<PAGE> 1
Securities and Exchange Commission
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO 13D-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO 13D-2(a)
(Amendment No. __)*
GENERAL HOUSEWARES CORP.
(Name of Issuer)
COMMON STOCK, $.33-1/3 PAR VALUE
(Title of Class of Securities)
370073108
(CUSIP Number)
GERALD J. RUBIN
6827 MARKET STREET
EL PASO, TEXAS 79915
(915)779-6363
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
JUNE 18, 1999
(Date of Event Which Requires
Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
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*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(Continued on following pages)
(Page 1 of 8 Pages)
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CUSIP NO. 370073108 13D PAGE 2 OF 8 PAGES
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<TABLE>
<S> <C>
=======================================================================================================================
Helen of Troy Limited
1 Name of reporting person 74-2692550
IRS Identification No. of above person (entities only)
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2 Check the appropriate box if a member of a group* (a)
-------
(b) X
-------
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3 SEC use only
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4 Source of funds* WC, BK
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5 Check box if disclosure of legal proceedings is required pursuant to Items 2(d) [X]
or 2(e)
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6 Citizenship or place of organization Bermuda
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Number of Sole voting power 536,999
Shares 7
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Beneficially Shared voting power N/A
Owned 8
=================================================================================================
By each Sole dispositive power 536,999
Reporting 9
=================================================================================================
Person Shared dispositive power N/A
with 10
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11 Aggregate amount beneficially owned by each reporting person 536,999
=======================================================================================================================
12 Check box if the aggregate amount in row (11) excludes certain shares* [ ]
=======================================================================================================================
13 Percent of class represented by amount in row (11) 13.3 %
=======================================================================================================================
14 Type of reporting person* HC
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</TABLE>
<PAGE> 3
Page 3 of 8 Pages
The information contained in this statement is as of the date hereof, unless
otherwise expressly provided herein.
ITEM 1. SECURITY AND ISSUER.
This statement relates to the common stock, par value $.33-1/3 per
share (the "Common Stock"), of General Housewares Corp. (the
"Issuer"). The principal executive offices of the Issuer are located
at 1536 Beech Street, Terre Haute, Indiana 47804.
ITEM 2. IDENTITY AND BACKGROUND.
(a) Name:
This statement is filed on behalf of Helen of Troy Limited, a
Bermuda company ("HoT"). The name, business address and
present principal occupation (including the name and address
of the corporation or organization in which such employment
is conducted) of each executive officer and director of HoT
is set forth in Schedule I to this Schedule 13D, which is
incorporated herein by reference.
(b) Address of principal business and principal offices of HoT:
Helen of Troy Limited
6827 Market Street
El Paso, Texas 79915
(c) Present principal business of HoT:
HoT designs, develops and sells a variety of personal care
and comfort products, including hair dryers, curling irons,
brush irons, lighted mirrors, hair setters, hair brushes,
combs, hair accessories, women's shavers, foot baths, body
massagers and artificial finger nails. Most of HoT's products
are sold by mass merchandisers, drug chains, warehouse clubs,
grocery stores and beauty supply retailers and wholesalers.
HoT sells its products primarily in the United States.
(d) During the last five years, neither HoT nor, to its
knowledge, any of its directors or executive officers has
been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) During the last five years HoT was not a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject
to, Federal or State
<PAGE> 4
Page 4 of 8 Pages
securities laws or finding any violation with respect to such
laws, nor, to its knowledge, have any of its directors or
executive officers, other than as noted under "Election of
Directors" in HoT's 1999 Proxy Statement, attached as Exhibit
4 to this Schedule 13D, and incorporated herein by reference.
(f) Citizenship:
All directors and executive officers of HoT are citizens of
the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
All of the shares of Common Stock acquired by HoT, except for 496,999
of the shares acquired on June 18, 1999, were acquired with funds from
HoT's working capital, in the total aggregate amount of $590,025
(includes brokerage commissions).
A total of 496,999 shares of Common Stock acquired by HoT were
acquired with funds provided through HoT's previously existing line of
credit with Chase Bank of Texas, in the total aggregate amount of
$9,964,829.95 (includes brokerage commissions). A copy of such credit
agreement (as amended) is attached as Exhibits 1-3 to this Schedule
13D.
The shares of Common Stock held by Gerald J. Rubin (see Item 5) were
acquired with his personal funds on October 22, 1996, for the total
aggregate amount of $49,062.50 (includes brokerage commissions).
ITEM 4. PURPOSE OF TRANSACTION.
HoT acquired the Common Stock as part of its continuing strategy to
evaluate business opportunities and make investments that might enhance
shareholder value. HoT acknowledges that it might seek to increase its
ownership stake under certain circumstances and is attempting to enter
into discussions with Issuer regarding a possible business combination.
HoT has retained Donaldson, Lufkin & Jenrette as its exclusive
financial advisor in connection with any transaction involving the
Issuer. HoT will continue to review its investment in Issuer and
reserves the right, based on such review, (1) to acquire additional
securities of Issuer, including possibly acquiring the Issuer through a
business combination with HoT or a wholly-owned subsidiary, (2) to
dispose of any or all of the securities purchased by it, or (3) to
otherwise change its intentions with respect to any or all of the
matters referred to in this Item 4.
Gerald J. Rubin acquired the Common Stock for investment purposes
only.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) HoT owns beneficially, and has the sole power to vote or
dispose of, 536,999 shares, or 13.3%, of the outstanding
Common Stock. HoT disclaims the existence of a "group"
with any person as contemplated by Rule 13d-5(b) of the
Act.
<PAGE> 5
Page 5 of 8 Pages
Other than as described below in this Item 5, to HoT's
knowledge, none of the directors or executive officers of
HoT named on Schedule I hereto beneficially owns or has
any power to vote or dispose of any of the shares of
Common Stock of the Issuer.
Gerald J. Rubin beneficially owns and has the sole power
to vote or dispose of, 5,000 shares, or less than 1%, of
the outstanding Common Stock. Gerald J. Rubin disclaims
the existence of a "group" with any person as
contemplated by Rule 13d-5(b) of the Act.
The calculation of percentages of outstanding Common
Stock set forth herein is based upon 4,027,912 shares of
Common Stock outstanding as of May 14, 1999, as reported
by the Issuer in its Form 10-Q for the quarter ended
March 31, 1999.
(c) Commencing on June 4, 1999, HoT acquired the following
shares of Common Stock of the Issuer. All shares of
Common Stock, other than 496,999 shares, were acquired on
the open market. The 496,999 shares shown below as
acquired on June 18, 1999, were purchased in an
after-hours brokerage transaction.
<TABLE>
<CAPTION>
Date No. of Shares Price per Share (1)
- --------------- ------------- -------------------
<S> <C> <C>
June 4, 1999 5,800 $13.9375
June 7, 1999 6,000 14.0000
June 15, 1999 3,000 15.0625
June 16, 1999 6,100 15.0000
June 17, 1999 4,000 15.0000
June 18, 1999 15,100 15.0000
June 18, 1999 496,999 20.0000
</TABLE>
(1) Excludes brokerage commissions.
Gerald J. Rubin has acquired the following shares of
Common Stock of the Issuer. All of the shares were
acquired on the open market.
<TABLE>
<CAPTION>
Date No. of Shares Price per Share (2)
- --------------- ------------- -------------------
<S> <C> <C>
October 22, 1996 5,000 $9.8125
</TABLE>
(2) Includes brokerage commissions.
<PAGE> 6
Page 6 of 8 Pages
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Except for the engagement of Donaldson, Lufkin & Jenrette discussed
above in Item 4, there are no contracts, arrangements, understandings,
agreements or relationships (legal or otherwise) between HoT and any
person with respect to the securities of the Issuer. To HoT's
knowledge, there are no contracts, arrangements, understandings,
agreements or relationships (legal or otherwise) between any of the
individuals named on Schedule I hereto and any person with respect to
the securities of the Issuer.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
Exhibit 1 Loan Agreement, dated December 31, 1996, between Chase Bank
of Texas, National Association, a national banking
association, f/k/a Texas Commerce Bank National Association,
Helen of Troy L.P., a Texas limited partnership, Helen of
Troy Limited, a Bermuda company, and Helen of Troy
Corporation, a Texas corporation.
Exhibit 2 Amendment to Loan Agreement, dated July 31, 1997, between
Chase Bank of Texas, National Association, a national banking
association, f/k/a Texas Commerce Bank National Association,
Helen of Troy L.P., a Texas limited partnership, Helen of
Troy Limited, a Bermuda company, HoT Nevada, Inc., a Nevada
corporation, Helen of Troy Limited, a Barbados corporation,
Helen of Troy Nevada Corporation, a Nevada corporation and
Helen of Troy Texas Corporation, a Texas corporation.
Exhibit 3 Second Amendment to Loan Agreement, dated July 31, 1998,
between Chase Bank of Texas, National Association, a national
banking association, f/k/a Texas Commerce Bank National
Association, Helen of Troy L.P., a Texas limited partnership,
Helen of Troy Limited, a Bermuda company, HoT Nevada, Inc., a
Nevada corporation, Helen of Troy Limited, a Barbados
corporation, Helen of Troy Nevada Corporation, a Nevada
corporation and Helen of Troy Texas Corporation, a Texas
corporation.
Exhibit 4 Helen of Troy Limited 1999 Proxy Statement, originally filed
with the Commission on June 25, 1999.
<PAGE> 7
Page 7 of 8 Pages
SIGNATURE
After reasonable inquiry and to the best of the undersigned's
knowledge and belief, the undersigned certifies that the information set forth
in this statement is true, complete and correct.
Date: June 28, 1999 HELEN OF TROY LIMITED
By: /s/ H. McIntyre Gardner
----------------------------------------
Name: H. McIntyre Gardner
Title: President and Chief Operating Officer
<PAGE> 8
Page 8 of 8 Pages
SCHEDULE I
The name and principal occupation or employment of each of the directors and
executive officers of Helen of Troy Limited are set forth below. Unless
otherwise indicated, the director's or officer's business address is 6827
Market Street, El Paso, Texas 79915. Except as set forth below, each occupation
set forth opposite an individual's name refers to Helen of Troy Limited.
<TABLE>
<CAPTION>
Name Present Principal Occupation or Employment
- ---------------------------------- ------------------------------------------
<S> <C>
Gerald J. Rubin Chairman of the Board and
Chief Executive Officer
H. McIntyre Gardner President and Chief Operating Officer
Dona Fisher Senior Vice-President, Finance and
Chief Financial Officer
Gary B. Abromovitz Director of Helen of Troy Limited
Gary B. Abromovitz, P.C. President of Gary B. Abromovitz, P.C.
213 Montebello
Phoenix, Arizona 85013
Stanlee N. Rubin Director of Helen of Troy Limited
801 River Oaks Drive
El Paso, Texas 79912
Christopher L. Carameros Director of Helen of Troy Limited
L&M Asset Management, Inc. Vice-President of L&M Asset Management, Inc.
Box 12007
El Paso, Texas 79913
Byron H. Rubin Director of Helen of Troy Limited
Daniels & Rubin Partner, Daniels & Rubin
5310 Harvest Hill Road, Suite 169
Dallas, Texas 75230-5805
Daniel C. Montano Director of Helen of Troy Limited
C&K Capital Corp. Managing Director, Investment Banking
18500 Von Karman Ave., Suite 560 of C&K Capital Corp.
Irvine, California 92612
</TABLE>
<PAGE> 9
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
1 Loan Agreement, dated December 31, 1996, between Chase Bank
of Texas, National Association, a national banking
association, f/k/a Texas Commerce Bank National Association,
Helen of Troy L.P., a Texas limited partnership, Helen of
Troy Limited, a Bermuda company, and Helen of Troy
Corporation, a Texas corporation.
2 Amendment to Loan Agreement, dated July 31, 1997, between
Chase Bank of Texas, National Association, a national banking
association, f/k/a Texas Commerce Bank National Association,
Helen of Troy L.P., a Texas limited partnership, Helen of
Troy Limited, a Bermuda company, HoT Nevada, Inc., a Nevada
corporation, Helen of Troy Limited, a Barbados corporation,
Helen of Troy Nevada Corporation, a Nevada corporation and
Helen of Troy Texas Corporation, a Texas corporation.
3 Second Amendment to Loan Agreement, dated July 31, 1998,
between Chase Bank of Texas, National Association, a national
banking association, f/k/a Texas Commerce Bank National
Association, Helen of Troy L.P., a Texas limited partnership,
Helen of Troy Limited, a Bermuda company, HoT Nevada, Inc., a
Nevada corporation, Helen of Troy Limited, a Barbados
corporation, Helen of Troy Nevada Corporation, a Nevada
corporation and Helen of Troy Texas Corporation, a Texas
corporation.
4 Helen of Troy Limited 1999 Proxy Statement, originally filed
with the Commission on June 25, 1999.
</TABLE>
<PAGE> 1
Exhibit 1
LOAN AGREEMENT
between
HELEN OF TROY L.P.
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
dated
December 31, 1996
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<PAGE> 2
LOAN AGREEMENT
THIS LOAN AGREEMENT ("this Agreement"), dated as of December 31, 1996,
is made by and between TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national
banking association ("Lender"), with its principal office at 201 E. Main, El
Paso, Texas 79901, HELEN OF TROY L.P., a Texas limited partnership duly
organized under the laws of the State of Texas, with its principal office at
6827 Market Avenue, El Paso, Texas 79915 ("Borrower"), HELEN OF TROY LIMITED a
company organized under the laws of Bermuda, with its principal office at 6827
Market Avenue, El Paso, Texas 79915 ("Limited"), and HELEN OF TROY CORPORATION,
a Texas corporation, with its principal office at 6827 Market Avenue, El Paso,
Texas 79915 ("HOTC") (Limited and HOTC are collectively referred to herein as
the "Guarantors").
Borrower has requested Lender to provide a revolving line of credit
loan (the "Revolving Credit Loan") up to an aggregate amount not exceeding
$5,000,000.00 at anytime outstanding.
Lender and Borrower desire to set forth the terms pursuant to which
Lender and Borrower have agreed to enter into the Revolving Credit Loan;
NOW, THEREFORE, Lender and Borrower agree as follows:
1. DEFINITIONS
1.01 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"Affiliate" means, at any time, and with respect to any
Person, (a) any other Person that at such time directly or indirectly
through one or more intermediaries Controls, or is Controlled by, or
is under common Control with, such first Person, and (b) any Person
beneficially owning or holding, directly or indirectly, 10% or more of
any class of voting or equity interests of such first Person or any
Subsidiary or such first Person or any corporation of which such first
Person and its Subsidiaries beneficially own or hold, in the
aggregate, directly or indirectly, 10% or more of any class of voting
or equity interests. As used in this definition, "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.
Unless the context otherwise clearly requires, any reference to an
"Affiliate" is a reference to an Affiliate of Limited.
"Agreement" means this Loan Agreement, and all Exhibits
appended hereto, as the same may be from time to time amended,
supplemented or modified.
"Alternate Base Rate" means, for any day, a rate per annum
equal to the Prime Rate in effect on such day. For purposes hereof,
"Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by Texas Commerce Bank National
Association, as its prime rate, and thereafter entered in the minutes
of its Loan and Discount Committee; each change in the Prime Rate
shall be effective on the date such change is
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<PAGE> 3
determined without special notice to the Borrower or any other person
or entity. In the event the Prime Rate ceases to be stated or
designated by Texas Commerce Bank National Association, or any
successor to it, Prime Rate shall mean the rate of interest published
as "Prime Rate" in the "Money Rates" section of The Wall Street
Journal.
The Prime Rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to any customer,
and Lender disclaims any statement, representation or warranty to the
contrary. Any change in the Alternate Base Rate due to a change in the
Prime Rate shall be effective on the effective date of such change in
the Prime Rate.
"Alternate Base Rate Loan" means a loan which bears interest
at a rate determined by reference to the Alternate Base Rate.
"Borrowing" means a borrowing by Borrower consisting of a
loan made by Lender hereunder, each such loan being a "Loan".
"Borrowing Date" means any Business Day on which Lender shall
make a Loan hereunder.
"Board" shall mean the Board of Governors of the Federal
Reserve System of the United States.
"Business Day" means a day (i) on which the Lender and
commercial banks in New York City are generally open for business, and
(ii) with respect to Eurodollar Loans, on which dealings in Dollar
deposits are carried out in the Eurodollar interbank markets.
"Capital Lease" means, at any time, a lease with respect to
which the lessee is required concurrently to recognize the acquisition
of an asset and the incurring of a liability in accordance with GAAP.
"Commitment" means the obligation of Lender to make the
Revolving Credit Loan pursuant to Section 2.
"Commitment Period" means the period of time the Commitment
is in effect, which period shall commence on the Effective Date and,
unless sooner terminated pursuant to the Loan Documents, shall end on
July 31, 1997.
