceases to be in full force
and effect or shall be declared to be null and void, or the validity or
enforceability of any document or instrument delivered pursuant to this
Agreement shall be contested by the Borrower, any Guarantor or any party to such
document or instrument or the Borrower, any Guarantor or any party to such
document or instrument shall deny that it has any or further liability or
obligation under any such document or instrument; or
(j) An event of default specified in any Loan Document other
than this Agreement shall have occurred and be continuing.
SECTION 6.02. REMEDIES ON DEFAULT. Upon the occurrence and continuance
of an Event of Default the Agent may, and at the request of the Required Lenders
shall, by notice to the Borrower, take any or all of the following actions, (i)
terminate the Commitments, (ii) demand cash collateral in the full amount of the
Outstanding L/C Exposure, (iii) declare the Notes, all interest thereon and all
other amounts payable under this Agreement to be forthwith due and payable,
whereupon the Commitments shall be terminated, the cash collateral shall be due,
the Revolving Credit Notes, all such interest and all such amounts shall become
and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower and (iv) proceed to enforce its rights whether by suit in equity or by
action at law, whether for specific performance of any covenant or agreement
contained in this Agreement or any Loan Document, or in aid of the exercise of
any power granted in either this Agreement or any Loan Document or proceed to
obtain judgment or any other relief whatsoever appropriate to the enforcement of
its rights, or proceed to enforce any other legal or equitable right which the
Agent may have by reason of the occurrence of any Event of Default hereunder or
under any Loan Document, provided, however, upon the occurrence of an Event of
Default referred to in Section 6.01(e), the Commitments shall be immediately
terminated, the cash collateral shall be immediately due, the Revolving Credit
Notes, all interest thereon and all other amounts payable under this Agreement
shall be immediately due and payable without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower. Any amounts collected pursuant to action taken under this Section 6.02
shall be applied to the payment of, first, any costs incurred by the Agent in
taking such action, including, but without limitation, reasonable attorneys fees
and expenses, second, to cash collateral for the Outstanding L/C Exposure,
third, to payment of the accrued but unpaid interest on the Revolving Credit
Notes, and fourth, to payment of the unpaid principal of the Revolving Credit
Notes.
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<PAGE>
SECTION 6.03. REMEDIES CUMULATIVE. No remedy conferred upon or reserved
to the Agent or the Lenders hereunder or in any Loan Document is intended to be
exclusive of any other available remedy, but each and every such remedy shall be
cumulative and in addition to every other remedy given under this Agreement or
any Loan Document or now or hereafter existing at law or in equity. No delay or
omission to exercise any right or power accruing upon any Event of Default shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised from time to time and as often as may
be deemed expedient. In order to entitle the Agent or any Lender to exercise any
remedy reserved to it in this Article VI, it shall not be necessary to give any
notice, other than such notice as may be herein expressly required in this
Agreement or in any Loan Document.
(THE BALANCE OF THIS PAGE IS INTENTIONALLY BLANK)
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<PAGE>
ARTICLE VII
THE AGENT; RELATIONS AMONG LENDERS AND BORROWER
SECTION 7.01. APPOINTMENT, POWERS AND IMMUNITIES OF AGENT. Each Lender
hereby irrevocably appoints and authorizes the Agent to act as its agent
hereunder and under any other Loan Document with such powers as are specifically
delegated to the Agent by the terms of this Agreement and any other Loan
Document, together with such other powers as are reasonably incidental thereto.
The Agent shall have no duties or responsibilities except those expressly set
forth in this Agreement and any other Loan Document, and shall not by reason of
this Agreement be a trustee or fiduciary for any Lender. The Agent shall not be
responsible to the Lenders for any recitals, statements, representations or
warranties made by the Borrower or the Guarantors, or any officer or official of
the Borrower or Guarantors, or any of them, or any other Person contained in
this Agreement or any other Loan Document, or in any certificate or other
document or instrument referred to or provided for in, or received by any of
them under, this Agreement or any other Loan Document, or for the value,
legality, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Loan Document or any other document or instrument
referred to or provided for herein or therein, except as explicitly provided
herein, or for the failure by the Borrower, the Guarantors, or any of them to
perform any of their or its respective obligations hereunder or thereunder. The
Agent may employ agents and attorneys-in-fact and shall not be responsible,
except as to money or securities received by it or its authorized agents, for
the negligence or misconduct of any such agents or attorneys-in-fact selected by
it with reasonable care. Except as otherwise explicitly provided herein, neither
the Agent nor any of its directors, officers, employees or agents shall be
liable or responsible to any Lender for any action taken or omitted to be taken
by it or them hereunder or under any other Loan Document or in connection
herewith or therewith, except for its or their own gross negligence or wilful
misconduct. The Borrower shall pay any fee agreed to by the Borrower and the
Agent with respect to the Agent's services hereunder.
SECTION 7.02. RELIANCE BY AGENT. The Agent shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telex, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel, independent accountants and
other experts selected by the Agent with reasonable care. The Agent may deem and
treat each Lender as the holder of the Loans
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<PAGE>
made by it for all purposes hereof unless and until a notice of the permitted
transfer thereof satisfactory to the Agent and signed by such Lender shall have
been furnished to the Agent but the Agent shall not be required to deal with any
Person who has acquired a participation in any Loan from a Lender. As to any
matters not expressly provided for by this Agreement or any other Loan Document,
the Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder in accordance with instructions signed by the Required
Lenders, and such instructions of the Required Lenders and any action taken or
failure to act pursuant thereto shall be binding on all of the Lenders and any
other holder of all or any portion of any Loan.
SECTION 7.03. DEFAULTS. The Agent shall not be deemed to have knowledge
of the occurrence of a Default or Event of Default (other than the non-payment
of principal of or interest on the Loans or the non-payment of fees due
hereunder) unless the Agent has actual knowledge of such Default or Event of
Default or has received notice from a Lender or a Borrower specifying 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 of, or otherwise
has actual knowledge of the occurrence of, a Default or Event of Default, the
Agent shall give prompt notice thereof to the Lenders (and shall give each
Lender prompt notice of each such non-payment). The Agent shall (subject to
Section 7.08 and Section 8.01 hereof) take such action with respect to such
Default or Event of Default which is continuing as shall be directed by the
Required Lenders; provided that, unless and until the Agent shall have received
such directions, the Agent may 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 interest of the Lenders; and provided further that the
Agent shall not be required to take any such action which it determines to be
contrary to law.
SECTION 7.04. RIGHTS OF AGENT AS A LENDER. With respect to the Loans
made by it, any Person which is the Agent in its capacity as a Lender hereunder
shall have the same rights and powers hereunder as any other Lender and may
exercise the same as though it were not acting as the Agent, and the term
"Lender" or "Lenders" shall, unless the context otherwise indicates, include any
Person which is the Agent in its capacity as a Lender. The Agent or any Lender
and their respective Affiliates may (without having to account therefor to any
other Lender except as otherwise expressly provided in this Agreement) accept
deposits from, lend money to (on a secured or unsecured basis but subject to the
provisions of Section 5.02(a) and (b) of this Agreement), and generally engage
in any kind of banking, trust or other business with, the Borrower, the
Guarantors or any of them (and any of their Affiliates);
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PROVIDED that no payment or lien priority (other than purchase money liens on
equipment being financed by such Lender) shall be given to the Agent or to any
Lender for any other transaction without the express written approval of all of
the other Lenders. In the case of Chase, it may do so as if it were not acting
as the Agent, and the Agent may accept fees and other consideration from the
Borrower, the Guarantors or any of them for services in connection with this
Agreement or otherwise without having to account for the same to the Lenders.
Although the Agent or a Lender or any of their respective Affiliates may in the
course of such relationships and relationships with other Persons acquire
information about the Borrower, the Guarantors, their Affiliates and such other
Persons, neither the Agent nor such Lender shall have any duty to the other
Lenders or the Agent to disclose such information to the other Lenders or the
Agent except as otherwise provided herein with respect to the occurrence of an
Event of Default.
SECTION 7.05. INDEMNIFICATION OF AGENT. The Lenders agree to indemnify
the Agent and its directors, officers, employees, agents and Affiliates (the
"Indemnitees") (to the extent not reimbursed under Section 8.05 hereof or under
the applicable provisions of any other Loan Document, but without limiting the
obligations of the Borrower and Guarantors under Section 8.05 hereof or such
provisions), ratably in accordance with their Pro Rata Shares of the Total
Commitment (without giving effect to any participation in all or any portion of
the Total Commitment sold by them to any other Person), for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Indemnitees in any way relating
to or arising out of this Agreement, any other Loan Document or any other
documents contemplated by or referred to herein or the transactions contemplated
hereby or thereby (including, without limitation, the costs and expenses which
the Borrower and Guarantors are obligated to pay under Section 8.05 hereof or
under the applicable provisions of any other Loan Document but excluding, unless
a Default or Event of Default has occurred, normal administrative costs and
expenses incidental to the performance of its agency duties hereunder) or the
enforcement of any of the terms hereof or thereof or of any such other documents
or instruments; provided that no Lender shall be liable for any of the foregoing
to the extent they arise from the gross negligence or wilful misconduct of an
Indemnitee.
SECTION 7.06. DOCUMENTS. It is the responsibility of the Borrower to
forward to each Lender, on or before the due dates set forth herein, a copy of
each report, notice (other than notices of borrowings and payments) or other
document required by this
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Agreement or any other Loan Document to be delivered to the Agent. The Agent is
not responsible for forwarding such information to the Lenders.
SECTION 7.07. NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender
agrees that it has, independently and without reliance on the Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Borrower, the Guarantors and
their Subsidiaries and decision to enter into this Agreement and that it will,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under this Agreement or any other Loan Document. The Agent shall not be required
to keep itself informed as to the performance or observance by the Borrower or
Guarantors of this Agreement or any other Loan Document or any other document
referred to or provided for herein or therein or to inspect the properties or
books of the Borrower, the Guarantors or any Subsidiary of the Borrower or any
Guarantor. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Agent hereunder, the
Agent shall not have any duty or responsibility to any other Lender to provide
any Lender with any credit or other information concerning the affairs,
financial condition or business of the Borrower, the Guarantors or any
Subsidiary (or any of their Affiliates) which may come into the possession of
the Agent or of its Affiliates. The Agent shall not be required to file this
Agreement, any other Loan Document or any document or instrument referred to
herein or therein, or record or give notice of this Agreement, any other Loan
Document or any document or instrument referred to herein or therein, to any
Person.
SECTION 7.08. FAILURE OF AGENT TO ACT. Except for action expressly
required of the Agent hereunder, the Agent shall in all cases be fully justified
in failing or refusing to act hereunder unless it shall have received further
assurances (which may include cash collateral) of the indemnification
obligations of the Lenders under Section 7.05 hereof in respect of any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.
SECTION 7.09. RESIGNATION OF AGENT. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrower. Upon any
such resignation, the Required Lenders shall have the right to appoint a
successor Agent, which shall be a Lender which has an office in New York, New
York and, provided no Default or Event of Default has occurred and is
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continuing, which shall be reasonably acceptable to the Borrower, such
acceptance not to be unreasonably withheld or delayed. If no successor Agent
shall have been so appointed by the Required Lenders and shall have accepted
such appointment within 30 days after the retiring Agent's giving of notice of
resignation, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent, which shall be a Lender which has an office in New York, New
York and, provided no Default or Event of Default has occurred and is
continuing, which shall be reasonably acceptable to the Borrower, such
acceptance not to be unreasonably withheld or delayed. The Required Lenders or
the retiring Agent, as the case may be, shall upon the appointment of a
Successor Agent promptly so notify the Borrower, the Guarantors and the other
Lenders. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation as Agent, the provisions of
this Article 7 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Agent.
SECTION 7.10. AMENDMENTS CONCERNING AGENCY FUNCTION. The Agent shall
not be bound by any waiver, amendment, supplement or modification of this
Agreement or any other Loan Document which affects its rights or duties
hereunder or thereunder unless it shall have given its prior written consent
thereto.
SECTION 7.11. LIABILITY OF AGENT. The Agent shall not have any
liabilities or responsibilities to the Borrower, the Guarantors or any of them
on account of the failure of any Lender to perform its obligations hereunder or
to any Lender on account of the failure of the Borrower, the Guarantors or any
of them to perform their or its obligations hereunder or under any other Loan
Document. Nothing herein shall be read to relieve any obligation that the Agent
may have to the Borrower as a Lender hereunder.
SECTION 7.12. TRANSFER OF AGENCY FUNCTION. Without the consent of the
Borrower, the Guarantors or any Lender, the Agent may at any time or from time
to time transfer its functions as Agent hereunder to any of its offices located
in the New York metropolitan area, provided that the Agent shall promptly notify
the Borrower, the Guarantors and the Lenders thereof.
SECTION 7.13. WITHHOLDING TAXES. Each Lender represents that it is
entitled to receive any payments to be made to it hereunder without the
withholding of any tax and will furnish to the Agent such forms, certifications,
statements and other documents as the Agent may request from time to time to
evidence such Lender's exemption from the withholding of any tax imposed by any
jurisdiction or to enable the Agent to comply with any applicable laws or
regulations relating thereto. Without limiting the effect
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of the foregoing, if any Lender is not created or organized under the laws of
the United States of America or any state thereof, in the event that the payment
of interest by the Borrower is treated for U.S. income tax purposes as derived
in whole or in part from sources from within the United States, such Lender will
furnish to the Agent Form 4224 or Form 1001 of the Internal Revenue Service, or
such other forms, certifications, statements or documents, duly executed and
completed by such Lender as evidence of such Lender's exemption from the
withholding of United States tax with respect thereto. The Agent shall not be
obligated to make any payments hereunder to such Lender in respect of any Loan
until such Lender shall have furnished to the Agent the requested form,
certification, statement or document.
SECTION 7.14. SEVERAL OBLIGATIONS AND RIGHTS OF LENDERS. The failure of
any Lender to make any Loan to be made by it on the date specified therefor
shall not relieve any other Lender of its obligation to make its Loan on such
date, but no Lender shall be responsible for the failure of any other Lender to
make a Loan to be made by such other Lender.
SECTION 7.15. PRO RATA TREATMENT OF LOANS, ETC. Except to the extent
otherwise provided, each prepayment and payment of principal of, or interest on,
Loans of a particular type and a particular Interest Period, if any, and each
payment of fees or other amounts due hereunder shall be made to the Agent for
the account of the Lenders holding Loans of such type and Interest Period, if
any, pro rata (unless expressly provided otherwise in this Agreement) in
accordance with the respective unpaid principal amounts for such Loans of such
Interest Period held by such Lenders.
SECTION 7.16. SHARING OF PAYMENTS AMONG LENDERS. If a Lender shall
obtain payment of any principal of or interest on any Loan any fee due
hereunder, made by it through the exercise of any right of setoff, banker's
lien, counterclaim, or any other means, it shall share such payment with the
other Lenders and the amount of such payment shall be applied to reduce the
Loans of all the Lenders pro rata in accordance with the unpaid principal on the
Loans held by each of them, and make such other adjustments from time to time as
shall be equitable to the end that all the Lenders shall share the benefit of
such payment (net of any expenses which may be incurred by such Lender in
obtaining or preserving such benefit) pro rata in accordance with the unpaid
principal and interest on the Loans held by each of them. To such end the
Lenders shall make appropriate adjustments among themselves if such payment is
rescinded or must otherwise be restored. The Borrower agrees that any Lender so
purchasing a participation (or direct interest) in the Loans made by the other
Lenders may exercise all rights of set off, banker's lien, counterclaim or
similar rights with respect to such participation (or direct interest). Nothing
contained herein shall require any Lender to exercise any such right or shall
affect the right of any Lender to exercise, and
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retain the benefits of exercising, any such right with respect to any other
indebtedness of the Borrower. Notwithstanding the foregoing or any other
provision of this Agreement, no right or remedy of any Lender relating to any
assets of the Borrower (including real property, improvements or fixtures) not
covered by this Agreement or the other Loan Documents shall in any way be
affected by this Agreement or otherwise with respect to any other indebtedness
of the Borrower to any of the Lenders.
SECTION 7.17. NONRECEIPT OF FUNDS BY AGENT; PAYMENTS TO LENDERS. (a)
Unless the Agent shall have received notice from the Borrower prior to the date
on which any payment is due to the Lenders hereunder that the Borrower will not
make such payment in full, the Agent may assume that the Borrower has made such
payment in full to the Agent on such date and the Agent in its sole discretion
may, but shall not be obligated to, in reliance upon such assumption, cause to
be distributed to each Lender on such due date an amount equal to the amount
then due such Lender. If and to the extent that the Borrower shall not have so
made such payment in full to the Agent, such Lender agrees to repay to the Agent
on demand such amount and if for any reason the Agent does not receive such
amount from such Lender on the day of such demand, if such demand is made before
2:00 p.m. on such day, or on the next Business Day if demand is made after 2:00
p.m. on such day, such Lender shall repay to the Agent forthwith on demand such
amount distributed to such Lender together with interest thereon, for each day
from the date such amount is distributed to such Lender until the date such
Lender repays such amount to the Agent, at the customary rate set by the Agent
for the correction of errors among lenders for three (3) Business Days and
thereafter at the interest rate applicable to the obligation that was not repaid
by the Borrower, or if no such rate was in effect, at the Alternate Base Rate.
(b) If the Agent shall fail to pay any amounts owing by the Agent to a
Lender as promptly as may be required by this Agreement, the Agent shall pay to
such Lender, on its demand, interest on such delinquent amount at the customary
rate set by the Agent for the correction of errors among lenders for three (3)
Business Days and thereafter at the Alternate Base Rate.
(THE BALANCE OF THIS PAGE IS INTENTIONALLY BLANK)
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. AMENDMENTS, ETC. Except as otherwise expressly provided
in this Agreement, any provision of this Agreement may be amended or modified
only by an instrument in writing signed by the Borrower, the Guarantors, the
Agent and the Required Lenders, and any provision of this Agreement may be
waived by the Borrower (if such provision requires performance by the Agent or
the Lenders) or by the Agent acting with the consent of the Required Lenders (if
such provision requires performance by the Borrower or any Guarantor); PROVIDED
that no amendment, modification or waiver shall, unless by an instrument signed
by all of the Lenders or by the Agent acting with the consent of all of the
Lenders result in: (1) a reduction in the principal amount of the Revolving
Credit Loans or Outstanding L/C Exposure or extension of the Maturity Date; (2)
a reduction in the rate of interest on reduction of any Loan or any fee or any
extension of any due date thereof; (3) an increase in the amount of the Total
Commitment; (4) a change in the duration or the amount of any Lender's
Commitment; (5) a modification of the definition of "Required Lenders" or any
provision of this Section 8.01; (6) the assignment or transfer by the Borrower
of any of its rights and obligations under the Loan Documents; or (7) releases
of any Guarantors or any Collateral, except as provided in Section 8.02 of this
Agreement.
SECTION 8.02. RELEASE OF COLLATERAL. The security interest of the Agent
and the Lenders in the Collateral shall be released if (i) the Total Commitment
shall have been reduced to an amount not greater than $22,500,000 and (ii) the
Borrower shall have provided evidence satisfactory to the Collateral Agent, the
Agent the Lenders and the Senior Note Holders that its Funded Debt to EBITDA
Ratio for the immediately preceding four (4) fiscal quarters is less than 2.00
to 1.0 and (iii) there shall be no Default or Event of Default continuing prior
to or after giving effect to such release of the Collateral. Prior to releasing
any Collateral, the Collateral Agent and the Agent shall have the right, but not
the obligation, to request a written acknowledgment, in form and substance
satisfactory to the Collateral Agent and the Agent, from each Lender and each
Senior Note Holder that the conditions of this Section 8.02 have been satisfied.
SECTION 8.03. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telegraphic communication)
and mailed, telegraphed, sent by facsimile or delivered, if to the Borrower or a
Guarantor, at the address of the Borrower or Guarantor, as the case may be, set
forth at the beginning of this Agreement and if to the Agent or any
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<PAGE>
of the Lenders, at the addresses of the Agent and the Lenders set forth at the
beginning of this Agreement to the attention of Del Laboratories, Inc. Account
Officer, or, as to each party, at such other address as shall be designated by
such party in a written notice complying as to delivery with the terms of this
Section 8.02 to the other parties. All such notices and communications shall be
effective two (2) days after mailing or when telegraphed or delivered, except
that notices to the Agent or Lender shall not be effective until actually
received by the Agent or such Lender.
SECTION 8.04. NO WAIVER, REMEDIES. No failure on the part of the Agent
or any Lender to exercise, and no delay in exercising, any right, power or
remedy under any Loan Document, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right under any Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The
remedies provided in the Loan Documents are cumulative and not exclusive of any
remedies provided by law.
SECTION 8.05. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on
demand all reasonable costs and expenses of the Agent in connection with the
preparation, execution, delivery and administration of this Agreement, the
Revolving Credit Notes and any other Loan Documents, including, without
limitation, the reasonable fees and expenses of counsel for the Agent with
respect thereto and with respect to advising the Agent as to its rights and
responsibilities under this Agreement, and all costs and expenses, if any
(including reasonable counsel fees and expenses), of the Agent and the Lenders
in connection with the enforcement of this Agreement, the Revolving Credit Notes
and any other Loan Documents. The Borrower and each Guarantor, jointly and
severally, shall at all times protect, indemnify, defend and save harmless the
Agent and the Lenders from and against any and all claims, actions, suits and
other legal proceedings, and liabilities, obligations, losses, damages,
penalties, judgments, costs, expenses or disbursements which the Agent or any of
the Lenders may, at any time, sustain or incur by reason of or in consequence of
or arising out of the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby except as herein provided.
The Borrower and each Guarantor acknowledge that it is the intention of the
parties hereto that this Agreement shall be construed and applied to protect and
indemnify the Agent and the Lenders against any and all risks involved in the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, all of which risks are hereby assumed by the
Borrower and the Guarantors, including, without limitation, any and all risks of
the acts or omissions, whether rightful or wrongful, of any present or future DE
JURE or DE FACTO government or governmental authority, provided that neither the
Borrower nor any
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<PAGE>
Guarantor shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's or any Lender's gross negligence or
willful misconduct. The provisions of this Section 8.05 shall survive the
payment of the Notes and the termination of this Agreement.
SECTION 8.06. RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default, each Lender is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Lender, or any Affiliate of such Lender to or for the credit or the account of
the Borrower or any Guarantor against any and all of the obligations of the
Borrower or the Guarantors now or hereafter existing under this Agreement and
the Revolving Credit Notes, irrespective of whether or not the Agent shall have
made any demand under this Agreement or the Revolving Credit Notes and although
such obligations may be unmatured. The rights of the Agent and the Lenders under
this Section are in addition to all other rights and remedies (including,
without limitation, other rights of set-off) which they may have.
SECTION 8.07. BINDING EFFECT. This Agreement shall become effective
when it shall have been executed by the Borrower, the Guarantors, the Agent and
the Lenders and thereafter it shall be binding upon and inure to the benefit of
the Borrower, the Guarantors, the Agent and the Lenders and their respective
permitted successors and assigns.
SECTION 8.08. SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective permitted successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of all Lenders.
(b) Any Lender may at any time grant to one or more lenders or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans or its obligations in connection with Letters of Credit.
In the event of any such grant by a Lender of a participating interest to a
Participant, whether or not upon notice to the Borrowers and the Agent, such
Lender shall remain responsible for the performance of its obligations
hereunder, and the Borrower and the Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement pursuant to which any Lender may
grant such a
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<PAGE>
participating interest shall provide that such Lender shall retain the sole
right and responsibility to enforce the obligations of the Borrower hereunder
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement. The Borrower agrees that each
Participant shall, to the extent provided in its participation agreement, be
entitled to the benefits of Section 8.06 of this Agreement and this subparagraph
(b) with respect to its participating interest. An assignment or other transfer
which is not permitted by subsection (c) or (d) below shall be given effect for
purposes of this Agreement only to the extent of a participating interest
granted in accordance with this subsection (b).
(c) (i) Any Lender may at any time assign to one or more lenders or
other institutions (each an "Assignee") all, or a proportionate part (equivalent
to an initial Commitment of not less than $5,000,000.00) of all, of its rights
and obligations under this Agreement, the Notes and its obligations in
connection with Letters of Credit, and such Assignee shall assume such rights
and obligations, pursuant to an Assignment and Assumption Agreement in
substantially the form of Exhibit B hereto executed by such Assignee and such
transferor Lender, with the subscribed consent of the Agent, which shall not be
unreasonably withheld. Upon execution and delivery of such instrument and
payment by such Assignee to such transferor Lender of an amount equal to the
purchase price agreed between such transferor Lender and such Assignee, such
Assignee shall be a Lender party to this Agreement and shall have all the rights
and obligations of a Lender with a Commitment as set forth in such instrument of
assumption, and the transferor Lender shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by any
party shall be required.
(ii) Upon the consummation of any assignment pursuant to this
subsection (c), the transferor Lender, the Agent and the Borrower shall make
appropriate arrangements so that, if required, new Notes are issued to the
Assignee. In connection with any such assignment, the transferor Lender shall
pay to the Agent an administrative fee for processing such assignment in the
amount of $3,000.00 and the reasonable fees of the Agent's counsel. If an
Assignee is not incorporated under the laws of the United States of America or a
state thereof, it shall deliver to the Borrower and the Agent certification as
to exemption from deduction or withholding of any United States federal income
taxes in accordance with Section 7.13 hereof.
(d) Notwithstanding anything to the contrary in this Section 8.08, if
either Chase or EAB agrees to make any assignment hereunder, such assignor shall
notify the other and, at the other's
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<PAGE>
option, the prospective assignee shall purchase its interest on a pro rata basis
from each of Chase and EAB.
(e) Any Lender may at any time assign all or any portion of its rights
under this Agreement and its Notes to a Federal Reserve Bank. No such assignment
shall release the transferor Lender from its obligations hereunder.
SECTION 8.09. FURTHER ASSURANCES. The Borrower and each Guarantor agree
at any time and from time to time at its expense, upon request of the Agent or
its counsel, to promptly execute, deliver, or obtain or cause to be executed,
delivered or obtained any and all further instruments and documents and to take
or cause to be taken all such other action the Agent may deem desirable in
obtaining the full benefits of, this Agreement or any other Loan Document.
SECTION 8.10. SECTION HEADINGS, SEVERABILITY, ENTIRE AGREEMENT. Section
and subsection headings have been inserted herein for convenience only and shall
not be construed as part of this Agreement. Every provision of this Agreement
and each Loan Document is intended to be severable; if any term or provision of
this Agreement, any Loan Document, or any other document delivered in connection
herewith shall be invalid, illegal or unenforceable for any reason whatsoever,
the validity, legality and enforceability of the remaining provisions hereof or
thereof shall not in any way be affected or impaired thereby. All exhibits and
schedules to this Agreement shall be annexed hereto and shall be deemed to be
part of this Agreement. This Agreement and the exhibits and schedules attached
hereto embody the entire Agreement and understanding among the Borrower, the
Guarantors, the Agent and the Lenders and supersede all prior agreements and
understandings relating to the subject matter hereof.
SECTION 8.11. CONFIDENTIALITY. The Agent, the Lenders and each of their
assignees and participants agree to use commercially reasonable efforts
(reasonably equivalent to the efforts the Agent, a Lender or such assignee or
participant applies to maintaining the confidentiality of its own confidential
information) to maintain as confidential all confidential information provided
to them by the Borrower or any of its Subsidiaries, except that the Agent, a
Lender and any assignee or participant may disclose such information (a) to
Persons employed or engaged by the Agent, a Lender or such assignee or
participant in evaluating, approving, structuring or administering this
Agreement, the Loans or its Commitment; (b) to any bona fide assignee or
participant or potential assignee or participant that has agreed to comply with
the covenant contained in this Section 8.11 (and any such bona fide assignee or
participant or potential assignee or participant may disclose such information
to Persons employed or engaged by them as
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<PAGE>
described in CLAUSE (A) above); (c) as required or requested by any governmental
authority or reasonably believed by the Agent, a Lender or such assignee or
participant to be compelled by any court decree, subpoena or legal or
administrative order or process; (d) as, in the opinion of the Agent's, a
Lender's or such assignee's or participant's counsel, required by law; (e) in
connection with the exercise of any right or remedy under the Loan Documents or
in connection with any litigation to which the Agent, a Lender or such assignee
or participant is a party arising in connection with any Loan Document; or (f)
which ceases to be confidential through no fault of the Agent, a Lender or such
assignee or participant.
SECTION 8.12. GOVERNING LAW. This Agreement, the Revolving Credit Notes
and all other Loan Documents shall be governed by, and construed in accordance
with, the laws of the State of New York, without regard to principles of
conflict of laws.
SECTION 8.13. WAIVER OF JURY TRIAL. THE BORROWER, EACH GUARANTOR, THE
AGENT AND THE LENDERS WAIVE ALL RIGHTS TO TRIAL BY JURY ON ANY CAUSE OF ACTION
DIRECTLY OR INDIRECTLY INVOLVING THE TERMS, COVENANTS OR CONDITIONS OF THIS
AGREEMENT OR ANY LOAN DOCUMENT.
(THE BALANCE OF THIS PAGE IS INTENTIONALLY BLANK)
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<PAGE>
SECTION 8.14. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
DEL LABORATORIES, INC.
BY /s/ Enzo Vialardi
----------------------------------------------
Name: Enzo Vialardi
Title: Executive Vice President
and Chief Financial Officer
DEL PHARMACEUTICALS, INC.
By /s/ Enzo Vialardi
----------------------------------------------
Name: Enzo Vialardi
Title: Executive Vice President
and Chief Financial Officer
PARFUMS SCHIAPARELLI, INC.
By /s/ Enzo Vialardi
----------------------------------------------
Name: Enzo Vialardi
Title: Executive Vice President
and Chief Financial Officer
ROYCE & RADER, INC.
By /s/ Enzo Vialardi
----------------------------------------------
Name: Enzo Vialardi
Title: Executive Vice President
and Chief Financial Officer
565 BROAD HOLLOW REALTY CORP.
By /s/ Enzo Vialardi
----------------------------------------------
Name: Enzo Vialardi
Title: Executive Vice President
and Chief Financial Officer
<PAGE>
THE CHASE MANHATTAN BANK, as Agent
By /s/ Christopher G. Zimmerman
----------------------------------------------
Name: Christopher G. Zimmermann
Title: Vice President
THE CHASE MANHATTAN BANK
By /s/ Christopher G. Zimmerman
----------------------------------------------
Name: Christopher G. Zimmermann
Title: Vice President
EUROPEAN AMERICAN BANK
By /s/ Jason Quinn
----------------------------------------------
Name: Jason Quinn
Title: Assistant Vice President
<PAGE>
SCHEDULE 1.01
COMMITMENTS OF EACH LENDER
<TABLE>
<CAPTION>
AMOUNT PRO RATA SHARE
------ --------------
<S> <C> <C>
The Chase Manhattan Bank $35,000,000.00 73.6842%
European American Bank $12,500,000.00 26.3158%
</TABLE>
<PAGE>
SCHEDULE 2.01
Outstanding Letters of Credit
<PAGE>
SCHEDULE 4.01(a)
SUBSIDIARIES
<TABLE>
<CAPTION>
STATE OF INCORPORATION IDENTITY AND
AND EACH STATE IN WHICH PERCENTAGE OF
SUBSIDIARY'S NAME IT IS QUALIFIED TO DO OWNERSHIP OF
AND ADDRESS BUSINESS EACH SHAREHOLDER
----------- -------- ----------------
<S> <C> <C>
</TABLE>
<PAGE>
SCHEDULE 4.01 (t)
CREDIT AGREEMENTS
<TABLE>
<CAPTION>
NATURE OF AMOUNT OF LIENS SECURING
CREDITOR AGREEMENT CREDIT CREDIT
- -------- --------- ------ ------
<S> <C> <C> <C>
</TABLE>
<PAGE>
SCHEDULE 4.01(v)
TRADEMARKS
<PAGE>
SCHEDULE 5.02(a)
<TABLE>
<CAPTION>
LIENS
-----
CREDITOR AMOUNT PROPERTY SUBJECT TO LIEN
- -------- ------ ------------------------
<S> <C> <C>
</TABLE>
<PAGE>
SCHEDULE 5.02(b)
DEBT
CREDITOR AMOUNT
-------- ------
See Schedules 4.01(t) and 5.01(a)
<PAGE>
SCHEDULE 5.02(i)
GUARANTIES
Description of All Guaranties: None, other than pursuant to the Loan
Documents.
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
$_____________ Garden City, New York
-------- --, ----
FOR VALUE RECEIVED, on the Maturity Date, DEL LABORATORIES, INC., a
Delaware corporation, having its principal place of business at 178 EAB Plaza,
Uniondale, New York 11556 (the "Borrower"), promises to pay to the order of the
_______________ __________________________ (the "Lender") at the office of The
Chase Manhattan Bank, as agent for the Lender (the "Agent") located at 395 North
Service Road, Suite 302, Melville, New York 11747, the principal sum of the
lesser of: (a) ___________________ ($_____________) DOLLARS; or (b) the
aggregate unpaid principal amount of all Revolving Credit Loans made by the
Lender to Borrower pursuant to the Agreement (as defined below).
Borrower shall pay interest on the unpaid principal balance of this
Note from time to time outstanding, at said office, at the rates of interest, at
the times and for the periods set forth in the Agreement.
All payments including prepayments on this Note shall be made in lawful
money of the United States of America in immediately available funds. Except as
otherwise provided in the Agreement, if a payment becomes due and payable on a
day other than a Business Day, the maturity thereof shall be extended to the
next succeeding Business Day, and interest shall be payable thereon at the rate
herein specified during such extension.
Borrower hereby authorizes the Lender to enter from time to time the
amount of each Loan to Borrower and the amount of each payment on a Loan on the
schedule annexed hereto and made a part hereof. Failure of the Lender to record
such information on such schedule shall not in any way effect the obligation of
Borrower to pay any amount due under this Note.
This Note is the Revolving Credit Note referred to in that certain Loan
Agreement among Borrower, certain Guarantors, the Lender, certain other
lender(s) and the Agent, dated of even date herewith, as such Agreement may be
amended from time to time (the "Agreement"), and is subject to prepayment and
its maturity is subject to acceleration upon the terms contained in said
Agreement. All capitalized terms used in this Note and not defined herein shall
have the meanings given them in the Agreement.
If any action or proceeding be commenced to collect this Note or
enforce any of its provisions, Borrower further agrees to pay all reasonable
costs and expenses of such action or proceeding and attorneys' fees and expenses
and further expressly waives any and every right to interpose any counterclaim
in any such action or
<PAGE>
proceeding. Borrower hereby submits to the jurisdiction of the Supreme Court of
the State of New York and agrees with the Lender that personal jurisdiction over
Borrower shall rest with the Supreme Court of the State of New York for purposes
of any action on or related to this Note, the liabilities hereunder, or the
enforcement of either or all of the same. Borrower hereby waives personal
service by manual delivery and agrees that service of process may be made by
pre-paid certified mail directed to the Borrower at the Borrower's address set
forth above or at such other address as may be designated in writing by the
Borrower to the Lender in accordance with Section 7.02 of the Agreement, and
that upon mailing of such process such service be effective with the same effect
as though personally served. BORROWER HEREBY EXPRESSLY WAIVES ANY AND EVERY
RIGHT TO A TRIAL BY JURY IN ANY ACTION ON OR RELATED TO THIS NOTE, THE
LIABILITIES HEREUNDER OR THE ENFORCEMENT OF EITHER OR ALL OF THE SAME.
Subject to the provisions of the Agreement, the Lender may transfer
this Note to the permitted transferee or transferees, who shall thereupon become
vested with all the powers and rights above given to the Lender in respect
thereto, and the Lender shall thereafter be forever relieved and fully
discharged from any liability or responsibility in the matter. The failure of
any holder of this Note to insist upon strict performance of each and/or all of
the terms and conditions hereof shall not be construed or deemed to be a waiver
of any such term or condition.
Borrower and all endorsers and guarantors hereof waive presentment and
demand for payment, notice of non-payment, protest, and notice of protest.
This Note shall be construed in accordance with and governed by the
laws of the State of New York.
DEL LABORATORIES, INC.
By:
Name: Enzo Vialardi
Title: Executive Vice President
and Chief Financial
Officer
<PAGE>
SCHEDULE OF REVOLVING CREDIT LOANS
----------------------------------
<TABLE>
<CAPTION>
AMOUNT OF
PRINCIPAL UNPAID NAME OF
AMOUNT OF PAID OR PRINCIPAL PERSON MAKING
DATE LOAN PREPAID BALANCE NOTATION
---- ---- ------- ------- --------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT B
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Assignment") dated
as of __________________ among ___________________ (the "Assignor"),
________________ (the "Assignee") and THE CHASE MANHATTAN BANK, as Agent (the
"Agent").
WITNESSETH
WHEREAS, this Assignment and Assumption Agreement (the
"Assignment") relates to the Loan Agreement dated ___________, 2000 among the
Lenders, the Borrower, the Guarantors (as such terms are defined in the
Agreement referred to herein) and the Assignor as Agent (as amended from time to
time, the "Agreement"); and
WHEREAS, as provided under the Agreement, the Assignor has
heretofore made Loans to the Borrower; and
WHEREAS, the Assignor proposes to assign to the Assignee all
of the rights of the Assignor under the Agreement in respect of all or a portion
of its Commitment and the Loans and the Assignee proposes to accept assignment
of such rights and assume the corresponding obligations from the Assignor on
such terms;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Agreement.
SECTION 2. ASSIGNMENT. The Assignor hereby sells and assigns
to the Assignee, without recourse, and the Assignee hereby purchases and assumes
from the Assignor, a ____% interest in and to all of the Assignor's rights and
obligations as a Lender under the Agreement as of the Effective Date (as defined
below) including, without limitation, such percentage interest in (i) the
Assignor's Commitment, (ii) the Revolving Credit Loans owing to Assignor
outstanding on the Effective Date, (iii) the Revolving Credit Note held by the
Assignor under the Agreement, together with the rights to interest accruing from
the Effective Date and (iv) the Outstanding L/C Exposure.
SECTION 3. ASSIGNOR REPRESENTATIONS. The Assignor (i)
represents and warrants that as of the date hereof, (x) its Commitment,
unreduced by any assignments thereof which have not yet become effective, is
$_____________, and (y) the outstanding balance of its Revolving Credit Loans,
unreduced by any assignments thereof which have not yet become effective, is
$___________; (ii) its pro rata share of Outstanding L/C Exposure is $_________;
(iii)
<PAGE>
it makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with the Agreement or any other Loan Document or any other instrument
or document furnished pursuant thereto or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Agreement, any other
Loan Document or any other instrument or document furnished pursuant thereto,
other than that it is the legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is free and clear of any adverse
claim created by it; (iv) it makes no representation or warranty and assumes no
responsibility with respect to the solvency or financial condition of the
Borrower or the Guarantors, or the performance or observance by the Borrower or
the Guarantors of any of their obligations under the Agreement, any other Loan
Document or any other instrument or document furnished pursuant thereto; and (v)
confirms that its Revolving Credit Note shall be exchanged as of the Effective
Date for two Revolving Credit Notes, each dated the Effective Date, to be
delivered to the Assignor and the Assignee, in an aggregate principal amount of
$____________ and $__________, respectively.
SECTION 4. ASSIGNEE REPRESENTATIONS. The Assignee (i)
represents and warrants that it is legally authorized to enter into this
Assignment and Assumption Agreement; (ii) confirms that it has received copies
of the Agreement and the other Loan Documents, together with copies of such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Assumption
Agreement; (iii) attaches the forms prescribed by the Internal Revenue Service
of the United States certifying as to the Assignee's status for purposes of
determining exemption from United States withholding taxes with respect to all
payments to be made to the Assignee under the Agreement and the Notes or such
other documents as are necessary to indicate that all such payments are subject
to such rates at a rate reduced by an applicable tax treaty; (iv) agrees that it
will, independently and without reliance upon the Agent, the Assignor or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Agreement and the other Loan Documents; and (v)
agrees that it will perform in accordance with their terms all the obligations
which by the terms of the Agreement are required to be performed by it as a
Lender.
SECTION 5. PAYMENTS. As consideration for the assignment and
sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on
the date hereof in federal funds an amount equal to the outstanding principal of
the Revolving Credit Loans. Each of the Assignor and the Assignee hereby agrees
that if either of them receives any amount under the Agreement or any other Loan
Document which is for the account of the other, it shall receive the same for
the account of such other party to the extent of such other party's interest
herein and shall promptly pay the same to the Agent on behalf of such other
party.
<PAGE>
SECTION 6. EFFECTIVENESS. Subject to the remaining provisions
of this Section 6, the effective date for this Assignment and Assumption
Agreement shall be ___________, 2000 (the "Effective Date"). Following the
execution of this Assignment and Assumption Agreement, it will be delivered by
the Assignor to the Agent for acknowledgment and recording by the Agent. The
Assignor agrees to pay to the Agent, on or prior to the Effective Date, the
$3,000.00 assignment fee required by Section 8.08 of the Agreement. This
Assignment and Assumption Agreement shall become effective, as of the Effective
Date, upon (i) its execution by the Agent.
SECTION 7. EFFECT OF ASSIGNMENT. On and after the Effective
Date, (i) the Assignee shall be a party to the Agreement and the other Loan
Documents to which each Lender is a party and, to the extent provided in this
Assignment and Assumption Agreement, shall have the rights and obligations of a
Lender and (ii) the Assignor shall, to the extent provided in this Assignment
and Assumption Agreement, relinquish its rights and be released from its
obligations under the Agreement and the other Loan Documents to which it is a
party.
SECTION 8. PAYMENTS. From and after the Effective Date, the
Agent shall make all payments in respect of the interest assigned hereby
(including payments of principal, interest and other amounts) to the Assignee.
SECTION 9. GOVERNING LAW. This Assignment and Assumption
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.
SECTION 10. COUNTERPARTS. This Assignment and Assumption
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument.
(THE BALANCE OF THIS PAGE IS INTENTIONALLY BLANK)
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By:_____________________
Name:
Title:
[ASSIGNEE]
By:_____________________
Name:
Title:
THE CHASE MANHATTAN BANK, as Agent
By:____________________
Name:
Title:
<PAGE>
[DEL]
Exhibit 10.33
EXHIBIT 10.33
TRADEMARK COLLATERAL ASSIGNMENT
AND SECURITY AGREEMENT
THIS TRADEMARK COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT is entered
into as of this 25th day of February, 2000, between DEL LABORATORIES, INC. (the
"Assignor" or the "Company"), a Delaware corporation having a mailing address at
178 EAB Plaza, Uniondale, New York 11556 and THE CHASE MANHATTAN BANK ("Chase"),
in its capacity as Collateral Agent (the "Assignee" or the "Collateral Agent")
for The Chase Manhattan Bank, as the agent under the Credit Agreement described
below (together with its permitted successors, transferees and assigns, the
"Agent"), for each of the lenders which is a party to the Credit Agreement and
each lender which may, after the date of this Agreement, become a party to the
Credit Agreement (together with their permitted successors, transferees and
assigns, the "Lenders") and for each of the Noteholders (as defined in the
Intercreditor Agreement) (together with their permitted successors, transferees
and assigns, the "Noteholders") (the Lenders and the Noteholders, collectively,
the "Secured Parties").
WHEREAS:
A. Pursuant to the Amended and Restated Loan Agreement, dated as of
February 25, 2000 (as such may be amended, restated, refinanced, replaced,
renewed, modified or otherwise supplemented from time to time, the "Loan
Agreement"), entered into by Del Laboratories, Inc., Del Pharmaceuticals, Inc.
("DPI"), Parfums Schiaparelli, Inc. ("Parfums"), Royce & Rader, Inc. ("Royce")
and 565 Broad Hollow Realty Corp. ("565") (DPI, Parfums, Royce and 565
collectively, the "Guarantors"), with the Noteholders, the Noteholders have
amended and restated the Loan Agreement dated as of May 26, 1993, as amended,
under and pursuant to which the Noteholders have purchased $40,000,000 9.5%
Senior Notes, Due May 31, 2005 (collectively, the "Senior Notes") from the
Company;
B. The Company and the Guarantors have entered into that certain
Amended and Restated Loan Agreement, dated February 25, 2000 (as such may be
amended, restated, refinanced, replaced, renewed, modified or otherwise
supplemented from time to time, the "Credit Agreement"), with the Lenders and
the Agent, pursuant to which the Lenders are providing to the Company various
credit facilities;
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C. The obligations of the Company to the Noteholders under the Loan
Agreement and under the Senior Note Documents (as defined in the Intercreditor
Agreement) including, without limitation, the obligations evidenced by the
Senior Notes, and the obligations of the Company to the Lenders under the Credit
Agreement and under the loan documents relating thereto including, without
limitation, the obligations evidenced by the promissory notes issued under the
Credit Agreement (together with amendments, modifications, and replacements
thereof, the "Credit Agreement Notes") are to be secured pari passu pursuant to
this Agreement and a certain Security Agreement of even date herewith between
the Collateral Agent and the Company (the "Security Agreement"), and pursuant to
the Intercreditor Agreement (as defined herein), the Noteholders, the Agent and
the Lenders have appointed Chase as Collateral Agent to act on their behalf
regarding the Collateral (as hereinafter defined); and
D. Assignor wishes to grant further collateral security and assurance
to the Assignee and the other Secured Parties in order to secure the performance
by Assignor of the Obligations (as defined herein), and to that effect Assignor
agrees to collaterally assign to Assignee certain tradenames and trademark
rights.
NOW, THEREFORE, in consideration of the premises, Assignor hereby
agrees with Assignee as follows:
1. As used in this Agreement, the following term shall have the
following meaning:
"Obligations" shall mean any and all liabilities and obligations of the
Company to the Collateral Agent, the Agent and the Secured Parties of every kind
whether arising under this Agreement, the Loan Agreement, the Senior Notes, the
Credit Agreement Notes, the Credit Agreement or any of the agreements,
instruments and documents executed in connection herewith or therewith
(including, without limitation, any and all costs and reasonable attorneys' fees
incurred by the Collateral Agent, the Agent or any of the Secured Parties in the
collection, whether by suit or by any other means of any of such Obligations
hereunder or thereunder) and any amendment, modification, extension or renewal
of any of the foregoing. The Obligations shall include interest accruing thereon
before or after the commencement of any insolvency, bankruptcy or reorganization
proceeding in respect of the Company or any guarantor of the Obligations whether
or not such interest is an allowable claim in any such proceeding and
irrespective of the discharge or release of the Company or any other guarantor
in such proceeding.
"Intercreditor Agreement" shall mean that certain Intercreditor
Agreement dated of even date herewith among each of
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the Secured Parties, the Agent and the Collateral Agent relating to the relative
interests of such parties in and to the Collateral and the distribution of
proceeds thereof.
2. To secure the complete and timely satisfaction of all Obligations,
Assignor hereby grants, assigns and conveys to Assignee a continuing security
interest in and to the trademarks and trademark applications and tradenames and
tradename applications listed in Schedule A hereto (as the same may be amended
pursuant hereto from time to time), all proceeds thereof (including but not
limited to license royalties and proceeds of infringement suits thereon), claims
for past, present and future infringements, all rights corresponding thereto
throughout the world, all reissues, divisions, continuations, renewals,
extensions and continuations in part thereof, and all trademarks and
applications for trademarks and all tradenames and applications for tradenames
of Assignor hereafter filed or acquired, together with all goodwill associated
with any and all of the foregoing and all proceeds of any and all of the
foregoing (collectively called the "Collateral" or the "Trademarks").
3. This security interest is granted in conjunction with the security
interests granted to the Collateral Agent pursuant to the Security Agreement.
The Company does hereby further acknowledge and affirm that the rights and
remedies of the Collateral Agent with respect to the security interest in the
Trademarks made and granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein.
(The rest of this page intentionally left blank)
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4. Assignor authorizes Assignee to modify this Agreement by amending
Schedule A to include any future trademarks and trademark applications which are
Trademarks under paragraph 2 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
DEL LABORATORIES, INC.
By: /s/ Enzo Vialardi
----------------------------------
Name: Enzo Vialardi
Title: Executive Vice President
and Chief Financial Officer
THE CHASE MANHATTAN BANK,
as Collateral Agent for the Agent and
the Secured Parties
By: /s/ Chrisotpher G. Zimmerman
----------------------------------
Name: Christopher G. Zimmermann
Title: Vice President
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STATE OF NEW YORK
COUNTY OF NASSAU ss.:
On the 25th day of February, in the year 2000 before me, the
undersigned, a notary public in and for said State, personally appeared Enzo
Vialardi, personally known to me or proved to me on the basis of satisfactory
evidence to be the individual whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his capacity, and that by
his signature on the instrument, the individual, or the person upon behalf of
which the individual acted, executed the instrument.
-----------------------------
Notary Public
STATE OF NEW YORK
COUNTY OF NASSAU ss.:
On the 25th day of February, in the year 2000 before me, the
undersigned, a notary public in and for said State, personally appeared
Christopher G. Zimmermann, personally known to me or proved to me on the basis
of satisfactory evidence to be the individual whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
capacity, and that by his signature on the instrument, the individual, or the
person upon behalf of which the individual acted, executed the instrument.
-----------------------------
Notary Public
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SCHEDULE A
TRADEMARKS AND TRADEMARK APPLICATIONS
6
<PAGE>
(Del)
EXHIBIT 10.34
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of February 25, 2000 (this
"Agreement"), is entered into by and between the Company (as defined herein),
and The Chase Manhattan Bank ("Chase"), in its capacity as Collateral Agent (the
"Collateral Agent") under and pursuant to the Intercreditor and Collateral
Agency Agreement dated as of February 25, 2000 (the "Intercreditor Agreement")
for The Chase Manhattan Bank, as the agent under the Credit Agreement described
below (together with its permitted successors, transferees and assigns, the
"Agent"), for each of the lenders which is a party to the Credit Agreement
described below and each lender which may, after the date of this Agreement,
become a party to the Credit Agreement (together with their permitted
successors, transferees and assigns, the "Lenders") and for each of the
Noteholders (as defined in the Intercreditor Agreement) (together with their
permitted successors, transferees and assigns, the "Noteholders") (the Lenders
and the Noteholders, collectively, the "Secured Parties").
WHEREAS:
A. Pursuant to the Amended and Restated Loan Agreement, dated as of
February 25, 2000 (as such may be amended, restated, refinanced, replaced,
renewed, modified or otherwise supplemented from time to time, the "Loan
Agreement"), entered into by Del Laboratories, Inc. (the "Borrower"), Del
Pharmaceuticals, Inc. ("DPI"), Parfums Schiaparelli, Inc. ("Parfums"), Royce &
Rader, Inc. ("Royce") and 565 Broad Hollow Realty Corp. ("565") (DPI, Parfums,
Royce and 565 collectively, the "Guarantors"), with the Noteholders, the
Noteholders have amended and restated the Loan Agreement dated as of May 26,
1993, as amended, under and pursuant to which the Noteholders have purchased
$40,000,000 9.5% Senior Notes, Due May 31, 2005 (collectively, the "Senior
Notes") from the Company.
B. The Borrower and the Guarantors have entered into that certain
Amended and Restated Loan Agreement, dated February 25, 2000 (as such may be
amended, restated, refinanced, replaced, renewed, modified or otherwise
supplemented from time to time, the "Credit Agreement"), with the Lenders and
the Agent, pursuant to which the Lenders are providing to the Company various
credit facilities.
C. The obligations of the Borrower to the Noteholders under the Loan
Agreement and under the Senior Note Documents (as defined in the Intercreditor
Agreement) including, without limitation, the obligations evidenced by the
Senior Notes, and the obligations of the Borrower to the Lenders under the
Credit Agreement and under the Loan Documents (as defined in the Credit
Agreement) relating thereto including, without limitation, the obligations
evidenced by
<PAGE>
the promissory notes issued under the Credit Agreement (together with
amendments, modifications, and replacements thereof, the "Credit Agreement
Notes") are to be secured pari passu pursuant to this Agreement. Pursuant to the
Intercreditor Agreement (as defined herein), the Noteholders, the Agent and the
Lenders have appointed Chase as Collateral Agent to act on their behalf
regarding the Collateral (as hereinafter defined).
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 ADDITIONAL DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings, unless the context otherwise requires:
"Account" or "Accounts" shall mean and include any and all present and
future accounts, accounts receivable and chattel paper, including, without
limitation, any and all purchase orders, instruments and other documents
evidencing obligations for and representing payment for goods sold or leased
and/or services rendered by the Company whether or not earned by performance,
all rights and remedies of the Company under or in connection with credit
insurance, guaranties, letters of credit and other security for any of the
foregoing, the proceeds of any of the foregoing and all books and records
pertaining to the foregoing.
"Account Debtors" means customers of the Company and all other persons
who are obligated or indebted to the Company in any manner, whether directly or
indirectly, primarily or secondarily, contingently or otherwise, with respect to
Accounts.
"Agent" means The Chase Manhattan Bank, as Agent under the Credit
Agreement, or any institution which succeeds to such position pursuant to the
terms and conditions of the Credit Agreement.
"Agreement" shall mean this Security Agreement, as amended or modified.
"Collateral" shall mean all Accounts, Trademark Rights and all books,
records, invoices and any other document, instrument or writing relative
thereto, whether now owned or in existence or hereafter acquired or existing and
wherever located and in the proceeds (including, without limitation, insurance
proceeds) and products thereof.
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"Collateral Agent" shall have the meaning given such term in the
preamble to this Agreement.