"Consolidated Indebtedness" means all Indebtedness of Limited
and its Subsidiaries, all as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Earnings" means for any period, net
earnings (or loss) after income taxes of Limited and its Subsidiaries
for such period, determined on a consolidated basis in accordance with
GAAP, but not including in such net earnings (or loss) the following:
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<PAGE> 4
(a) any extraordinary gain or loss arising from the
sale of capital assets;
(b) any extraordinary gain or loss arising from any
write-up or write-down of assets;
(c) net earnings of any Person in which Limited or
any Subsidiary shall have an ownership interest other than a
Subsidiary unless such net earnings (or any portion thereof)
shall have actually been received by Limited or such
Subsidiary in the form of cash distributions;
(d) earnings or losses of any Subsidiary accrued
prior to the date it became a Subsidiary;
(e) any portion of the net earnings of any
Subsidiary that by reason of any contract or charter
restriction or applicable law or regulation (or in the good
faith judgment of the Board of Directors of Limited for any
reason) is unavailable for payment of dividends to Limited or
any of its Subsidiaries;
(f) the earnings or losses of any Person acquired by
Limited or any Subsidiary through purchase, merger,
consolidation or otherwise, or the earnings or losses of any
Person substantially all of whose assets have been acquired
by Limited or any of its Subsidiaries, for any period prior
to the date of such acquisition;
(g) any gain arising from the acquisition of any
Securities of Limited or any of its Subsidiaries; and
(h) any other extraordinary gains or losses or any
other gain or loss arising from any event or transaction that
is unusual in nature and infrequent in occurrence (but which
otherwise does not constitute an extraordinary item under
GAAP) and which GAAP requires to be reported as a separate
component of revenues and expenses from continuing
operations.
The above determination of net earnings (or loss) shall be
made without giving effect to any allocation thereof to any minority
interest in respect of Limited or any of its Subsidiaries.
"Consolidated Net Worth" means, at any time, shareholders'
equity of Limited as set forth in its consolidated balance sheet,
determined in accordance with GAAP.
"Consolidated Total Capitalization" means, at any time,
Consolidated Net Worth plus Consolidated Indebtedness.
"Contingent Obligation" means as to any Person, any
obligation of such Person guaranteeing, or in effect guaranteeing any
indebtedness, leases, dividends or other obligations ("Primary
Obligations") of any other Person (the "Primary Obligor") in any
manner, whether directly or indirectly, including, without limitation,
any obligation of such
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<PAGE> 5
Person, (a) to advance or supply funds (i) for the purchase or payment
of any such Primary Obligation, or (ii) to maintain working capital or
equity capital for the Primary Obligor, or otherwise to maintain the
net worth or solvency of the Primary Obligor, (b) to purchase
property, securities or services primarily for the purpose of assuring
the owner of any such Primary Obligation of the ability of the Primary
Obligor to make payment of such Primary Obligation, or (c) otherwise
to assure the owner of such Primary Obligation against loss in respect
thereof; provided, however, that the term Contingent Obligation shall
not include endorsements of instruments for deposit or collection in
the ordinary course of business, or Borrower's guaranteeing of the
Primary Obligations of any Subsidiary.
"Contractual Obligation" means as to any Person, any
provision of any security issued by such Person, or of any mortgage,
indenture, lease, contract or other agreement, instrument or
undertaking to which such Person is or purports to be a party or by
which it or any of its property is or purports to be bound.
"Default" means any Event of Default (as defined herein),
whether or not any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Default Rate" means a rate per annum equal to the lesser of
(a) eighteen percent (18.00%), or (b) the Highest Lawful Rate, which
interest shall be due and payable on demand.
"Effective Date" means the date of this Agreement.
"Eurodollar Lending Office" means the office of Texas
Commerce Bank National Association located at 712 Main Street,
Houston, Texas, or such other office of said Bank as the said Bank may
from time to time specify to Borrower.
"Eurodollar Loan" means a Loan which bears interest at a rate
determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means, for each Eurodollar Loan, an
interest rate per annum determined by dividing (i) the rate per annum
determined by Texas Commerce Bank National Association at or before
10:00 a.m. (Houston time) (or as soon thereafter as practicable) two
(2) Business Days before the first day of the applicable Interest
Period to be the rate per annum at which deposits of dollars are
offered to Texas Commerce Bank National Association by prime banks in
whatever Eurodollar interbank market may be selected by the said Bank
in its sole discretion, acting in good faith, at the time of
determination and in accordance with the usual practice in such market
for delivery on the first day of such Interest Period in immediately
available funds and for a period equal to such Interest Period and in
an amount substantially equal to the amount of the said Bank's
Eurodollar Loan during such Interest Period, by (ii) Statutory
Reserves.
"Event of Default" means any of the events specified in
Section 9 hereof.
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<PAGE> 6
"Generally Accepted Accounting Principles" means generally
accepted accounting principles as applied to businesses of this nature
and the official interpretations thereof by the Financial Accounting
Standards Board in effect from time to time. All accounting terms
herein and not otherwise defined shall have the meanings given them in
accordance with generally accepted accounting principles.
"Governmental Authority" means the United States Government,
any state or other political subdivision thereof, and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled (through stock or
capital ownership or otherwise) by the foregoing.
"Guarantor's Guaranty" means the continuing guaranty
agreement by which each Guarantor unconditionally guarantees payment
of the Note.
"Guaranty" means, with respect to any Person, any obligation
(except the endorsement in the ordinary course of business of
negotiable instruments for deposit or collection) of such Person
guaranteeing or in effect guaranteeing any indebtedness, dividend or
other obligation of any other Person in any manner, whether directly
or indirectly, including (without limitation) obligations incurred
through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or
any property constituting security therefor;
(b) to advance or supply funds (i) for the purchase
or payment of such indebtedness or obligation, or (ii) to
maintain any working capital or other balance sheet condition
or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase
or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or
services primarily for the purpose of assuring the owner of
such indebtedness or obligation of the ability of any other
Person to make payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of such
indebtedness or obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the
obligor under any Guaranty, the indebtedness or other obligations that
are the subject of such Guaranty shall be assumed to be direct
obligations of such obligor.
"Highest Lawful Rate" means the maximum nonusurious contract
interest rate permitted from time to time to be contracted for, taken,
reserved, charged or received on any Loan under applicable federal or
Texas laws, whichever permits the higher lawful rate; provided,
however, that in the event (i) such maximum nonusurious interest rate
shall, at any
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<PAGE> 7
time or times during the term of a Loan evidenced hereby, be reduced
to a rate less than the maximum non-usurious contract rate in effect
on the date of such Loan, and (ii) applicable law permits contracting
for, taking, reserving, charging and receiving on such Loan throughout
the duration thereof the maximum nonusurious contract rate in effect
on the date such Loan was made, then and at all such times the Highest
Lawful Rate shall be the maximum nonusurious contract rate permitted
to be contracted for, taken, reserved, charged or received on such
Loan under applicable law in effect on the date of such Loan. At all
such times, if any, as Texas law shall establish the Highest Lawful
Rate, it shall be the "indicated rate ceiling" (as defined in Tex.
Rev. Civ. Stat. art. 5069-1.04) from time to time in effect.
"Indebtedness" with respect to any Person means, at any time,
without duplication,
(a) its liabilities for borrowed money and its
redemption obligations in respect of mandatorily redeemable
Preferred Stock;
(b) its liabilities for the deferred purchase price
of property acquired by such Person (excluding accounts
payable arising in the ordinary course of business but
including all liabilities created or arising under any
conditional sale or other title retention agreement with
respect to any such property);
(c) all liabilities appearing on its balance sheet
in accordance with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by
any Lien with respect to any property owned by such Person
(whether or not it has assumed or otherwise become liable for
such liabilities);
(e) all its liabilities in respect of letters of
credit or instruments serving a similar function issued or
accepted for its account by banks and other financial
institutions (whether or not representing obligations for
borrowed money);
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to
liabilities of a type described in any of clauses (a) through
(f) hereof.
Indebtedness of any Person shall include all obligations of such
Person of the character described in clauses (a) through (g) to the
extent such Person remains legally liable in respect thereof
notwithstanding that any such obligation is deemed to be extinguished
under GAAP.
"Interest Period" means, with respect to any Loan, the period
commencing on the Borrowing Date and ending on the Maturity Date,
consistent with the following provisions. The duration of each
Interest Period shall be:
(a) in the case of an Alternate Base Rate Loan, a
period of up to 90 days; and
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(b) in the case of a Eurodollar Loan, two (2) weeks,
one (1) month, three (3) months, or six (6) months;
in each case as selected by Borrower and agreed to by Lender.
Borrower's choice of Interest Period shall also be subject to the
following limitations:
(c) no Interest Period shall end on a date after the
Termination Date of the Note; and
(d) if the last day of an Interest Period would be a
day other than a Business Day, the Interest Period shall end
on the next succeeding Business Day (unless the Interest
Period relates to a Eurodollar Loan and the next succeeding
Business Day is in a different calendar month than the day on
which the Interest Period would otherwise end, in which case
the Interest Period shall end on the next preceding Business
Day); and
(e) there shall not be more than seven (7) Interest
Periods in effect at any one time.
"Lien" means, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance, or any
interest or title of any vendor, lessor, lender or other secured party
to or of such Person under any conditional sale or other title
retention agreement or Capital Lease, upon or with respect to any
property or asset of such Person (including in the case of stock,
stockholder agreements, voting trust agreements and all similar
arrangements).
"Loan Documents" means, as in effect at anytime, this
Agreement, the Note (including all renewals, extensions and
rearrangements thereof), together with all other instruments executed
(i) pursuant to this Agreement or in connection with it, and (ii) any
other document reasonably required by Lender in connection with this
Agreement.
"Revolving Credit Loan Note" means the promissory note of
Borrower executed and delivered under Section 2.02 hereof, including
any and all renewals, modifications, extensions or rearrangements
thereto.
"Maturity Date" means, with respect to any Loan, the maturity
date agreed to by Lender and Borrower with respect to such Loan as the
date when such Loan is due and payable. In no event shall any Maturity
Date fall on a date after the Termination Date.
"Note" shall mean the Revolving Credit Loan Note in the
original principal amount of $5,000,000.00.
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"Person" means any natural person, partnership, association,
joint venture, corporation (which shall include any business trust),
bank, trust, unincorporated organization and/or any government, agency
or political subdivision thereof.
"Preferred Stock" means any class of capital stock of a
corporation that is preferred over any other class of capital stock of
such corporation as to the payment of dividends or the payment of any
amount upon liquidation or dissolution of such corporation.
"Requirement of Law" means as to any Person, the Articles of
Incorporation and Bylaws, or other organizational or governing
documents of such Person, and any law, rule or regulation, or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon, or purporting
to be applicable to or binding upon, such Person or any of its assets
or to which such Person or any of its assets is or purports to be
subject.
"Statutory Reserves" shall mean 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 as a decimal
established by the Board and any other banking authority to which
Lender or Texas Commerce Bank National Association are subject with
respect to the Eurodollar Rate, for Eurocurrency Liabilities (as
defined in Regulation D of the Board). 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 any bank under
such Regulation D. Statutory Reserves shall be adjusted automatically
on and as of the effective date of any change in any reserve
percentage.
"Stock" means and includes any and all shares, interests,
participations or other equivalents (howsoever designated) of
corporate stock.
"Subsidiary" means, as to any Person, any corporation,
association or other business entity in which such Person or one or
more of its Subsidiaries or such Person and one or more of its
Subsidiaries owns sufficient equity or Voting Stock to enable it or
them (as a group) ordinarily, in the absence of contingencies, to
elect a majority of the directors (or Persons performing similar
functions) of such entity, and any partnership or joint venture if
more than a 50% interest in the profits or capital thereof is owned by
such Person or one or more of its Subsidiaries or such Person and one
or more of its Subsidiaries (unless such partnership can and does
ordinarily take major business actions without the prior approval of
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such Person or one or more of its Subsidiaries). Unless the context
otherwise clearly requires, any reference to a "Subsidiary" is a
reference to a Subsidiary of Limited and, in any event, includes HOTC,
Borrower and HOT-Barbados.
"Swaps" means, with respect to any Person, payment
obligations with respect to interest rate swaps, currency swaps and
similar obligations obligating such Person to make payments, whether
periodically or upon the happening of a contingency. For the purposes
of this Agreement, the amount of the obligation under any Swap shall
be the amount determined in respect thereof as of the end of the then
most recently ended fiscal quarter of such Person, based on the
assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating
to such Swap provides for the netting of amounts payable by and to
such Person thereunder or if any such agreement provides for the
simultaneous payment of amounts by and to such Person, then in each
such case, the amount of such obligation shall be the net amount so
determined.
"Termination Date" means a final scheduled maturity date of
July 31, 1997.
"Voting Stock" shall mean securities or other equity
interests of any class or classes, the holders of which are
ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or persons performing similar
functions in the case of business entities other than corporations).
1.02 Other Definitions.
All terms defined in this Agreement shall have the defined meanings
when used in the Note or any certificate or other document made or delivered
pursuant hereto.
As used herein and in the Note, any certificate or other document made
or delivered pursuant hereto, accounting terms not defined in Section 1.01, and
accounting terms partly defined in Section 1.01, to the extent not defined,
shall have the respective meanings given to them under generally accepted
accounting principles.
The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
2. AMOUNT AND TERMS OF REVOLVING CREDIT LOAN
2.01 Revolving Credit Loan Commitment. Subject to the terms
and conditions and relying upon the representations and warranties set forth in
this Agreement, Lender agrees to lend hereunder to Borrower on any one or more
Business Days during the Commitment Period, for the purpose of providing
working capital and for general corporate purposes, amounts which shall
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not at anytime exceed in the principal sum of $5,000,000.00 less the aggregate
unpaid principal amount of all Loans, and the aggregate amount of all Letters
of Credit issued by Lender pursuant to this Agreement, which are outstanding on
the Business Day on which such borrowing is to be made.
To the extent the unpaid principal balance of the Revolving Credit
Loan shall at anytime exceed the amount permitted above, payment in an amount
necessary to reduce the unpaid principal balance of the Note to the lesser of
the amount permitted under this Section, shall be made within two (2) Business
Days.
During the Commitment Period, Borrower may use the Revolving Credit
Loan by borrowing, prepaying as herein provided, and reborrowing; provided,
however, Borrower must be in full compliance with all of the terms of the Loan
Documents at the time of and as a prerequisite to any Loan.
Lender's records shall serve as presumptive evidence of any and all
amounts outstanding under the Revolving Credit Loan.
2.01.1 Letters of Credit. In the event that during the
Commitment Period Lender shall agree to issue on Borrower's account letters of
credit ("Letters of Credit"), as defined in Chapter 5 of the Texas Uniform
Commercial Code - Letters of Credit, then Borrower agrees as aforesaid that (i)
the available principal balance of the Revolving Credit Loan shall be reduced
by the aggregate amount of all Letters of Credit outstanding from time to time;
(ii) outstanding Letters of Credit shall never exceed in the aggregate at any
time the sum of $3,000,000.00, and (iii) no Letter of Credit shall have an
expiry date later than July 31, 1997.
Borrower agrees to pay to Lender all customary charges for issuing
Letters of Credit, and Borrower further agrees that should Lender be required
to fund all or any part of any Letter of Credit on behalf of Borrower, any such
funding shall be simultaneously charged to the Revolving Credit Loan, subject
to all of the terms and conditions of this Agreement.
2.02 Revolving Credit Loan Note. The Revolving Credit Loan
shall be evidenced by the Revolving Credit Loan Note in the principal sum of
$5,000,000.00, dated as of the Effective Date, executed and delivered by
Borrower, payable to the order of Lender, in the form appended hereto as
Exhibit "A". The Termination Date of the Revolving Credit Loan Note shall be
July 31, 1997.
Loans made by Lender under the terms of the Revolving Credit Loan Note
may be either Alternate Base Rate Loans, or two (2) week, one (1) month, three
(3) month, or six (6) month Eurodollar Loans.
Borrower shall pay interest on each Alternate Base Rate Loan for the
Interest Period with respect thereto at a rate per annum equal to the lesser of
(i) the Alternate Base Rate for such Interest Period, or (ii) the Highest
Lawful Rate, which interest shall be due and payable on March 31, 1997, June
30, 1997, and on the Termination Date.
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Borrower shall pay interest on each Eurodollar Loan for the Interest
Period with respect thereto on the unpaid principal amount thereof at a rate
per annum equal to the lesser of (i) the Eurodollar Rate plus one percent
(1.00%) (the "Effective Eurodollar Rate"), or (ii) the Highest Lawful Rate,
which interest shall be due and payable on March 31, 1997, June 30, 1997, and
on the Termination Date.
If not sooner paid, the entire unpaid principal of, and all accrued,
unpaid interest on, the Revolving Credit Loan Note shall be due and payable on
July 31, 1997.
2.03 Notice for Revolving Credit Loan Borrowing. Any Loan
which Lender agrees in its sole discretion to make under the Note shall be made
(a) in the case of Eurodollar Loans, on the Borrower's irrevocable notice given
to Lender not later than 10:00 a.m. (Houston time) on the third Business Day
prior to the proposed Borrowing Date, or, (b) in the case of Alternate Base
Rate Loans, on the Borrower's irrevocable notice given to Lender not later than
3:00 p.m. (El Paso time) on the first Business Day prior to the proposed
Borrowing Date. Each such notice of a requested borrowing (a "Notice of
Requested Borrowing") may be oral or in writing, and shall specify (i) the
requested amount of such Loan, (ii) the proposed Borrowing Date, (iii) whether
the requested Loan is to be Alternate Base Rate Loan or a Eurodollar Loan, (iv)
if a Eurodollar Loan, whether it is a two (2) week, one (1) month, three (3)
month, or six (6) month Eurodollar Loan, and (v) the Interest Period for such
Loan. If any Notice of Requested Borrowing shall be oral, Borrower shall
deliver to Lender prior to the Borrowing Date a confirmatory written Notice of
Requested Borrowing.