"Company" means Del Laboratories, Inc.
"Credit Agreement" shall have the meaning given such term in the
preamble to this Agreement.
"Creditors" shall mean, collectively, the Secured Parties and, to the
extent the Company is obligated to pay the fees and expenses of them, the Agent
and the Collateral Agent.
"Event of Default" shall mean any of the events specified in Section 5
hereof, provided that any requirement for the giving of notice, or the lapse of
time, or both has been satisfied.
"Intercreditor Agreement" shall have the meaning given such term in the
preamble to this Agreement.
"Loan Agreement" shall have the meaning given such term in the preamble
to this Agreement.
"Obligations" shall mean any and all liabilities and obligations of the
Company to the Collateral Agent, the Agent and the Secured Parties of every kind
whether arising under this Agreement, the Loan Agreement, the Credit Agreement,
the Senior Notes, the Credit Agreement Notes, the Senior Note Documents and the
Loan Documents or any of the agreements, instruments and documents executed in
connection herewith or therewith (including, without limitation, any and all
costs and reasonable attorneys' fees incurred by the Collateral Agent, the Agent
or any of the Secured Parties in the collection, whether by suit or by any other
means of any of such Obligations hereunder or thereunder) and any amendment,
modification, extension or renewal of any of the foregoing. The Obligations
shall include interest accruing thereon before or after the commencement of any
insolvency, bankruptcy or reorganization proceeding in respect of the Company or
any guarantor of the Obligations whether or not such interest is an allowable
claim in any such proceeding and irrespective of the discharge or release of the
Company or any other guarantor in such proceeding.
"Trademark Rights" shall mean all trademarks, trade names, service
marks, licenses, franchise rights and all other intangible assets relating to
any of the trademarks listed on Exhibit A annexed hereto, now owned or hereafter
acquired and applications for trademarks of Assignor hereafter filed or
acquired, together with all goodwill associated with any and all of the
foregoing and all proceeds of any of the foregoing and all of the Company's
books and records pertaining to all of the foregoing.
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<PAGE>
"UCC" shall mean the New York Uniform Commercial Code, as amended from
time to time.
Section 1.2. USAGE. Any capitalized term used but not defined
herein shall have the meaning given such term in the Credit Agreement.
SECTION 2. SECURITY INTEREST
(a) As collateral security for the prompt, complete and unconditional
payment and performance of the Obligations, the Company does hereby grant to the
Collateral Agent, for the benefit of itself and the other Creditors a continuing
first priority security interest in and to the Collateral. Such security
interest shall continue until terminated in accordance with Section 7.2 of this
Agreement, notwithstanding the fact that there may be no Obligations outstanding
from time to time. As additional security for the payment of the Obligations,
the Company hereby grants to the Collateral Agent, for the benefit of itself and
the other Creditors, and to each Creditor, a continuing lien, security interest
and right of set-off in and to all property of the Company, and the proceeds
thereof, now or hereafter actually or constructively held or received by or for
the Collateral Agent or any other Creditor for any purpose, including
safekeeping, custody, pledge, transmission and collection, and the Collateral
Agent and each Creditor shall have a continuing lien and/or right of set-off for
the amount of any of the Obligations upon all of the Company's deposits (general
and special) and credits with the Collateral Agent or any Creditor. The
Collateral Agent and each other Creditor is authorized at any time or from time
to time, during the existence and continuation of an Event of Default, with or
without notice to the Company, to apply, subject to the provisions of the
Intercreditor Agreement, all or part of such property, deposits or credits to
any of the Obligations in such amounts as the Collateral Agent or such other
Creditor may elect in its sole and absolute discretion, although the Obligations
may be contingent or unmatured, and whether or not the Collateral may be deemed
adequate. Any amounts collected or received by the Collateral Agent or any
Creditor pursuant to this paragraph shall be applied in accordance with the
provisions of the Intercreditor Agreement.
(b) The foregoing grant of a security interest shall not include any rights
or interests in any contract or document evidencing a license relating to a
Trademark right if and to the extent that (a) the terms of any contract or
document creating or evidencing such Trademark right prohibits (or requires the
consent for) assignment or encumbrance thereof and (b) the provision prohibiting
such assignment or encumbrance is effective as a matter of law. As of the date
hereof, Exhibit B annexed hereto sets forth a list of all such contracts and
documents that prohibit assignment
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<PAGE>
or encumbrance of the rights of the Company as licensee thereunder. The Company
will update Exhibit B from time to time if it enters into any new contracts or
documents with such prohibitions.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company represents and warrants to the Collateral Agent and the
other Creditors, and shall be deemed to continually do so, as long as this
Agreement shall remain in force, as follows (except for those relating to a
specific date, which shall be true and correct as of such date):
3.1 CORPORATE EXISTENCE. The Company is duly organized and validly
existing and is in good standing under the laws of its jurisdiction of
incorporation and in each other jurisdiction where the failure to so qualify
would be reasonably likely to result in a material adverse change in the
financial condition, business, operations, properties, prospects or results of
operations of the Company or a material adverse effect on the Company's ability
to perform its obligations under this Agreement, has the power to own its assets
and to transact the business in which it presently is engaged and to subject the
Collateral to the security interest herein provided.
3.2 CORPORATE POWER AND AUTHORIZATION. The Company is authorized to
enter into this Agreement and is empowered to implement and carry out the
provisions hereof, and has taken all necessary actions, corporate or otherwise,
in respect thereto.
3.3 CORPORATE NAME. As of the date of this Agreement, the full,
complete and accurate legal name of the Company is correctly stated above the
signature line of the Company at the end hereof. As of the date of this
Agreement, any other name (including trade names) by which the Company or any
predecessor of the Company has been known in the past five (5) years is
disclosed on Schedule A annexed hereto.
3.4 ACCOUNT STATUS. Each Account is, at the time of its origination,
and as subsequently reflected on the books and records of the Company, a true
and current statement of the actual indebtedness incurred by each Account Debtor
with respect thereto, and arises out of or in connection with the sale or lease
of goods or the rendering of services by the Company to each such Account
Debtor. Not more than two (2%) percent of the Accounts are, or will be, at any
time, due from any agency or instrumentality of the United States government or
any state or local government or agency (each, a "Governmental Entity"). If at
any time more than five (5%) percent of the Accounts are due from one or more
such Governmental Entities, the Company will take such action as the Collateral
Agent may reasonably require to properly perfect its security interest in
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such Accounts by proper filings under the Assignment of Claims Act or other
applicable federal or state laws, rules and regulations.
3.5 ACCOUNT PAYMENT. None of the monies due or to become due with
respect to any Account is represented by any promissory note, chattel paper or
other instrument which has not been delivered to the Collateral Agent.
3.6 OWNERSHIP OF COLLATERAL. The Company is the owner of the Collateral
free and clear of all security interests or encumbrances of any kind, except as
created by this Agreement or as permitted by the Loan Agreement and the Credit
Agreement, and it does not sell, transfer, factor or otherwise convey any of its
accounts receivable. To the best of the Company=s knowledge, each Account Debtor
with respect thereto owes the full amount thereof without defenses,
counterclaims or offsets of any kind or nature whatsoever, except for bona fide
returns for damaged goods or bona fide delivery errors thereto.
3.7 LICENSING AGREEMENTS. The sale of goods, the rendering of services
by the Company in relationship to the Collateral or the granting of a security
interest in the Collateral is not, except as set forth in Exhibit B, subject to
or restricted by the terms of any agreement pertaining to the licensing or
assigning or the general or exclusive right to the use of any patent, trademark,
trade secret or copyright to which the Company is the licensee.
3.8 COLLATERAL INFORMATION. As of the date of this Agreement, the chief
executive office of the Company, its principal place of business, the location
at which the Company maintains its books and records with respect to Accounts,
each of the Company's tradename(s), and tradestyle(s) and the Company's records
pertaining to the Collateral and the address for the payment of its invoices for
the Accounts are as set forth on Schedule A annexed hereto.
3.9 ENFORCEABLE SECURITY INTEREST. The provisions of this Agreement are
effective to create a legal, valid and enforceable first priority (except where
disclosed in Schedule A annexed hereto) security interest in favor of the
Collateral Agent in all right, title and interest of the Company in the
Collateral, and when financing statements have been filed in the appropriate
offices in each of the jurisdictions where the Company maintains its Accounts or
has its chief executive office, the Company shall have granted a fully perfected
first (except where disclosed in Schedule A annexed hereto) lien on, and
security interest in, all right, title and interest of the Company in the
Collateral.
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<PAGE>
SECTION 4. AFFIRMATIVE COVENANTS
4.1 PAYMENT OF OBLIGATIONS. The Company shall pay or perform all of the
Obligations secured hereby when due.
4.2 MAINTENANCE OF COLLATERAL. The Company shall, at any time and from
time to time, at its own expense, continually take such steps necessary and
prudent to protect the security interest of the Collateral Agent in the
Collateral including, without limitation, the following:
(a) Keep and maintain the books and records pertaining to the
Collateral at the location of its chief executive office, its principal place of
business or the location utilized by the Company for the sending of invoices as
set forth in Schedule A annexed hereto and will change the same only with 30
days prior written notice to the Collateral Agent and if any Account is or
becomes evidenced by an instrument or other writing, deliver same to the
Collateral Agent properly endorsed;
(b) In the event of any change in the information provided in
Schedule A, the Company shall, at the request of the Collateral Agent, take such
steps as the Collateral Agent may deem reasonably necessary or desirable,
including, without limitation, the execution and filing of UCC financing
statements or amendments thereto, to continue the perfected security interest of
the Collateral Agent in the Collateral;
(c) (i) At any reasonable time, and from time to time, and
upon prior notice, and, provided no Event of Default then exists, not more often
than once during any calendar year, permit the Collateral Agent or any agents or
representatives thereof, to examine and make copies of (except if such copies
would result in the loss of any attorney-client or other privilege) and
abstracts from the financial and accounting books and records of, and visit the
properties of, the Company and to discuss the affairs, finances and accounts of
the Company with any of its officers or the Company=s independent accountants;
(ii) Not later than March 6, 2000, permit the Collateral Agent
to begin to conduct a Field Examination (as defined in the Loan Agreement), and
cooperate with the Collateral Agent to complete the Field Examination within
thirty (30) days, the reasonable cost of which, along with all other reasonable
collateral monitoring expenses will be paid by the Company;
(d) Deliver to the Collateral Agent, promptly at its
reasonable request, copies of all schedules, lists, receipts, chattel paper,
instruments and other items relating to the Collateral;
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(e) If there exists an Event of Default (as defined herein),
make, stamp, or record such entries or legends on any of the Company's books and
records relating to the Collateral as the Collateral Agent shall reasonably
request from time to time;
(f) Keep the Collateral free of, and defend the Collateral
from all liens and encumbrances, except the security interest granted to the
Collateral Agent and as permitted by the Credit Agreement and the Loan Agreement
and the Company shall not sell, discount (other than discounts for early payment
of accounts which are disclosed on invoices or other documents relating to such
accounts or other discounts in the ordinary course of business and consistent
with past practices), transfer or otherwise dispose of the Collateral or any
interest therein, in bulk or otherwise, without the prior written notice to and
the written consent of the Collateral Agent;
(g) Execute and deliver to the Collateral Agent such other and
further documents, instruments or writings (including without limitation
additional financing statements or continuations to be filed in any
jurisdiction) which the Collateral Agent may reasonably deem necessary and/or
advisable in order to evidence, effectuate, perfect or maintain the Collateral
Agent's security interest in the Collateral and the rights, remedies and other
powers available to the Collateral Agent under this Agreement;
(h) Promptly notify the Collateral Agent of the existence of
any material claims, liens, security interests, rights or other encumbrances
with respect to any of the Collateral;
(i) Promptly notify the Collateral Agent in the event of any
change in the nature or value of the Collateral which could result in a Material
Adverse Change in the Company or which change could materially and adversely
affect the security interest of the Collateral Agent in the Collateral;
(j) Pay all expenses incurred in connection with the
maintenance, preservation or other handling of the Collateral and all taxes
which are or may become a lien on the Collateral promptly when due, unless such
expenses, taxes or liens are being contested in good faith by appropriate
proceedings and no proceeding to enforce any tax liens against the Collateral
has begun, and in any event reimburse the Collateral Agent for any expenses
which it might incur in satisfying such expenses, liens or taxes, which the
Collateral Agent may reasonably incur, in its sole discretion, to protect the
Collateral;
(k) Provide at least 30 days prior written notice to the
Collateral Agent of any change of the Company's name, any trade name, any trade
style, its chief executive office, its principal
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place of business or any address for the payment of any Accounts or such other
places where the books and records pertaining to the Collateral may now or
hereafter be kept or maintained by or on behalf of the Company; and
(l) Keep the Collateral, at the Company's cost and expense, in
good and merchantable condition.
4.3 EXPENSES OF THE COLLATERAL AGENT. The Company shall reimburse the
Collateral Agent for all actual expenses including, without limitation,
disbursements and any other costs and fees incurred by the Collateral Agent in
connection with this Agreement or with the Collateral, including, without
limitation, any reasonable attorneys' fees.
SECTION 5. EVENTS OF DEFAULT
Any of the following events shall be an Event of Default:
(a) The occurrence of any "Event of Default" as defined in the Credit
Agreement or the Loan Agreement;
(b) The failure of the Company to pay any obligation due and payable
pursuant to the terms of this Agreement within 10 days after demand for payment
thereof by the Collateral Agent; or
(c) The failure of the Company to perform or observe any term or
provision of this Agreement, and such failure shall continue unremedied for a
period of 20 days.
SECTION 6. COLLATERAL AGENT'S RIGHTS AND REMEDIES
6.1 GENERAL RIGHTS. The rights of the Collateral Agent shall at all
times be those of a secured party under the UCC and without limiting the
generality of the foregoing, the Collateral Agent shall have the additional
rights set forth in this Section. The actions of the Collateral Agent hereunder
shall at all times be subject to the terms of the Intercreditor Agreement.
6.2 RIGHTS UPON DEFAULT. Upon the occurrence or continuance of an Event
of Default, the Collateral Agent may, subject to the Intercreditor Agreement,
exercise in respect of the Collateral (i) all of the rights and remedies of a
secured party under the UCC, (ii) all of the rights and remedies provided for in
this Agreement, the Loan Agreement or the Credit Agreement and (iii) such other
rights and remedies as may be provided by law or otherwise. The Company further,
effective upon and during the continuation of an Event of Default, subject to
the Intercreditor Agreement, authorizes the Collateral Agent and does hereby
irrevocably make, constitute and appoint the Collateral Agent and any officer or
Collateral Agent thereof, with full power of substitution, as the
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Company's true and lawful attorney-in-fact with full power, in its own name or
in the name of the Company: (a) to endorse any notes, checks, drafts, money
orders or other instruments of payment relating to the Collateral or in
connection therewith, to sign and endorse any invoices, drafts against debtors,
assignments, verifications and notices in connection with accounts and other
documents relating to the Collateral; (b) to give written notice to such
officials of the United States Post Office to effect such change or changes of
address so that all mail addressed to the Company may be delivered directly to a
Post Office Box or to such other depository as may be selected by the Collateral
Agent and to receive, open and dispose of mail addressed to the Company; (c) to
pay or discharge taxes, liens, security interests or other encumbrances levied
or placed on or threatened against the Collateral; (d) to receive payment of,
receipt for, settle, compromise or adjust and give discharges and releases for
or in respect of any and all moneys, claims and other amounts due and to become
due at any time under or rising out of the Collateral; (e) to defend any suit,
action or proceeding brought against the Company with respect to any Collateral;
(f) to settle, compromise or adjust any suit, action or proceeding described
above and in connection therewith, to give such discharges or releases as the
Collateral Agent may deem appropriate and, generally, to sell, transfer, pledge,
make any agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though the Collateral Agent was the absolute owner
thereof for all purposes; and (g) without limiting the generality of the
foregoing and with respect to the Accounts; (i) to take, demand, collect,
receive and give acquittances, releases and receipts for any and all moneys due
or to become due in the name of the Company or in the name of the Collateral
Agent or otherwise and to take possession of and endorse and collect any notes,
checks, drafts, money orders or other instruments of payment (including payments
payable under or with respect to any policy of insurance) relating thereto or in
connection therewith and to file any claim and to take any other action in any
court of law or equity or otherwise deemed appropriate by the Collateral Agent
for the purpose of collecting any and all such moneys whenever payable relating
thereto, although the Collateral Agent shall not be required or be obligated in
any manner to make any demand or to make any inquiry as to the nature of
sufficiency of any payment received by it, or to present or file any claim or
take any action to collect or enforce the payment of any amounts which may have
been assigned to it or to which it may be entitled hereunder at any time or
times; and (ii) to direct obligors respecting Accounts or any other party liable
for the payment thereof to make payment of any and all moneys at any time
payable in connection therewith directly to the Collateral Agent or to an agent
specified by it; and notwithstanding the foregoing, neither this Agreement nor
the receipt by the Collateral Agent of any payment pursuant thereto or
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<PAGE>
hereto shall cause the Collateral Agent to be under any obligation or liability
in any respect to any obligor or any other party for the performance or
observance of any of the representations, warranties, conditions or terms of any
invoice, agreement or other document issued or executed in connection with the
Accounts and in connection with the foregoing, the Company agrees that upon the
occurrence and continuation of an Event of Default (1) it will not renew or
extend the time of payment of any Account other than in the ordinary course of
business, (2) it will furnish to the Collateral Agent all original invoices or
papers which relate to the creation of the Account, and (3) with respect to any
Accounts which are collected by the Company, it will remit such collections
promptly to the Collateral Agent in the form received (with appropriate
endorsements) and, until remitted, it will hold such collections in trust for
the Collateral Agent.
6.3 SALE OF THE COLLATERAL. In the event the Collateral Agent
determines, subject to the terms of the Intercreditor Agreement, that the
Collateral should be sold to satisfy all or any part of the Obligations, the
Collateral Agent may dispose of the Collateral in whole or in part at public or
private sale, and any notice required to be given shall be given in accordance
with Section 7.4 herein at least ten (10) days before the proposed sale. The
parties agree said notice shall be reasonable, provided, however, the Collateral
Agent need not give such notice with respect to Collateral which is perishable
or threatens to decline speedily in value or is a type customarily sold on a
recognized market. At any such sale the Collateral Agent or any Secured Party
may purchase the Collateral free from, and discharged of all trusts, claims,
rights of redemption and equities of the Company, all of which are hereby waived
and released. The Company shall remain liable for any deficiency resulting from
any sale of the Collateral and shall pay such deficiency promptly on the
Collateral Agent's demand.
6.4 EXPENSE OF COLLECTION AND SALE. The Company agrees to pay all
reasonable costs and expenses incurred by the Collateral Agent in enforcing,
collecting or realizing upon the Obligations or the Collateral (including,
without limitation, reasonable attorneys' fees).
6.5 FINANCING STATEMENTS. Where permitted by applicable law, the
Collateral Agent is authorized to file financing statements relating to the
Collateral without the Company's signature thereon, executed only by the
Collateral Agent and at the expense of the Company. The Company will, however,
at the request of the Collateral Agent, execute any financing statement or
amendment of any financing statement with respect to the Collateral. Upon the
Company's failure to do so, any officer of the Collateral Agent is authorized as
the Company's Collateral Agent and in its name to
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<PAGE>
execute any such financing statement or amendment to any such financing
statement.
6.6 EXERCISE OF REMEDIES. If any Obligations are now or hereafter
secured by property other than the Collateral, or by any guaranty, endorsement
or property now or hereafter owned by any other person, firm or corporation,
then the Collateral Agent, subject to the Intercreditor Agreement, shall have
the right in its sole discretion to determine, which rights, security, liens,
security interests or remedies the Collateral Agent shall at any time pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any such rights or any of the
Collateral Agent's rights hereunder.
6.7 APPLICATION OF PROCEEDS. All proceeds received by the Collateral
Agent in respect of any sale of, collection from or other realization upon all
or part of the Collateral in accordance with this Agreement shall be distributed
by the Collateral Agent to the Secured Parties for application to the
Obligations at the time, in the manner and in the order of priority set forth in
the Intercreditor Agreement.
SECTION 7. MISCELLANEOUS
7.1 LIMITED ROLE OF THE COLLATERAL AGENT. The relationship between the
Company and the Collateral Agent, the Agent and the Secured Parties shall be
solely that of Agent, debtor and creditors, respectively. Neither the Collateral
Agent, the Agent nor any Secured Party shall have any fiduciary responsibilities
to the Company or with respect to the Collateral and no joint venture exists
between the Company and the Collateral Agent, the Agent or any Secured Party.
The Collateral Agent's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the UCC or otherwise, shall be to deal with the Collateral in the same manner
as the Collateral Agent deals with similar property for its own account. The
Company and the Collateral Agent each hereby severally acknowledge that there
are no representations, warranties, covenants, undertakings or agreements by the
parties hereto as to this Agreement except as specifically provided herein.
Except as set forth in the Intercreditor Agreement, the Collateral Agent shall
have no obligation to sell or otherwise realize upon the Collateral and shall
not be responsible for, and the Company shall not assert as a defense, the
Collateral Agent's failure to realize upon the Collateral.
7.2 TERMINATION OF SECURITY INTERESTS; RELEASE OF COLLATERAL. The
security interests granted hereunder shall terminate and all rights to the
Collateral shall revert to the Company upon the
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earlier to occur of (i) payment in full of all Obligations (other than unmatured
contingent obligations unrelated to reimbursement of letters of credit) and the
termination of all commitments to make further extensions of credit to the
Company under the Credit Agreement, including without limitation, the issuance
of any letters of credit and (ii) the satisfaction of each of the conditions to
the release of the Collateral as set forth in Section 19 of the Loan Agreement
and Section 8.02 of the Credit Agreement. Upon termination of the security
interest or release of any Collateral, the Collateral Agent will, at the expense
of the Company, execute and deliver to the Company such documents as the Company
shall reasonably request to evidence the termination of the security interest or
the release of such Collateral, as the case may be.
7.3 CHOICE OF LAW, CONSTRUCTION. This Agreement shall be construed in
accordance with the internal laws (and not the law of conflicts) of the State of
New York. If any provision of this Agreement shall be or become unenforceable or
illegal under any law, all other provisions shall remain in full force and
effect.
7.4 CONSENT TO JURISDICTION. (a) The Company hereby irrevocably submits
to the non-exclusive jurisdiction of any United States federal or New York state
court sitting in Nassau or Suffolk Counties in any action or proceeding arising
out of or relating to this Agreement and the Company hereby irrevocably agrees
that all claims in respect of such action or proceeding may be heard and
determined in any such court and irrevocably waives any objection it may now or
hereafter have as to the venue of any such action or proceeding brought in such
a court or the fact that such court is an inconvenient forum.
(b) The Company irrevocably and unconditionally consents to the service
of process in any such action or proceeding in any of the aforesaid courts by
the mailing of copies of such process to it, by certified or registered mail in
accordance with the terms of Section 7.5 herein.
(c) The Company agrees that nothing herein shall affect the Collateral
Agent's right to effect service of process in any other manner permitted by law
and the Collateral Agent shall have the right to bring any legal proceeding
(including a proceeding for enforcement of a judgment entered by any of the
aforementioned courts) against the Company in any other court or jurisdiction in
accordance with applicable law.
7.5 NOTICES. All notices, requests and demands to or upon the
respective parties hereto shall be in writing (including telegraphic
communication) and mailed, telegraphed, sent by facsimile or delivered at the
addresses set forth below or at such
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<PAGE>
other address as shall be designated by a party in a written notice complying as
to delivery with the terms of this Section 7.5 to the other party. All such
notices and communications shall be effective two (2) days after mailing or when
telegraphed or delivered. Notices shall be sent:
The Collateral Agent: The Chase Manhattan Bank
395 N. Service Road
Melville, New York 11747
Attention: Del Laboratories, Inc.
Account Officer
The Company: Del Laboratories, Inc.
178 EAB Plaza
Uniondale, New York 11556
Attention: President
7.6 WAIVERS. The Company expressly waives notice of non-payment or
protest, demand, or presentment, in relation to the Obligations or the
Collateral. No delay or omission of the Collateral Agent in exercising or
enforcing any of its rights, powers, privileges, options or remedies under this
Agreement, the Credit Agreement, the Loan Agreement or any other agreement or
promissory note shall constitute a waiver thereof, and no waiver by the
Collateral Agent of any Event of Default by the Company shall operate as a
waiver of any other Event of Default. Except for the terms and provisions of any
promissory notes, loan agreements, guaranties, other security agreements or
other documents executed in connection therewith, now existing or hereafter
executed and delivered to the Collateral Agent, the Agent or any Secured Party
by the Company (which terms and provisions are specifically deemed to be in
addition to and not in derogation of the terms and provisions hereof), this
Agreement constitutes the entire understanding between the Company and the
Collateral Agent with respect to the subject matter hereof and supersedes all
prior written or oral communications or understandings. No term or provision of
this Agreement shall be waived, altered or modified except in writing signed by
the parties hereto. All rights and remedies of the Collateral Agent under this
Agreement shall be cumulative and not alternative or exclusive of any rights or
remedies provided by law and may be exercised by the Collateral Agent at such
time or times and in such order as the Collateral Agent, in its sole discretion,
may determine and are for the sole benefit of the Collateral Agent and the
exercise or failure to exercise such shall not result in liability to the
Company or others except in the event of willful misconduct or gross negligence
by the Collateral Agent, and in no event shall the Collateral Agent be liable
for more than it actually receives as a
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<PAGE>
result of the exercise or failure to exercise such right and remedies. The
Collateral Agent shall not be liable for any failure by it to comply with any
recording, re-recording, filing, refiling or other legal requirement necessary
to establish or maintain the validity, priority or enforceability of, or the
Collateral Agent's right in and to the Collateral, or any part thereof.
7.7 SUCCESSORS AND SURVIVAL. This Agreement shall remain in full force
and effect until terminated as to future transactions by written agreement of
the parties. The Company may not transfer or assign any of its rights, interest
or obligations hereunder without the prior written consent of the Collateral
Agent. This Agreement shall be binding upon the Company and shall inure to the
benefit of the Collateral Agent, the Agent and the Secured Parties and their
successors and assigns and to the permitted successors and assigns of the
Company. All representations, warranties and covenants contained herein or in
any other agreement between the Collateral Agent, the Agent or any Secured Party
and the Company relating to the Obligations shall survive the execution hereof
and thereof and the granting of loans or advances pursuant hereto or thereto.
7.8 WAIVER OF COUNTERCLAIM; SETOFF. In any litigation whether pursuant
hereto in which the Company and the Collateral Agent are adverse parties the
Company waives the right to interpose any set-off or counterclaim (other than
compulsory counterclaims) of any nature or description against the Collateral
Agent.
7.9 CAPTIONS. The headings of the Section in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
7.10 SEVERABILITY. If any provision of this Agreement shall be or
become illegal or unenforceable in whole or in part for any reason whatsoever,
the remaining provisions shall nevertheless be deemed valid, binding and
subsisting.
(THE BALANCE OF THIS PAGE IS INTENTIONALLY BLANK)
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<PAGE>
7.11 WAIVER OF JURY TRIAL. COMPANY AND THE COLLATERAL AGENT HEREBY
WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER.
IN WITNESS WHEREOF, this Agreement has been executed this 25th day of
February, 2000.
DEL LABORATORIES, INC.
By: /s/ Enzo Vialardi
------------------------------
Name: Enzo Vialardi
Title: Executive Vice President
and Chief Financial Officer
THE CHASE MANHATTAN BANK,
as Collateral Agent
By: /s/ Christopher Zimmerman
------------------------------
Name: Christopher Zimmermann
Title: Vice President
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<PAGE>
SCHEDULE A
Company's Federal Tax ID #: 13-1953103
Company's Executive Office and 178 EAB Plaza - 8th Floor
Principal Place of Business: Uniondale, NY 11556-0178
Location of books and records 565 Broad Hollow Road
relating to the Collateral, Farmingdale, NY 11735
including all Accounts:
Company's Address(s) on Invoice 565 Broad Hollow Road
for Accounts Receivable: Farmingdale, NY 11735
Any other name by which
Company has been known
for the past five (5) years: None
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<PAGE>
EXHIBIT A
List of Trademarks
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<PAGE>
EXHIBIT B
Limitation on Grant of Security
Interest in Trademark
-19-
<PAGE>
[DPI]
EXHIBIT 10.35
GENERAL GUARANTY
Garden City, New York February 25 ,2000
THIS GUARANTY, dated as of February 25, 2000 (this "Agreement"), is
executed and delivered by the undersigned Guarantor in favor of The Chase
Manhattan Bank (the "Agent"), in its capacity as the agent under the Loan
Agreement (as defined below) (together with its permitted successors,
transferees and assigns, the "Agent"), for the benefit of each of the lenders
which is a party to the Loan Agreement and each lender which may, after the date
of this Agreement, become a party to the Loan Agreement (together with their
permitted successors, transferees and assigns, the "Lenders").
WHEREAS, pursuant to the Amended and Restated Loan Agreement, dated as of
February 25, 2000 (as such may be amended, restated, modified or otherwise
supplemented from time to time, the "Loan Agreement"), entered into by Del
Laboratories, Inc., (the "Borrower"), Del Pharmaceuticals, Inc., Parfums
Schiaparelli, Inc., Royce & Rader, Inc. and 565 Broad Hollow Realty Corp., as
guarantors, with the Lenders and the Agent, the Lenders are providing to the
Borrower certain credit facilities described therein.
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the sufficiency and receipt of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. DEFINED TERMS. As used in this Guaranty, the following terms shall have
the following meanings, unless the context otherwise requires. Any other
capitalized term used but not defined herein shall have the meaning given such
term in the Loan Agreement.
"Agent" means The Chase Manhattan Bank, as Agent under the Loan Agreement,
or any institution which succeeds to such position pursuant to the terms and
conditions of the Loan Agreement.
"Loan Agreement" shall have the meaning given such term in the preamble to
this Agreement.
"Obligations" shall mean any and all liabilities and obligations of the
Borrower to the Agent and the Lenders of every kind whether arising under this
Guaranty, the Loan Agreement, the
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<PAGE>
Loan Documents or any of the agreements, instruments and documents executed in
connection herewith or therewith (including, without limitation, any and all
costs and reasonable attorneys' fees incurred by the Agent or any of the Lenders
in the collection, whether by suit or by any other means of any of such
Obligations hereunder or thereunder) and any amendment, modification, extension
or renewal of any of the foregoing. The Obligations shall include interest
accruing thereon before or after the commencement of any insolvency, bankruptcy
or reorganization proceeding in respect of the Borrower or the Guarantor whether
or not such interest is an allowable claim in any such proceeding and
irrespective of the discharge or release of the Borrower in such proceeding.
2. GUARANTY. For value received, and in consideration of the loans made or
to be made or credit otherwise extended or to be extended by Lenders to or for
the account of the Borrower from time to time and at any time and for other good
and valuable consideration and to induce the Lenders to make such loans or
extensions of credit and to make or grant such renewals, extensions, releases of
collateral or relinquishments of legal rights as to the Lenders may seem
advisable, the Guarantor absolutely and unconditionally guarantees to the Agent
and the Lenders, their successors, endorsees and assigns, the prompt and
complete payment when due of all Obligations, irrespective of the genuineness,
validity, regularity or enforceability of such Obligations, or of any instrument
evidencing any of the Obligations or of any collateral therefor or of the
existence or extent of such collateral.
3. MODIFICATIONS; EXTENSIONS, ETC. The Guarantor hereby assents that the
Agent and/or the Lenders may at any time and from time to time, either before or
after the maturity thereof, without notice to or reservation of rights against
or further consent of the Guarantor (i) extend the time of payment of, exchange,
release, substitute or surrender any collateral for, renew or extend any of the
Obligations or increase the interest rate thereon, and (ii) make any agreement
with the Borrower or with any other party to or person liable on any of the
Obligations, or interested therein, for the extension, renewal, payment,
compromise, discharge or release thereof, in whole or in part, or for any
modification of the terms thereof or of any agreement between the Agent and any
of the Lenders and the Borrower or any such other party or person. Any of the
foregoing shall not, in any way impair or affect this Guaranty or the obligation
of the Guarantor hereunder.
4. FINANCIAL ADVANTAGE. The Guarantor hereby acknowledges that it has
derived or expects to derive a financial or other advantage from each and every
Obligation incurred by the Borrower
2
<PAGE>
to the Agent and the Lenders reasonably equivalent to the obligation of the
Guarantor hereunder.
5. WAIVER OF NOTICE. The Guarantor waives notice of the acceptance of
this Guaranty and of the making of any loans or extensions of credit or the
incurrence of any Obligation, presentment to or demand of payment from anyone
whomsoever liable upon any of the Obligations, protest, notice of presentment,
non-payment or protest and notice of any default of any sort.
6. CONTINUING GUARANTY. This is a continuing Guaranty and shall remain
in full force and effect and be binding upon the Guarantor and its successors
and assigns, until all of the Obligations (other than unmatured contingent
obligations unrelated to reimbursements of letters of credit) have been
irrevocably paid in full and the Loan Agreement and the Commitments of the
Lenders thereunder have been terminated. If any of the present or future
Obligations are guaranteed by persons, partnerships or corporations in addition
to the Guarantor, the death, release or discharge in whole or in part, or the
bankruptcy, liquidation or dissolution of one or more of them, shall not
discharge or affect the liabilities of the Guarantor under this Guaranty.
7. REINSTATEMENT. This Guaranty shall continue to be effective, or be
reinstated, as the case may be, if at any time any payment, or any part thereof,
of any of the Obligations is rescinded or must otherwise be restored or returned
by the Agent or any Lender upon insolvency, bankruptcy, dissolution, liquidation
or reorganization of the Borrower or the Guarantor, or otherwise or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for the Borrower or the Guarantor or any substantial
part of their property, or otherwise, all as though such payments had not been
made.
8. GUARANTY OF PAYMENT. This Guaranty is a guaranty of payment and not of
collection, and neither the Agent or any Lender shall be under any obligation to
take any action against the Borrower or any other person liable with respect to
any of the Obligations or resort to any collateral security held by it to secure
any of the Obligations as a condition precedent to the Guarantor being obligated
to perform as agreed herein. The Guarantor hereby waives any rights to interpose
any defense, counterclaim (other than mandatory counterclaims) or offset of any
nature and description which it may have or which may exist between and among
the Agent, any Lender, the Borrower and/or the Guarantor. Neither the Agent nor
any Lender nor their successors, endorsees or assigns shall have any obligation
to protect, secure, perfect or insure any lien at any time held by it as
security for the
3
<PAGE>
Obligations or for this Guaranty or any property subject thereto or hereto,
but at the Agent's or such Lender's sole option and without prejudice may do
so or incompletely do so, and the Guarantor's obligations hereunder shall in
no way be affected by reason thereof.
9. WAIVER OF TRIAL BY JURY. THE GUARANTOR, THE AGENT AND EACH LENDER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY WHICH
THE GUARANTOR, THE AGENT AND EACH LENDER MAY HAVE IN ANY ACTION, PROCEEDING,
CLAIM OR COUNTERCLAIM, IN LAW OR IN EQUITY, IN CONNECTION WITH THIS GUARANTY OR
THE TRANSACTIONS RELATED HERETO. THE GUARANTOR REPRESENTS AND WARRANTS THAT NO
REPRESENTATIVE OR AGENT OF THE AGENT OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT THE AGENT OR SUCH LENDER WILL NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THIS JURY TRIAL WAIVER. THE GUARANTOR ACKNOWLEDGES THAT THE
AGENT AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS GUARANTY BY, AMONG
OTHER THINGS, THE PROVISIONS OF THIS SECTION.
10. SUBROGATION. The Guarantor hereby waives all rights to be subrogated to
the rights of the Agent and the Lenders with respect to the Obligations until
the full and complete payment of the Obligations. In addition, until the full
and complete payment of the Obligations, the Guarantor hereby waives any right
to proceed against the Borrower, now or hereafter, for contribution, indemnity,
reimbursement and all other suretyship rights and claims, whether direct or
indirect, liquidated or contingent, whether arising under express or implied
contract or by operation of law, which the Guarantor may now or hereafter have
against the Borrower with respect to the Obligations. The Guarantor also hereby
waives any rights to recourse to or with respect to any assets of the Borrower.
If any amount shall be paid to the Guarantor on account of such subrogation
rights at any time when all such Obligations shall not have been irrevocably
paid in full, such amount shall be held in trust for the benefit of the Agent
and the Lenders and shall forthwith be paid to the Agent to be credited and
applied upon the Obligations.
11. NO WAIVER. No failure on the part of the Agent to exercise, and no
delay in exercising, any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Agent of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power.
12. CUMULATIVE RIGHTS. Each and every right, remedy and power hereby
granted to the Agent or allowed it by law or other
4
<PAGE>
agreement shall be cumulative and not exclusive of any other, and may be
exercised by the Agent at any time and from time to time.
13. ENTIRE AGREEMENT. This Guaranty embodies the entire agreement and
understanding between the Agent and the Guarantor and supersedes all prior
agreements and understandings relating to the subject matter hereof.
14. APPLICABLE LAW; JURISDICTION; VENUE. This Guaranty shall be construed
and interpreted in accordance with the laws of the State of New York. The
Guarantor agrees that any action or proceeding relating in any way to this
Guaranty shall be brought and enforced in the courts of the State of New York or
the United States District Court for the Southern or Eastern District of New
York, and irrevocably submits to the jurisdiction of each such court in any
action or proceeding arising out of or relating to this Guaranty, and the
Guarantor irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such New York State or Federal Court.
In furtherance of the foregoing, the Guarantor hereby irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of venue in any action or proceeding relating in any way to
this Guaranty brought in the Supreme Court of the State of New York within New
York City, Nassau, Suffolk and Westchester Counties or the United States
District Court for the Southern and Eastern Districts of New York and any claim
that such action or proceeding brought in any such court has been brought in an
inconvenient forum. Notwithstanding the foregoing, the Agent may bring any
action or proceeding against the Guarantor or its property in the courts of such
jurisdictions as are deemed necessary by the Agent in its sole and absolute
discretion.
15. PAYMENTS. No payment or payments made by any person or received or
collected by the Agent or any Lender from any person by virtue of any action or
proceeding or any setoff or appropriation or application, at any time or from
time to time, in reduction of or in payment of the 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, remain in
place until there is cash payment of the Obligations in full.
16. REPRESENTATIONS. The Guarantor represents and warrants that all
necessary and proper corporate action has been taken to make this Guaranty and
all of the provisions hereof the valid and binding obligations of the Guarantor,
enforceable against the Guarantor in accordance with its terms.
5
<PAGE>
17. SEVERABILITY. Any provision(s) of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to extent of such prohibition or enforceability without invalidating the
remaining provisions hereof, and any prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
18. REQUIRED LIMITATION. If any third party shall contest the validity or
enforceability of this Guaranty on the basis of any fraudulent conveyance claim,
preference claim or other grounds, including, without limitation, any grounds
based in federal or state bankruptcy or insolvency laws, this Guaranty shall be
enforced to the maximum amount to which it may be enforced without being subject
to any such contest on such claims or grounds.
19. AMENDMENT. None of the terms or provisions of this Guaranty may be
waived, amended, supplemented or otherwise modified except by a written
instrument executed by the Guarantor and the Agent; provided, however, that any
provision of this Guaranty may be waived by the Agent in a letter or agreement
executed by the Bank or by telex or facsimile transmission from the Agent.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed
by its authorized officers this 25th day of February, 2000.
DEL PHARMACEUTICALS, INC.
By: /s/ Enzo Viarldi
----------------------------------
Name: Enzo Vialardi
Title: Executive Vice President
and Chief Financial
Officer
6
<PAGE>
EXHIBIT 10.36
- ------------------------------------------------------------------------------
AMENDED AND RESTATED LOAN AGREEMENT
dated as of February 25, 2000
among
DEL LABORATORIES, INC.
DEL PHARMACEUTICALS, INC.
PARFUMS SCHIAPARELLI, INC.
ROYCE & RADER, INC.
565 BROAD HOLLOW REALTY CORP.
and
THE LENDERS NAMED HEREIN
$40,000,000
9.5% Senior Notes Due May 31, 2005
------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
SECTION 1. Exhibits and Section References...................................1
SECTION 2. Loans.............................................................2
SECTION 3. Effectiveness of Amendment and Restatement........................2
SECTION 4. Prepayment of Notes; Maturity.....................................2
SECTION 4.1. Required Prepayments...................................2
SECTION 4.2. Optional Prepayments...................................3
SECTION 4.3. Special Prepayment Following Restricted Asset Sale.....3
SECTION 4.4. Special Prepayment Upon Change of Control..............4
SECTION 4.5. Manner of Making Special Prepayments...................4
SECTION 4.6. Obligation to Prepay after Notice......................5
SECTION 4.7. Application of Prepayments.............................5
SECTION 4.8. Presentation or Surrender of Notes.....................5
SECTION 4.9. Note Purchase Prohibition..............................5
SECTION 5. Covenants.................................................5
SECTION 5.1. Compliance with Laws, Etc..............................5
SECTION 5.2. Reporting Requirements.................................5
SECTION 5.3 Taxes..................................................8
SECTION 5.4. Corporate Existence....................................8
SECTION 5.5. Maintenance of Properties and Insurance................8
SECTION 5.6. Books of Record and Account............................8
SECTION 5.7. Visitation.............................................8
SECTION 5.8. Performance and Compliance with Other Agreements.......8
SECTION 5.9. Continued Perfection of Liens..........................9
SECTION 5.10. Pension Funding........................................9
SECTION 5.11. Licenses; Trademarks...................................9
SECTION 5.12. New Subsidiaries......................................10
SECTION 5.13. North Carolina Mortgage...............................10
SECTION 5.14. Canadian Mortgage.....................................10
SECTION 5.15. Liens, Etc............................................10
SECTION 5.16. Debt.................................................12
</TABLE>
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TABLE OF CONTENTS
(continued)
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SECTION 5.17. Merger..................................................13
SECTION 5.18 Sale of Assets, Etc......................................13
SECTION 5.19. Investments, Etc........................................13
SECTION 5.20. Transactions With Affiliates.............................13
SECTION 5.21. Prepayment of Outstanding Debt..........................13
SECTION 5.22. Guarantees..............................................13
SECTION 5.23. Change of Business......................................13
SECTION 5.24. Fiscal Year.............................................14
SECTION 5.25. Maximum Losses; Minimum Net Income......................14
SECTION 5.26. Accounting Policies.....................................14
SECTION 5.27. Dividends, Etc..........................................14
SECTION 5.28. Change in Control.......................................14
SECTION 5.20. Hazardous Material......................................14
SECTION 5.30. Limitations on Consolidated Foreign Assets and Revenues.15
SECTION 5.31. Financial Requirements..................................15
SECTION 6. Definitions; Accounting Terms...............................16
SECTION 7. Remedies....................................................26
SECTION 7.1 Events of Default; Acceleration..........................26
SECTION 7.2. Other Remedies...........................................28
SECTION 7.3. Notice of Acceleration...................................29
SECTION 8. Communications; Payment of Notes............................29
SECTION 9. First Offer Upon Transfer of Notes..........................30
SECTION 10. Amendment and Waiver........................................30
SECTION 11. Registration, Transfer and Exchange of Notes................31
SECTION 12. Lost Notes..................................................31
SECTION 13. Expenses....................................................31
SECTION 14. Confidential Information....................................32
SECTION 15. Successors and Assigns......................................33
SECTION 16. Survival of Representations and Warranties..................33
SECTION 17. Governing Law...............................................33
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SECTION 18. Reaffirmation, Restatement and Waivers....................33
SECTION 19. Termination of Security Interests; Release of Collateral..34
</TABLE>
SCHEDULE I
EXHIBIT A DEL LABORATORIES, INC
EXHIBIT B REPRESENTATIONS
EXHIBIT C CLOSING CONDITIONS
EXHIBIT D DOCUMENTS AND INFORMATION FURNISHED TO THE LENDERS
SCHEDULE D-1
SCHEDULE D-2
SCHEDULE D-3
SCHEDULE D-4
SCHEDULE D-5
SCHEDULE D-6
SCHEDULE D-7
SCHEDULE D-8
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AMENDED AND RESTATED
LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT, dated as of February 25,
2000, (the or this "Agreement") among DEL LABORATORIES, INC., a Delaware
corporation (as further defined in Section 6, the "Company"), Del
Pharmaceuticals, Inc., a Delaware corporation ("DPI"), Parfums Schiaparelli,
Inc., a New York corporation ("Parfums"), Royce & Rader, Inc., a Delaware
corporation ("Royce"), 565 Broad Hollow Realty Corp., a New York corporation
("Broad"), and the lender named in Schedule I hereto (and with such other
lenders as may become parties hereto in accordance with the terms hereof,
collectively, the "Lenders").
WHEREAS, Jackson National Life Insurance Company and Jackson
National Life Insurance Company of Michigan, as lenders (the "Original Lenders")
and the Company are parties to that certain Loan Agreement dated as of May 26,
1993, as amended by the First Amendment to Loan Agreement dated as of March 31,
1997, the Second Amendment to Loan Agreement dated as of December 30, 1998, and
the Third Amendment to Loan Agreement dated as of December 22, 1999 (as amended,
the "Original Loan Agreement"), pursuant to which the Original Lenders made
certain loans to the Company and the Company issued to the Original Lenders its
Notes (as defined in the Original Loan Agreement) (the "Original Notes");
WHEREAS, Jackson National Life Insurance Company, as the successor
in interest to Jackson National Life Insurance Company of Michigan, is the
holder of 100% of the issued and outstanding Original Notes;
WHEREAS, the Company and the Lenders now desire to amend and
restate the Original Loan Agreement to, among other things, (i) change the
amount of certain of the mandatory prepayments required to be made thereunder,
(ii) provide for the securing of the obligations represented by the Notes, (iii)
amend certain covenants and related definitions, and (iv) make certain other
changes to the Original Loan Agreement.
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other good and valuable consideration, the parties hereto
agree as follows:
SECTION 1. EXHIBITS AND SECTION REFERENCES. This Agreement includes the
attached Schedule I and Exhibits A through D. Section numbers herein that are
preceded by a capital letter refer to sections in the Exhibit designated by that
letter.
<PAGE>
SECTION 2. LOANS. Each Lender has made a loan to the Company in the
amount set forth opposite such Lender's name in Schedule I. On the Restatement
Effective Date, as defined below, the Company will amend and restate the
Original Notes in the form of Exhibit A to this Agreement to evidence its
promise to repay the loans with interest. Reference in this Agreement to the
"Notes" shall be a reference to the Original Notes as amended and restated in
the form of Exhibit A, or any Note or Notes delivered in substitution or
exchange therefor pursuant to the provisions of this Agreement. The Company will
issue such amended and restated Notes to the Lenders upon surrender by them of
the Original Notes for cancellation by the Company. The aggregate amount of
loans to be made pursuant to this Agreement is $40,000,000, but the loan by each
Lender is a separate and several loan. To induce each Lender to enter into this
Agreement and to amend and restate its Original Notes, the Company makes the
representations and warranties set forth in Exhibit B, Part One, and the
covenants and agreements hereinafter stated. Each Lender makes the
representation set forth in Exhibit B, Part Two.
SECTION 3. EFFECTIVENESS OF AMENDMENT AND RESTATEMENT. The terms and
provisions of this Agreement shall become effective (the "Restatement Effective
Date") on such date upon which (i) the Lenders shall have received an amendment
fee from the Company in the amount of $40,000, which amendment fee shall be
fully earned upon the execution of this Agreement, and (ii) each of the closing
conditions listed on Exhibit C hereto shall have been satisfied in form and
substance reasonably satisfactory to the Lenders.
SECTION 4. PREPAYMENT OF NOTES; MATURITY. The Company will make
required, and may make optional, prepayments of the principal of the Notes as
hereinafter provided. The principal balance of the Notes not otherwise prepaid,
together with all accrued and unpaid interest thereon and other applicable fees
and charges, shall be due in full on May 31, 2005.
SECTION 4.1. REQUIRED PREPAYMENTS. So long as any of the Notes shall be
outstanding, there shall become due and payable, and the Company will prepay,
the following aggregate principal amount of the Notes (or the unpaid balances
thereof) on the dates indicated (each, a "Mandatory Prepayment Date"):
May 31, 2001 $4,000,000
May 31, 2002 $4,000,000
May 31, 2003 $8,000,000
May 31, 2004 $8,000,000
without prepayment charge, whether or not any optional prepayment has been or is
being made pursuant to Section 4.2 (subject to the next proviso), 4.3 or 4.4;
provided that, in the event that any prepayment shall have been made pursuant to
Section 4.3 or 4.4 (a "Special Prepayment"), then with respect to all subsequent
prepayments pursuant to this Section 4.1 the aggregate principal amount of Notes
to be prepaid on each subsequent Mandatory Prepayment Date shall be an amount
equal to the product of (i) the aggregate principal amount of the Notes to be
prepaid on such Mandatory Prepayment Date (or the amount to which such number
shall have been theretofore reduced pursuant to this proviso by reason of a
prior Special Prepayment), times
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(ii) a fraction, the numerator of which shall be the aggregate principal amount
of the Notes outstanding immediately after such Special Prepayment (before
giving effect to any prepayment pursuant to Section 4.2 or this Section 4.1
being made on the same day) and the denominator of which shall be the aggregate
principal amount of Notes outstanding immediately prior to such Special
Prepayment (before giving effect to any prepayment pursuant to Section 4.2 or
this Section 4.1 being made on the same day).
SECTION 4.2. OPTIONAL PREPAYMENTS. The Company, upon not less than 30
or more than 60 days' prior written notice of the date and amount of optional
prepayment to the holders of the Notes, may prepay at any time all or from time
to time any part (in a multiple of $100,000) of the principal of the Notes, upon
payment of a prepayment charge equal to the excess, if any, of (a) the sum of
the present values, discounted semi-annually in accordance with accepted
financial practice at a rate per annum equal to the Treasury Yield plus
seventy-five hundredths percent (.75%), of each of (i) all remaining scheduled
payments and prepayments (whether at maturity or pursuant to Section 4.1) of the
principal amount to be prepaid pursuant to this Section 4.2 (any partial
prepayment pursuant to this Section 4.2 being deemed applied in satisfaction of
such scheduled payments and prepayments in inverse chronological order of their
due dates) plus (ii) all remaining payments of interest payable on such
principal amount according to the terms of the Notes to and including maturity
or the dates of such scheduled prepayments, as the case may be (assuming each
payment referred to in clauses (i) and (ii) above is made when due), over (b)
the principal amount to be prepaid pursuant to this Section 4.2.
SECTION 4.3. SPECIAL PREPAYMENT FOLLOWING RESTRICTED ASSET SALE. In the
event that the Company proposes to enter into a transaction or series of
transactions not permitted by Section 5.17 or 5.18 (a "Restricted Asset Sale"),
the Company shall, not less than 30 nor more than 90 days prior to such
Restricted Asset Sale, give each holder of any Notes written notice thereof by
telecopy confirmed by telephone in accordance with Section 8, such notice to
describe the proposed Restricted Asset Sale and the amount of the expected
proceeds thereof and request the consent of the holder or holders of the Notes
thereto. The Company may proceed with the Restricted Asset Sale only if the
holder or holders of at least 66-2/3% of the unpaid principal amount of the
Notes then outstanding consent in writing thereto.
Not more than 190 days following the first day on which the Company or
any of its Subsidiaries receives any proceeds from an approved Restricted Asset
Sale (the "Asset Sale Closing Date"), the Company shall give each holder of any
Notes a written notice (the "Offer Notice") by telecopy confirmed by telephone
in accordance with Section 8 containing the Company's unconditional and
irrevocable offer to prepay, on a date specified therein (the "Special
Prepayment Date"), which date shall be not less than 45 nor more than 60 days
following the date on which such notice is given, a principal amount of the
Notes equal to the sum of (a) 100% of the proceeds received by the Company and
its Subsidiaries from all sales of assets which individually or in the aggregate
disposed of a Substantial Part of the assets of the Company or a Subsidiary,
less (b) the amount of such proceeds which were reinvested by the Company within
180 days following their receipt in assets substantially similar to those assets
sold, up to the entire unpaid principal amount of the Notes, at the Prepayment
Price (as defined in Section 4.5) plus interest accrued to and including the
Special Prepayment Date. If the Company shall not within 30 days of the giving
of such notice have received a written
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acceptance (which may be by telecopy or other means of telecommunication) of
such offer by such holder, such offer shall be deemed to have been rejected by
such holder, and the Company shall have no further obligation to prepay the
Notes of such holder as a consequence of such Restricted Asset Sale.
SECTION 4.4. SPECIAL PREPAYMENT UPON CHANGE OF CONTROL. In the event of
a Change of Control, the Company shall not less than 15 days prior to such event
(or, if prior notice is not possible, immediately following the Company's
becoming aware of such Change of Control) give to each holder of any Notes
written notice thereof by telecopy confirmed by telephone in accordance with
Section 8, such notice to contain the Company's unconditional and irrevocable
offer to prepay, on a date specified therein (the "Special Prepayment Date"),
which date shall be not less than 60 nor more than 90 days following the date on
which such notice is given, all but not less than all the Notes held by such
holder, at the Prepayment Price (as defined in Section 4.5) plus interest
accrued to and including the Special Prepayment Date. If the Company shall not
within 30 days of the giving of such notice have received a written acceptance
(which may be by telecopy or other means of telecommunication) of such offer by
such holder, such offer shall be deemed to have been rejected by such holder,
and the Company shall have no further obligation to prepay the Notes of such
holder and such holder shall be deemed to have consented to the Change of
Control, as the case may be.