2.04 Payments. All payments (whether of principal, interest,
reimbursements or otherwise) by or on behalf of Borrower shall be made, in
immediately available funds, at the principal office of Lender without set-off,
deduction or counterclaim. If received prior to 2:00 p.m. (El Paso time),
payments shall be credited on the day of receipt, or if received after 2:00
p.m., payments shall be credited on the next Business Day after receipt by
Lender, and shall be applied first to interest accrued to the date of payment,
and the balance, if any, to the unpaid principal thereof.
Except as is otherwise provided herein with respect to Eurodollar
Loans, if the due date of any payment falls on a day which is not a Business
Day, such date shall be extended to the next succeeding full Business Day and
interest shall be payable for any principal so extended for the period of such
extension.
2.05 Prepayments. Borrower may, at its option, on any
Business Day, prepay the outstanding principal amount of any Alternate Base
Rate Loan, in whole or in part, together with accrued interest to the date of
such prepayment on the principal amount prepaid.
Except as specified in this Section 2.05, Borrower shall have no right
to prepay any Loan.
2.06 Past Due Amounts. Any amount not paid when due with
respect to the principal of a Loan (whether at the Termination Date, by
acceleration or otherwise), costs or expenses, or, to the extent permitted by
applicable law, interest, shall bear interest at the Default Rate. The
principal of any Loan shall be deemed past due if not paid on or before the
expiration of ten (10) days after the Maturity Date or any earlier maturity
date resulting from acceleration in
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accordance with the terms of the Note evidencing such Loan or as provided by
law or otherwise. Interest accrued and unpaid with respect to any Loan shall be
deemed past due if not paid on or before the expiration of ten (10) days after
the applicable interest payment date as provided in such Note.
2.07 Set-off. In the event Borrower shall fail to pay any sum
due under the terms of this Agreement or the Note, which failure shall
constitute one or more Events of Default hereunder, Lender shall have the
right, in addition to all other rights and remedies available to it, to
set-off, to the extent permitted by applicable law, against the unpaid balance
of any note held by it or any debt owing to Borrower, HOTC or Limited,
including, without limitation, any funds in any deposit account, whether
general or special in nature, maintained by Borrower, HOTC, or Limited with
Lender, and nothing in this Agreement shall be deemed any waiver or prohibition
of any depository's right or banker's lien or set-off.
3. INTEREST; FEES
3.01 Interest. Interest with respect to Alternate Base Rate
Loans and Eurodollars Loans shall be calculated on the basis of a 360 day year
for the actual days elapsed, unless such calculation would result in a usurious
rate, in which case such interest shall be calculated on the basis of a 365 day
or 366 day year, as the case may be.
3.02 Usury; Non-Usurious Interest. Lender and Borrower intend
in the execution of the Loan Documents to contract in strict compliance with
applicable usury laws. Lender and Borrower therefore stipulate and agree that
none of the terms and provisions contained in this Agreement, or in the Loan
Documents, shall ever be construed to create a contract to pay for the use,
forbearance, or detention of money, or interest at a rate in excess of the
Highest Lawful Rate. Accordingly, it is agreed that (i) the aggregate of all
interest, and other charges and fees constituting interest under applicable
laws, contracted for, chargeable, receivable or reserved under the Loan
Documents or otherwise in connection with this loan transaction, shall never
exceed that which would accrue on the outstanding principal balance of the
Revolving Credit Loan at the Highest Lawful Rate, and (ii) no provision of the
Loan Documents, or any other instrument relating to the Revolving Credit Loan,
shall require the payment or permit the charging, receipt, collection or
reserving of interest in excess of that which would accrue at the Highest
Lawful Rate. If any such excess is, or is adjudicated to be, so provided for,
it shall be deemed a mistake and the provisions of this Section 3.02 shall
govern, and neither Borrower, nor any guarantors, endorsers or other parties
now or hereafter becoming liable for payment of the Note, nor their heirs,
personal representatives, successors or assigns, shall be contractually
obligated to pay such excess, nor shall Lender be permitted to contract for,
charge, receive, collect or reserve such excess, and this Loan Agreement and
the Loan Documents shall automatically be reformed so as to permit only the
charge for and collection of the amount of non-usurious interest allowed under
applicable usury laws. The Highest Lawful Rate shall be computed from the date
Loan funds are disbursed to Borrower for its account, and interest shall, to
the full extent permitted by applicable law, be amortized, prorated, allocated
and spread over the full term of the Note, that is, from the Effective Date
until the Maturity Date, to the extent permitted by applicable law.
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Any interest in excess of that which accrues at the Highest Lawful
Rate shall be canceled automatically, and if theretofore paid, shall at
Lender's option, be either refunded to Borrower or credited on the unpaid
principal amount of the Revolving Credit Loan.
For purposes of this Section 3, "interest" shall include, if and to
the extent characterized as interest under applicable law, any charge, payment,
fee or obligation characterized as interest under applicable laws.
4. CONDITIONS OF LENDING
4.01 Conditions Precedent. The obligation of Lender to make
the initial advance constituting a Loan hereunder on the first Borrowing Date
is subject to the receipt by Lender of the following documents, each of which
shall be satisfactory in form and substance to Lender, and the satisfaction of
the following conditions precedent:
(a) Note. Lender shall have received the Note, conforming to
the requirements hereof, duly completed and executed.
(b) Resolutions and Certificates. Lender shall have received,
prior to the execution of the Loan Documents (i) appropriate
resolutions from Borrower evidencing that the partners of Borrower
have authorized execution and delivery of this Agreement and all
instruments contemplated hereby, (ii) appropriate resolutions from
Guarantors evidencing that the Board of Directors or shareholders of
Guarantors, as applicable, have authorized execution and delivery of
this Agreement, the Guarantors' Guaranties, and all instruments
contemplated hereby, (iii) the Articles of Incorporation and Bylaws of
each Guarantor, and a Certificate of Limited Partnership of Borrower
from the State of Texas confirming the existence and good standing of
each Guarantor and Borrower, respectively, and (iv) if applicable, a
certificate of assumed name duly filed as required by law.
(c) Guarantors' Guaranty. Lender shall have received the
Guarantors' Guaranties in form and substance acceptable to the Lender.
(d) Opinion of Counsel. If required by Lender, Lender shall
have received a legal opinion from Borrower's legal counsel opining as
to due organization, existence, good standing and authority of
Borrower and each Guarantor, due authority of the Person or Persons
executing the Loan Documents on behalf of Borrower and each Guarantor,
the enforceability, validity and binding effect of the Loan Documents
to be executed by Borrower and/or each Guarantor, and such other
matters as Lender may reasonably require.
(e) Additional Matters. Such other documents as reasonably
requested by Lender, each duly completed and executed. All documents
and legal matters in connection with the transactions contemplated by
this Agreement shall be satisfactory in form and substance to Lender
and its counsel.
4.02 Conditions to All Loans. The obligation of Lender to
make any Loan under the Revolving Credit Loan is subject to the satisfaction
concurrently with the making of such Loan of the following conditions
precedent:
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(a) Representations and Warranties. The representations and
warranties contained in Section 5 hereof, or which are contained in
any certificate, document or financial or other statement furnished at
anytime under or in connection herewith, shall be materially true and
correct on and as of the Borrowing Date for such Loan as if made on
and as of such date.
(b) No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing on such date, or after
giving effect to the advance to be made on such Borrowing Date unless,
in the case of a Default other than (i) failure to pay the Note as and
when due, (ii) failure to give any notice required in Section 7.05
hereof, and (iii) failure to comply with the negative covenants set
forth in Section 8 hereof (for which no notice or opportunity to cure
is required to be given or is allowed, as the case may be) Borrower
has commenced in good faith to cure any such Default in a manner
reasonably acceptable to Lender.
(c) Delivery of Waived Items. Lender shall have received any
items or documents which were to have been delivered to Lender on or
before the initial funding of the Revolving Credit Loan, the delivery
of which was waived by Lender at the time of the initial funding of
the Revolving Credit Loan.
(d) Approvals. The business and operations of Borrower as
conducted at all times relevant to the transactions contemplated by
this Agreement to and including the close of business on the date of
each advance hereunder shall have been and shall be in compliance with
all applicable laws, regulations and orders of any Governmental
Authority affecting Borrower and its business and operations.
(e) Commitment Fees. All commitment fees, if any, billed to
Borrower pursuant to this Agreement have been paid in full.
5. REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Agreement and to make the
Revolving Credit Loan, Borrower and each Guarantor jointly and severally
represent and warrant, as of the date hereof, and as of the date of each
advance under the Revolving Credit Loan or any renewal thereof, that:
5.01 Corporate Existence; Compliance with Law.
5.01.1 Borrower is (a) a Texas limited partnership which is
duly organized, validly existing and in good standing; (b) has the
power, authority and legal right to own or lease and operate its
property and to conduct the business in which it is currently engaged;
and (c) is in compliance with all material Requirements of Law,
including, without limitation, all Requirements of Law necessary for
the operation of Borrower's business. Borrower is duly qualified to do
business and is in good standing in all jurisdictions wherein the
character of property it owns or the nature of the business it
transacts makes such qualification necessary.
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5.01.2 Limited is (a) a Bermuda corporation which is duly
organized, validly existing and in good standing; (b) has the
corporate power, authority and legal right to own or lease and operate
its property and to conduct the business in which it is currently
engaged; and (c) is in compliance with all material Requirements of
Law, including, without limitation, all Requirements of Law necessary
for the operation of Limited's business. Limited is duly qualified to
do business as a foreign corporation and is in good standing in all
jurisdictions wherein the character of property it owns or the nature
of the business it transacts makes such qualification necessary.
5.01.3 HOTC is (a) a Texas corporation which is duly
organized, validly existing and in good standing; (b) has the power,
authority and legal right to own or lease and operate its property and
to conduct the business in which it is currently engaged; and (c) is
in compliance with all material Requirements of Law, including,
without limitation, all Requirements of Law necessary for the
operation of HOTC's business. HOTC is duly qualified to do business
and is in good standing in all jurisdictions wherein the character of
property it owns or the nature of the business it transacts makes such
qualification necessary.
5.02 Authority; Authorization; Enforceable Obligations.
5.02.1 Borrower has the power, authority and legal right to
make, deliver and perform this Agreement and the Loan Documents and to
borrow hereunder and has taken all necessary action to authorize the
borrowings on the terms and conditions of this Agreement and the Loan
Documents and to authorize the execution, delivery and performance of
this Agreement and the Loan Documents. No further consent of any other
Person (including partners and creditors of Borrower), and no further
authorization of, notice to, or other act by or in respect of any
Governmental Authority, is required in connection with the borrowings
hereunder or with the execution, delivery, performance, validity or
enforceability of this Agreement or the Loan Documents. This Agreement
has been, and the Note will be, duly executed and delivered on behalf
of Borrower, and this Agreement constitutes, and each of the Loan
Documents when executed and delivered will constitute, a legal valid
and binding obligation of Borrower enforceable against Borrower
substantially in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors'
rights generally.
5.02.2 Each Guarantor has the corporate power, authority and
legal right to make, deliver and perform this Agreement and such
Guarantor's Guaranty and has taken all necessary corporate action to
authorize the guarantee of the Revolving Credit Loan on the terms and
conditions of this Agreement and its Guaranty and to authorize the
execution, delivery and performance of this Agreement and its
Guaranty. No further consent of any other Person (including
stockholders and creditors of either Guarantor), and no further
authorization of, notice to, or other act by or in respect of any
Governmental Authority, is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement or
the Guaranties. This Agreement has been duly executed and delivered on
behalf of each Guarantor, and this Agreement constitutes, and each
Guarantor's Guaranty when executed and delivered will constitute, a
legal valid and binding obligation of such
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Guarantor enforceable against such Guarantor substantially in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally.
5.03 No Legal Bar. The execution, delivery and performance of
this Agreement and the Loan Documents, and the use of the proceeds of the
borrowings hereunder, will not violate any Requirement of Law or any
Contractual Obligation of Borrower or either Guarantor, and will not result in,
or require, the creation or imposition of any Lien on any of their respective
properties or revenues pursuant to any Requirement of Law or Contractual
Obligation.
5.04 No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of Borrower, Limited or HOTC overtly threatened against
Borrower, Limited or HOTC or any of their respective properties or revenues
with respect to this Agreement or the Loan Documents or any of the transactions
contemplated hereby, which involve the probability of any judgment or liability
not adequately covered by insurance and which, if adversely determined, could
result in any material adverse change in the business, operations, properties,
or financial or other condition of Borrower, Limited or HOTC.
5.05 No Default. Neither Borrower, Limited or HOTC is in
Default under, or with respect to, any Contractual Obligation in any respect
which could be materially adverse to the business, operations, property or
financial or other condition of such party, or which could materially adversely
affect the ability of such party to perform its obligations under this
Agreement and the Loan Documents. None of the execution of and delivery of the
Loan Documents, the consummation of the transactions therein contemplated, and
compliance with the terms and provisions thereof, will conflict with or result
in a breach of, or require any consent (not theretofore obtained at the time
the representation is made) under, applicable law or regulation, or any order,
writ, injunction or decree of any court or Governmental Authority, or any
agreement to which the Borrower, Limited or HOTC is a party or by which it is
bound, or to which it is subject.
5.06 No Burdensome Restrictions. No Contractual Obligation of
Borrower, Limited or HOTC and no Requirement of Law materially adversely
affects, or insofar as Borrower, Limited or HOTC may reasonably foresee may so
affect, the business, operations, property or financial or other condition of
Borrower, Limited or HOTC.
5.07 Taxes. Each of the Borrower and Guarantors has filed all
material tax returns which, to their knowledge, are required to be filed with
any domestic or foreign Governmental Authority, and has paid all taxes shown on
said returns and all assessments which are due, except such taxes the payment
of which is not yet due, or which if due, is not yet delinquent or is being
contested in good faith by appropriate proceedings or which has not been
finally determined. Except as reported in Guarantors' financial statements,
Guarantors know of no claims by any Governmental Authority for any unpaid
taxes, and the charges, accruals and reserves on the books of Guarantors in
respect of all taxes and other governmental charges are, in the opinion of
Guarantors, adequate in all respects.
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5.08 Purpose of Loans. Borrower does not own any "margin
stock" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (hereinafter called "margin stock"). None of the
proceeds of the Revolving Credit Loan will be used for the purpose of
purchasing or carrying any margin stock or for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry a
margin stock or for any other purpose which might make this transaction a
"purpose" credit within the meaning of said Regulation U, as now in effect or
as it may hereafter be amended. Neither Borrower, nor any agent acting on its
behalf, has taken or will take any action which might cause this Agreement or
the Note to violate Regulation U, Regulation T or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the Securities
Exchange Act of 1934, as in effect now or as the same may hereafter be in
effect on the date of the Revolving Credit Loan.
5.09 Trade Names. Borrower and each Guarantor have all
licenses, permits, patents, patent rights, trademark rights, trade names, trade
name rights, and copyrights which are required in order for them to conduct
their business as now conducted without known material conflict with the rights
of others.
5.10 Investment Company Act. Borrower to the best of its
knowledge is not, and to the best of its knowledge 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.
6. COLLATERAL SECURITY. The Loan is unsecured, but is guaranteed by
Continuing Guaranty Agreements executed by Guarantors.
7. AFFIRMATIVE COVENANTS
Borrower and each Guarantor covenant and agree that so long as this
Agreement, or any renewal, extension or modification hereof, remains in effect,
or any Note remains outstanding and unpaid, or any Liabilities are owing to
Lender, Borrower shall:
7.01 Financial Statements; Reports. Deliver to Lender:
(a) Borrower's Financial Statements. As soon as
available, and in any event (i) within forty-five (45) days after the
end of each of the first three (3) quarters of Borrower's fiscal year,
a quarterly unaudited balance sheet and income statement prepared by
Borrower, and (ii) annually within ninety (90) days after the end of
each fiscal year, Borrower's annual unaudited balance sheet and income
statement prepared by Borrower. The balance sheets and income
statements shall present the separate results of operations (including
investments in Subsidiaries on a cost basis) for Borrower for the
period covered, and Borrower's financial condition as of the end of
such period in a manner consistent with the Borrower's prior unaudited
balance sheets and income statements. Each balance sheet and income
statement shall be certified as such by the General Partner or Chief
Financial Officer of Borrower. The unaudited balance sheets and income
statements need not be prepared in accordance with Generally Accepted
Accounting Principles, so long as they are prepared in a manner
consistent with prior balance sheets and income statements delivered
to the Bank.
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<PAGE> 19
(b) Financial Statements of Limited. As soon as
available, and in any event (i) within forty-five (45) days after the
end of each of the first three (3) quarters of Limited's fiscal year,
quarterly unaudited financial statements showing Limited's financial
condition and the results of its operations for each such quarter, and
(ii) annually within ninety (90) days after the end of each fiscal
year, Limited's audited financial statement at the end of and for the
entire fiscal year. Such statements shall be on a consolidated basis
and fairly present the result of Limited's operations for the period
covered and Limited's financial condition as of the end of such period
in accordance with Generally Accepted Accounting Principles
consistently applied. Each quarterly financial statement shall be
certified as such by the President or Chief Financial Officer of
Limited, and each annual statement shall be accompanied by (i) a
report of independent certified public accountants acceptable to
Lender, which report will not be qualified by reason of any audit
limitations imposed by Limited, and, if required by Lender, (ii) a
so-called "Management Letter" to Lender commenting on any accounting
or financial deficiencies.
Each quarterly financial statement shall set forth
Limited's quarterly and year-to-date balance sheet and income
statement prepared in accordance with Generally Accepted Accounting
Principles consistently applied on a comparative basis.
(c) Financial Statements of HOTC. As soon as
available, and in any event (i) within forty-five (45) days after the
end of each of the first three (3) quarters of HOTC's fiscal year, a
quarterly unaudited balance sheet and income statement prepared by
HOTC, and (ii) annually within ninety (90) days after the end of each
fiscal year, HOTC's annual unaudited balance sheet and income
statement prepared by HOTC. The balance sheets and income statements
shall present the separate results of operations (including
investments in Subsidiaries on a cost basis) for HOTC for the period
covered, and HOTC's financial condition as of the end of such period
in a manner consistent with the HOTC's prior unaudited balance sheets
and income statements. Each balance sheet and income statement shall
be certified as such by the President or Chief Financial Officer of
HOTC. The unaudited balance sheets and income statements need not be
prepared in accordance with Generally Accepted Accounting Principles,
so long as they are prepared in a manner consistent with prior balance
sheets and income statements delivered to the Bank.
(d) SEC Reports. Together with each delivery of each
financial statement, a copy of all reports with or submitted to the
Securities and Exchange Commission by Borrower, Limited, or HOTC
during the period covered by such financial statement, including,
without limitation, Form 10-K -- Annual Report, and Form 10-Q --
Quarterly Report;
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<PAGE> 20
(e) Compliance Report. Together with each delivery
of each financial statement, a certificate from Borrower's General
Partner or Chief Financial Officer stating that (x) there exists no
Event of Default or, if the same has occurred, stating the nature
thereof, the period of existence thereof and what action Borrower has
taken and proposes to take with respect thereto, and (y) that no
Default (as defined in the Loan Agreement) exists with respect to the
payment of any debt of Borrower, any Affiliate, or, if the same has
occurred, stating the nature thereof, the period of existence thereof
and what action Borrower, or such Affiliate has taken or proposed to
take with respect thereto.
7.02 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, or in
accordance with a plan of arrangement, as the case may be, all its debt and
other obligations of whatever nature, except when the amount or validity
thereof is currently being contested in good faith and by appropriate
proceedings, or, when the amount involved exceeds the sum of $500,000.00,
Lender has been furnished with a certificate of Borrower's Chief Financial
Officer stating that Borrower has a bona fide defense to the debt being
contested and that Borrower is contesting such indebtedness in good faith.
7.03 Conduct of Business and Maintenance of Existence.
Continue to engage in business of the same general type as now conducted by it,
and preserve, renew and keep in full force and maintain all rights, privileges
and franchises necessary or desirable in the normal conduct of its business;
comply with all Contractual Obligations and Requirements of Law except to the
extent that the failure to comply therewith could not, in the aggregate, have a
material adverse effect on the business, operations, property or financial or
other condition of Borrower.
7.04 Inspection of Books and Records; Discussions. Keep
proper books of records and accounts in which full, true and correct entries in
conformity with generally accepted accounting principles, and all Requirements
of Law, shall be made of all dealings and transactions in relation to their
respective business and activities; and permit representatives of Lender, upon
reasonable advance notice, to visit and inspect any of its books and records at
any reasonable time and as often as may reasonably be desired, and to discuss
the business, operations, properties and financial and other condition of each
such party with their respective officers and employees and with their
respective independent certified public accountants.
7.05 Notices. Promptly give notice to Lender in writing of:
(a) the occurrence of any Default or Event of
Default;
(b) any default, or claim of default, with respect
to any Contractual Obligation of Borrower, Limited or HOTC in excess
of $500,000.00;
(c) any litigation, arbitration, administrative
proceeding, or other proceeding affecting Borrower, Limited or HOTC in
which (i) the amount involved is $500,000.00 or more, which involves
the probability of any judgment or liability not adequately covered by
insurance, or (ii) in which injunctive or similar relief is sought,
and which, if adversely determined, could result in any material
adverse change in the business, operations, properties, or financial
or other condition of Borrower, Limited or HOTC;
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<PAGE> 21
(d) a material adverse change in the business,
operations, property or financial or other condition of Borrower;
(e) the resignation or removal of Gerald J. Rubin as
Chairman of the Board of Directors of HOTC, and/or the resignation or
removal of Sam L. Henry as an officer of HOTC, after the date of this
Agreement; and
(f) any material change in the method of computing
its depreciation for either tax or book purposes, or make any other
material change in its accounting method, at least fifteen (15) days
prior to the effective date of such change.
Each notice pursuant to this Section 7.05 shall be accompanied by a
statement of a senior officer setting forth details of the occurrence referred
to therein and stating what action Borrower proposes to take with respect
thereto.
7.06 Payment of Expenses and Costs. Pay all costs and
expenses of Lender (including, without limitation, the reasonable attorneys'
fees of its legal counsel) in connection with the enforcement or preservation
of Lender's rights under the Loan Documents; and Borrower will pay all costs
and expenses (including, without limitation, the reasonable attorneys' fees of
Lender's legal counsel) in connection with the preparation, execution and
delivery of this Agreement and the other documents described herein and any and
all amendments, modifications and supplements thereof or thereto, whether or
not the transactions contemplated hereby are consummated.
7.07 Amendments to Note Purchase Agreement. Give Lender
written notice prior to amending that certain Note Purchase and Guaranty
Agreement dated effective January 5, 1996, by and among HOTC, Limited and
certain note purchasers as further described therein, and to deliver copies of
any such amendments to the Lender within ten (10) days following the date the
amendment(s) is fully executed.
7.08 Dividends. Have the right to declare and pay dividends
on any shares of any class of its Stock, so long as no Event of Default has
occurred and is continuing at the time of such payment, and so long as the
making of such payment does not cause or create an Event of Default.
8. NEGATIVE COVENANTS
Borrower and each Guarantor covenant and agree that so long as this
Agreement, or any renewal, extension or modification hereof, remains in effect,
or the Note remains outstanding and unpaid, or any Liabilities are owing to
Lender:
8.01 Consolidated Net Worth. Limited will not permit
Consolidated Net Worth (i) at any time during the period commencing on the date
of this Agreement and ending on February 29, 1996 to be less than $65,000,000,
(ii) at the end of the fiscal quarter of Limited ending on May 31, 1996 to be
less than $65,000,000 plus the greater of zero or 40% of Consolidated Net
Earnings for such quarter, or (iii) at any time during any fiscal quarter of
Limited thereafter to be less than the
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<PAGE> 22
minimum Consolidated Net Worth required by this Section at the end of the
immediately preceding fiscal quarter of Limited plus the greater of zero or 40%
of Consolidated Net Earnings for the immediately preceding fiscal quarter of
Limited.
8.02 Consolidated Indebtedness. Limited will not permit
Consolidated Indebtedness to exceed 55% of Consolidated Total Capitalization at
any time.
8.03 Liens. Neither Borrower, HOTC nor Limited shall grant,
create, incur, assume, permit or suffer to exist any Lien upon its property,
assets or revenues, whether now owned or hereafter acquired, except:
(a) liens for taxes not yet due, or which are being
contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained on the books of such
party in accordance with generally accepted accounting principles;
(b) other Liens incidental to the conduct of its
business or the ownership of its assets which (i) are expressly
subordinated to all debt due Lender, and (ii) which do not in the
aggregate materially detract from such party's ability to perform its
obligations hereunder or in connection herewith;
(c) liens created by this Agreement, or hereafter
granted to Lender for the benefit of Lender;
(d) purchase money Liens granted in connection with
any purchase of equipment;
(e) liens, or any existing pledge of a deposit,
securing the payment of senior debt by an Affiliate or Subsidiary to a
foreign financial institution as disclosed in the financial statements
delivered pursuant to Section 5.07 of this Agreement or which may be
granted or amended and may be disclosed from time to time by any such
party.
8.04 Operations. Neither Borrower, HOTC, nor Limited shall
materially change the nature of the business in which it is presently engaged.
8.05 Law. Neither Borrower, HOTC nor Limited shall be in
violation of any law or any regulation, order, writ, injunction or decree of
any court or Governmental Authority, or in breach of any agreement or
instrument to which Borrower, HOTC or Limited is a party or to which Borrower,
HOTC or Limited is subject or in Default thereunder, the breach or violation of
which, or Default under which, would have a material adverse effect on
Borrower, HOTC or Limited, or their respective financial condition.
8.06 Overdrafts. Borrower shall not use overdrafts or draw on
uncollected funds instead of using the proceeds of the Revolving Credit Loan
available under this Agreement. If such an event does occur, Borrower agrees to
pay interest on such overdrafts and uncollected funds, in addition to any other
charges applicable to such overdrafts and uncollected funds, at the Alternate
Base Rate; provided, however, in no event shall the rate contracted for,
charged to Borrower,
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<PAGE> 23
received, collected or reserved hereunder exceed the Highest Lawful Rate, and
if application of the Alternate Base Rate as provided in this Section, or any
other circumstances, would cause the rate of interest hereunder to exceed the
Highest Lawful Rate, the rate of interest hereunder shall automatically be
reduced to the Highest Lawful Rate.
8.07 Merger. Without the written consent of Lender, which
shall not be unreasonably withheld, Borrower, HOTC and Limited shall not, and
shall not permit any Subsidiary of either to, enter into any transaction of
merger, consolidation, reorganization, exchange of Stock or assets, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or otherwise dispose of all or a substantial part of their
assets, except that, for so long as no Event of Default has occurred and is
continuing, (i) any Subsidiary may merge into or transfer assets to Borrower,
HOTC or Limited, and (ii) any Subsidiary may merge into or consolidate with or
transfer assets to any other Subsidiary.
8.08 Management. Limited shall not, and shall not permit its
Affiliates to change the duties, obligations, titles and offices of Gerald J.
Rubin without the prior written consent of the Lender.
9. EVENTS OF DEFAULT
9.01 Events of Default. The following shall be Events of
Default under this Agreement:
(a) Borrower shall fail to pay any principal of or
interest on the Note, or either of them, or any other amount payable
hereunder, within ten (10) days after the date due in accordance with
the terms hereof; or
(b) any representation or warranty made or deemed
made by Borrower or either Guarantor herein or which is contained in
any certificate, document or financial or other statement furnished at
anytime under or in connection with this Agreement shall prove to have
been incorrect in any material respect on or as of the date made or
deemed made; or
(c) Borrower or either Guarantor shall Default in
the observance or performance of any other covenant or agreement
contained in this Agreement, and (except for Borrower's covenants as
to (i) notices as set forth in Section 7.05, and (ii) negative
covenants as set forth in Section 8 hereof, for which no notice or
opportunity to cure is required to be given or is allowed, as the case
may be) said Default shall have continued for a period of thirty (30)
days after written notice thereof shall have been given to Borrower by
Lender, or Borrower or either Guarantor, as the case may be, has not,
by the expiration of such thirty (30) day period, commenced in good
faith to cure such Default and pursue such cure with diligence; or
(d) Borrower or either Guarantor shall Default in
its payments according to a plan of arrangement, composition or
readjustment of its debts or any other event shall occur, the effect
of which Default or other event is to cause, or permit the holder or
holders of any material indebtedness or beneficiary or beneficiaries
of any material Contingent
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<PAGE> 24
Obligation (or a trustee or agent on behalf of such holder or holders
or beneficiary or beneficiaries) to cause, any material indebtedness
or Contingent Obligation to become due prior to its stated maturity;
or
(e) Borrower or either Guarantor shall commence any
case, proceeding or other action relating to it in bankruptcy or seek
reorganization, liquidation, dissolution, winding-up, arrangement,
composition, readjustment of debt or other similar act or law of any
jurisdiction, domestic or foreign, now or hereafter existing; or
Borrower or either Guarantor shall apply for a receiver, custodian or
trustee of it or for all or a substantial part of its property; or
Borrower or either Guarantor shall make an assignment for the benefit
of creditors; or
(f) any case, proceeding or other action against
Borrower or either Guarantor shall be commenced in bankruptcy or
Borrower or either Guarantor shall seek reorganization, liquidation,
dissolution, winding-up, arrangement, composition or readjustment of
its debts, or any other relief, under any bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement, composition,
readjustment of debt or other similar act or law of any jurisdiction,
domestic or foreign, now or hereafter existing; or a receiver,
custodian or trustee of Borrower or either Guarantor or for all or a
substantial part of its property shall be appointed; or a warrant of
attachment, execution or distraint, or similar process, shall be
issued against any substantial part of the property of Borrower or
either Guarantor; and in each such case such condition shall continue
for a period of sixty (60) days undismissed, undischarged or unbonded;
or
(g) one or more judgments or decrees shall be
entered against Borrower or either Guarantor involving in the
aggregate a liability (not paid or fully covered by insurance) of
$500,000.00 or more and all such judgments or decrees shall not have
been vacated, discharged or stayed or bonded pending appeal within
sixty (60) days from the entry thereof; or
(i) the failure by Borrower or either Guarantor to
perform any covenant or agreement contained in this Agreement (after
the expiration of any applicable cure period); or
(j) upon the occurrence of an Event of Default under
the terms of, and as defined in, that certain Note Purchase and
Guaranty Agreement dated effective January 5, 1996, among Guarantors
and certain named purchasers, regarding the purchase of 7.01%
Guaranteed Senior Notes due January 5, 2008.
Upon the occurrence of any Event of Default, either or both of the
following actions may be taken by Lender: (a) declare the Commitment to be
terminated forthwith, whereupon the Commitment shall immediately terminate; and
(b) declare the Revolving Credit Loan (with accrued interest thereon) and all
other amounts owing under this Agreement and the Note to be due and payable
forthwith, whereupon the same shall immediately become due and payable, without
presentment, demand, protest, notice of intent to accelerate, notice of
acceleration, or other notice of any kind, all of which are hereby expressly
waived, except as otherwise expressly provided herein.
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<PAGE> 25
10. MISCELLANEOUS
10.01 Amendment; Waivers. Borrower and Lender may, from time
to time, enter into written amendments, supplements, waivers or modifications
hereto for the purpose of adding any provisions to this Agreement or the Note
or changing in any manner the rights of Lender or of Borrower hereunder or
thereunder.
10.02 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of Lender, any right, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and not exclusive of any rights or
remedies provided by law.
10.03 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE
DEEMED TO BE CONTRACTS UNDER THE LAWS OF THE STATE OF TEXAS AND FOR ALL
PURPOSES SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF SAID
STATE AND APPLICABLE FEDERAL LAW. TEX. REV. CIV. STAT. ANN. ART. 5069-15.01, AS
AMENDED, SHALL NOT APPLY TO THIS AGREEMENT AND THE NOTE ISSUED HEREUNDER.
10.04 Survival of Representation and Warranties. All
representations and warranties made by Borrower and Guarantors hereunder and in
any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the Note.
10.05 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Borrower, Guarantors and Lender, all future
holders of the Note and their respective successors and assigns, except that
Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Lender.
10.06 Severability. Should any clause, sentence, paragraph or
Section of this Agreement be judicially declared to be invalid, unenforceable
or void, such decision will not have the effect of invalidating or voiding the
remainder of this Agreement and the parties hereto agree that the part or parts
of this Agreement so held to be invalid, unenforceable or void will be deemed
to have been stricken herefrom and the remainder will have the same force and
effectiveness as if such part or parts had never been included herein.
10.07 Descriptive Headings. The Section headings in this
Agreement have been inserted for convenience only and shall be given no
substantive meaning or significance whatsoever in construing the terms and
provisions of this Agreement.
10.08 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument.
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<PAGE> 26
10.09 No Liability. Lender shall not be deemed to be a
partner or a Joint Venturer of Borrower or an agent or principal of Borrower,
nor shall it be liable for the performance or Default of any party other than
Lender. Nothing, including, without limitation, any advance of any of the
proceeds of the Revolving Credit Loan, or any acceptance of any document, shall
be construed as a representation or warranty of any kind by Lender.
10.10 Indemnity. Borrower and Guarantors agree to protect,
indemnify, defend and save harmless Lender and its directors, officers, agents,
and employees from and against any and all liability, expense or damage of any
kind or nature and from any suits, claims, commissions, brokerage fees or
demands, including reasonable legal fees and expenses on account of any matter
or thing, whether in suit or not, arising out of this Agreement, the Revolving
Credit Loan, the Note, or in connection herewith, unless the suits, claims,
commissions, brokerage fees or damages are caused by the negligence or willful
misconduct by Lender, or any of the parties herein indemnified. This obligation
shall survive the repayment of the indebtedness evidenced by the Note.
10.11 Assignment. Neither this Agreement, nor the Loan
proceeds shall be assignable by Borrower without the prior written consent of
Lender and any attempt at any such assignment without such consent shall be
void and at the option of Lender be deemed a Default hereunder.