SECTION 4.5. MANNER OF MAKING SPECIAL PREPAYMENTS. In the case of any
acceptance of an offer to prepay Notes pursuant to Section 4.3 or Section 4.4,
the Company shall give a further written notice (a "Prepayment Notice") with
respect to such prepayment to each holder accepting the offer not more than 20
days nor less than 10 days prior to the Special Prepayment Date (as defined in
Section 4.3 or 4.4, as applicable) specifying (1) the Special Prepayment Date,
(2) the accrued interest to be paid to such holder, (3) the prepayment charge
component of the Prepayment Price (assuming, for purposes of such notice only,
that the applicable prepayment charge will be that which would be applicable if
the Notes were being prepaid on the date of such notice, it being understood,
however, that the actual prepayment charge to be paid may vary from the amount
specified in such notice), (4) the total amount of the Prepayment Price to be
paid to such holder (calculated using the same assumption set forth in the
foregoing clause (3)), and (5) the total aggregate principal amount of all Notes
(including those of such holder) to be prepaid by the Company. On the Special
Prepayment Date, the Company shall prepay the Notes held by such holder at the
Prepayment Price plus accrued interest to and including the Special Prepayment
Date.
The term "Prepayment Price" shall mean, with respect to any Notes to be
prepaid pursuant to Section 4.3 or 4.4, an amount equal to the sum of (a) either
(i) in the case of a prepayment made pursuant to Section 4.3, the amount
specified in the Offer Notice, or (ii) in the case of a prepayment made pursuant
to Section 4.4, the entire unpaid principal amount of such Notes, plus (b) a
prepayment charge equal to 50% of the prepayment charge which would be payable
under Section 4.2, if such Notes were being prepaid on the Special Prepayment
Date pursuant to Section 4.2.
For purposes of this Section 4, any prepayment pursuant to Section 4.3
shall be deemed to have preceded any prepayment pursuant to Section 4.1 or 4.2
occurring on the same day.
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<PAGE>
SECTION 4.6. OBLIGATION TO PREPAY AFTER NOTICE. The principal amount of
the Notes designated for prepayment in any notice of optional prepayment given
pursuant to Section 4.2 or in any Prepayment Notice given pursuant to Section
4.3 or 4.4 shall become due and payable on the date fixed for prepayment,
together with accrued interest and the amount of any prepayment charge.
SECTION 4.7. APPLICATION OF PREPAYMENTS. Each prepayment pursuant to
Section 4.1, 4.2 or 4.3 of less than the entire unpaid amount of all outstanding
Notes shall be applied (in multiples of $1,000) pro rata (as nearly as may be,
with adjustments to equalize for prior prepayments) to all outstanding Notes
according to the respective unpaid principal amounts thereof.
SECTION 4.8. PRESENTATION OR SURRENDER OF NOTES. Subject to the second
paragraph of Section 8, the Company may, as a condition to making any prepayment
of a Note, require the holder thereof to present such Note, at the place
specified in the Note for payment of the principal thereof, for notation thereon
of the amount and date of such prepayment or, if such Note is prepaid in full,
to surrender the same at such price.
SECTION 4.9. NOTE PURCHASE PROHIBITION. Except as permitted by Section
9, the Company will not, and will not permit any Subsidiary or Affiliate to,
directly or indirectly acquire any Note, by purchase or prepayment or otherwise,
except by way of payment or prepayment thereof by the Company or such Subsidiary
or Affiliate in accordance with the provisions of the Notes and of this
Agreement.
SECTION 5. COVENANTS. So long as any amount shall remain outstanding
under the Notes, the Company and each Guarantor will, unless the Required
Lenders shall otherwise consent in writing:
SECTION 5.1. COMPLIANCE WITH LAWS, ETC. Comply, and cause each
Subsidiary of the Company or any Guarantor to comply, in all material respects
with all applicable laws, rules, regulations and orders, where the failure to so
comply would be reasonably likely to result in a Material Adverse Change.
SECTION 5.2. REPORTING REQUIREMENTS. Furnish to the Lenders:
(A) ANNUAL FINANCIAL STATEMENTS. As soon as available and in
any event within ninety (90) days after the end of each fiscal
year of the Company, a copy of the audited consolidated and
unaudited consolidating (such consolidating statements to be
prepared by management of the Company) financial statements of
the Company and its Consolidated Subsidiaries for such year,
including balance sheets with related statements of income and
retained earnings and statements of cash flows, all in
reasonable detail and setting forth in comparative form the
figures for the previous fiscal year, together with an
unqualified opinion, prepared by independent certified public
accountants selected by the Company and reasonably
satisfactory to the Required Lenders, all such financial
statements to be prepared in accordance with GAAP.
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(B) QUARTERLY FINANCIAL STATEMENTS. As soon as available and
in any event within forty-five (45) days after the end of each
of the first three fiscal quarters of each fiscal year of the
Company, a copy of the consolidated and consolidating
financial statements of the Company and its Consolidated
Subsidiaries for such quarter, including balance sheets with
related statements of income and retained earnings and
statements of cash flows, all in reasonable detail and setting
forth in comparative form the figures for the comparable
quarter for the previous fiscal year, all such financial
statements to be prepared by management of the Company in
accordance with GAAP.
(C) MANAGEMENT LETTERS. Promptly upon receipt thereof, copies
of any reports submitted to the Company or any Guarantor by
independent certified public accountants in connection with
the examination of the financial statements of the Company and
the Guarantor made by such accountants.
(D) CERTIFICATE OF NO DEFAULT. Simultaneously with the
delivery of the financial statements referred to in Section
5.2(A) and (B), a certificate of the President or the Chief
Financial Officer of the Company, (1) certifying that no
Default or Event of Default has occurred and is continuing, or
if a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof and the
action which is proposed to be taken with respect thereto; and
(2) with computations demonstrating compliance with the
covenants contained in Section 5.31.
(E) ACCOUNTANTS' REPORT. Simultaneously with the delivery of
the annual financial statements referred to in Section 5.2(A),
a certificate of the independent certified public accountants
who audited such statements to the effect that, in making the
examination necessary for the audit of such statements, they
have obtained no knowledge of any condition or event which
constitutes a Default or Event of Default, or if such
accountants shall have obtained knowledge of any such
condition or event, specify in such certificate each such
condition or event of which they have knowledge and the nature
and status thereof.
(F) NOTICE OF LITIGATION. Promptly after the commencement
thereof, notice of all actions, suits and proceedings before
any court or governmental department, commission, board,
bureau, agency, or instrumentality, domestic or foreign,
affecting the Company, any Guarantor or any Subsidiary of the
Company or any Guarantor which, if determined adversely to the
Company, such Guarantor or any such Subsidiary would be
reasonably likely to result in a Material Adverse Change.
(G) NOTICE OF DEFAULTS AND EVENTS OF DEFAULT. As soon as
possible and in any event within five (5) days after the
occurrence of each Default or Event of Default, a written
notice setting forth the details of such Default or Event of
Default and the action which is proposed to be taken by the
Company with respect thereto.
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(H) ERISA REPORTS. Promptly after the filing or receiving
thereof, copies of all reports, including annual reports, and
notices which the Company, any Guarantor or any Subsidiary of
the Company or any Guarantor, files with or receives from the
PBGC, the Internal Revenue Service or the U.S. Department of
Labor under ERISA; and as soon as possible after the Company,
any Guarantor or any such Subsidiary knows or has reason to
know that any Reportable Event or Prohibited Transaction has
occurred with respect to any Plan or that the PBGC or the
Company, any Guarantor or any such Subsidiary has instituted
or will institute proceedings under Title IV of ERISA to
terminate any Plan, the Company or such Guarantor will deliver
to the Lenders a certificate of the President or the Chief
Financial Officer of the Company or such Guarantor setting
forth details as to such Reportable Event or Prohibited
Transaction or Plan termination and the action the Company or
such Guarantor proposes to take with respect thereto.
(I) ENVIRONMENTAL NOTICES. Promptly after the receipt thereof,
a copy of any claim, summons, charge or other notice to the
Company, any Guarantor or any Subsidiary of the Company or any
Guarantor regarding compliance (or failure to comply) with any
federal, state or local laws governing Hazardous Materials.
(J) MATERIAL ADVERSE CHANGE. Promptly, upon the occurrence
thereof, notice of a Material Adverse Change.
(K) REPORTS TO OTHER CREDITORS. Promptly after the furnishing
thereof, copies of any statement or report furnished to any
other party pursuant to the terms of any indenture, loan, or
credit or similar agreement and not otherwise required to be
furnished to the Lenders pursuant to any other clause of this
Section 5.2.
(L) PROXY STATEMENTS, ETC. Promptly after the sending or
filing thereof, copies of all proxy statements, financial
statements and reports which the Company, any Guarantor or any
Subsidiary of the Company or any Guarantor sends to its
stockholders, and copies of all regular, periodic, and special
reports, and all registration statements which the Company or
such Guarantor or any such Subsidiary files with the SEC or
any governmental authority which may be substituted therefor,
or with any national securities exchange.
(M) NOTICE OF AFFILIATES. Promptly after any Person becomes an
Affiliate of the Company or any Guarantor (other than if such
Person becomes an Affiliate solely by virtue of a member of
management of the Company making an investment in such
Person), notice to the Lenders of such Affiliate, provided
that this clause (M) shall not require the Company or any
Guarantor to advise the Lenders of any changes in officers
other than executive officers.
(N) GENERAL INFORMATION. Such other information respecting the
condition or operations, financial or otherwise, of the
Company, any Guarantor or any Subsidiary of the Company or any
Guarantor as any Lender may from time to time reasonably
request.
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SECTION 5.3. TAXES. Pay and discharge, and cause each Subsidiary of the
Company or any Guarantor to pay and discharge, all taxes, assessments and
governmental charges upon it or them, its or their income and its or their
properties prior to the dates on which penalties are attached thereto, unless
and only to the extent that (i) such taxes shall be contested in good faith and
by appropriate proceedings by the Company, such Guarantor or any such
Subsidiary, as the case may be; (ii) there be adequate reserves therefor in
accordance with GAAP entered on the books of the Company, such Guarantor or any
such Subsidiary; and (iii) no enforcement proceedings against the Company, such
Guarantor or any such Subsidiary have been commenced.
SECTION 5.4. CORPORATE EXISTENCE. Preserve and maintain, and cause each
Subsidiary of the Company or any Guarantor to preserve and maintain, their
corporate existence and good standing in the jurisdiction of their incorporation
and the rights, privileges and franchises of the Company, each Guarantor and
each such Subsidiary in each case where failure to so preserve or maintain would
be reasonably likely to result in a Material Adverse Change.
SECTION 5.5. MAINTENANCE OF PROPERTIES AND INSURANCE. (i) Keep, and
cause each Subsidiary of the Company and any Guarantor to keep, the respective
properties and assets (tangible or intangible) that are useful and necessary in
its business, in good working order and condition, reasonable wear and tear
excepted; and (ii) maintain, and cause any such Subsidiary to maintain,
insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in similar businesses and owning properties and doing business
in the same general areas in which the Company, any Guarantor and any such
Subsidiary may operate.
SECTION 5.6. BOOKS OF RECORD AND ACCOUNT. Keep, and cause each
Subsidiary of the Company and any Guarantor to keep, adequate records and proper
books of record and account in which complete entries will be made in a manner
to enable the preparation of financial statements in accordance with GAAP,
reflecting all financial transactions of the Company, such Guarantor, and any
such Subsidiary.
SECTION 5.7. VISITATION. At any reasonable time, and from time to time,
and upon prior notice, and, provided no Default or Event of Default then exists,
not more often than once during any calendar year, permit any Lenders or
representatives thereof, to examine and make copies of (except if such copies
would result in the loss of any attorney-client or other privilege) and
abstracts from the financial and accounting books and records of, and visit the
properties of, the Company, any Guarantor or any Subsidiary of the Company or
any Guarantor to discuss the affairs, finances and accounts of the Company, any
Guarantor or any such Subsidiary with any of the respective officers of the
Company, any Guarantor or any such Subsidiary or the Company's, any Guarantor's
or such Subsidiary's independent accountants.
SECTION 5.8. PERFORMANCE AND COMPLIANCE WITH OTHER AGREEMENTS. Perform
and comply in all material respects, and cause each Subsidiary of the Company or
any Guarantor to perform and comply in all material respects, with each of the
provisions of each and every agreement the failure to perform or comply with
which would be reasonably likely to result in a Material Adverse Change.
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SECTION 5.9. CONTINUED PERFECTION OF LIENS. Record or file, or rerecord
or refile any Loan Document or financing statement or any other filing or
recording in each and every office where and when necessary to preserve and
perfect the security interests of the Loan Documents.
SECTION 5.10. PENSION FUNDING. Comply in all material respects, and
cause each Subsidiary of the Company or any Guarantor to comply in all material
respects, with the following and cause each ERISA Affiliate of the Company, any
Guarantor or any such Subsidiary to comply with the following: (i) engage solely
in transactions which would not subject any of such entities to either a civil
penalty assessed pursuant to Section 502
(i) of ERISA or a tax imposed by Section 4975 of the Internal Revenue
Code in either case in an amount in excess of $25,000.00;
(ii) make full payment when due of all amounts which, under the
provisions of any Plan or ERISA, the Company, any Guarantor, any such Subsidiary
or any ERISA Affiliate of any of same is required to pay as contributions
thereto;
(iii) all applicable provisions of the Internal Revenue Code and the
regulations promulgated thereunder, including but not limited to Section 412
thereof, and all applicable rules, regulations and interpretations of the
Accounting Principles Board and the Financial Accounting Standards Board;
(iv) not fail to make any payments in an aggregate amount greater than
$25,000.00 to any Multiemployer Plan that the Company, any Guarantor, any such
Subsidiary or any ERISA Affiliate may be required to make under any agreement
relating to such Multiemployer Plan, or any law pertaining thereto; or
(v) not take any action regarding any Plan which could result in the
occurrence of a Prohibited Transaction.
SECTION 5.11. LICENSES; TRADEMARKS. (i) Maintain at all times, and
cause each Subsidiary of the Company or any Guarantor to maintain at all times,
all licenses or permits necessary to the conduct of its business or as may be
required by any governmental agency or instrumentality thereof, except for such
licenses or permits where the failure to so maintain would not be reasonably
likely to result in a Material Adverse Change, and take all steps necessary to
maintain the exclusive ownership of, and the rights to, all trademarks and
tradenames listed in Exhibit D-8 to this Agreement; provided, however, that the
Company and the Guarantors shall not be required to take such steps, including,
without limitation the renewal or continuation of trademark or tradename
registrations in the United States Trademark Office, if the Company or the
applicable Guarantor has provided the Collateral Agent and the Lenders with a
written statement giving the reasons why such steps are not necessary and why
such failure to maintain such trademark or tradename would not result in a
Material Adverse Change.
(ii) Promptly advise the Collateral Agent and the Lenders of the
acquisition or creation, after the date of this Agreement, by the Company or any
of its Subsidiaries of any additional or new trademarks or tradenames (the "New
Trademarks") and upon the request of the Collateral Agent or the Required
Lenders, take, and cause any Subsidiary to take, all steps necessary or
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desirable to grant to the Collateral Agent, on behalf of the Secured Parties (as
such term is defined in the Intercreditor Agreement), and perfect, a security
interest in the New Trademarks, including but without limitation, the filing of
one or more Trademark Security Agreements in the United States Patent and
Trademark Office.
SECTION 5.12. NEW SUBSIDIARIES. (i) Cause any Subsidiary (other than a
Foreign Subsidiary) of the Company or any Guarantor formed after the date of
this Agreement to become a Guarantor and to become a party to this Agreement and
the Guaranty as a Guarantor.
(ii) Cause any Foreign Subsidiary which, in the reasonable
determination of the Company and its professional advisors, if it became a
Guaranteeing Foreign Subsidiary would not result in adverse tax consequences to
the Company, to become a Guarantor and to become a party to this Agreement as a
Guarantor.
(iii) Cause each Subsidiary which delivers a Guaranty pursuant to this
Section 5.12 to secure the obligations thereunder by executing a Security
Agreement and such other documentation necessary in order to grant to the
Collateral Trustee a Lien on all of its tradenames, trademarks, tradename
registrations, trademark registrations, trademark applications and trademark
licenses.
SECTION 5.13. NORTH CAROLINA MORTGAGE. (a) Not later than the thirtieth
(30th) day following the Restatement Effective Date, deliver to the Lenders a
commitment letter for the North Carolina Mortgage which shall (i) provide for
the refinance of the North Carolina Mortgage, (ii) have been accepted by the
Company, (iii) be in an amount not less than the then current principal balance
of the North Carolina Mortgage and not more than one hundred twenty (120%)
percent of the then current principal balance of the North Carolina Mortgage,
(iv) be for a term of not less than three (3) years, (v) have principal
amortization on a least a fifteen (15) year "mortgage style" amortization, (vi)
be secured solely by the property securing the North Carolina Mortgage and (vi)
be otherwise reasonably satisfactory to the Required Lenders.
(b) Not later than ninety (90) days after the date of the commitment
referred to in (a) above, close the refinance of the North Carolina Existing
Mortgage.
SECTION 5.14. CANADIAN MORTGAGE. Not later than thirty (30) days after
the date of this Agreement, close the Canadian Mortgage (i) in a principal
amount of not more than $1,722,500.00 (Canadian), (ii) with a term of five (5)
years, (iii) with principal amortization on a twenty (20) year "mortgage style"
amortization and (iv) on such other terms and conditions as are reasonably
satisfactory to the Required Lenders.
SECTION 5.15. LIENS, ETC. Not create, incur, assume or suffer to exist,
any Lien, upon or with respect to any of its properties, now owned or hereafter
acquired, except:
(A) Liens in favor of the Collateral Agent (i) for the benefit
of itself, the Agent (as such term is defined in the Bank Credit Agreement), or
the Bank Lenders and (ii) for the benefit of the Lenders as provided for herein,
in the Security Agreement or the Trademark Security Agreement, as each is in
effect as of the Restatement Effective Date;
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<PAGE>
(B) Liens for taxes or assessments or other government charges
or levies if not yet due and payable or if due and payable if they are being
contested in good faith by appropriate proceedings and for which appropriate
reserves are maintained;
(C) Liens imposed by law, such as mechanics', materialmen's,
landlords', warehousemen's, and carriers' Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due or which are being contested in good faith by appropriate proceedings
and for which appropriate reserves have been established;
(D) Liens under workers' compensation, unemployment insurance,
Social Security, or similar legislation;
(E) Liens, deposits, or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement), public or statutory obligations,
surety, stay, appeal, indemnity, performance or other similar bonds, or other
similar obligations arising in the ordinary course of business;
(F) Liens described in Exhibit D-2, which Liens may be
renewed, extended or refinanced, without securing any additional Debt and on
terms no less favorable to the Company or applicable Guarantor than the original
terms (except for the refinancing permitted by clause (K) below, which may be on
the terms set forth therein);
(G) Judgment and other similar Liens arising in connection
with court proceedings (other than any judgment or order or combination of
judgments or orders for the payment of money, in excess of $500,000.00 in the
aggregate, which sum shall not be subject to full, complete and effective
insurance coverage (subject to deductibles), shall be rendered against the
Company, any Guarantor or any Subsidiary of the Company or any Guarantor and
either (i) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order or (ii) there shall be any period of 30 consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect), provided the execution
or other enforcement of such Liens is effectively stayed and the claims secured
thereby are being actively contested in good faith and by appropriate
proceedings;
(H) Easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere with the
Company's or a Guarantor's occupation, use and enjoyment of the property or
assets encumbered thereby in the normal course of its business or materially
impair the value of the property subject thereto;
(I) The Canadian Bridge Loan Mortgages, provided that such
mortgages shall be satisfied when the Canadian Bridge Loan is repaid;
(J) The Canadian Mortgage;
(K) The North Carolina Mortgage which may be refinanced in
accordance with Section 5.13 of this Agreement; and
(L) Purchase money Liens on any property hereafter acquired or
the assumption
11
<PAGE>
of any Lien on property existing at the time of such acquisition, or a Lien
incurred in connection with any conditional sale or other title retention
agreement or a Capital Lease, provided that:
(i) Any property subject to any of the foregoing is acquired
by the Company or a Guarantor in the ordinary course of its
respective business and the Lien on any such property is
created contemporaneously with such acquisition;
(ii) The obligation secured by any Lien so created, assumed,
or existing shall not exceed one hundred (100%) percent of
lesser of cost or fair market value of the property acquired
as of the time of the Company or the Guarantor acquiring the
same;
(iii) Each such Lien shall attach only to the property so
acquired and fixed improvements thereon; and
(iv) The obligation secured by such Lien is permitted by the
provisions of Section 5.16 and the related expenditure is
permitted by the provisions of Section 5.31 (B).
SECTION 5.16. DEBT. Not create, incur, assume, or suffer to exist, any
Debt, except:
(A) Debt of the Company under this Agreement or the Notes;
(B) Debt described in Exhibit D-2, which Debt may be renewed, extended
or refinanced on terms no less favorable to the Company or applicable
Guarantor than the original terms (except for the refinancing provided
for hereby and as permitted by clause (J) below, which may be on the
respective terms set forth herein or therein);
(C) Subordinated Debt;
(D) Accounts payable to trade creditors for goods or services and
current operating liabilities (other than for borrowed money), in each
case incurred and paid in the ordinary course of business;
(E) Debt of the Company or any Guarantor secured by purchase money
Liens permitted by Section 5.15(L);
(F) Debt incurred under the Bank Loan Agreement in an aggregate amount
at any time outstanding not in excess of $47,500,000;
(G) Intercompany Debt;
(H) the Canadian Bridge Loan;
(I) Debt secured by the Canadian Mortgage; and
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<PAGE>
(J) Debt secured by the North Carolina Mortgage which may be refinanced
in accordance with the provisions of Section 5.13 of this Agreement.
SECTION 5.17. MERGER. Not merge into, or consolidate with or into, or
have merged into it, any Person; and, for the purpose of this Section 5.17, the
acquisition or sale by the Company or any Guarantor by lease, purchase or
otherwise, of all, or substantially all, of the common stock or the assets of
any Person or of it shall be deemed a merger of such Person with the Company or
any Guarantor, provided that (i) the Company may merge with any Guarantor,
provided the Company is the surviving entity and (iii) any Guarantor may merge
with any other Guarantor.
SECTION 5.18. SALE OF ASSETS, ETC. Not sell, assign, transfer, lease or
otherwise dispose of any of its assets, (including a sale leaseback transaction)
with or without recourse, except for (i) inventory disposed of in the ordinary
course of business; (ii) the sale or other disposition of assets no longer used
or useful in the conduct of its business; (iii) Permitted Equipment Sales, (iv)
the Permitted Real Estate Sale and (v) sales of assets between the Company and a
Guarantor or between Guarantors.
SECTION 5.19. INVESTMENTS, ETC. Not make any Investment other than
Permitted Investments.
SECTION 5.20. TRANSACTIONS WITH AFFILIATES. Except for transactions
with the current Chief Executive Officer of the Company, and except as otherwise
expressly permitted by this Agreement or except in the ordinary course of
business and pursuant to the reasonable requirements of the Company's, a
Guarantor's or a Subsidiary's business and upon fair and reasonable terms no
less favorable to the Company or a Guarantor or a Subsidiary than would be
obtained in a comparable arm's length transaction with a Person not an
Affiliate, not enter into any transaction, including, without limitation, the
purchase, sale, or exchange of property or the rendering of any service, with
any Affiliate, provided however, in no event shall the Company or any Guarantor
engage in any transaction with a Subsidiary of the Company or a Guarantor which
Subsidiary is not a Guarantor.
SECTION 5.21. PREPAYMENT OF OUTSTANDING DEBT. Not pay, in whole or in
part, any outstanding Debt of the Company or a Guarantor, which by its terms is
not then due and payable other than (i) Debt owing to the Lenders, (ii)
Intercompany Debt, (iii) Revolving Credit Loans (as defined in the Bank Credit
Agreement), and (iv) accounts payable and other trade payables.
SECTION 5.22. GUARANTEES. Not guaranty, or in any other way become
directly or contingently obligated for any Debt of any other Person (including
any agreements relating to working capital maintenance, take or pay contracts or
similar arrangements) other than (i) the endorsement of negotiable instruments
for deposit in the ordinary course of business; (ii) guarantees existing on the
date hereof and set forth in Exhibit D-2 annexed hereto; or (iii) guarantees of
any Debt permitted under Section 5.16 of this Agreement.
SECTION 5.23. CHANGE OF BUSINESS. Not materially alter the nature of
its business.
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<PAGE>
SECTION 5.24. FISCAL YEAR. Not Change the ending date of its fiscal
year from December 31.
SECTION 5.25. MAXIMUM LOSSES; MINIMUM NET INCOME. (i) Not incur a
consolidated net loss (calculated exclusive of extraordinary gains but inclusive
of extraordinary losses, as calculated in accordance with GAAP) greater than
$500,000.00 for the fiscal quarter ending March 31, 2000; (ii) not incur a
consolidated net loss (calculated exclusive of extraordinary gains but inclusive
of extraordinary losses, as calculated in accordance with GAAP) for the six (6)
month period ending June 30, 2000; and (iii) not incur a consolidated net loss
(calculated exclusive of extraordinary gains but inclusive of extraordinary
losses, as calculated in accordance with GAAP) for any fiscal year.
SECTION 5.26. ACCOUNTING POLICIES. Not Change any accounting policies,
except as permitted by GAAP.
SECTION 5.27. DIVIDENDS, ETC. Not declare or pay any dividends,
purchase, redeem, retire or otherwise acquire for value any of its capital stock
now or hereafter outstanding, or make any distribution of assets to its
stockholders as such, whether in cash, assets, or in obligations of the Company
or a Guarantor; or allocate or otherwise set apart any sum for the payment of
any dividend or distribution on, or for the purchase, redemption or retirement
of any shares of its capital stock; or make any other distribution by reduction
of capital or otherwise in respect of any share of its capital stock, except,
(i) any Subsidiary may pay dividends to its shareholder(s), (ii) the Company may
pay the Permitted Dividends described in clause (i) of the definition thereof,
(iii) the Company may make the Permitted Stock Repurchases described in clause
(i) of the definition thereof and (iv) provided no Default or Event of Default
has occurred and is continuing or would result therefrom, the Company may pay
Permitted Dividends described in clause (ii) of the definition thereof and the
Company may make Permitted Stock Repurchases described in clause (ii) of the
definition thereof.
SECTION 5.28. CHANGE IN CONTROL. (i) Not permit any Person or "group"
(within the meaning of Section 13(d)-3 under the Securities Exchange Act of 1934
and the rules of the Securities and Exchange Commission as in effect on the date
hereof), other than the members of management of the Company and the directors
of the Company, each as in office on the date of this Agreement, to own more
than fifty (50%) percent of the outstanding voting securities of the Company.