10.12 No Third Party Beneficiaries. This Agreement is made
for the sole and exclusive benefit of Borrower and Guarantors. No other person,
firm, corporation or entity shall have any right of action, claim for relief or
benefit from this Agreement, nor shall this Agreement be construed to establish
any fund, loan, or payment for the benefit of anyone not a party hereto.
10.13 Notices. All notices, requests and demands to or upon
the respective parties hereto shall be effective and shall be deemed to have
been duly given or made, unless otherwise expressly provided herein, when
deposited in the mail, postage prepaid, certified mail, return receipt
requested. The mailing address of each party for the purpose of this Section
10.13 is as follows:
<TABLE>
<S> <C>
Borrower: 6827 Market
El Paso, Texas 79915
Attention:
Gerald J. Rubin
Sam L. Henry
Guarantors: 6827 Market
El Paso, Texas 79915
Attention:
Gerald J. Rubin, Chairman
Sam L. Henry, Chief Financial Officer
Lender: P. O. Drawer 140
El Paso, Texas 79980
Attention: David W. Osborn,
Senior Vice President, Corporate
Banking Division
</TABLE>
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<PAGE> 27
10.14 Exhibits. Exhibit A appended hereto is hereby
incorporated herein for all purposes.
10.16 Sale of Participations. Lender reserves the right in
its sole discretion, without notice to Borrower or Guarantors, to sell
participations or assign its interest, or both, in all or any part of the
Revolving Credit Loan, the Note or the Commitment to banks owned by Chemical
Banking Corporation or Texas Commerce Bancshares, Inc., and further reserves
the right to sell such participations and/or assign such interests to any other
financial institution with the written consent of Borrower.
NOTICE
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED TO BE EFFECTIVE as of December 31, 1996, regardless of the
date actually signed.
HELEN OF TROY L.P., a Texas limited partnership
By: HELEN OF TROY NEVADA CORPORATION,
a Nevada corporation, General Partner
By: /s/ Sam L. Henry
--------------------------------------
Sam L. Henry, Chief Financial Officer
BORROWER
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: /s/ David W. Osborn
--------------------------------------
David W. Osborn, Senior Vice President
LENDER
<PAGE> 1
EXHIBIT 2
AMENDMENT TO LOAN AGREEMENT
THIS AMENDMENT TO LOAN AGREEMENT (this "Amendment") is entered into
effective the 31st day of July, 1997 (the "Effective Date"), by and among TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, a national banking association ("Lender"),
with its principal office at 201 E. Main, El Paso, Texas 79901, HELEN OF TROY
L.P., a Texas limited partnership, with its principal office at 6827 Market
Avenue, El Paso, Texas 79901 ("Borrower"), and HELEN OF TROY LIMITED, a Bermuda
corporation, with its principal office at 6827 Market Avenue, El Paso, Texas
79915, HOT NEVADA, INC., a Nevada corporation, with its principal office at 1325
Airmotive Drive, Suite 130, Reno, Nevada 89502, HELEN OF TROY LIMITED, a
Barbados corporation, with its principal office at P. O. Box 36, Lucas Steet,
Bridgetown, Barbados, West Indies, HELEN OF TROY NEVADA CORPORATION, a Nevada
corporation, with its principal office at 6827 Market Avenue, El Paso, Texas
79915, and HELEN OF TROY TEXAS CORPORATION, a Texas corporation, with its
principal office at 6827 Market Avenue, El Paso, Texas 79915 (collectively
"Guarantors") for the purpose of amending and supplementing that one certain
Loan Agreement dated as of December 31, 1996, among Lender, Borrower, HELEN OF
TROY LIMITED and HELEN OF TROY TEXAS CORPORATION (the "Loan Agreement").
Capitalized terms used, but not otherwise defined, in this Amendment shall have
the meanings ascribed to them in the Loan Agreement.
WHEREAS, Borrower has requested Lender to (i) increase the amount that
may be advanced under the terms of the Revolving Credit Loan to TEN MILLION AND
NO/100 DOLLARS ($10,000,000.00), and (ii) extend the maturity of the Note
evidencing the Revolving Credit Loan to July 31, 1999; all in accordance with
the terms of this Amendment, which Lender is willing to do upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lender, Borrower and Guarantors
hereby agree as follows:
1. INCREASE OF MAXIMUM LOAN TOTAL. From the effective date of this
Amendment the amount available under the Revolving Credit Loan shall be
increased from FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00) to TEN MILLION
AND NO/100 DOLLARS ($10,000,000.00), to be evidenced by a Revolving Credit Loan
Note dated effective July 31, 1997, executed by Borrower. Beginning July 31,
1997, and continuing until fully paid, the Maximum Loan Total available under
the Note shall be in the amount of TEN MILLION AND NO/100 DOLLARS
($10,000,000.00). There is no current outstanding principal balance on the Note.
2. COMMITMENT PERIOD. The Commitment Period is hereby extended to July
31, 1999; subject, however, to the payment of the Commitment Fee described
below.
3. LETTERS OF CREDIT. Section 2.01 of the Loan Agreement is amended to
read as follows:
<PAGE> 2
2.01.1 Letters of Credit. In the event that
during the Commitment Period Lender shall agree to issue on Borrower's
account letters of credit ("Letters of Credit"), as defined in Chapter
5 of the Texas Uniform Commercial Code - Letters of Credit, then
Borrower agrees as aforesaid that (i) the available principal balance
of the Revolving Credit Loan shall be reduced by the aggregate amount
of all Letters of Credit outstanding from time to time; (ii)
outstanding Letters of Credit shall never exceed in the aggregate at
any time the sum of $3,000,000.00, and (iii) no Letter of Credit shall
have an expiry date later than July 31, 1999.
Borrower agrees to pay to Lender a fee equal to one-half of
one percent (.5%) per annum of the face amount for issuing Letters of
Credit, and Borrower further agrees that should Lender be required to
fund all or any part of any Letter of Credit on behalf of Borrower, any
such funding shall be simultaneously charged to the Revolving Credit
Loan, subject to all of the terms and conditions of this Agreement.
4. RENEWAL OF REVOLVING CREDIT LOAN NOTE. Section 2.02 of the Loan
Agreement is amended to read as follows:
2.02 Revolving Credit Loan Note. The Revolving Credit
Loan shall be evidenced by the Revolving Credit Loan Note in the
principal sum of $10,000,000.00, executed and delivered by Borrower,
payable to the order of Lender, in the form appended hereto as Exhibit
"A". The Termination Date of the Revolving Credit Loan Note shall be
July 31, 1999.
Loans made by Lender under the terms of the Revolving Credit
Loan Note shall be two (2) week, one (1) month, two (2) month, three
(3) month, or six (6) month Eurodollar Loans.
Borrower shall pay interest on each Alternate Base Rate Loan
for the Interest Period with respect thereto at a rate per annum equal
to the lesser of (i) the Alternate Base Rate for such Interest Period,
or (ii) the Highest Lawful Rate, which interest shall be due and
payable quarterly, beginning October 31, 1997, and continuing on the
last day of each third month thereafter until Termination Date.
Borrower shall pay interest on each Eurodollar Loan for the
Interest Period with respect thereto on the unpaid principal amount
thereof at a rate per annum equal to the lesser of (i) the Eurodollar
Rate plus one-half of one percent (.50%) (the "Effective Eurodollar
Rate"), or (ii) the Highest Lawful Rate, which interest shall be due
and payable quarterly, beginning October 31, 1997, and continuing on
the last day of each third month thereafter until Termination Date.
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<PAGE> 3
If not sooner paid, the entire unpaid principal of, and all
accrued, unpaid interest on, the Revolving Credit Loan Note shall be
due and payable on July 31, 1999.
5. CONSOLIDATED NET WORTH. Section 8 of the Loan Agreement is amended
to read as follows:
8.01 Consolidated Net Worth. HELEN OF TROY LIMITED
("Limited") will not permit Consolidated Net Worth (i) at any time
during the period commencing on May 31, 1997, and ending on July 31,
1997 to be less than $110,000,000, (ii) at any time during any fiscal
quarter of Limited thereafter to be less than the minimum Consolidated
Net Worth required by this Section at the end of the immediately
preceding fiscal quarter of Limited plus the greater of zero or 40% of
Consolidated Net Earnings for the immediately preceding fiscal quarter
of Limited.
6. COMMITMENT FEE. Borrower agrees to pay to Lender a Commitment Fee of
$12,500.00 on or before July 31, 1997, in consideration of Lender's execution of
this Amendment, and at the option of Borrower an additional $12,500.00 on or
before August 31, 1998; provided, that if the payment due on or before August
31, 1998 is not paid, the Commitment shall terminate on that date and the
Revolving Credit Loan Note shall be immediately due and payable.
7. LIMITATION ON USE. The proceeds of the Revolving Credit Loan Note
shall not be used to acquire the stock or assets of any Person unless there is a
firm commitment from another lender to provide the funds to pay off Lender
within thirty (30) days of the draw under the Revolving Credit Loan Note.
8. CONTINUED VALIDITY. Except as expressly provided in this Amendment,
all terms, conditions, representations, warranties, and covenants contained in
the Loan Agreement, shall remain in full force and effect, and are hereby
confirmed and acknowledged by Borrower.
9. COUNTERPARTS. This Amendment may be executed in several
counterparts, each of which shall be fully effective as an original, and all of
which together shall constitute one and the same instrument.
10. DISCLOSURE. As of the date hereof, there is no fact known to
Borrower which Borrower has not disclosed to Lender in writing, that materially
and adversely affects or in the future may (as far as Borrower can now foresee)
materially and adversely affect the business, operations, properties, prospects
or conditions, financial or otherwise, of Borrower or any of its affiliates.
Borrower shall immediately notify the Lender in writing in the event any such
fact or facts become known during the term of the Loan Agreement, as herein
amended.
11. CONDITIONS. This Amendment shall not be effective unless and until
the Lender
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<PAGE> 4
shall have received this Amendment and all such other agreements, documents or
instruments necessary or required by Lender in connection with the transactions
contemplated by this Amendment, including the Note Modification Agreement, all
duly executed.
12. NO DEFAULT. Borrower represents and warrants to Lender (after
giving effect to the terms and conditions of this Amendment), that there exists
on this day no Event of Default, as that term is defined in the Loan Agreement,
and no event which, with notice or lapse of time or both, would become an Event
of Default.
13. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Lender that all of the representations and warranties set forth in
the Loan Agreement (after giving effect to the terms and conditions of this
Amendment), are true and correct on and as of the date of this Amendment as if
made on and as of such date.
14. EVENT OF DEFAULT. It is understood and agreed by Borrower that an
Event of Default shall exist if any representation, warranty or covenant made or
deemed made by Borrower in this Amendment, in the Loan Agreement (including all
amendments and supplements thereto), or in any document or exhibit attached
thereto or referred to therein, shall prove to have been incorrect in any
material respect on or as of the date made or deemed made.
15. CONSTRUCTION. This Amendment and the rights and obligations of the
parties hereunder shall be construed and interpreted in accordance with and
governed by, the laws of the State of Texas, except as federal law may apply.
16. BINDING EFFECT. This Amendment shall be binding upon and enure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns; provided, however, that Borrower shall not assign or
transfer its rights or obligations hereunder without the prior written consent
of the Lender.
17. OTHER TERMS. Except as expressly provided herein, all of the terms
and conditions of the Loan Agreement and the Guaranty (collectively, the "Loan
Documents"), and any and all other documents described in or executed in
connection with the Loan Documents shall continue in full force and effect and
are hereby reaffirmed. It is expressly understood and agreed that if there are
inconsistencies between or among the Loan Documents, the terms of the Loan
Agreement, as amended, shall prevail.
THIS AMENDMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
-4-
<PAGE> 5
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
HELEN OF TROY L.P., a
Texas limited partnership
By: /s/ Sam L. Henry
--------------------------------------
Sam L. Henry
Chief Financial Officer
BORROWER
HELEN OF TROY LIMITED, a Bermuda
corporation
By: /s/ Sam L. Henry
--------------------------------------
Sam L. Henry
Chief Financial Officer
HELEN OF TROY LIMITED
a Barbados corporation
By: /s/ Sam L. Henry
--------------------------------------
Sam L. Henry
Chief Financial Officer/Vice President
HOT NEVADA, INC. a Nevada corporation
By: /s/ Gary B. Abromovitz
--------------------------------------
Gary B. Abromovitz
President
-5-
<PAGE> 6
HELEN OF TROY NEVADA CORPORATION
a Nevada corporation
By: /s/ Sam L. Henry
--------------------------------------
Sam L. Henry
Chief Financial Officer
HELEN OF TROY TEXAS CORPORATION
a Texas corporation
By: /s/ Sam L. Henry
--------------------------------------
Sam L. Henry
Chief Financial Officer
GUARANTORS
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By: /s/ David W. Osborn
--------------------------------------
David W. Osborn
Senior Vice President
LENDER
-6-
<PAGE> 1
EXHIBIT 3
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment") is entered
into effective the 31st day of July, 1998, by and among CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, a national banking association, f/k/a TEXAS COMMERCE BANK
NATIONAL ASSOCIATION ("Lender"), with its office at 201 E. Main, El Paso, Texas
79901, HELEN OF TROY L.P., a Texas limited partnership, with its principal
office at 6827 Market Avenue, El Paso, Texas 79901 ("Borrower"), and HELEN OF
TROY LIMITED, a Bermuda corporation, with its principal office at 6827 Market
Avenue, El Paso, Texas 79915, HOT NEVADA, INC., a Nevada corporation, with its
principal office at 1325 Airmotive Drive, Suite 130, Reno, Nevada 89502, HELEN
OF TROY LIMITED, a Barbados corporation, with its principal office at P. O. Box
36, Lucas Street, Bridgetown, Barbados, West Indies, HELEN OF TROY NEVADA
CORPORATION, a Nevada corporation, with its principal office at 6827 Market
Avenue, El Paso, Texas 79915, and HELEN OF TROY TEXAS CORPORATION, a Texas
corporation, with its principal office at 6827 Market Avenue, El Paso, Texas
79915 (collectively "Guarantors") for the purpose of amending and supplementing
that one certain Loan Agreement dated as of December 31, 1996, among Lender,
Borrower, HELEN OF TROY LIMITED and HELEN OF TROY TEXAS CORPORATION, as amended
by an Amendment to Loan Agreement dated effective July 31, 1997 (the "Loan
Agreement"). Capitalized terms used, but not otherwise defined, in this
Amendment shall have the meanings ascribed to them in the Loan Agreement.
WHEREAS, Borrower has requested Lender to (i) replace the current
committed revolving line of credit with an uncommitted revolving line of credit
in the same amount, (ii) cancel the existing Revolving Credit Loan Note, which
has no current outstanding principal balance, (iii) extend the period in which
Borrower may request loans under the new uncommitted revolving credit line of
credit, and (iv) increase the minimum required Consolidated Net Worth, all in
accordance with the terms of this Amendment, which Lender is willing to do upon
the terms and conditions hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lender, Borrower and Guarantors
hereby agree as follows:
1. GENERAL. This Amendment is intended to delete from the Loan
Agreement any obligation on the part of the Lender to make a Loan to Borrower,
and to replace any such obligation with an uncommitted facility. Any references
in the Loan Agreement to a Borrowing, Commitment, Commitment Period, Revolving
Credit Loan Note, and other terms indicating a committed facility are hereby
deleted to the extent inconsistent with this Amendment. The term "Note" shall
now refer to each note executed by the Borrower to evidence an Advance (as
hereinafter defined), and the term "Loan" shall mean each Advance approved by
the Lender and evidenced by a Note.
2. ADVANCE PERIOD. The Commitment Period as used in the Loan Agreement
is hereby cancelled and from July 31, 1998 until July 31, 2000 (the "Advance
Period"), the Lender
<PAGE> 2
shall establish an uncommitted line of credit for the benefit of the Borrower
subject to the terms and conditions of the Loan Agreement, as amended.
3. LINE OF CREDIT. Subject to the terms and conditions of the Loan
Agreement, as amended, the Lender hereby establishes during the Advance Period,
an uncommitted line of credit (the "Line of Credit") in favor of the Borrower,
pursuant to which the Lender may, in its sole discretion, from time to time make
advances in an aggregate amount of TEN MILLION DOLLARS ($10,000,000) (the "Line
Amount").
4. ADVANCES. In order to obtain an Advance from the Lender, the
Borrower shall deliver to the Lender a written borrowing request (a "Borrowing
Request") at least five (but not more than fifteen) Business Days prior to the
date on which the Advance is to be made, specifying (i) the date (which shall be
a Business Day) on which the Advance is to be made, (ii) the amount thereof,
(iii) whether the requested Advance is to be an Alternate Base Rate Loan or a
Eurodollar Loan, (iv) if a Eurodollar Loan, whether it is a two (2) week, one
(1) month, three (3) month, or six (6) month Eurodollar Loan, (v) the Interest
Period for such Loan, and (vi) the Maturity Date of such Loan (which must be on
or before July 31, 2000). The Lender shall notify the Borrower in writing as to
whether a Borrowing Request is approved. Upon fulfillment of the applicable
conditions set forth in Section 4 of the Loan Agreement, the Lender will make
such Advance available to the Borrower at the offices of the Lender in El Paso,
Texas. Each Advance will be evidenced by a separate Note issued pursuant to the
Loan Agreement. Interest on all Notes issued pursuant to the Loan Agreement
shall be due and payable quarterly, and all such Notes shall mature not later
than July 31, 2000.
5. CONSOLIDATED NET WORTH. Section 8.01 of the Loan Agreement is
amended to read as follows:
8.01 Consolidated Net Worth. HELEN OF TROY LIMITED
("Limited") will not permit Consolidated Net Worth (i) at any time
during the period commencing on the date hereof and ending August 31,
1998 to be less than $120,000,000, and (ii) at any time during any
fiscal quarter of Limited thereafter to be less than the minimum
Consolidated Net Worth required by this Section at the end of the
immediately preceding fiscal quarter of Limited plus the greater of
zero or 40% of Consolidated Net Earnings for the immediately preceding
fiscal quarter of Limited.
6. LETTERS OF CREDIT. In connection with the conversion to an
uncommitted line of credit, Section 2.01.1 of the Loan Agreement is hereby
amended in its entirety to read as follows:
2.01.1 Letters of Credit. In the event that
during the Advance Period Lender shall agree to issue on Borrower's
account letters of credit ("Letters of Credit"), as defined in Chapter
5 of the Texas Uniform Commercial Code - Letters of Credit, then
Borrower agrees that (i) the uncommitted Line of Credit shall be
reduced by the aggregate amount of all Letters of Credit outstanding
from time to time; (ii) outstanding Letters of Credit shall never
exceed in the aggregate at any time the sum of $3,000,000.00, and (iii)
no
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<PAGE> 3
Letter of Credit shall have an expiry date later than July 31, 2000.
Borrower agrees to pay to Lender all customary charges for
issuing Letters of Credit, and Borrower further agrees that should
Lender be required to fund all or any part of any Letter of Credit on
behalf of Borrower, any such funding shall be simultaneously charged as
an Alternate Base Rate Loan, subject to all of the terms and conditions
of this Agreement.
7. LIMITATION ON USE. The proceeds of the Line of Credit shall not be
used to acquire the stock or assets of any Person unless there is a firm
commitment from another lender to provide the funds to pay off Lender within
thirty (30) days of the Advance.
8. CONTINUED VALIDITY. Except as expressly provided in this Amendment,
all terms, conditions, representations, warranties, and covenants contained in
the Loan Agreement, shall remain in full force and effect, and are hereby
confirmed and acknowledged by Borrower.
9. COUNTERPARTS. This Amendment may be executed in several
counterparts, each of which shall be fully effective as an original, and all of
which together shall constitute one and the same instrument.
10. DISCLOSURE. As of the date hereof, there is no fact known to
Borrower which Borrower has not disclosed to Lender in writing, that materially
and adversely affects or in the future may (as far as Borrower can now foresee)
materially and adversely affect the business, operations, properties, prospects
or conditions, financial or otherwise, of Borrower or any of its affiliates.
Borrower shall immediately notify the Lender in writing in the event any such
fact or facts become known during the term of the Loan Agreement, as herein
amended.
11. CONDITIONS. This Amendment shall not be effective unless and until
the Lender shall have received this Amendment and all such other agreements,
documents or instruments necessary or required by Lender in connection with the
transactions contemplated by this Amendment, all duly executed.
12 NO DEFAULT. Borrower represents and warrants to Lender (after giving
effect to the terms and conditions of this Amendment), that there exists on this
day no Event of Default, as that term is defined in the Loan Agreement, and no
event which, with notice or lapse of time or both, would become an Event of
Default.
13. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Lender that all of the representations and warranties set forth in
the Loan Agreement (after giving effect to the terms and conditions of this
Amendment), are true and correct on and as of the date of this Amendment as if
made on and as of such date.
14. EVENT OF DEFAULT. It is understood and agreed by Borrower that an
Event of Default shall exist if any representation, warranty or covenant made or
deemed made by Borrower in this Amendment, in the Loan Agreement (including all
amendments and supplements thereto), or in any document or exhibit attached
thereto or referred to therein, shall prove to have been incorrect in any
-3-
<PAGE> 4
material respect on or as of the date made or deemed made.
15. CONSTRUCTION. This Amendment and the rights and obligations of the
parties hereunder shall be construed and interpreted in accordance with and
governed by, the laws of the State of Texas, except as federal law may apply.
16. BINDING EFFECT. This Amendment shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns; provided, however, that Borrower shall not assign or
transfer its rights or obligations hereunder without the prior written consent
of the Lender.
17. OTHER TERMS. Except as expressly provided herein, all of the terms
and conditions of the Loan Agreement and the Guaranty (collectively, the "Loan
Documents"), and any and all other documents described in or executed in
connection with the Loan Documents shall continue in full force and effect and
are hereby reaffirmed. It is expressly understood and agreed that if there are
inconsistencies between or among the Loan Documents, the terms of the Loan
Agreement, as amended, shall prevail.
THIS AMENDMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
HELEN OF TROY L.P., a
Texas limited partnership
By: Helen of Troy Nevada Corporation
General Partner
By: /s/ Sam L. Henry
---------------------------------------
Sam L. Henry
Chief Financial Officer
BORROWER
HELEN OF TROY LIMITED, a Bermuda
corporation
By: /s/ Sam L. Henry
---------------------------------------
Sam L. Henry
Chief Financial Officer
-4-
<PAGE> 5
HELEN OF TROY LIMITED
a Barbados corporation
By: /s/ Sam L. Henry
---------------------------------------
Sam L. Henry
Chief Financial Officer/Vice President
HOT NEVADA, INC. a Nevada corporation
By: /s/ Gary B. Abromovitz
---------------------------------------
Gary B. Abromovitz
President
HELEN OF TROY NEVADA CORPORATION
a Nevada corporation
By: /s/ Sam L. Henry
---------------------------------------
Sam L. Henry
Chief Financial Officer
HELEN OF TROY TEXAS CORPORATION
a Texas corporation
By: /s/ Sam L. Henry
---------------------------------------
Sam L. Henry
Chief Financial Officer
GUARANTORS
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION
By: /s/ Dan B. Dawes
---------------------------------------
Dan B. Dawes
Senior Vice President
LENDER
-5-
<PAGE> 1
EXHIBIT 4
HELEN OF TROY LIMITED
ONE HELEN OF TROY PLAZA
EL PASO, TEXAS 79912
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 24, 1999
Notice is hereby given that the Annual Meeting of the Shareholders (the
"Meeting") of Helen of Troy Limited, a Bermuda company, will be held at the
Camino Real Hotel, 101 S. El Paso Street, El Paso, Texas on Tuesday, August 24,
1999 at 1:00 p.m., Mountain Daylight Time, for the following purposes:
1. To elect a board of seven directors;
2. To consider approval of amendments to the Helen of Troy
Limited 1995 Non-Employee Director Stock Option Plan;
3. To transact such other business as may properly come before
the Meeting or any adjournment thereof.
June 23, 1999 has been fixed as the date of record for determining
Shareholders entitled to receive notice of and vote at the Annual Meeting. You
are urged to read carefully the attached Proxy Statement for additional
information concerning the matters to be considered at the Meeting.
If you do not expect to be present in person at the Meeting, please
sign and date the enclosed proxy and return it promptly in the enclosed
postage-paid envelope that has been provided for your convenience. The prompt
return of proxies will help ensure the presence of a quorum and save the Company
the expense of further solicitation.
You are cordially invited and encouraged to attend the Meeting in
person.
Gerald J. Rubin
Chairman of the Board
El Paso, Texas
June 25, 1999
IMPORTANT
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE PROVIDED. IF YOU DO ATTEND
THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
Helen of Troy(R)
<PAGE> 2
HELEN OF TROY LIMITED
PRINCIPAL EXECUTIVE OFFICE
ONE HELEN OF TROY PLAZA
EL PASO, TEXAS 79912
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 24, 1999
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of Helen
of Troy Limited (the "Company") for use at its Annual Meeting of Shareholders
(the "Meeting") to be held at the Camino Real Hotel, 101 S. El Paso Street, El
Paso, Texas, on Tuesday, August 24, 1999 at 1:00 p.m., Mountain Daylight Time,
and at any adjournment thereof, for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders. A proxy may be revoked by filing
written notice of revocation or an executed proxy bearing a later date with the
Secretary of the Company any time before exercise of the proxy. A shareholder
giving a proxy may attend the Meeting and vote in person. Forms of proxy and
proxy statements are to be mailed on or about July 7, 1999.
The Annual Report to Shareholders for the year ended February 28, 1999
("fiscal 1999"), including financial statements, is enclosed. It does not form
any part of the material provided for the solicitation of proxies.
The cost of solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, officers and employees of the Company may
solicit the return of proxies by telephone and personal interview. Forms of
proxy and proxy material may also be distributed through brokers, custodians and
like parties to beneficial owners of the Company's common shares, par value $.10
per share (the "Common Stock") for which the Company will, upon request,
reimburse the forwarding expense.
VOTING SECURITIES
The close of business on June 23, 1999 was the record date for
determination of shareholders entitled to notice of, and to vote at, the
Meeting. At the record date, there were 29,054,862 issued and outstanding shares
of Common Stock, entitled to one vote per share.
2
<PAGE> 3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 15, 1999, the beneficial
ownership of the Common Stock of the Directors, the executive officers of the
Company, the executive officers and the Directors of the Company as a group, and
each person known to the Company to be the beneficial owner of more than 5% of
the Common Stock:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES PERCENT
<S> <C> <C>
Gerald J. Rubin (1)(2)(3)(4)(5) 4,724,922 15.3%
One Helen of Troy Plaza
El Paso, Texas 79912
Byron H. Rubin (6) 33,000 *
Daniel C. Montano (7) 32,000 *
Gary B. Abromovitz (7) 36,000 *
Stanlee N. Rubin (1)(2)(3)(4)(5) 4,724,922 15.3%
One Helen of Troy Plaza
El Paso, Texas 79912
Christopher L. Carameros (6) (8) 34,000 *
H. McIntyre Gardner (9) 66,666 *
All directors and executive officers as a group 4,926,588 16.0%
(8 persons) (10) (11) (12)
Fidelity Management and Research 2,705,000 8.9%
Company (13)
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
*Ownership of less than 1% of the outstanding Common Stock
(1) Does not include 144,000 shares in a trust for the children of Gerald
J. Rubin and Stanlee N. Rubin in which they disclaim any beneficial
ownership.
(2) Includes 276,980 shares held beneficially through a partnership in
which Gerald J. Rubin and Stanlee Rubin are partners.
(3) Includes 1,550,000 shares that are held by Gerald J. Rubin and that are
issuable pursuant to options that are exercisable within sixty days of
June 15, 1999. Gerald J. Rubin's stock options are subject to a
one-half undivided community property interest with Stanlee N. Rubin.
(4) Includes 2,865,942 shares owned directly by Gerald Rubin, all of which
are subject to a one-half undivided community property interest with
Stanlee N. Rubin.
(5) Includes 32,000 stock options, issued under the 1995 Non-Employee
Director Plan and exercisable within 60 days of June 15, 1999, held by
Stanlee Rubin and subject to a one-half undivided community property
interest with Gerald J. Rubin.
(6) 24,000 of the shares for each of Byron H. Rubin and Christopher L.
Carameros consist of options issued under the 1995 Non-Employee
Director Stock Option Plan and exercisable within 60 days of June 15,
1999.
3
<PAGE> 4
(7) 32,000 of the shares for each of Daniel C. Montano and Gary B.
Abromovitz consist of options issued under the 1995 Non-Employee
Director Stock Option Plan and exercisable within 60 days of June 15,
1999.
(8) Includes 10,000 shares held in a trust, of which Mr. Carameros is the
trustee, for Mr. Carameros' family.
(9) All of the shares for H. McIntyre Gardner consist of stock options
exercisable within 60 days of June 15, 1999.
(10) The Company's Senior Vice-President, Finance and Chief Financial
Officer, Dona Fisher, did not beneficially own any shares of the
Company's common stock at June 15, 1999. Ms. Fisher's tenure with the
Company commenced in March 1999.
(11) The following shares are included in both Gerald J. Rubin's and Stanlee
N. Rubin's individual beneficial ownership totals: 2,865,942 shares
owned directly by Gerald J. Rubin and subject to a one-half undivided
community property interest with Stanlee N. Rubin; 1,550,000 stock
options exercisable within 60 days of June 15, 1999 held directly by
Gerald J. Rubin and subject to a one-half undivided community property
interest with Stanlee N. Rubin; 276,980 shares held beneficially
through a partnership in which Gerald J. Rubin and Stanlee N. Rubin are
partners; and 32,000 stock options exercisable within 60 days of June
15, 1999, held directly by Stanlee N. Rubin and subject to a one-half
undivided community property interest with Gerald J. Rubin.
(12) Includes 1,760,666 stock options, 1,616,666 of which were issued under
the Company's 1994 and 1998 Employee Stock Option and Restricted Stock
Plans and 144,000 of which were issued under the Company's 1995
Non-Employee Director Stock Option Plan. All stock options included in
this total are exercisable within 60 days of June 15, 1999.
(13) As extracted from Form 13G filed as of February 1, 1999 by Fidelity
Management and Research Company, represents sole dispositive power for
2,705,000 shares and sole voting power for no shares.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The By-laws of the Company state that the number of Directors of the
Company shall not be less than two. Accordingly, the number of Director
positions has been set at seven. The Nominating Committee has identified seven
candidates for election to the Board of Directors. Each Director elected shall
serve as a Director until the next annual meeting of shareholders, or until his
or her successor is elected and qualified.
The seven persons named below are the Nominating Committee's nominees
for election as Directors. Gerald J. Rubin and Stanlee N. Rubin are married.
Gerald J. Rubin and Byron H. Rubin are brothers. Set forth below are
descriptions of the principal occupations during at least the past five years of
the nominees for membership on the Company's Board of Directors.
Gerald J. Rubin, age 55, founder of the Company, has been the Chairman
of the Board and Chief Executive Officer of the Company since 1984. Mr. Rubin
has been a Director of the Company since 1969.
Gary B. Abromovitz, age 56, has been a Director of the Company since
1990. Mr. Abromovitz was a partner in the law firm of Bonn/Abromovitz from
January 1990 to September 1998. Since September 1998, Mr. Abromovitz has been
active in real estate, concentrating on historic properties and downtown
redevelopment.
Stanlee N. Rubin, age 55, has been a Director of the Company since
1990. Mrs. Rubin is active in civic and charitable organizations. She is a
member of the University of Texas at El Paso Board of Development. She is
presently on the Board of Directors of the Alumni Association of the University
of Texas at El Paso, The National Conference of Christians and Jews and the El
Paso Symphony Guild. Mrs. Rubin is also a Partner for the Susan G. Komen Breast
Cancer Foundation.
4
<PAGE> 5
Christopher L. Carameros, age 45, has been a Director of the Company
since June 1993. Mr. Carameros has been an officer of L & M Asset Management
Inc., a financial services and asset management company, from August 1997 to the
present. He was an Executive Vice President of Cactus Apparel Inc., an apparel
manufacturing company, from January 1992 to July 1997.
Byron H. Rubin, age 49, has been a Director of the Company since 1981.
He has been a partner in the firm Daniels & Rubin (formerly known as Integrated
Financial of Texas), an insurance and tax planning firm in Dallas, Texas since
1979.
Daniel C. Montano, age 50, has been a Director of the Company since
1980. He has been the managing Director of C&K Capital since January 1997. From
January 1995 to December 1996, he was Director of Investment Banking at
Brookstreet Securities. Mr. Montano was President and a director of Montano
Securities Corporation from 1979 to January 1995. In connection with matters
that occurred in 1994, Mr. Montano agreed in 1997 to a settlement with the
National Association of Securities Dealers, Inc. (the "NASD") pursuant to which
he was fined $102,500 and suspended by the NASD from associating with any NASD
members for a period of two years. Mr. Montano consented to the findings that he
had engaged in a course of conduct that resulted in the mishandling or misuse by
his firm, Montano Securities, of funds entrusted to it. Montano Securities was
also found to have carried out securities transactions without maintaining
sufficient net capital. In May 1998, the NASD suspended Mr. Montano's
registration as a registered securities broker for an unspecified time due to
his failure to pay an arbitration award. In July 1998, the Securities and
Exchange Commission entered an order affirming a decision by the NASD that Mr.
Montano was found to have violated certain rules of the NASD, including not
accurately and sufficiently discussing the mechanism of short-selling or the
risks associated with implementing the strategy using a particular stock, making
improper references to prior recommendations, making exaggerated and
inappropriate presentations of prior recommendations and making improper
projections. None of the matters discussed above with regard to Mr. Montano
involved any securities of or transactions involving Helen of Troy Limited or
any of its subsidiaries.
H. McIntyre Gardner, age 38, has been the President and Chief Operating
Officer of the Company since September 1997. Mr. Gardner served as Executive
Vice President and President of Appliance Corp. of America from 1994 to
September 1997. Mr. Gardner held the position of President of Hanover
Associates, Inc. from 1991 to 1994.
VOTE REQUIRED FOR ELECTION OF DIRECTORS
The nominees receiving a majority of the votes cast at the Meeting will
be elected as Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR EACH OF
THE SEVEN NOMINEES NAMED ABOVE.