(ii) Not permit any nominees other than nominees nominated by the existing board
of directors of the Company to hold a majority of the seats on the board of
directors of the Company.
SECTION 5.29. HAZARDOUS MATERIAL. The Company, each Guarantor and each
Subsidiary of the Company or a Guarantor shall not cause or permit any property
owned or occupied by the Company, a Guarantor or any such Subsidiary to be used
to generate, manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce or process Hazardous Materials, except in compliance with all
applicable federal, state and local laws or regulations; nor shall the Company,
a Guarantor or any such Subsidiary cause or permit, as a result of any
intentional or unintentional act or omission on the part of the Company, such
Guarantor or any such Subsidiary or any tenant or subtenant, a release of
Hazardous Materials
14
<PAGE>
onto any property owned or occupied by the Company, such Guarantor or any such
Subsidiary or onto any other property; nor shall the Company, the Guarantors and
each such Subsidiary fail to comply with all applicable federal, state and local
laws, ordinances, rules and regulations, whenever and by whomever triggered, nor
fail to obtain and comply with, any and all approvals, registrations or permits
required thereunder. The Company and the Guarantors shall execute any
documentation required by the Agent in connection with the representations,
warranties and covenants contained in this paragraph and Exhibit B to this
Agreement.
SECTION 5.30. LIMITATIONS ON CONSOLIDATED FOREIGN ASSETS AND REVENUES.
(i) Not have more than fifteen (15%) percent of the consolidated assets or
revenues of the Company and its Consolidated Subsidiaries be located in, or
derived from, locations other than the United States.
(ii) Not have more than ten (10%) percent of the consolidated assets or
revenues of the Company and its Consolidated Subsidiaries be held by, or
produced by, any Foreign Subsidiary.
SECTION 5.31. FINANCIAL REQUIREMENTS. So long as any amount shall
remain outstanding under the Notes: (A) Minimum Consolidated Tangible Net Worth.
The Company will maintain on the dates set forth below, Consolidated Tangible
Net Worth ("CTNW") of not less than the amounts set forth below for the periods
set forth below:
<TABLE>
<CAPTION>
Period Minimum CTNW
- ------ ------------
<S> <C>
9/30/00 The greater of (i) $34,000,000 or
(ii) $1,000,000 in excess of the
actual CTNW as of 12/31/99
12/31/00; 3/31/01;
6/30/01 and 9/30/01 The actual CTNW as of 12/31/99 plus
80% of the Company's Consolidated
Net Income for the fiscal
year ending 12/31/00.
12/31/01; 3/31/02;
6/30/02 and 9/30/02 The actual CTNW as of 12/31/00 plus
80% of the Company's Consolidated
Net Income for the fiscal
year ending 12/31/01.
12/31/02 to the Maturity Date The actual CTNW as of 12/31/01 plus
80% of the Company's Consolidated
Net Income for the fiscal year
ending 12/31/02.
</TABLE>
(B) CONSOLIDATED CAPITAL EXPENDITURES. The Company will not make
Consolidated Capital Expenditures in excess of: (i) $10,000,000.00 in the
aggregate during the fiscal year of the Company ending December 31, 2000; and
(ii) $8,000,000.00 in the aggregate during any fiscal year thereafter.
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<PAGE>
(C) CONSOLIDATED FIXED CHARGE RATIO. The Company will maintain at all
times a Consolidated Fixed Charge Ratio of not less than the ratios set forth
below for the periods set forth below (to be tested quarterly):
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
9/30/00 to 12/30/00 0.45 to 1.00
12/31/00 to 12/30/01 0.60 to 1.00
12/31/01 to 12/30/02 1.15 to 1.00
12/31/02 to the Maturity Date 1.25 to 1.00
</TABLE>
(D) Funded Debt to EBITDA Ratio. The Company will maintain at all times a
Funded Debt to EBITDA Ratio of not greater than the ratios set forth below for
the periods set forth below (to be tested quarterly):
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
9/30/00 to 12/30/00 5.15 to 1.00
12/31/00 to 12/30/01 4.65 to 1.00
12/31/01 to 12/30/02 3.00 to 1.00
12/31/02 to the Maturity Date 2.50 to 1.00
</TABLE>
(E) Consolidated Interest Coverage Ratio. The Company will maintain at all
times a Consolidated Interest Coverage Ratio of not less than the ratios set
forth below for the periods set forth below (to be tested quarterly):
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
9/30/00 to 12/30/00 0.90 to 1.00
12/31/00 to 12/30/01 1.25 to 1.00
12/31/01 to 12/30/02 2.25 to 1.00
12/31/02 to the Maturity Date 2.75 to 1.00
</TABLE>
SECTION 6. DEFINITIONS. The following defined terms have the indicated
meanings in this Agreement, unless the context otherwise requires:
"AFFILIATE" means, as to any Person (i) a Person which directly or
indirectly controls, or is controlled by, or is under common control with, such
Person; (ii) a Person which directly or indirectly beneficially owns or holds
twenty (20%) percent or more of any class of voting stock of, or twenty (20%)
percent or more of the equity interest in, such Person; or (iii) a Person twenty
(20%) percent or more of the voting stock of which, or twenty (20%) or more of
the equity interest of which, is directly or indirectly beneficially owned or
held by such Person. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise.
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<PAGE>
"AGREEMENT" means this Loan Agreement, as amended, supplemented or
modified from time to time.
"BANK CREDIT AGREEMENT" means that certain amended and restated loan
agreement dated as of February 25, 2000 among the Company, DPI, Parfums, Royce,
Broad, Chase Manhattan Bank as Agent and as a lender, and European American
Bank, as a lender[, as such agreement may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof].
"BANK LENDERS" means the lenders from time to time party to the Bank
Credit Agreement.
"BROAD" means 565 Broad Hollow Realty Corp., a New York corporation.
"BUSINESS DAY" means a day of the year on which banks are not required
or authorized to close in New York City.
"CANADIAN BRIDGE LOAN" means a short term loan to be incurred by the
Company in an amount not in excess of $2,650,000.00 (Canadian) for the purchase
of the real property and the improvements thereon at 316 Bayview Drive, Barrie,
Ontario Canada.
"CANADIAN BRIDGE LOAN MORTGAGES" means the mortgages or similar Liens
on the Company's real property and the improvements thereon at 316 Bayview
Drive, Barrie, Ontario, Canada and 25 Morrow Road, Barrie, Ontario, Canada,
which mortgages secure the Canadian Bridge Loan.
"CANADIAN MORTGAGE" means a mortgage or similar Lien on the Company's
real property and the improvements thereon at 316 Bayview Drive, Barrie,
Ontario, Canada.
"CAPITAL EXPENDITURES" means as to any Person, the aggregate amount of
any expenditures (including purchase money debt and purchase money liens) by
such Person for assets (including fixed assets acquired under Capital Leases)
which it is contemplated will be used or usable in fiscal years subsequent to
the year of acquisition and that are required to be capitalized in accordance
with GAAP.
"CAPITAL LEASE" means a lease which has been, or should be, in
accordance with GAAP, capitalized on the books of the lessee.
"CHANGE OF CONTROL" means the acquisition by any Person, other than a
member of the present management of the Company, and the Affiliates of such
Person of the right to vote, in the aggregate, more than 50% of the Company's
common stock or to elect more than 50% of the Board.
"CHASE LINE OF CREDIT" means the line of credit made available to the
Company by Chase, pursuant to that certain line letter dated July 6, 1999.
17
<PAGE>
"COLLATERAL AGENT" means The Chase Manhattan Bank, or such other Person
as may succeed to the position of Collateral Agent, as provided in the
Intercreditor Agreement.
"COMPANY" means the corporation that originally executed this Agreement
as Company and any successor or transferee corporation.
"COMPETITOR" means any Person which is principally engaged in the
business of manufacturing cosmetics or pharmaceuticals and whose business
substantially competes with the business of the Company.
"CONSOLIDATED CAPITAL EXPENDITURES" means, as to any Person, the
aggregate amount of the Capital Expenditures by such Person and its Consolidated
Subsidiaries, computed and consolidated in accordance with GAAP.
"CONSOLIDATED EBITDA" means, as to any Person, for any period, the
EBITDA of such Person and its Consolidated Subsidiaries, computed and
consolidated in accordance with GAAP.
"CONSOLIDATED FIXED CHARGE RATIO" means, as to the Company and its
Consolidated Subsidiaries, the ratio of (i) the sum of net income plus interest
expense plus income tax expense for the period measured plus depreciation
expense plus amortization of intangible assets minus Consolidated Unfunded
Capital Expenditures minus Permitted Dividends paid in cash during such period
minus Permitted Stock Repurchases to (ii) the sum of the current portion of
Consolidated Funded Debt, computed and consolidated in accordance with GAAP
(excluding Debt described in clauses (ii), (v) and (vi) of the definition of
"Consolidated Funded Debt") plus whether or not included as Current Debt under
GAAP (but without duplication), the amount of the Mandatory Reductions required
to be made within twelve (12) months of the date of determination under the Bank
Credit Agreement and the $4,000,000.00 mandatory prepayments of the Notes
required to be made by Section 4.1 within twelve (12) months of the date of
determination plus interest expense. The Consolidated Fixed Charge Coverage
Ratio shall be measured for the four (4) fiscal quarters then ended, except for
the current portion of Consolidated Funded Debt and the Mandatory Reductions,
which shall be measured for the next succeeding four (4) fiscal quarters.
"CONSOLIDATED FUNDED DEBT" means, as to any Person, at any date, any
Debt of such Person and its Consolidated Subsidiaries which is (i) indebtedness
or liability for borrowed money having an original maturity of one (1) year or
more (including the current portion thereof) or which is extendable at the
option of the obligor to a date more than one year from the date of such
extension, including, in any event, all of the outstanding Revolving Credit
Loans as defined in and incurred under the Bank Credit Agreement; (ii)
indebtedness or liability for borrowed money under lines of credit extended to
such Person or any of its Consolidated Subsidiaries; (iii) the deferred purchase
price of property (excluding trade obligations); (iv) obligations as a lessee
under Capital Leases; (v) obligations to reimburse a letter of credit issuer for
draws under letters of credit; and (v) all liabilities under any preferred stock
which, at the option of the holder or upon the occurrence or one or more certain
events, is redeemable by such holder, or which, at the option of such holder is
convertible into Debt.
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<PAGE>
"CONSOLIDATED INTEREST COVERAGE RATIO" means, as to any Person, for any
period, the ratio of (i) Consolidated EBITDA minus Consolidated Unfunded Capital
Expenditures to (ii) consolidated interest expense. The Consolidated Interest
Coverage Ratio shall be measured for the four (4) fiscal quarters then ended.
"CONSOLIDATED NET INCOME" means, with respect to the Company and its
Consolidated Subsidiaries, net income for a fiscal year, computed and
consolidated in accordance with GAAP.
"CONSOLIDATED SUBORDINATED DEBT" means, as to any Person, all of the
Subordinated Debt of such Person and its Consolidated Subsidiaries, computed and
consolidated in accordance with GAAP.
"CONSOLIDATED SUBSIDIARIES" means, as to any Person, those Subsidiaries
of such Person which are consolidated with such Person in the financial
statements delivered pursuant to Section 5.2.
"CONSOLIDATED TANGIBLE NET WORTH" means, as to any Person, (excluding
the effect (positive or negative) of the "Accumulated Other Comprehensive Income
(Loss)" as reflected on the consolidated balance sheet of the Company and its
Consolidated Subsidiaries as of any date of determination) the excess of (i)
such Person's Consolidated Total Assets, less all intangible assets properly
classified as such in accordance with GAAP, including, but without limitation,
patents, patent rights, trademarks, trade names, franchises, copyrights,
licenses, permits and goodwill, over (ii) such Person's Consolidated Total
Liabilities.
"CONSOLIDATED TOTAL ASSETS" means, as to any Person, at any date, the
aggregate net book value of the assets of such Person and its Consolidated
Subsidiaries at such date, after all appropriate adjustments in accordance with
GAAP (including without limitation, reserves for doubtful receivables,
obsolescence, depreciation and amortization and excluding the amount of any
write-up or revaluation of any asset, other than those permitted under standard
cost accounting procedures), computed and consolidated in accordance with GAAP.
"CONSOLIDATED TOTAL LIABILITIES" means, as to any Person, at any date,
all of the liabilities of such Person and its Consolidated Subsidiaries at such
date, including all items which, in accordance with GAAP would be included on
the liability side of the balance sheet (other than capital stock, treasury
stock, capital surplus and retained earnings) computed and consolidated in
accordance with GAAP.
"CONSOLIDATED TOTAL UNSUBORDINATED LIABILITIES" means, as to any
Person, the excess of (i) such Person's Consolidated Total Liabilities over (ii)
such Person's Consolidated Subordinated Debt.
"CONSOLIDATED UNFUNDED CAPITAL EXPENDITURES" means, as to any Person,
the aggregate amount of the Unfunded Capital Expenditures by such Person and its
Consolidated Subsidiaries, computed and consolidated in accordance with GAAP.
19
<PAGE>
"DPI" means Del Pharmaceuticals, Inc., a Delaware corporation.
"DEBT" means, as to any Person, all (i) indebtedness or liability of
such Person for borrowed money; (ii) indebtedness of such Person for the
deferred purchase price of property or services (including trade obligations);
(iii) obligations of such Person as a lessee under Capital Leases; (iv) current
liabilities of such Person in respect of unfunded vested benefits under any
Plan; (v) obligations of such Person under letters of credit issued for the
account of such Person; (vi) obligations of such Person arising under acceptance
facilities; (vii) guaranties, endorsements (other than for collection or deposit
in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any other
Person, or otherwise to assure a creditor against loss; (viii) obligations
secured by any Lien on property owned by such Person whether or not the
obligations have been assumed; (ix) liabilities of such Person under any
preferred stock or other preferred equity instrument which, at the option of the
holder or upon the occurrence of one or more events, is redeemable by such
holder, or which, at the option of such holder is convertible into Debt; and (x)
all other liabilities recorded as such, or which should be recorded as such, on
such Person's financial statements in accordance with GAAP.
"DEFAULT" means any of the events specified in Section 7 of this
Agreement, whether or not any requirement for notice or lapse of time or any
other condition has been satisfied.
"DOLLARS" and the sign "$" mean lawful money of the United States of
America.
"EAB LINE OF CREDIT" means that certain line of credit made available
to the Company by EAB pursuant to that certain line letter dated June 24, 1999.
"EBITDA" means, as to any Person, for any period, the sum of (i) net
income plus (ii) interest expense plus (iii) income tax expense plus (iv)
depreciation expenses plus (v) amortization of intangible assets, all measured
and/or calculated for the four (4) fiscal quarters then ended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, the regulations promulgated thereunder and the
published interpretations thereof as in effect from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) which together with any other Person would be treated, with such
Person, as a single employer under Section 4001 of ERISA.
"EVENT OF DEFAULT" means any of the events specified in Section 7 of
this Agreement, provided that any requirement for notice or lapse of time or any
other condition has been satisfied.
"FOREIGN SUBSIDIARIES" means, with respect to the Company, those
Subsidiaries of the Company which are incorporated, formed or organized outside
of the United States.
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<PAGE>
"FUNDED DEBT TO EBITDA RATIO" means, as to the Company and its
Consolidated Subsidiaries for any period, the ratio of (i) Consolidated Funded
Debt (as of the last day of such period) to (ii) Consolidated EBITDA for such
period. The Funded Debt to EBITDA Ratio shall be measured for a period covering
the four (4) fiscal quarters then ended.
"GAAP" means Generally Accepted Accounting Principles.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means those generally
accepted accounting principles and practices which are recognized as such by the
American Institute of Certified Public Accountants acting through the Financial
Accounting Standards Board ("FASB") or through other appropriate boards or
committees thereof and which are consistently applied for all periods so as to
properly reflect the financial condition, operations and cash flows of a Person,
except that any accounting principle or practice required to be changed by the
FASB (or other appropriate board or committee of the FASB) in order to continue
as a generally accepted accounting principle or practice may be so changed. Any
dispute or disagreement between the Company and the Required Lenders relating to
the determination of Generally Accepted Accounting Principles shall, in the
absence of manifest error, be conclusively resolved for all purposes hereof by
the written opinion with respect thereto, delivered to the Lenders, of the
independent accountants selected by the Company and reasonably satisfactory to
the Required Lenders for the purpose of auditing the periodic financial
statements of the Company.
"GUARANTEEING FOREIGN SUBSIDIARIES" means those Foreign Subsidiaries of
the Company required to become a Guarantor pursuant to Section 5.12 of this
Agreement.
"GUARANTOR" or "GUARANTORS" means DPI, Parfums, Royce, and Broad, and
any other Person required to guarantee the obligations of the Company in
accordance with Section 5.12 of this Agreement.
"GUARANTY" or "GUARANTIES" means the Joint Guaranty dated December 22,
1999 in favor of the Lender made by DPI, Parfums, Royce, and Broad, ratified and
confirmed by such parties as of the Restatement Effective Date, as such Joint
Guaranty may be amended to include or be affirmed by additional Guarantors, and
any and all other guaranties executed and delivered by one or more Guarantors
pursuant to Exhibit C or Section 5.12 of this Agreement.
"HAZARDOUS MATERIALS" includes, without limitation, any flammable
explosives, radioactive materials, hazardous materials, hazardous wastes,
hazardous or toxic substances, or related materials defined in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. Sections 9601, et seq.), the Hazardous Materials Transportation Act, as
amended (49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery
Act, as amended (42 U.S.C. Sections 6901 et. seq.), and in the regulations
adopted and publications promulgated pursuant thereto, or any other federal,
state or local environmental law, ordinance, rule or regulation.
"INTERCOMPANY DEBT" means Debt owing by the Company to any Guarantor or
from any Guarantor to the Company or from any Guarantor to any other Guarantor.
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"INTERCREDITOR AGREEMENT" means the Intercreditor and Collateral Agency
Agreement dated of even date herewith among the Collateral Agent, the Agent, the
Lenders and the Bank Lenders, and acknowledged by the Company.
"INVESTMENT" means any stock, evidence of Debt or other security of any
Person, any loan, advance, contribution of capital, extension of credit or
commitment therefor, including without limitation the guaranty of loans made to
others (except for current trade and customer accounts receivable for services
rendered in the ordinary course of business and payable in accordance with
customary trade terms in the ordinary course of business) and any purchase of
(i) any security of another Person or (ii) any business or undertaking of any
Person or any commitment or option to make any such purchase, or any other
investment.
"LENDER or LENDERS" shall have the meaning assigned thereto in the
introductory paragraphs hereof.
"LIEN" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever, including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Guaranties, the
Intercreditor Agreement, the Security Agreements, the Trademark Security
Agreements, and any other document executed or delivered pursuant to this
Agreement.
"MATERIAL ADVERSE CHANGE" means, as to the Company alone, DPI alone,
any other Guarantor which has revenues or assets representing more than ten
(10%) percent of the Company's consolidated revenues or assets (a "Material
Guarantor") or the Company and its Consolidated Subsidiaries taken as a whole,
(i) a material adverse change in the financial condition, business, operations,
properties, prospects or results of operations of the Company alone, DPI alone,
a Material Guarantor alone, or the Company and its Consolidated Subsidiaries
taken as a whole (provided that the elimination of the inter-company payable
between the Company and DPI shall not, by virtue of such elimination alone, be
deemed a Material Adverse Change in either the Company or DPI) or (ii) any event
or occurrence which could have a material adverse effect on the ability of the
Company alone, DPI alone, a Material Guarantor alone, or the Company and its
Consolidated Subsidiaries taken as a whole to perform its or their obligations
under the Loan Documents.
"MULTIEMPLOYER PLAN" means a Plan described in Section 4001(a)(3) of
ERISA which covers employees of the Company or any ERISA Affiliate.
"NORTH CAROLINA EXISTING MORTGAGE" means the mortgage Lien existing on
the date of this Agreement on the Company's real property and the improvements
thereon at 1830 Carver Drive, Rocky Point, North Carolina.
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"NOTES" shall have the meaning assigned thereto in the introductory
paragraphs of this Agreement.
"OFFICER'S CERTIFICATE" means a certificate signed by the chief
executive officer or the chief financial officer of the Company, provided that
the Officer's Certificates delivered pursuant to Exhibit C must be signed by the
chief executive officer.
"ORIGINAL LOAN AGREEMENT" shall have the meaning assigned thereto in
the introductory paragraphs of this Agreement.
"ORIGINAL NOTES" shall have the meaning assigned thereto in the
introductory paragraphs of this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PARFUMS" means Parfums Schiaparelli, Inc., a New York corporation.
"PERMITTED DIVIDENDS" means, with respect to the Company, the payment
of (i) any dividend payable in stock of the Company or (ii) subject to the
proviso at the conclusion hereof, cash dividends which, in any fiscal year of
the Company, do not exceed, in the aggregate, fifteen (15%) percent of the
Company's Consolidated Net Income for such fiscal year; provided, however, (x)
no Default or Event of Default shall have occurred and be continuing or shall
result from the payment of such cash dividend and (y) the Company shall have
provided to the Agent and the Lenders evidence that its Funded Debt to EBITDA
Ratio as of the end of the immediately preceding fiscal quarter, and after
giving effect to the paying of such cash dividend, does not, and will not,
exceed 3.50 to 1.00.
"PERMITTED EQUIPMENT SALES" means sales by the Company or its
Consolidated Subsidiaries of equipment in an aggregate principal amount not
exceeding $500,000.00 during any fiscal year.
"PERMITTED INVESTMENTS" means, (i) direct obligations of the United
States of America or any governmental agency thereof, or obligations guaranteed
by the United States of America, provided that such obligations mature within
one year from the date of acquisition thereof; (ii) time certificates of deposit
having a maturity of one year or less issued by any commercial bank organized
and existing under the laws of the United States or any state thereof and having
aggregate capital and surplus in excess of $500,000,000.00; (iii) money market
mutual funds having assets in excess of $2,500,000,000; (iv) commercial paper
rated not less than P-1 or A-1 or their equivalent by Moody's Investor Services,
Inc. or Standard & Poor's Corporation, respectively; (v) tax exempt securities
rated Prime 2 or better by Moody's Investor Services, Inc. or A-1 or better by
Standard & Poor's Corporation; (vi) loans or advances between the Company and a
Guarantor or between Guarantors; (vii) deposits in, and other investments made
available by any Lender; (viii) investments in, or loans or advances to, wholly
owned domestic Subsidiaries, provided that any such investment, loan or advance
made after the date of this
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Agreement shall be made only in a domestic Subsidiary which is a Guarantor; (ix)
investments in, or loans or advances to, Foreign Subsidiaries, provided any such
single investment (valued at cost), loan or advance shall not exceed
$10,000,000.00 and all such investments (valued at cost), loans and advances
shall not exceed $12,500,000.00; and (x) loans or advances to employees of the
Company or a Guarantor which do not exceed $2,000,000.00 in the aggregate at any
time.
"PERMITTED REAL ESTATE SALE" means the sale by the Company of its real
property and the improvements thereon located at 25 Morrow Road, Barrie,
Ontario, Canada, provided that the gross sale price shall be approximately
$1,000,000.00 (Canadian) and provided further that the net proceeds of such sale
shall be applied to partially repay the Canadian Bridge Loan.
"PERMITTED STOCK REPURCHASES" means, with respect to the Company, (i)
transactions in which (x) the Company's common stock is transferred to the
Company by a current or former employee of the Company or any of its
Subsidiaries in an amount equal to the consideration payable to such employee
upon the exercise of stock options held by such employee or (y) the Company's
common stock is transferred to the Company by an employee in an amount equal to
the withholding tax liability for such employee resulting from the exercise of
such stock option rights by such employee, provided that the amount paid by the
Company for transactions described in clause (y) (net of the related tax benefit
received by the Company for such transaction) shall not exceed $250,000.00 in
the aggregate during any fiscal year of the Company or (ii) the repurchase of
common stock of the Company from participants in the Del Laboratories, Inc.
Employee Stock Ownership Trust (the "ESOT") and from the ESOT.
"PERSON" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity or a federal, state or
local government, or a political subdivision thereof or any agency of such
government or subdivision.
"PLAN" means any employee benefit plan established, maintained, or to
which contributions have been made by the Company or any ERISA Affiliate.
"PROHIBITED TRANSACTION" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended from
time to time.
"REGULATION T" means Regulation T of the Board of Governors, as the
same may be amended and in effect from time to time.
"REGULATION U" means Regulation U of the Board of Governors, as the
same may be amended and in effect from time to time.
"REGULATION X" means Regulation X of the Board of Governors, as the
same may be amended and in effect from time to time.
"REPORTABLE EVENT" means any of the events set forth in Section 4043 of
ERISA.
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"REQUIRED LENDERS" means Lenders holding at least 51% of the aggregate
unpaid principal amount of all Notes at the time outstanding. For the purpose of
determining whether the holders of outstanding Notes of the requisite unpaid
principal amount at any time have taken any action authorized by this Agreement,
any Notes owned by the Company or any Affiliate of the Company shall not be
deemed outstanding.
"ROYCE" means Royce & Rader, Inc., a Delaware corporation.
"SEC" means the Securities and Exchange Commission or any governmental
body succeeding to such of its authority as may from time to time be relevant to
this Agreement and the transactions contemplated hereby.
"SECURITY AGREEMENT" or "SECURITY AGREEMENTS" means, one or more, as
the context requires, of the security agreement or security agreements to be
executed and delivered pursuant to Exhibit C or Section 5.12 of this Agreement.
"SUBORDINATED DEBT" means Debt of any Person, the repayment of which
the obligee has agreed in writing, on terms which have been approved by the
Required Lenders in advance in writing, shall be subordinate and junior to the
rights of the Lenders with respect to Debt owing from such Person to the
Lenders.
"SUBSIDIARY" means, as to any Person, any corporation, partnership,
limited liability company or joint venture whether now existing or hereafter
organized or acquired (i) in the case of a corporation, of which a majority of
the securities having ordinary voting power for the election of directors (other
than securities having such power only by reason of the happening of a
contingency) are at the time owned by such Person and/or one or more
Subsidiaries of such Person or (ii) in the case of a partnership, limited
liability company or joint venture or similar entity, of which a majority of the
partnership, membership or other ownership interests are at the time owned by
such Person and/or one or more Subsidiaries of such Person.
"TRADEMARK SECURITY AGREEMENT" or "Trademark Security Agreements" means
one or more, as the context requires, of the trademark security agreements to be
executed and delivered pursuant to Exhibit C and Section 5.11 of this Agreement.