5
<PAGE> 6
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Company's Executive Committee consisted of Mr. Gerald J. Rubin and
Mr. Byron H. Rubin during fiscal 1999. The Executive Committee has the power to
exercise all of the authority of the Board of Directors in the management of the
business and affairs of the Company, except to the extent provided in the
Company's By-laws and by applicable law. All actions and resolutions of the
Executive Committee are reported to the Board of Directors at the next meeting
of the Board for its review, approval and ratification. The Executive Committee
meets periodically during the year; but no resolutions were adopted nor were any
formal meetings held during fiscal 1999.
The Company's Audit Committee consisted of Mr. Gary B. Abromovitz, Mr.
Daniel C. Montano and Mr. Christopher L. Carameros during fiscal 1999. The Audit
Committee is responsible for evaluating the accounting and control procedures
and practices of the Company and for reporting on such matters to the Board of
Directors. The Audit Committee serves as a direct liaison with the Company's
independent public accountants and recommends the engagement or discharge of
such accountants. The Audit Committee meets periodically with the Chief
Financial Officer, other appropriate officers of the Company and the Company's
independent public accountants to review the Company's financial and accounting
systems, accounting and financial controls, reports by the independent public
accountants, proposed accounting changes and financial statements and opinions
on such financial statements. The Audit Committee met three times during fiscal
1999.
The Company's Nominating Committee consisted of Mr. Gerald J. Rubin and
Mrs. Stanlee N. Rubin during fiscal 1999. The Nominating Committee receives
recommendations from its members or other members of the Board of Directors for
candidates to be appointed to the Board or Committee positions, reviews and
evaluates such candidates and makes recommendations to the Board of Directors
for nominations to fill Board and Committee positions. The Nominating Committee
held periodic informal meetings during the year. The Nominating Committee will
consider candidates recommended by employees and shareholders. Written
suggestions for candidates, accompanied by a written consent of the proposed
candidate to serve as a Director if nominated and elected, a description of his
or her qualifications and other relevant biographical information, should be
sent by March 6, 2000 for consideration by the Nominating Committee prior to the
next Annual Meeting to the Secretary of the Company, One Helen of Troy Plaza, El
Paso, Texas 79912.
The Company's Stock Option and Compensation Committee consisted of Mr.
Gary B. Abromovitz and Mr. Daniel C. Montano during fiscal 1999. The Stock
Option and Compensation Committee generally oversees matters relating to
compensation of executive employees of the Company. In connection with this
oversight, it reviews and makes recommendations to the Board of Directors on
officer and senior employee compensation and on grants of stock options under
the Company's stock option plans. The Stock Option and Compensation Committee
met or unanimously voted on resolutions twice during fiscal 1999.
The full Board of Directors met or unanimously voted on resolutions
seven times during fiscal 1999. Three of the seven Board of Directors meetings
were held by telephone. Each of the Directors attended or acted upon at least
seventy-five percent of the aggregate number of Board of Director meetings,
consents, and Committee meetings or consents held or acted upon during the
period for which he or she acted as a member of the Board of Directors during
fiscal 1999.
6
<PAGE> 7
EXECUTIVE COMPENSATION
The following table sets forth the summary of compensation paid to the
Company's Chief Executive Officer and its other Executive Officers during fiscal
years 1997 through 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING
NAME AND PRINCIPAL FISCAL COMPENSATION OPTIONS / ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) ($) SARS (#) COMPENSATION ($)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gerald J. Rubin 1999 $ 600,000 $ 1,250,000 $ -- 1,000,000 $ 17,052(1)(2)(3)
Chairman and Chief 1998 625,003 885,000 -- 1,000,000 16,414(1)(2)(3)
Executive Officer 1997 623,158 551,705 -- -- 15,821(1)(2)(3)
H. McIntyre Gardner 1999 400,000 400,000 -- -- 1,629(1)(2)
President and Chief 1998 216,667 50,000 -- 300,000 --
Operating Officer 1997 -- -- -- -- --
Sam L. Henry 1999 218,032 25,000 -- -- 3,545(1)(4)
Senior Vice-President 1998 215,636 28,240 -- 20,000 4,517(1)(4)
Finance and Chief 1997 205,367 40,343 -- -- 4,517(1)(4)
Financial Officer
</TABLE>
(1) Includes $1,000 consisting of the Company's contributions to the Helen
of Troy 401(k) Plan.
(2) Includes amounts representing the economic benefit of split-dollar life
insurance policies for which the Company paid the premiums. In the case
of Gerald J. Rubin, the economic benefit of such polices totaled
$7,802, $7,164 and $6,571 in fiscal 1999, 1998 and 1997, respectively.
In the case of H. McIntyre Gardner the economic benefit of such
policies totaled $629 in fiscal 1999.
(3) Includes $8,250 representing the annual lease value of a vehicle
provided by the Company.
(4) Includes amounts consisting of premiums paid by the Company for term
life insurance on behalf of Sam L. Henry. Such premiums totaled $2,545
in fiscal 1999 and $3,517 in fiscal 1998 and 1997.
7
<PAGE> 8
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM
- ----------------------------------------------------------------------------------------- ---------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS / SARS
UNDERLYING GRANTED TO
OPTIONS / SARS EMPLOYEES IN EXERCISE OR BASE EXPIRATION
NAME GRANTED (#) FISCAL YEAR PRICE ($/SH) DATE 5% ($) 10% ($)
- ----------- ---------------- -------------------- -------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
G. Rubin 500,000 45.8% 17.6250 1/29/2009 $ 5,542,134 $ 14,044,855
G. Rubin 500,000 45.8% 13.4688 2/26/2009 $ 4,235,228 $ 10,732,900
</TABLE>
AGGREGATED OPTION / SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION / SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS / IN-THE-MONEY OPTIONS / SARS
SARS AT YEAR-END (#) AT FISCAL YEAR-END ($) (2)
------------------------------- -------------------------------
SHARES
ACQUIRED
ON
EXERCISE VALUE REALIZED
NAME (#) ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------ ----------- -------------- ------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
G. Rubin 900,000 $ 16,246,890 1,300,000 1,900,000 $ 11,325,000 $ 234,500
H.M. Gardner -- $ -- 66,666 234,334 $ -- $ --
S. Henry 34,284 $ 559,740 35,716 68,000 $ 339,054 $ 500,000
</TABLE>
(1) Represents the number of shares acquired on exercise multiplied by the
increase in the price of the Common Stock from the option grant date to
the exercise date.
(2) Based on the closing price of the NASDAQ National Market System -
Composite Transactions of the Common Stock on February 26, 1999
($13.9375).
Mr. Sam L. Henry resigned as the Company's Chief Financial Officer,
Senior Vice-President, Finance and Secretary in March 1999.
Dona Fisher, age 46, has been the Senior Vice-President, Finance and
Chief Financial Officer of the Company since March 1999. Ms. Fisher was a Senior
Executive Vice-President at Sun Apparel, Inc., an apparel manufacturer, from
September 1996 to March 1999. Ms. Fisher was with the Franklin Mint from 1982 to
June 1996, serving as a Senior Vice-President from 1991 to 1996.
EMPLOYMENT CONTRACTS
The Company indemnifies each of its Directors and executive officers,
as well as certain officers of the subsidiaries, against certain fees, expenses
and losses incurred in legal proceedings to which the officer or Director is
made a party by reason of serving as an executive officer or Director of the
Company, so long as the party to be indemnified acted in good faith or in a
manner reasonably believed to be in or not opposed to the best interests of the
Company
Mr. Rubin's employment contract was amended and restated effective
March 1999. Mr. Rubin's employment contract has a term of five years, renews
itself daily and provides for a base salary of $600,000, a bonus equal to 5% of
adjusted earnings from continuing operations less Mr. Rubin's base salary in
accordance with the Company's cash bonus performance plan, which was approved by
the Company's shareholders, and reimbursement of certain expenses and taxes. Mr.
Rubin also received options to purchase common stock of the Company that are
immediately vested in the amount of 250,000 shares on May 28, 1999, and will
continue to receive options in such amount on the last business day of each
8
<PAGE> 9
August, November, February and May during the term of the agreement.
Should Mr. Rubin's employment with the Company be terminated by an
occurrence other than by death, disability, or good cause, Mr. Rubin will
receive payments, each in an amount equal to his monthly rate of basic
compensation, which shall commence on the date of termination and shall continue
until the date the employment contract would have expired but for said
occurrence. Mr. Rubin would also receive payments, payable annually after the
close of each fiscal year of the Company, each in an amount equal to the amount
of incentive compensation and bonuses that would otherwise have been payable to
him if he had continued in the employ of the Company for the same period.
Upon the occurrence of a change in control of the Company, Mr. Rubin
may elect to terminate his employment with the Company, and upon such
termination will receive a lump sum payment of that amount due to him as basic
compensation if his employment contract had continued until the date the
employment contract would have expired but for said occurrence. In the event of
a change in control, Mr. Rubin will also receive a lump sum payment in an amount
equal to the amount of incentive compensation and bonuses that would otherwise
have been payable to him under the employment agreement. For the purposes of
calculating such lump sum payment, Mr. Rubin's incentive compensation and
bonuses payable with respect to each fiscal year shall be the highest annual
incentive compensation and bonus award made to him with respect to the Company's
most recent three fiscal years ending prior to the date of the termination, with
present value calculated using the applicable federal rate for the date of the
termination of employment. Mr. Rubin's contract also provides for a gross-up for
the excise tax on any amounts that are treated as excess parachute payments
under the Internal Revenue Code.
If Mr. Rubin's employment is terminated by an occurrence other than by
death, disability, or good cause, including upon a change in control, Mr. Rubin
will also receive: (1) all amounts earned, accrued or owing but not yet paid to
him, (2) immediate vesting of all options granted to him, (3) removal of all
restrictions on restricted stock awarded to him and immediate vesting of the
rights to such stock, (4) medical benefits for him and his wife for life and to
his children until their attainment of age 23, and (5) paid premiums on his life
insurance policy. Mr. Rubin will continue to participate in all employee
benefits plans, programs or arrangements available to Company executives in
which he was participating on the date of termination until the date the
employment contract would have expired but for said occurrence or, if earlier,
until he receives equivalent benefits and coverage by another employer.
The Company has an employment contract with H. McIntyre Gardner. Mr.
Gardner's contract became effective September 1, 1997, and provides for a base
salary of $400,000 and a bonus that is dependent upon the Company earning
specific amounts of pre-tax income. No incentive compensation will be paid to
Mr. Gardner for any fiscal year unless such pre-tax income for a fiscal year
exceeds $30 million.
Upon the occurrence of Mr. Gardner's termination for reasons other than
death, disability or good cause, and upon his election to terminate his
employment after a change in control of the Company, the Company shall make
monthly payments to Mr. Gardner, each in an amount equal to the monthly rate of
his basic compensation under the employment contract, commencing on the first
day of the month following the occurrence of the termination and ending on the
date the employment contract would have naturally expired. In addition, upon
termination, in the event the Stock Option and Compensation Committee fails to
grant an incentive award under the bonus plan of the Company, Mr. Gardner will
receive an amount equal to the product of (1) the incentive compensation he
would have received for the entire fiscal year, multiplied by (2) a fraction,
the numerator of which is the number of days during such fiscal year in which he
was an employee of the Company or its affiliates, and the denominator of which
is the number of days in such fiscal year.
In the event of the death of Messrs. Rubin or Gardner, all unpaid
benefits under these agreements are payable to their estates. Gerald J. Rubin's
and H. McIntyre Gardner's contracts grant each of them the right to elect a cash
payment of the remainder of their contracts in the event of a merger,
consolidation or transfer of all or substantially all of the Company's assets to
any unaffiliated company or other person.
The Company has purchased, pursuant to the terms of his employment
contract, life insurance in the amount of $5.0 million on the life of Gerald J.
Rubin, payable in the event of death to his respective designees. The Company
has purchased three "second to die" life insurance contracts in the cumulative
amount of $29.0 million on the lives of Gerald J. Rubin and Stanlee N. Rubin,
payable to their respective designee(s). The Company has also purchased life
insurance in the amount
9
<PAGE> 10
of $1.0 million on the life of H. McIntyre Gardner, payable in the event of
death, to his respective designee(s). All of the above policies referred to in
this paragraph are Split Dollar policies, which provide for the return of
premiums advanced by the Company, to be reimbursed to the Company upon death of
the insured(s).
DIRECTOR COMPENSATION
During fiscal 1999, each member of the Board of Directors of the
Company who is not an employee or officer of the Company received a fee of
$3,000 for each meeting of the Board of Directors attended, together with travel
and lodging expenses incurred in connection therewith. Additional payments of
$1,500 were made quarterly to each such director. For fiscal 2000, each member
of the Board of Directors who is not an employee or officer of the Company will
receive a $4,000 quarterly retainer, $3,000 for each meeting of the Board of
Directors attended, together with travel and lodging expenses incurred
therewith, and $3,000 for each Audit Committee meeting attended after March 1,
1999. Members of the Board of Directors were not compensated for their
participation in telephonic meetings of the Board of Directors during fiscal
1999, nor will they be compensated for such meetings in fiscal 2000.
As approved by the Company's shareholders in fiscal 1996, each
non-employee director receives stock options to acquire 4,000 shares of the
Common Stock on September 1 of each year. Subject to approval by the Company's
shareholders, beginning September 1, 1999, each non-employee director will
receive 4,000 stock options quarterly. The following table illustrates the total
annual benefits that will be received by the group of Non-Employee Directors if
the amendment to the 1995 Non-Employee Director Stock Option Plan is approved by
the shareholders.
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
--------------------------------------------
NAME AND POSITION DOLLAR VALUE ($) NUMBER OF OPTIONS
- ----------------- ---------------- -----------------
<S> <C> <C>
Non-Employee Director Group $106,875 (1) 80,000 (2)
(5 persons)
</TABLE>
(1) Represents the dollar value that the Non-Employee Directors would have
received during fiscal 1999 if they had received 4,000 options each
quarter during that year. The total dollar value is computed based upon
the closing price of the Company's Common Stock at June 15, 1999
($17.625). Options that would have been granted with exercise prices
above $17.625 are valued at zero in this calculation.
(2) Each Non-Employee Director would receive 16,000 options per year,
compared to the 4,000 per year that they receive currently.
Stock options granted to non-employee directors have an exercise price
equal to the median of the high and low market prices of the Common Stock on the
day the stock options are granted. Such stock options vest after one year.
STOCK OPTION AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None.
STOCK OPTION AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Stock Option and Compensation Committee has submitted the following report:
The Stock Option and Compensation Committee is responsible for
developing the Company's executive compensation strategy and for administering
the policies and programs that implement this strategy. The Committee is
comprised entirely of independent, Non-Employee Directors.
The executive compensation strategy reflects the Company's fundamental
philosophy of aligning the interests of management with the long-term
performance of the Company and offering competitive compensation opportunities
based on each individual's contribution to the achievement of shareholder value.
This strategy is designed to attract and retain employees with outstanding
qualifications and experience.
10
<PAGE> 11
The three elements of the Company's executive compensation strategy,
all determined by corporate and individual performance, are:
Base salary
Annual incentive compensation
Long-term incentive compensation
Total compensation opportunities are competitive with those offered by
a range of comparable companies and are intended to align management interests
with shareholder interests. The Stock Option and Compensation Committee has
reviewed the Company's primary competitors in determining competitive
compensation. Some of these competitors are privately held and are therefore not
included in the stock performance graph.
Base salaries for Gerald J. Rubin (Chief Executive Officer) and H.
McIntyre Gardner for fiscal 1999 were based on their long-term employment
contracts. See "Executive Compensation - Employment Contracts."
Base salary for the Vice President of Finance and Chief Financial
Officer is determined by the Chief Executive Officer and the President of the
Company based upon the skills and experience required by the position, the
effect of the individual's performance on the Company and the potential of the
individual and is ratified by the Board of Directors.
Annual incentive compensation consists of cash bonuses. The amount of
the cash bonus for Gerald J. Rubin is based upon the 1997 Cash Bonus Performance
Plan, which was approved by the Company's shareholders. The amount of the cash
bonus for H. McIntyre Gardner is based on his employment contract with the
Company. During fiscal 1999, the Company awarded bonuses of $1,250,000 and
$400,000 to Messrs. Gerald J. Rubin and H. McIntyre Gardner, respectively.
The bonus for the Vice President of Finance and Chief Financial Officer
is determined based upon performance objectives set by the Company's Chief
Executive Officer and the Company's President.
Long-term incentive compensation consists of the Company's stock option
plans. Stock options are granted based on the performance and position of the
executive officer, as well as the Company's performance. Executive officers are
provided with opportunities for ownership positions in the Common Stock through
the Company's stock option plans. This opportunity for ownership, combined with
a significant performance-based incentive compensation opportunity, forges a
strong link between the Company's management and its shareholders. During fiscal
1999 the Company's Board of Directors granted to Gerald J. Rubin stock options
to purchase 1,000,000 shares of the Common Stock.
All of the factors discussed in this report were taken into
consideration by the Stock Option and Compensation Committee in determining the
total compensation for Mr. Rubin for fiscal 1999.
Gary B. Abromovitz (Chairman)
The foregoing report of the Stock Option and Compensation Committee
shall not be deemed incorporated by reference by any general statement
incorporating by reference the Proxy Statement into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
11
<PAGE> 12
HELEN OF TROY FIVE-YEAR
PERFORMANCE GRAPH
The graph below compares the cumulative total return of the Common
Stock to the NASDAQ Market Index and a peer group index.