"TREASURY YIELD" means, with respect to any Note to be prepaid pursuant
to Section 4.2, 4.3 or 4.4, or which shall have been declared to be or become
immediately due and payable pursuant to Section 7.1, the yield to maturity
reported (for the latest day for which such yields shall have been so reported
as of 10:00 a.m. (New York City time) on the business day next preceding the
scheduled date of prepayment or the date of acceleration of such Note (such
scheduled date or date of acceleration being called the "Settlement Date")) by
Telerate Systems (or any successor or comparable service selected by the holders
of the Notes which are being prepaid or which have been accelerated, if such
report by Telerate Systems is unavailable) for actively traded U.S. Treasury
securities having a maturity closest to the remaining weighted average life to
final maturity (calculated in accordance with accepted financial practice) as of
such Settlement Date (A) of such Note, in the case of a prepayment in full or
acceleration of such Note, or (B) of the principal of such Note that is to be
prepaid (any partial prepayment being
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deemed applied in satisfaction of required payments and prepayments of principal
in inverse chronological order of their due dates), in the case of a partial
prepayment pursuant to Section 4.2.
"UNFUNDED CAPITAL EXPENDITURES" means Capital Expenditures financed
other than by the incurrence of Debt.
"YEAR 2000 ISSUE" means the risk of failure of computer software,
hardware and firmware systems and equipment containing embedded computer chops
to properly receive, transmit, process, manipulate, store, retrieve, re-transmit
or in any other way utilize data and information due to the occurrence of the
year 2000 or the inclusion of dates on or after January 1, 2000. SECTION 6.1.
....Accounting Terms. Except as otherwise herein specifically provided, each
accounting term used herein shall have the meaning given to it under GAAP. For
purposes of determining compliance with the financial covenants set forth in
Sections 5.25 and 5.31, such financial covenants shall be calculated, excluding
the impact of the adoption of the Proposed Statement of Financial Accounting
Standards entitled "Business Combinations and Intangible Assets", which, if
issued as a final Statement, would require the Company to write-off the carrying
value of goodwill (which is currently approximately $6.3 million) that is
currently being accounted for in accordance with Accounting Research Bulletin
No. 43, Chapter 5, "Intangible Assets", in the first interim or annual period
ending after the issuance date of the Statement. The effect of the write-off
would be reported as a cumulative effect of a change in accounting principle in
the Company's statement of operations.
SECTION 7. REMEDIES.
SECTION 7.1. EVENTS OF DEFAULT; ACCELERATION. If any of the following
events ("Events of Default") shall occur and be continuing for any reason
whatsoever (and whether it shall be voluntary or involuntary or occur or be
effected by operation of law or otherwise):
(A) the Company defaults in the payment or prepayment when due
of any principal of, or prepayment charge on, any Note,
(B) the Company defaults for at least five business days in
the payment when due of any interest on any Note,
(C) the Company defaults in the observance of any agreement
contained in Sections 5.15, 5.16, 5.17, 5.18, 5.22, 5.25,
5.27, 5.30, and 5.31.
(D) the Company defaults in the observance of any other
agreement or covenant in this Agreement and shall not have
remedied the default within 30 days after written demand to
remedy the same has been given to the Company by the holder of
any Note,
(E) the Company, any Guarantor or any Subsidiary shall not pay
(or otherwise
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satisfy on terms consistent with the terms of this Agreement)
any other Debt in an aggregated principal amount exceeding
$500,000 when due, or any condition shall exist permitting
other Debt of the Company, any Guarantor or any Subsidiary in
an aggregate principal amount exceeding $500,000 to become or
be declared due prior to its stated maturity, except, however,
a condition in respect of a Guarantee of the Company, any
Guarantor or any Subsidiary if the Company, such Guarantor or
such Subsidiary shall duly perform its obligations under such
Guarantee,
(F) the Company, any Guarantor or any Subsidiary shall (1) be
generally not paying its debts as they become due, (2) file,
or consent by answer or otherwise to the filing against it of,
a petition for relief or reorganization or arrangement or any
other petition in bankruptcy, for liquidation or to take
advantage of any bankruptcy or insolvency law of any
jurisdiction, (3) make any assignment for the benefit of its
creditors, (4) consent to the appointment of a custodian,
receiver, trustee or other officer with similar powers of
itself or of any substantial part of its property, (5) be
adjudicated insolvent or be liquidated, or (6) take corporate
action for the purpose of any of the foregoing,
(G) a court or governmental authority of competent
jurisdiction shall enter an order appointing, without consent
by the Company, any Guarantor or any Subsidiary, a custodian,
receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its
property, or if an order for relief shall be entered in any
case or proceeding for liquidation or reorganization or
otherwise, to take advantage of any bankruptcy or insolvency
law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of the Company, any Guarantor or any
Subsidiary, or if any petition for any such relief shall be
filed against the Company, any Guarantor or any Subsidiary and
such petition shall not be dismissed within 60 days,
(H) final judgment shall be rendered against the Company, any
Guarantor or any Subsidiary for the payment of money in excess
of $500,000, and such judgment shall not be discharged or
execution thereon stayed pending appeal, within 30 days after
entry thereof, or, in the event of such a stay, such judgment
shall not be discharged within 30 days after such stay
expires,
(I) any material representation or warranty heretofore or
hereafter made by or on behalf of the Company herein or in any
certificate or other writing delivered under or pursuant to
this Agreement or in connection with any provision hereof or
related to the transactions contemplated hereby shall prove to
have been false or incorrect or breached in any material
respect on the date as of which made, or
(J) any Guaranty shall cease, other than in accordance with
its terms, to be in full force and effect or shall be declared
by a court or governmental authority of competent jurisdiction
to be void, voidable or unenforceable against any Guarantor,
or any Guarantor or the Company asserts any of the foregoing
in
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writing or before any court or governmental authority,
then (i) upon the occurrence of any Event of Default described in subsection (F)
or (G) with respect to the Company (other than such an Event of Default
described in subsection (F)(1) or described in subsection (F)(6) by virtue of
the reference in such clause (6) to such clause (1)), the unpaid principal
amount of the Notes, together with the accrued interest thereon and, to the
extent permitted by law, an amount equal to 50% of the prepayment charge that
would be payable if the Company were prepaying the Notes at the time pursuant to
Section 4.2, shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived by the Company, or (ii) upon occurrence of any other
Event of Default, the holder or holders of at least 66-2/3% of the unpaid
principal amount of the Notes at the time outstanding (subject to the last
paragraph of Section 9) may, by written notice to the Company, declare all of
the Notes to be, and the same shall forthwith become due and payable, together
with accrued interest thereon which shall be deemed matured and, to the extent
permitted by law, an amount equal to 50% of the prepayment charge that would be
payable if the Company were prepaying the Notes at the time pursuant to Section
4.2, provided that, during the existence of an Event of Default described in
Subsection (A) or (B) with respect to any Note, the holder of such Note may, by
written notice to the Company, declare such Note to be, and the same shall
forthwith become, due and payable, together with accrued interest thereon which
shall be deemed matured and, to the extent permitted by law, an amount equal to
50% of the prepayment charges that would be payable if the Company were
prepaying such Note at the time pursuant to Section 4.2. If any holder of any
Note shall exercise the option specified in the proviso to the preceding
sentence, each other holder of any Note may, by written notice to the Company,
declare the principal of all Notes held by it to be, and the same shall
forthwith become, due and payable, together with accrued interest thereon which
shall be deemed matured and, to the extent permitted by law, an amount equal to
50% of the prepayment charge that would be payable if the Company were prepaying
the Notes at the time pursuant to Section 4.2. Nevertheless, if at any time
after acceleration of the maturity of any Note or Notes, the Company shall pay
all arrears of interest and all payments on account of the principal and
prepayment charge which shall have become due otherwise than by acceleration
(with interest on principal and prepayment charge and, to the extent permitted
by law, on overdue interest, at the rate specified in the Notes) and all Events
of Default (other than non-payment of principal of and accrued interest on the
Notes, an amount equal to prepayment charges as aforesaid, due and payable
solely by virtue of acceleration) shall be remedied or waived pursuant to
Section 9, then the holder or holders of at least 66-2/3% of the unpaid
principal amount of the Notes at the time outstanding (subject to the last
paragraph of Section 9) by written notice to the Company, may rescind and annul
the acceleration and its consequences; but such action shall not affect any
subsequent Default or Event of Default or impair any right consequent thereon.
SECTION 7.2. OTHER REMEDIES. If any Default or Event of Default shall=
have occurred and be continuing, the holder of any Note may proceed to protect
and enforce its rights under this Agreement and such Note by exercising such
remedies as are available to such holder in respect thereof under applicable
law, either by suit in equity or by action at law, or both, whether for specific
performance of any agreement contained in this Agreement or in aid of the
exercise of any power granted in this Agreement. No remedy is intended to be
exclusive and each remedy
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shall be cumulative.
If the Company shall default in the payment of principal of, or
interest or prepayment charge on, any Note, or shall default in the performance
or observance of any agreement contained in this Agreement, it will pay to the
holder of any Note such amounts, to the extent lawful, as shall be sufficient to
pay the costs and expenses of collection or of otherwise enforcing any of such
holder's rights, including reasonable counsel fees.
SECTION 7.3. NOTICE OF ACCELERATION. If the maturity of any Note shall
be accelerated as provided in Section 7.1, the Company will give written notice
thereof to the holders of all outstanding Notes within one business day.
SECTION 8. COMMUNICATIONS; PAYMENT OF NOTES. All communications
provided for hereunder shall (except as otherwise provided by Section 4.3 and
4.4) be delivered, or mailed (by first-class mail, postage prepaid), addressed
(A) if to the Lender, at the Lender's address for the purpose thereof provided
in Schedule I, (B) if to any other Person who is the holder of a Note, at the
address of such Person for the purpose thereof as it appears on the register of
the Company maintained under Section 10, (C) if to the Company or any Guarantor,
c/o Del Laboratories, Inc., at 565 Broad Hollow Road, Farmingdale, NY 11735,
Attention: Chief Financial Officer, with a copy to Del Laboratories, Inc. at 178
EAB Plaza, 8th Floor, Uniondale, NY 11556, Attention: General Counsel. Any
address may be changed from time to time and shall be the most recent address
furnished in writing (1) if by any Lender or any other holder of a Note, to the
Company, or (2) if by the Company, to each Lender and to each holder of a Note.
Any communication shall be deemed to have been given when delivered or mailed,
as the case may be.
The Company agrees that, so long as any Lender or its nominee holds any
Note and notwithstanding any provision hereof or of the Notes to the contrary,
it will pay all sums becoming due thereon for principal, prepayment charge and
interest to such Lender in the manner provided for the Lender in Schedule I or
in such other manner as such Lender may designate to the Company in writing,
without presentation of the Notes. Each Lender agrees that if it sells or
transfers any Note held by it, (i) such sale shall be made in compliance with
all applicable Federal and state securities laws, (ii) prior to such disposition
it will make a notation thereon of all principal payments previously made, and
(iii) it will not sell or transfer a Note to any Competitor. The Company agrees
that the provisions of this paragraph shall inure to the benefit of any other
institutional holder of any such Note which shall have agreed to comply with the
requirements of this paragraph.
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SECTION 9. FIRST OFFER UPON TRANSFER OF NOTES. In the event that any
holder of a Note (a "Proposed Transferor") should wish to transfer its Note, or
any portion thereof, to another Person in a transaction which would result in
there being more than four holders of the Notes, the Proposed Transferor shall,
before making such transfer, deliver to the Company an offer (the "Offer") to
sell to the Company the Proposed Transferor's Note, or such portion of the Note
as the Proposed Transferor wishes to transfer. The Offer shall state the
purchase price upon which the Proposed Transferor will sell the Note, or portion
thereof, to the Company and shall remain open and irrevocable for a period of 30
days from the date of its delivery (the "Offer Period"). The Company may accept
the Offer by delivering to the Proposed Transferor within the Offer Period a
written notice of acceptance together with the purchase price specified in the
Offer in immediately available funds. In the event that the Company does not
accept the offer within the Offer Period, the Proposed Transferor shall be free
to sell or transfer its Note, or the portion thereof specified in the Offer, to
any Person for a purchase price not less than nine-five percent (95%) of the
purchase price specified in the Offer for a period of 90 days following the
expiration of the Offer Period subject to the restrictions contained in Section
8 hereof. Any portion of the Note not sold or transferred by the Proposed
Transferor during the 90 day period shall, at the expiration thereof, become
subject again to the transfer restrictions specified in this Section.
Any Note, or portion thereof, acquired by the Company pursuant to this
Section shall be immediately canceled. Neither the Company nor any of its
affiliates shall ever be deemed to be a holder of any Notes and no Notes
acquired or held by the Company or its affiliates shall be considered in
calculating the ownership of the Notes.
SECTION 10. AMENDMENT AND WAIVER. Except as otherwise expressly
provided herein, any provision of this Agreement or of the Notes may be amended
or waived if the Company shall obtain the written agreement thereto of the
holder or holders of at least 66-2/3% of the unpaid principal amount of the
Notes at the time outstanding, except that, without the written agreement of the
holder or holders of all the Notes at the time outstanding, no such amendment or
waiver shall extend the maturity of any Note or reduce the principal of, or the
rate of interest or any prepayment charge payable with respect to, any Note, or
affect the time or amount of any required prepayment or interest payment or
reduce the percentage of the unpaid principal amount of the Notes required with
respect to any amendment or waiver. Each holder of the Notes at the time or
thereafter outstanding shall be bound by any such amendment or waiver, whether
or not a notation thereof shall have been placed on the Note.
No course of dealing between the Company and any Lender or the holder
of any Note, and no delay in exercising any rights hereunder or under any Note,
shall imply or otherwise operate as a waiver of any rights of any Lender or the
holder of any Note.
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SECTION 11. REGISTRATION, TRANSFER AND EXCHANGE OF NOTES. The Company
will keep at its principal office a register in which it will provide for the
registration and registration of transfer of Notes, at its own expense
(excluding transfer taxes). If any Note is surrendered at said office or at the
place of payment named in the Note for registration of transfer or exchange
(accompanied in the case of registration of transfer by a written instrument of
transfer in form satisfactory to the Company duly executed by or on behalf of
the holder), the Company, at its expense, will deliver in exchange one or more
new Notes in any denominations (multiples of $1,000), as requested by the
holder, for the aggregate unpaid principal amount. Any Note or Notes issued in a
transfer or exchange shall carry the same rights to interest (unpaid and to
accrue) carried by the Note or Notes so transferred or exchanged so that there
will not be any loss or gain of interest on the Note or Notes surrendered. Each
holder of a Note shall promptly inform the Company of the transfer or assignment
of such Note, or any portion thereof.
SECTION 12. LOST NOTES. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction of any Note, and (in case of
loss, theft or destruction) of indemnity satisfactory to it (any Lender's or any
other institutional holder's undertaking to be satisfactory indemnity in case of
loss, theft or destruction of any Note owned by such Lender or by such other
institutional holder), and upon reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of such Note,
if mutilated, the Company will pay any unpaid principal, interest and prepayment
charge then or theretofore due and payable on such Note and will deliver in lieu
of such Note a new Note for the remaining unpaid principal amount thereof and
carrying the same rights to interest (unpaid and to accrue).
SECTION 13. EXPENSES. The Company agrees, whether or not the
transactions hereby contemplated are consummated, to pay all expenses incident
to the loans and related transactions and also in connection with any future
amendment of, or waiver under or with respect to (whether or not given), this
Agreement or any of the Notes, including in each case, without limitation, any
printing costs, and fees and expenses of Lenders' special counsel and of
Lender's local counsel, if any, for services to the Lenders in connection with
the loans and such other matters, and to reimburse each Lender for any
out-of-pocket disbursements for payment of the expenses mentioned.
The Company will also pay all taxes (including interest and penalties)
which may be payable in respect of the execution and delivery of this Agreement
or of any of the Notes (but not their transfer) or of any amendment of, or
waiver under or with respect to, this Agreement or of any of the Notes and will
save each Lender and all subsequent holders of the Notes harmless from any loss
or liability resulting from nonpayment or delay in payment of any such tax.
The obligations of the Company under this Section shall survive the
payment of the Notes.
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SECTION 14. CONFIDENTIAL INFORMATION. The Company acknowledges that the
holder of any Note may deliver copies of any financial statements and other
documents delivered to such holder, and disclose any other information disclosed
to such holder, by or on behalf of the Company or any Subsidiary in connection
with or pursuant to this Agreement to
(i) such holder's directors, officers, employees, agent and
professional consultants (other than a Competitor),
(ii) any other holder of any Note (other than a Competitor),
(iii) any Person (other than a Competitor) to which such holder offers
to sell such Note or any part thereof,
(iv) any Person (other than a Competitor) to which such holder sells or
offers to sell a participation in all or any part of such Note,
(v) any federal or state regulatory authority having jurisdiction over
such holder,
(vi) the National Association of Insurance Commissioners or any similar
organization, or
(vii) any other Person to which such delivery or disclosure may be
necessary or appropriate
(1) in compliance with any law, rule, regulation or order
applicable to such holder,
(2) in response to any subpoena or other legal process,
(3) in connection with any litigation to which such holder is
a party, or
(4) in order to protect such holder's investment in such Note.
The Lenders agree that any information concerning the Company or any
Subsidiary that has been supplied to them by the Company and conspicuously
identified in writing by the Company as confidential, and which is not
information available to or obtainable by the public, shall be treated as
confidential by the Lenders in accordance with the procedures and standards that
the Lenders generally apply to information of a confidential nature. Any Lender
who discloses confidential information to any Person described in subsections
(iii), (iv), or (vii) shall promptly advise the Company of such disclosure.
The Company's sole remedy for any breach by a Lender of its obligation
under this Section shall be limited to obtaining injunctive relief against
further disclosures of confidential information. The Company may not raise any
Lender's breach of its obligations under this Section as a defense, counterclaim
or basis for setoff in any action brought against the Company to enforce a
holder's rights under its Note or under this Agreement.
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SECTION 15. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon, and inure to the benefit of, and be enforceable by, the Company and each
Lender, and their respective successors and assigns, whether or not so
expressed; provided, however, that the benefits of Sections 8 (the second
paragraph thereof), 12 (as to satisfactory indemnity) and 13 shall be limited as
specifically provided therein, except that any other institutional investor
which is a holder of any of the Notes shall be entitled to the rights and
benefits thereunder as if it were a Lender.
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Agreement or made in writing by
or on behalf of the Company in connection with the transactions contemplated
hereby shall survive the execution and delivery of this Agreement and of the
Notes, regardless of any investigation at any time made by any Lender or on its
behalf. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company hereunder or in connection with the
transactions contemplated hereby shall be deemed representations and warranties
of the Company hereunder.
SECTION 17. GOVERNING LAW. The Note, this Agreement and (unless
otherwise provided) all amendments, supplements, waivers and consents relating
thereto or hereto shall be governed by the laws of the State of New York
(without regard to the conflict of law provisions thereof).
SECTION 18. REAFFIRMATION, RESTATEMENT AND WAIVERS. This Agreement
constitutes an amendment and restatement of the Original Loan Agreement and the
indebtedness evidenced by the Original Loan Agreement is continuing
indebtedness, and nothing herein shall be deemed to constitute a payment,
settlement or novation of the indebtedness evidenced by the Original Loan
Agreement except to the extent provided herein, or to release or otherwise
adversely affect any lien, mortgage or security interest securing such
indebtedness or any rights of any Lender against any guarantor, surety or other
party primarily or secondarily liable for such indebtedness.
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SECTION 19. TERMINATION OF SECURITY INTERESTS; RELEASE OF COLLATERAL.
The security interests granted under the Security Agreement shall terminate and
all rights to the Collateral (as defined therein) shall revert to the Loan
Parties (as defined therein) upon the earlier to occur of (i) payment in full of
all Obligations (as defined therein) (except for unmatured contingent
Obligations, as defined therein) and the termination of all commitments to make
further extensions of credit to any Loan Party under the Bank Credit Agreement,
including without limitation, the issuance of any letters of credit and (ii) the
satisfaction of each of the following conditions: (x) no Event of Default shall
have occurred and be continuing prior to or after giving effect to such release
of the Collateral, (y) the Total Commitment (as defined in the Bank Credit
Agreement) shall have been permanently reduced to at least $22,500,000 and (z)
the Funded Debt to EBITDA Ratio for the immediately preceding four (4) fiscal
quarters is less than or equal to 2.00 to 1.0. Upon termination of the security
interests or release of any Collateral, the Collateral Agent will, at the
expense of the Loan Parties, execute and deliver to the Loan Parties such
documents as the Loan Parties shall reasonably request to evidence the
termination of the security interests or the release of such Collateral, as the
case may be.
In the event that the security interest of the Collateral Agent shall
be released pursuant to and in accordance with the terms and provisions of this
Section 19, the Lenders hereby agree on a good faith basis to discuss and
consider changes and modifications to the negative financial covenants or
restrictions contained herein to the extent such changes and modifications are
made to the related terms and provisions of the Bank Credit Agreement or any
replacement thereto.
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IN WITNESS WHEREOF, the Company, each Guarantor and each Lender have
executed this Agreement as of the day and year first above written.
DEL LABORATORIES, INC.
By /s/ Enzo Vialardi
-------------------------
Executive Vice President and Chief Financial
Officer
DEL PHARMACEUTICALS, INC.
By /s/ Enzo Vialardi
--------------------------
Executive Vice President and Chief Finncial
Officer
PARFUMS SCHIAPARELLI, INC.
By /s/ Enzo Vialardi
---------------------------
Executive Vice President and Chief Financial
Officer
ROYCE & RADER, INC.
By /s/ Enzo Vialardi
---------------------------
Executive Vice President and Chief Financial
Officer
565 BROAD HOLLOW REALTY CORP.
By /s/ Enzo Vialardi
---------------------------
Executive Vice President and Chief Financial
Officer
35
<PAGE>
JACKSON NATIONAL LIFE INSURANCE COMPANY
BY: PPM AMERICA, INC., AS ATTORNEY IN FACT,
ON BEHALF OF JACKSON NATIONAL LIFE INSURANCE COMPANY
BY: /s/ James Young
-----------------------
James Young
Managing Director
36
<PAGE>
EXHIBIT A
DEL LABORATORIES, INC.
Amended and Restated
9.5% Senior Note Due May 31, 2005
February 25, 2000
No. N-3 New York, New York
PPN 245901 B# 9
DEL LABORATORIES, INC., a Delaware corporation (the "Company"), for
value received, hereby promises to pay to the order of Jackson National Life
Insurance Company or its registered assigns, on or before May 31, 2005, the
principal sum of FORTY MILLION DOLLARS ($40,000,000) (or so much thereof as
shall not have been prepaid) and to pay interest (computed on the basis of a
360-day year of twelve 30-day months) on the unpaid principal hereof from the
date hereof at the rate of 9.5% per annum, semiannually on November 30 and May
31 in each year, until such principal sum shall have become due and payable
(whether at maturity, at a required prepayment date, or otherwise) and to pay on
demand interest at the rate of 11.5% per annum on any overdue principal and on
any prepayment charge and, to the extent permitted by applicable law, on any
overdue interest, from the due date thereof, until the obligation of the Company
with respect to the payment thereof shall be discharged. Payments of principal,
prepayment charges, and interest shall be made in lawful money of the United
States of America upon presentation hereof at the office of the Company at 565
Broad Hollow Road, Farmingdale, New York 11735, or at such other place as the
holder hereof shall have designated to the Company in writing.
This Note is one of the Notes of the Company, aggregating $40,000,000
in original authorized principal amount, arising out of the Amended and Restated
Loan Agreement dated as of February 25, 2000 (the "Loan Agreement"), entered
into by the Company with the lenders named therein. This Note amends and
restates the promissory notes having an original aggregate principal amount of
$40,000,000 issued under and pursuant to the Loan Agreement dated May 26, 1993,
as amended (the "Original Notes") and replaces such Original Notes in their
entirety. The indebtedness evidenced by the Original Notes is continuing
indebtedness evidenced by this Note, and nothing herein shall be deemed to
constitute a payment, settlement or novation of the indebtedness evidenced by
the Original Notes. The holder of this Note is entitled to enforce the
provisions of such Loan Agreement and to enjoy the benefits thereof.
The Company is required by such Loan Agreement to prepay this Note on
May 31, 2001, and on each May 31 thereafter to and including May 31, 2004, as
long as this Note is outstanding. The Company may, at its election, prepay this
Note, in whole or in part, and may under certain circumstances be required to
prepay this Note in whole, and the maturity hereof may be accelerated by the
holder of this Note or by holders of a percentage of the Notes outstanding
following an Event of Default, all as provided in such Loan Agreement, to which
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reference is made for the terms and conditions of such provisions as to
prepayment and acceleration.
Transfer of this Note is registrable on the note register of the
Company upon presentation at the principal office of the Company, accompanied by
a written instrument of transfer in form satisfactory to the Company duly
executed by, or on behalf of, the holder hereof. This Note may also be exchanged
at such offices for one or more Notes in any denominations (multiples of
$1,000), as requested by the holder, of a like aggregate unpaid principal
amount.
The transfer of this Note is subject to certain restrictions set forth
in Sections 8 and 9 of the Loan Agreement.
Prior to due presentment for registration of transfer, the Company and
any agent of the Company may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment of principal
and prepayment charges and interest as herein provided and for all other
purposes.
DEL LABORATORIES, INC.
----------------------------------
By:
Its:
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EXHIBIT B
REPRESENTATIONS
PART ONE - REPRESENTATIONS BY THE COMPANY
SECTION B-1. GOOD STANDING OF THE COMPANY, GUARANTORS AND SUBSIDIARIES;
AUTHORIZATION. The Company, each Guarantor and each Subsidiary of the Company or
any Guarantor are each a corporation duly incorporated, validly existing and in
good standing under the laws of their respective jurisdictions of incorporation
and each has the corporate power to own its assets and to transact the business
in which it is presently engaged and is duly qualified and is in good standing
in all other jurisdictions where the failure to so qualify would be reasonably
likely to result in a Material Adverse Change. The execution, delivery and
performance of this Agreement and the Notes have been duly authorized by all
necessary proceedings on the part of the Company.
SECTION B-2. COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery
and performance of this Agreement and the Notes will not result in any breach
of, constitute a default under or result in the creation of any Lien in respect
of any property of the Company, any Guarantor or any Subsidiary pursuant to, the
charter or by-laws of the Company, any Guarantor or any Subsidiary, or any
agreement, instrument, judgment, decree, order, statute, rule or regulation
applicable to the Company, any Guarantor or any Subsidiary, other than the Liens
created pursuant to the Loan Documents. Neither the Company, any Guarantor nor
any Subsidiary is in violation of any term of its charter or by-laws, or of any
term of any agreement, instrument, judgment, decree, order, statute, rule or
regulation applicable to it, the violation of which might materially adversely
affect the business, operations, properties or financial position of the
Company, the Guarantors and Subsidiaries, taken as a whole. Neither the nature
of the Company, any Guarantor nor any Subsidiary, nor of any of their respective
businesses or properties, nor any relationship between the Company, any
Guarantor or any Subsidiary and any other Person is such as to require any
consent, approval or other action by, or any notice to, or filing with, any
Person in connection with the execution and delivery of this Agreement or
fulfillment of, or compliance with, the terms and provisions hereof or thereof,
other than such consents, approvals, actions, notices or filings which (i) have
been duly obtained or made on or prior to the Restatement Effective Date and are
set forth in an Officer's Certificate delivered to you on the Restatement
Effective Date, or (ii) are to be made pursuant to the Security Agreement after
the Restatement Effective Date.
SECTION B-3. BUSINESS, PROPERTIES, FINANCIAL AND OTHER INFORMATION
REGARDING THE COMPANY. The Company has delivered to each Lender copies of the
documents listed in Exhibit D and makes the representations that follow:
(A) Section D-1 lists all reports and proxy statements
required to be filed by the Company with the SEC since
November 14, 1999.
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(B) Section D-2 sets forth a correct and complete list and
description of all Debt of the Company, any Guarantor and each
Subsidiary, any Liens securing such Debt, and any Guaranties
outstanding or existing on the date there stated.
(C) Section D-3 contains a correct and complete list of the
Company's Subsidiaries.
(D) Section D-4 lists all insurance policies carried by the
Company, the Guarantors and Subsidiaries.
SECTION B-4. SHARES OF SUBSIDIARIES. All the outstanding shares of the
Subsidiaries shown in Section D-3 as being owned by the Company or by any of its
Subsidiaries have been validly issued, are fully paid and nonassessable and are
free and clear of any Liens. No Subsidiary of the Company owns any shares of the
Company.
SECTION B-5. TAXES. The Company, each Guarantor and each Subsidiary of
the Company or any Guarantor have filed all federal, state and local tax returns
required to be filed and have paid all taxes, assessments and governmental
charges and levies thereon to be due, including interest and penalties, unless
and only to the extent that (i) such taxes are being contested in good faith and
by appropriate proceedings by the Company, such Guarantor or any such
Subsidiary, as the case may be; (ii) there are adequate reserves therefor in
accordance with GAAP entered on the books of the Company, such Guarantor or any
such Subsidiary; and (iii) no enforcement proceedings against the Company, such
Guarantor or any such Subsidiary have been commenced.
SECTION B-6. ENCUMBRANCES. The Company, each Guarantor and each
Subsidiary has good and marketable title to its real properties and good and
merchantable title to each of its other properties as are reflected in the
audited balance sheet contained in the Company's Form 10-K for the fiscal year
ended December 31, 1998 (except as sold or otherwise disposed of in the ordinary
course of business) and, except as permitted by Section 5.15, all properties of
the Company, the Guarantors and Subsidiaries are free and clear of all Liens.
SECTION B-7. MATERIAL ADVERSE CHANGES. The consolidated financial
statements of the Company and its Consolidated Subsidiaries for the fiscal year
ended December 31, 1998, and for the nine (9) month period ended September 30,
1999 copies of each of which have been furnished to the Lenders, (i) fairly
present in all material respects the financial condition of the Company and its
Consolidated Subsidiaries as at such dates and the results of operations of the
Company and its Consolidated Subsidiaries for the periods ended on such dates,
all in accordance with GAAP, subject, in the case of the interim financial
statements, to year end adjustments and the absence of footnotes, (ii) between
December 31, 1998 and the date of this Agreement there has been (x) no material
increase in the consolidated liabilities of the Company and its Consolidated
Subsidiaries, other than increases in liabilities resulting solely from
increased borrowings under the Bank Credit Agreement, the Chase Line of Credit
or the EAB Line of Credit and (y) no Material Adverse Change and (iii) except as
disclosed on such financial statements or the notes thereto, there are no
undisclosed liabilities of the Company or any of its Consolidated Subsidiaries,
contingent or otherwise required to be disclosed therein.
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<PAGE>
SECTION B-8. OFFERING OF NOTES. Neither the Company nor anyone acting
on its behalf has offered the Notes or any similar securities for sale to, or
solicited any offer to buy any of the same from, or otherwise approached or
negotiated in respect thereof with, any person other than the Lenders and three
other institutional investors. Neither the Company nor anyone acting on its
behalf has taken, or will take, any action which would subject the issuance or
sale of the Notes to Section 5 of the Securities Act of 1933, as amended.
SECTION B-9. COMPLIANCE WITH FEDERAL RESERVE BOARD REGULATIONS. No part
of the proceeds of the loans made hereunder were used, and no part of the
proceeds of any loan repaid with the proceeds of the loans made hereunder were
used, directly or indirectly, for the purpose of purchasing or carrying any
"margin stock" within the meaning of Regulation T, U or X (other than the
repurchase of shares of Common Stock of the Company). The assets of the Company
and its Subsidiaries do not include any margin stock (other than shares of the
Company's common stock presently held in its treasury), and neither the Company
nor any of its Subsidiaries has any present intention of acquiring any margin
stock.
SECTION B-10. ERISA. No employee benefit plan established or maintained
by the Company or by any of its Subsidiaries or to which either the Company or
any of its Subsidiaries has made contributions, which is subject to Part 3 of
Subtitled B of Title I of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), has any material accumulated funding deficiency (as
defined in such Act), and neither the Company nor any of its Subsidiaries has
incurred any material liability to the Pension Benefit Guaranty Corporation (the
"PBGC") or any other governmental entity or agency with respect to any such
plan. The Company and each of its Subsidiaries are in compliance in all material
respects with ERISA to the extent applicable to them and have received no notice
to the contrary from the PBGC or from any other governmental agency or entity.
The consummation of the transaction provided for in this Agreement and the
compliance by the Company with the provisions hereof and the Notes issued
hereunder will not involve any prohibited transaction within the meaning of
ERISA or Section 4975 of the Internal Revenue Code of 1986.
SECTION B-11. INVESTMENT COMPANY ACT. The Company is not, and is not
directly or indirectly controlled by or acting on behalf of any person which is,
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
SECTION B-12. FOREIGN ASSETS CONTROL REGULATIONS. Neither the borrowing
by the Company hereunder nor its use of the proceeds thereof will violate the
Foreign Assets Control Regulations, the Foreign Funds Control Regulations, the
Transaction Control Regulations, the Cuban Assets Control Regulations, the
Iranian Transactions Regulations, the Iranian Assets Control Regulations or the
Libyan Sanctions Regulations of the United States Treasury Department (31
C.F.R., Subtitle B, Charter V, as amended) or any regulation or ruling issued
under Executive Order Nos. 12543, 12722, 12724, 12775, 12779, 12708 or 12810.
SECTION B-13. PENDING LITIGATION. Schedule D-5 lists all actions,
suits, proceedings or investigations pending, or, to the knowledge of the
Company, threatened, against or affecting the Company or any of its Subsidiaries
before any court, arbitrator or administrative or governmental body. None of
such actions, suits, proceedings or investigations will materially adversely
affect the enforceability of this Agreement or the Notes. None of such actions,
suits, proceedings or investigations, individually or in the aggregate, could
reasonably be expected to materially adversely affect the business, operations,
properties or financial position of the Company and its Subsidiaries, taken as a
whole.
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SECTION B-14. SOLVENCY. After giving effect to the execution of this
Agreement, the Bank Credit Agreement and availability of the Total Commitment
(as defined in the Bank Credit Agreement), (i) The fair value of the assets of
(x) the Company and its Consolidated Subsidiaries, on a consolidated basis and
(y) the Company and DPI, each singularly, exceeds, in each case, their debts and
liabilities (subordinated, contingent or otherwise); (ii) the present fair
saleable value of the property of (x) the Company and its Consolidated
Subsidiaries, on a consolidated basis and (y) the Company and DPI, each
singularly, is, in each case, greater than the amount required to pay the
probable liability of their debts and other liabilities (subordinated,
contingent or otherwise) as such debts and other liabilities mature; (iii) (x)
the Company and its Consolidated Subsidiaries, on a consolidated basis and (y)
the Company and each Guarantor singularly, is, in each case, able to pay their
debts and liabilities (subordinated, contingent or otherwise) as such debts and
liabilities mature; and (iv) (x) the Company and its Consolidated Subsidiaries,
on a consolidated basis and (y) the Company and each Guarantor singularly, do
not have, in each case, unreasonably small capital to conduct the businesses in
which they are engaged; and (v) the Company and DPI each has a positive net
worth.
SECTION B-15. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Company complies
with all applicable Federal, state and local laws, statues, rules, regulations
and ordinances relating to public health, safety or the environment including,
without limitation, relating to releases, discharges, emissions or disposals to
air, water, land or ground water, to the withdrawal or use of ground water, to
the use, handling or disposal of polychlorinated biphenyls (PCB's), asbestos or
urea formaldehyde, to the treatment, storage, disposal or management or
hazardous substances (including, without limitation, petroleum, its derivatives,
by-products or other hydrocarbons), to exposure to toxic, hazardous or other
controlled, prohibited or regulated substances, to the transportation, storage,
disposal, management or release of gases or liquid substances, the failure to
comply with which could reasonably be expected to have a materially adverse
effect on the Company, its Subsidiaries, and their businesses and properties,
taken as a whole. Except as disclosed in Schedule D-6 hereto, the Company does
not know of any claim against, and has not received notice that it is a
potentially responsible party, and is not aware of any response action or
clean-up where it may be a potentially responsible party, under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986 (42 U.S.C.
Section 9601 et seq.) or any state or local laws, regulations or orders
concerning similar subject matter.
SECTION B-16. COMPLIANCE WITH APPLICABLE LAWS. The Company and each of
its Subsidiaries is in compliance, in all material respects, with all applicable
statutes, rules, regulations, ordinances, codes, orders, licenses, franchises,
permits, authorizations and concessions, as such apply to the Company and its
Subsidiaries, including, without limitation, any applicable building, zoning,
anti-pollution, occupational safety, health or other law, ordinance or
regulation in respect of any of the Company's plants, warehouses, offices,
structures, or operations. Neither the Company nor any of its Subsidiaries have
received any
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notification alleging any violation of any of the foregoing which might
reasonably be expected to have a material adverse effect on the Company and its
Subsidiaries and with respect to which adequate corrective action has not been
taken. Schedule D-7 contains a list and brief description of all notices from
and related reports to governmental authorities (other than notices listed in
Schedule D-6), including, without limitation, citations received and corrective
action related thereto taken, by the Company or any of its Subsidiaries from the
Food and Drug Administration, the United States Environmental Protection Agency,
the Equal Employment Opportunity Commission, or the Occupational Safety and
Health Administration (or, in each case, any state agency performing a similar
function) with respect to potential claims which might reasonably be expected to
have a material adverse effect on the Company and its Subsidiaries.
SECTION B-17. INTELLECTUAL PROPERTY. All patents, trademarks, service
marks, trade names, copyrights, and all applications for any of the foregoing,
owned, used or licensed by the Company or any of its Subsidiaries are listed on
Schedule D-8. The Company and each Subsidiary owns or has the right to use all
patents, trademarks, service marks, trade names, copyrights, licenses, trade
secrets and other rights, free from burdensome restrictions, which are necessary
for the operation of their respective businesses as presently conducted and the
lack of which might reasonably be expected to have a material adverse effect on
the Company and its Subsidiaries. To the best knowledge of the Company, none of
the present or contemplated operations of the Company or any of its Subsidiaries
infringes any patent, trademark, service mark, trade name, copyright, license or
other right owned by any other Person which infringement would reasonably be
expected to have a material and adverse effect upon the Company or any of its
Subsidiaries. To the best knowledge of the Company, no Person is presently
infringing or threatening to infringe upon any patent, trademark, service mark,
trade name, copy rights or trade secret which is proprietary to or licensed by
the Company or any of its Subsidiaries.
SECTION B-18. CONSOLIDATED TANGIBLE NET WORTH. The Company's
Consolidated Tangible Net Worth at December 31, 1999 is not less than
$33,000,000.
SECTION B-19. REPRESENTATIONS AND WARRANTIES INCORPORATED FROM BANK
CREDIT AGREEMENT. As of the Restatement Effective Date, each of the
representations and warranties made in the Bank Credit Agreement by each of the
Company and the Guarantors is true and correct in all material respects, and
such representations and warranties are hereby incorporated herein by reference
with the same force and effect as though set forth in their entirety herein, as
qualified therein.
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PART TWO - REPRESENTATION BY THE LENDERS
SECTION B-19. ACQUISITION OF NOTES FOR INVESTMENT. Each Lender will
acquire the Notes for its own general account and/or for one or more separate
accounts maintained by it, for investment and not with a view to any
distribution of the Notes or with any present intention of distributing or
selling any of the Notes, but subject, nevertheless, to the disposition of the
Notes being at all times within its control.
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EXHIBIT C
CLOSING CONDITIONS
SECTION C-1. REPRESENTATIONS AND WARRANTIES TRUE. All representations
and warranties of the Company made in Exhibit B or otherwise under or pursuant
to this Agreement shall be true as though made on the Restatement Effective
Date, excepting representations and warranties specifically referring to an
earlier date, and provided that with respect to the representations and
warranties set forth in Sections B-13, B-15 and B-16 of Exhibit B, such
representations and warranties shall be true in all material respects as though
made on the Restatement Effective Date.
SECTION C-2. NO MERGER, ETC. The Company shall not have consolidated or
merged with, or sold, leased or otherwise disposed of its properties as an
entirety or substantially as an entirety to, any Person.
SECTION C-3. RESTATEMENT EFFECTIVE DATE. The Restatement Effective Date
shall occur on or prior to February 25, 2000.
SECTION C-4. NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of
Default shall have occurred and be continuing, after giving effect to this
Agreement and the Bank Credit Agreement.
SECTION C-5. INSTRUMENTS AND PROCEEDINGS TO BE SATISFACTORY. All
instruments relating to the amendment and restatement of the Original Notes and
of the Original Loan Agreement, including, but not limited to, the delivery of
the Notes and the Loan Documents, shall be satisfactory to each Lender and its
special counsel.
SECTION C-6. COMPLIANCE CERTIFICATE. The Company shall have delivered
to each Lender an Officer's Certificate, dated the Restatement Effective Date,
certifying to the effect set forth in Sections C-1, C-2 and C-4.
SECTION C-7. OPINION OF COMPANY'S COUNSEL. Each Lender shall have
received from O'Sullivan, Graev and Karabell, LLP, and Gene L. Wexler, Esq.,
counsel for the Company, opinions, dated as of the Restatement Effective Date,
in scope and substance satisfactory to each Lender, as to:
(A) the due incorporation, existence and good standing of the
Company and each Subsidiary and its power to own or hold under
lease the properties it purports so to own or hold and to
carry on the business in which it is engaged,
(B) the due authorization by all requisite corporate action
(including any required shareholder approval), and the
execution, delivery, validity, binding effect and
enforceability of this Agreement and the Notes, except to the
extent enforceability is limited by applicable bankruptcy,
insolvency or other similar laws affecting creditors' rights
generally,
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(C) the due qualification and good standing of the Company and
each Subsidiary as a foreign corporation in each jurisdiction
wherein, in the opinion of such counsel, the failure to so
qualify might have a material adverse effect on the business,
operations or properties of the Company and its Subsidiaries,
taken as a whole,
(D) the due authorization of, and good and valid title of the
Company and each Subsidiary to, full payment for, and
nonassessability of, all then-outstanding shares and other
securities which the Company or any such Subsidiary purports
to own of each Subsidiary free of any Liens (of which such
counsel, after due inquiry, shall have knowledge),
(E) the execution, delivery and performance of this Agreement
and the Notes not resulting in breach of, constituting a
default under or resulting in the creation of any Lien in
respect of the property of the Company or any Subsidiary
pursuant to the charter or by-laws of the Company or any
Subsidiary, or any agreement, instrument, judgment, decree,
order, statute, rule or regulation known to such counsel which
is applicable to the Company or any Subsidiary,
(F) the absence or satisfaction of any requirements for any
consent, approval or authorization of, or registration, filing
or declaration with, any governmental authority or other
regulatory agency for the valid execution, delivery and
performance by the Company of this Agreement or the Notes,
(G) except as disclosed in the Company's letter delivered to
each Lender prior to its execution hereof, no proceedings
being, to the knowledge of such counsel after due inquiry,
pending or threatened against or affecting the Company or any
of its Subsidiaries before any court, arbitrator or
administrative or governmental body which, in the aggregate,
would adversely affect any action taken or to be taken by the
Company under this Agreement or the Notes or which, in the
aggregate, would materially adversely affect the business,
operations, properties or financial position of the Company
and its Subsidiaries, taken as a whole, and
(H) such other matters, including the use of the proceeds of
the loans in accordance with the terms of this Agreement being
in compliance with Federal Reserve Board Regulations T, U and
X, and the due perfection of all security interests granted
under the Loan Documents incident to the transactions
contemplated hereby as any Lender may reasonably request.
SECTION C-8. CONSENTS, APPROVALS, ETC. The Company shall have delivered
to the Lenders the Officer's Certificate referred to in the last sentence of
Section B-2.
SECTION C-9. NECESSARY CORPORATE ACTION. The Lenders shall have
received:
(A) certified (as of the date of this Agreement) copies of the
resolutions of the Board of Directors of the Company
authorizing the loans evidenced by the Notes
-2-
<PAGE>
and authorizing and approving this Agreement and the other
Loan Documents and the execution, delivery and performance
thereof and certified copies of all documents evidencing other
necessary corporate action and governmental approvals, if any,
with respect to this Agreement and the other Loan Documents,
(B) certified (as of the date of this Agreement) copies of the
resolutions of the Board of Directors and the shareholders of
each of the Guarantors, authorizing and approving this
Agreement, its Guaranty and any other Loan Document applicable
to such Guarantors, and the execution, delivery and
performance thereof and certified copies of all documents
evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement, its
Guaranty and the other Loan Documents,
(D) a certificate of the Secretary or an Assistant Secretary
(attested to by another officer) of the Company certifying:
(i) the names and true signatures of the officer or officers
of the Company authorized to sign this Agreement, the Notes
and the other Loan Documents to be delivered hereunder on
behalf of the Company; and (ii) a copy of the Company's
by-laws as complete and correct on the date of this Agreement,
(E) a certificate of the Secretary or an Assistant Secretary
(attested to by another officer) of each of the Guarantors
certifying (i) the names and true signatures of the officer or
officers of such Guarantor authorized to sign this Agreement,
its Guaranty and any other Loan Documents to be delivered
hereunder on behalf of such Guarantor; (ii) a copy of such
Guarantor's by-laws as complete and correct on the date of
this Agreement; and (iii) the stock ownership of such
Guarantor,
(F) a copy of the certificate of incorporation and all
amendments thereto of the Company and each Guarantor,
certified in each case by the Secretary of State (or
equivalent officer) of the state of incorporation of the
Company and each Guarantor and a certificate of existence and
good standing with respect to the Company and each Guarantor
from the Secretary of State (or equivalent officer) of the
state of incorporation of the Company and each Guarantor and
from the Secretary of State (or equivalent officer) of any
state in which the Company or each Guarantor is authorized to
do business.
SECTION C-10. INSURANCE. The Lenders shall have received evidence that
the Company and each Guarantor maintain adequate casualty and liability
insurance, with financially sound and reputable insurance companies or
associations, in such amounts and covering such risks as are usually carried by
companies engaged in similar businesses and owning properties and doing business
in the same general areas in which the Company and the Guarantors operate.
SECTION C-11. TRADEMARK DISCLOSURE. The Lenders shall have received and
satisfactorily reviewed Exhibit D-8 to this Agreement which shall disclose all
intellectual property of the Company and its Subsidiaries including domestic
trademarks, tradenames
-3-
<PAGE>
and related product names, and including all registration numbers, serial
numbers, classifications and other information relating to any trademarks or
tradenames registered with the United States Patent and Trademark Office.
SECTION C-12. BANK LOAN AGREEMENT; INTERCREDITOR AGREEMENT. The Lenders
shall have received and satisfactorily reviewed the Bank Loan Agreement. The
parties thereto shall have entered into the Intercreditor Agreement.
SECTION C-13. CANCELLATION OF EXISTING LINES. The Lenders shall have
received letters evidencing the cancellation of the Chase Line of Credit and the
EAB Line of Credit and any other lines of credit or similar borrowing facilities
available to the Company or any Guarantor.
SECTION C-14. SECURITY AGREEMENTS. The Company and each Guarantor shall
have executed and delivered to the Lenders a Security Agreement or Security
Agreements, together with other agreements, instruments and documents
(including, without limitation, UCC financing statements) pursuant to which the
Collateral Agent shall have received, for the benefit of itself, the Agent, the
Lenders and the Bank Lenders a first priority perfected security interest in (i)
with respect to the Company and all Guarantors, all accounts and accounts
receivable of the Company and the Guarantors, and (ii) with respect to the
Company, DPI and Parfums, all trade names and trademarks, trademark
registrations, trademark applications and trademark licenses of the Company, DPI
and Parfums, and all product names related thereto (the "Collateral"). The
Company, DPI and Parfums as applicable, shall each have executed and delivered
to the Collateral Agent, a Trademark Collateral Assignment and Security
Agreement pursuant to which the Company, DPI and Parfums assign, to the
Collateral Agent for the benefit of itself, the Agent, the Lenders and the Bank
Lenders, all of their rights to each of their trademarks which have been
registered at the United States Patent and Trademark Office, such assignments to
be registered at such office.
SECTION C-15. OFFICER'S CERTIFICATE. The following statements shall be
true and the Lenders shall have received a certificate signed by the President
or the Chief Financial Officer of the Company dated the date hereof, stating
that:
(A) after giving effect to the execution and delivery of this
Agreement and the Bank Credit Agreement, the representations
and warranties contained in Exhibit B of this Agreement and in
the Loan Documents are true and correct in all material
respects on and as of such date, except for those relating to
an earlier date, which shall remain true and correct as of
such earlier date; and
(B) no Default or Event of Default has occurred and is
continuing.
SECTION C-16. GUARANTIES. The Joint Guaranty dated December 22, 1999
delivered to the Lenders by DPI, Parfums, Royce and Broad shall have been
ratified and confirmed by such parties or guaranties in replacement thereof
executed and delivered to the Lenders by such parties, such ratification or
replacement to be in form and substance satisfactory to the Lenders and their
special counsel.
-4-
<PAGE>
SECTION C-17. MISCELLANEOUS. The following additional requirements
shall be satisfied:
(A) all schedules, documents, certificates and other
information provided to the Lenders or any Lender pursuant to
or in connection with this Agreement shall be reasonably
satisfactory to the Lenders and its counsel in all respects,
(B) all legal matters incident to this Agreement and the
transactions contemplated hereby shall be satisfactory to
McDermott, Will & Emery, counsel to the Lenders, and
(C) the Lenders shall have received such other approvals,
opinions or documents as the Lenders or its counsel may
reasonably request.
SECTION C-18. FEES PAYABLE. (i) The Lenders' special counsel and local
counsel, if any, shall have received the legal fees and expenses required to be
paid or reimbursed by the Company as provided in Section 13 in connection with
their representation of the Lenders in connection with the amendment and
restatement of the Original Notes and the other transactions contemplated by the
Agreement. (ii) The Lenders shall have received the amendment fee in the amount
equal to $40,000.
-5-
<PAGE>
SCHEDULE I TO
LOAN AGREEMENT DATED AS OF FEBRUARY 25, 2000
Manner of Payment and Communications to the Lenders:
I. JACKSON NATIONAL LIFE INSURANCE COMPANY $40,000,000
1. Please wire all payments as follows:
NORTHERN TRUST CHGO
ABA #071-000-152
Credit Account #5186041000 (General ledger for all clients of
Northern Trust)
For Further Credit to: 26-91241/Jackson National Life
Insurance Company
Ref: DEL LABORATORIES, INC. PVTPL, PPN 245901 B# 9, date of
payment, principal and interest breakdown.
Attn: Tarsa Lewis
2. Physical securities should be delivered as follows:
NORTHERN TRUST COMPANY
40 Broad Street
19th Floor
Acct # 2691241/Jackson National Life Insurance Company
New York, NY 10004
Attn: Jose Mero (tel 212-701-7507)
3. a) One copy of documents, notes and certificates, waivers,
amendments, consents as well as periodic financial information and
covenant compliance certificates should be sent to:
Chris Raub,
Vice President, Private Placements,
PPM AMERICA, INC.
225 West Wacker Drive,
Suite 1200
Chicago, IL 60606-1228
Tel: (312) 634-2504
Fax: (312) 634-0054
b) Interest and principal payment notices should be faxed to the
operations contact and custodian bank as follows:
Brian Therien,
Private Placements,
PPM America, Inc.,
225 West Wacker Drive,
-6-
<PAGE>
Chicago,
IL 60606
Tel 312-634-1291
Fax 312-634-0054
Oscell Owens,
Northern Trust Company,
801 S Canal St, Floor CIN,
Chicago,
IL 60607
Tel 312-444-5754
Fax 312-630-8179
4. Jackson National Life Insurance Company is incorporated in the State
of Michigan.
Employer's ID Number: 38-1659835
Its address is: 5901 Executive Drive
Lansing, MI 48909
<PAGE>
EXHIBIT 21.1
List of Active Subsidiaries
Domestic
Del Pharmaceuticals, Inc. Delaware
565 Broad Hollow Realty Corp. New York
Parfums Schiaperlli, Inc. New York
Royce & Rader, Inc. Delaware
International
Del Laboratories (Canada) Inc. Canada
Del Pharmaceutics (Canada) Inc. Canada
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Del Laboratories, Inc.:
We consent to incorporation by reference in the Registration Statements
No. 33-27777, No. 33-64777, and No. 333-92249 on Form S-8 of Del Laboratories,
Inc. of our report dated March 6, 2000, relating to the consolidated balance
sheets of Del Laboratories, Inc. and subsidiaries as of December 31, 1999 and
1998 and the related consolidated statements of operations, shareholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1999, and the related schedule which report appears in the
December 31, 1999 annual report on Form 10-K of Del Laboratories, Inc.
/s/ KPMG LLP
Melville, New York
March 27, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,585
<SECURITIES> 0
<RECEIVABLES> 45,942
<ALLOWANCES> 1,300
<INVENTORY> 59,155
<CURRENT-ASSETS> 118,372
<PP&E> 57,723
<DEPRECIATION> 20,532
<TOTAL-ASSETS> 180,561
<CURRENT-LIABILITIES> 43,900
<BONDS> 75,750
0
0
<COMMON> 10,000
<OTHER-SE> 40,873
<TOTAL-LIABILITY-AND-EQUITY> 180,561
<SALES> 267,346
<TOTAL-REVENUES> 267,346
<CGS> 124,921
<TOTAL-COSTS> 269,971
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,961
<INCOME-PRETAX> (5,483)
<INCOME-TAX> (1,481)
<INCOME-CONTINUING> (4,002)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,002)
<EPS-BASIC> (.53)
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