ASSUMES $100 INVESTED March 1, 1994
[HELEN OF TROY FIVE-YEAR PERFORMANCE GRAPH]
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING FEBRUARY 28, 1999.
- --------------------------------------------------------------------------------
The Peer Group Index was the Dow Jones Industry Group - Cosmetics.
- --------------------------------------------------------------------------------
12
<PAGE> 13
The graph is comprised of the following data:
<TABLE>
<CAPTION>
Fiscal Year Helen of Troy Limited NASDAQ Market Index Peer Group Index
- ----------- --------------------- ------------------- ----------------
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 121.31 95.47 118.99
1996 150.82 131.83 160.80
1997 324.59 158.24 219.24
1998 401.64 215.21 283.06
1999 365.57 278.09 282.84
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1999 the Company entered into an agreement (the "Lease")
under which it leases a 108,000 square foot warehouse facility in El Paso, Texas
from a real estate partnership (the "Landlord") in which the Company's Chief
Executive Officer is a partner. The Company entered into the Lease in order to
expand its inventory storage capacity in El Paso, Texas. Under the terms of the
Lease, the Company pays $29,250 in monthly rent. The Company also pays certain
expenses associated with the operation of the facility. The Company began
leasing the warehouse facility in July 1998 and made a total of $271,335 in
payments for associated rent and operating expenses during fiscal 1999. The
Company believes that the amount of rent under the Lease is comparable to that
being paid by other companies for similar facilities in El Paso. The Company
obtained comparable rental information on similar properties from an
unaffiliated real estate company. This information was used to establish the
rental rate for this facility. The Lease is a month-to-month agreement. Either
the Company or the Landlord may cancel the Lease by providing the other party
with notice 30 days in advance of exiting the Lease. The Company also leases
other storage space in El Paso, Texas from the Landlord. The Company paid a
total of $12,123 for the use of this other storage space in fiscal 1999.
The Company is the sublessee of office space in three locations within
the United States under three separate agreements (collectively, the
"Subleases") with the real estate partnership (the "Sublessor") from whom the
Company leases the warehouse space and other storage space discussed above.
Under the Subleases, the Company pays rent and certain operating expenses in
amounts equal to the rent and operating expenses paid by the Sublessor under its
leases of these facilities. During fiscal 1999, the Company paid $85,774 under
the Subleases.
Chris Carameros, a member of the Company's Board of Directors, serves
as an officer of a financial services and asset management company to which the
Company paid $40,000 in consulting fees during fiscal 1999. In exchange for the
amounts paid, the Company received consulting services in regard to various
business issues.
Byron H. Rubin, a member of the Company's Board of Directors, earned
ordinary insurance agent's commissions in connection with the Company's group
health, life and disability insurance as well as in connection with certain life
insurance policies on its officers. During fiscal 1999 his commissions received
from policies sold to the Company approximated $35,000.
13
<PAGE> 14
AMENDMENTS TO THE HELEN OF TROY LIMITED 1995
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(PROPOSAL 2)
The Board of Directors has determined that it is in the best interest
of the Company and its shareholders to amend the 1995 Non-Employee Director
Stock Option Plan (the "Directors Plan"). The Board of Directors has approved
certain amendments to the Directors Plan, to be effective as of the date of
approval thereof by the Company's shareholders. The following summary of the
Directors Plan does not purport to be complete and is subject in all respects
to, and qualified by, the provisions of the Directors Plan.
The Directors Plan currently provides for an automatic annual grant of
options for 4,000 shares of Common Stock to each director, who is not at the
time of the grant an officer or employee of the Company or any of its affiliates
(each an "Eligible Director"). Section 3(a) of the Directors Plan has been
amended, subject to shareholder approval, to increase the automatic grant of
options for shares of Common Stock to each Eligible Director from 4,000 annually
to 4,000 quarterly, effective as of the date of shareholder approval. The full
text of this proposed amendment to Section 3(a) of the Directors Plan is set
forth as follows:
(a) The Company shall automatically grant to each Director, on the
first day of September, December, March and June following the
Director's appointment, election, reappointment, or reelection
as a member of the Board, Stock Options for 4,000 shares of
Common Stock; provided, however, the aggregate number of
shares of Common Stock issued under Stock Options granted
under the Plan shall not exceed 480,000.
The Directors Plan currently provides for transferability of options
for Common Stock granted under the Directors Plan only by will or the laws of
descent or distribution. Section 7(d) of the Directors Plan has been amended,
subject to shareholder approval, to allow the bona fide gift of options for
Common Stock granted to a Director under the Directors Plan to family members of
the Director, to trusts established for the benefit of family members of the
Director or to entities controlled by the Director or family members of the
Director, effective as of the date of shareholder approval. The full text of
this proposed amendment to Section 7(d) of the Directors Plan is set forth as
follows:
(d) No Stock Option or any other right under the Plan, contingent or
otherwise, shall be transferable, assignable or subject to any encumbrance,
pledge or charge of any nature, other than (i) by will or the laws of descent or
distribution, or (ii) by bona fide gift to a family member(s) of the Director, a
trust established for the benefit of a family member(s) of the Director, or an
entity controlled by the Director or a family member(s) of the Director. Upon
the death of the Director, if the beneficiary of any Stock Option is the
executor or administrator or the estate of the Director, any rights with respect
to the Stock Option may be transferred to the person or persons or entity
(including a trust) entitled thereto under the will of the holder of the Stock
Option. If no beneficiary is designated, the Director's legal representative
shall be the beneficiary, and any rights with respect to the Stock Option may be
transferred to the Director's legal representative. If the beneficiary is a
person or entity other than the executor or administrator of the estate of the
Director, any rights with respect to the Stock Option may be transferred to the
designated beneficiary.
If the amendments to the Directors Plan are not approved by the
shareholders of the Company, options will continue to be granted in accordance
with the terms of the current Directors Plan.
GENERAL PLAN INFORMATION
The Directors Plan was adopted by the Board of Directors on June 6,
1995, subject to shareholder approval, which was subsequently obtained on August
23, 1995 at the Annual Meeting of Shareholders. The purpose of the Directors
Plan is to attract and to retain the services of experienced and knowledgeable
independent individuals as members of the Board of Directors, to extend to them
the opportunity to acquire a proprietary interest in the Company so that they
will apply their best efforts for the benefit of the Company, and to provide
those individuals with an additional incentive to continue in their positions,
for the best interest of the Company and its shareholders. A total of 480,000
shares of Common Stock are reserved and available for issuance under the
Directors Plan, subject to adjustments to reflect certain changes in
capitalization.
14
<PAGE> 15
Options will be awarded under the Directors Plan only to members of the
Board of Directors who are not at the time of the grant an officer or employee
of the Company or any of its affiliates.
ADMINISTRATION OF THE DIRECTORS PLAN
The Directors Plan is administered by the members of the Board of
Directors who are employees of the Company or one of its affiliates (the
"Ineligible Directors"). The Ineligible Directors have the authority and
discretion to interpret the Directors Plan and to make all other determinations
necessary for the administration of the Directors Plan and to prescribe, amend
and rescind any rules and regulations relating to the Directors Plan. However,
the Ineligible Directors have no discretion or authority to disregard or change
any of the terms and conditions under which options are granted to the Eligible
Directors or may be exercised under the Directors Plan.
PRIOR GRANTS OF PLAN AWARDS
During fiscal 1999, options to purchase 4,000 shares of Common Stock
were granted to each Eligible Director pursuant to the Directors Plan. The
following table summarizes the options outstanding under the Directors Plan as
of June 15, 1999.
<TABLE>
<CAPTION>
NUMBER OF
POSITION OPTIONS
<S> <C>
Non-employee directors as a group (five 164,000
persons)
</TABLE>
As of June 15, 1999, 16,000 shares of Common Stock, adjusted for stock
dividends, had been acquired by Eligible Directors using options that were
issued under the Directors Plan. A total of 300,000 options were available for
issuance under the Directors Plan at June 15, 1999.
OPTIONS UNDER THE DIRECTORS PLAN
An option granted under the Directors Plan becomes fully vested for one
hundred percent (100%) of the number of shares of Common Stock subject to the
option one year after the date such option was granted. The exercise price under
each option shall be equal to the mean between the high and low prices of the
Common Stock reported on the NASDAQ National Market System or other primary
market or exchange on the last trading day preceding the date on which such
option is granted to an Eligible Director. The option shall be deemed exercised
on the day when written notice of such exercise has been received by the Company
from the person entitled to exercise the option, accompanied by full payment of
the purchase price in cash or check. No option is exercisable after the tenth
anniversary of its grant.
In the event that an optionee ceases to be a director of the Company or
one or more of its affiliates, for any reason other than death or disability,
and such optionee does not remain or thereupon become an employee of the Company
or one or more of its affiliates, all options to the extent then exercisable may
be exercised for a period of six months after the date of cessation of
directorship or employment. In the event that the optionee dies while serving on
the Board of Directors of the Company or the Board of Directors of an affiliate
of the Company or while an employee thereof, all options granted to such
optionee may be exercised by the optionee's legal representatives, legatees or
distributees to the extent such options are exercisable at any time prior to the
first anniversary of his or her death, and his or her unexercised options shall
expire at the end of such period. If an option holder becomes disabled while a
director or an employee of the Company or one or more of its affiliates and
thereafter ceases to be such a director by reason of a disability, all options
to the extent then exercisable may be exercised for a period of 90 days after
the date of cessation of directorship or employment. In no event, however, shall
the period during which such options may be exercised extend beyond the term of
the options.
Currently under the Directors Plan, an option may not be transferred,
assigned, encumbranced, pledged or charged, other than by will or the laws of
descent or distribution. Subject to shareholder approval of Proposal 2, options
for Common Stock granted to a Director under the Directors Plan may be
transferred to relatives of the Director, to trusts established for
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the benefit of relatives of the Director or to entities controlled by the
Director or relatives of the Director, effective as of the date of shareholder
approval. If Proposal 2 is not approved by the Shareholders, options may
continue to be transferred under the current terms of the Plan.
CAPITALIZATION ADJUSTMENTS; MERGER; CHANGE IN CONTROL
Adjustments to prevent dilution will be made in the event of a stock
dividend, or split, combination, exchange of shares or other recapitalization,
merger, or otherwise, in which the Company is the surviving corporation. No
fractional shares of Common Stock shall be issued under the Directors Plan on
account of any such adjustments. Such adjustments shall be made by the
Ineligible Directors.
TERM AND TERMINATION OF THE DIRECTORS PLAN; AMENDMENT
The Directors Plan will continue in effect until June 6, 2005, unless
sooner terminated. The Board of Directors may make such changes in and additions
to the Directors Plan as it may deem proper; provided, however, except for
adjustments to reflect certain changes in capitalization permitted under the
Directors Plan, shareholder approval is required for any amendment that (i)
materially increases the benefits accruing to the Eligible Directors under the
Directors Plan; (ii) changes the class of persons eligible to receive options
under the Directors Plan; or (iii) increases the duration of the Directors Plan.
The Board of Directors may not, without the Eligible Director's written consent,
modify the terms and conditions of an option previously granted under the
Directors Plan. In addition, no amendment, suspension or termination of the
Directors Plan shall, without the Eligible Director's written consent, alter,
terminate or impair any right or obligation under any option previously granted
under the Directors Plan. An amendment revising the price, date of
exercisability, option term or amount of shares of Common Stock covered by an
option granted under the Directors Plan may not be made more frequently than
every six months, unless such an amendment is required to comply with the Code,
or the Employee Retirement Income Security Act of 1974, as amended, or the rules
promulgated thereunder.
In the event that regulations and rules of the Securities and Exchange
Commission cease to require shareholder approval as a condition of exemption
under Rule 16b-3 of the Exchange Act or any successor rule or regulation, and
shareholder approval is not required as a condition of registration or listing
with an applicable national market system or stock exchange, the Directors Plan
shall cease to be subject to shareholder approval, and any amendment, suspension
or termination of the Directors Plan shall be deemed to be effective upon
adoption by the Board of Directors.
MISCELLANEOUS
The Directors Plan is not qualified under the provisions of Section
401(a) of the Code and is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
FEDERAL INCOME TAX CONSEQUENCES
The following general summary is based upon the Internal Revenue Code
and does not include a discussion of any state or local tax consequences. A
participant will not recognize any taxable income upon the grant of an option.
However, upon exercise of an option, a participant must recognize ordinary
income in an amount equal to the excess of the fair market value of the shares
of Common Stock at the time of exercise over the exercise price. Upon the
subsequent disposition of the shares, the participant will realize a capital
gain or loss, depending on whether the selling price exceeds the fair market
value of the shares on the date of exercise. The participant's holding period in
the shares, for capital gains and losses purposes, begins on the date of
exercise. A participant's tax basis in the shares received on exercise of an
option will be equal to the amount of consideration paid by the participant on
exercise, plus the amount of ordinary income recognized as a result of the
receipt of such shares. If a participant exercises an option by delivering
shares of Common Stock, the participant will not recognize gain or loss with
respect to the shares delivered by the participant, even if the then fair market
value of such shares is different from the participant's tax basis therein. The
participant, however, will be taxed as described above with respect to the
exercise of the option as if he had paid the exercise price in cash. The
participant's tax basis in the shares received on such exercise will be equal to
his basis in the number of shares surrendered on such exercise plus the fair
market value of the number of shares received in excess of the number of shares
surrendered and the holding period for
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such number of shares received will include the holding period of the shares
surrendered. The Company will not be entitled to a deduction for federal income
tax purposes for the compensation paid to the participants under the Directors
Plan.
THE SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE TO ALL INDIVIDUALS.
PARTICIPANTS SHOULD CONSULT THEIR OWN TAX ADVISORS FOR A DETERMINATION AS TO THE
SPECIFIC TAX CONSEQUENCES APPLICABLE TO THEM.
SHAREHOLDER APPROVAL
The affirmative vote of the majority of the votes cast at the Annual
Meeting is required to approve these amendments to the Directors Plan. If these
amendments thereto are not approved by the Company's shareholders, the Directors
Plan, as previously approved, will continue in effect.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR APPROVAL OF THESE AMENDMENTS TO THE DIRECTORS PLAN.
SHAREHOLDER PROPOSALS
Shareholders intending to present proposals at the 2000 Annual Meeting
of Shareholders and desiring to have those proposals included in the Company's
proxy statement and form of proxy relating to that meeting must submit such
proposals, in compliance with Rule 14a-8 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), to be received at the executive offices of the
Company no later than March 6, 2000. For proposals that shareholders intend to
present at the 2000 Annual Meeting of Shareholders outside the processes of Rule
14a-8 of the Exchange Act, unless the shareholder notifies the Company of such
intent by June 9, 2000, any proxy solicited by the Company for such Annual
Meeting will confer on the holder of the proxy discretionary authority to vote
on the proposal so long as such proposal is properly presented at the Annual
Meeting.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
No action is to be taken with respect to the selection or approval of
the Company's independent public accountants. KPMG LLP has served as independent
public accountants for the Company since 1978. A representative of KPMG LLP is
expected to be present at the Annual Meeting of Shareholders with the
opportunity to make a statement if he desires to do so. The KPMG LLP
representative is also expected to be available to respond to appropriate
questions.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Executive officers, Directors and greater than ten percent shareholders
are required by SEC Regulations to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during fiscal 1999, all Section 16(a) filing requirements
applicable to the officers, Directors and greater than ten percent beneficial
owners were complied with.
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QUORUM; VOTING
The presence in person of two or more persons, representing throughout
the Meeting, in person or by proxy, at least a majority of the issued shares of
Common Stock entitled to vote is necessary to constitute a quorum at the
Meeting. Abstentions and broker non-votes are counted for purposes of
determining whether a quorum is present. If a quorum is present, the seven
nominees for Directors receiving a majority of the votes cast at the Meeting in
person or by proxy shall be elected. The affirmative vote of the majority of the
votes cast at the Meeting in person or by proxy shall be the act of the
shareholders with respect to Proposal 2. If within half an hour from the time
appointed for the Meeting a quorum is not present or represented by proxy, the
Meeting shall stand adjourned to the same day one week later, at the same time
and place or to such other day, time or place the Board of Directors may
determine, provided that at least two persons are present at such adjourned
meeting, representing throughout the meeting, in person or by proxy, at least a
majority of the issued shares of Common Stock entitled to vote. At any such
adjourned meeting at which a quorum is presented or represented, any business
may be transacted that might have been transacted at the Meeting as originally
called.
Broker non-votes are shares held by a broker or nominee that are
represented at the Meeting, but with respect to which such broker or nominee is
not empowered to vote on a particular proposal. Such broker non-votes will be
counted towards a quorum. Abstentions and broker non-votes are not counted in
determining the total number of votes cast and will have no effect with respect
to Proposals 1 and 2.
OTHER MATTERS
The Board of Directors knows of no matters to be presented at the
Meeting other than the election of Directors and consideration of the amendments
to the 1995 Non-Employee Director Stock Option Plan to increase the number of
options granted annually under that plan and to change the terms under which
options granted under that plan may be transferred. If other matters properly
come before the Meeting or any adjournment thereof, the holders of the proxies
are authorized to vote on these matters in accordance with management's
discretion.
YOUR VOTE IS IMPORTANT
You are encouraged to let us know your preference by completing and
returning the enclosed proxy card.
Gerald J. Rubin
Chairman of the Board
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