SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 10-Q
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 33-83734
J. B. WILLIAMS HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 06-1387159
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification number)
65 HARRISTOWN ROAD
Glen Rock, New Jersey 07452
(Address of Principal Executive Offices, including Zip Code)
(201) 251-8100
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
---- ----
Number of shares of the issuer's Common Stock, par value $0.01, outstanding as
of October 30, 1997: 9,000
<PAGE>
J.B. Williams Holdings, Inc.
I N D E X
Page
Part I - FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited):
Condensed Consolidated Statements of Operations 1
for the Three Months and Nine Months Ended
September 30, 1997 and September 30, 1996
Condensed Consolidated Balance Sheets at 2
September 30, 1997 and December 31, 1996
Condensed Consolidated Statements of Cash Flows 3
for the Nine Months Ended September 30, 1997
and September 30, 1996
Notes to Condensed Consolidated Financial Statements 4
Item 2: Management's Discussion and Analysis of Financial 6
Condition and Results of Operations
Part II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K 10
Signature 11
<PAGE>
J.B. Williams Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In Thousands)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1997 1996 1997 1996
Net sales $15,379 $12,756 $38,892 $31,951
Cost of sales 5,747 3,933 12,783 9,504
------ ------ ------ ------
Gross margin 9,632 8,823 26,109 22,447
Distribution and cash discounts 1,122 926 3,128 2,476
Advertising and promotion 3,134 2,218 8,821 5,637
Selling, general and
administrative expenses 2,503 1,936 6,658 5,280
Depreciation and amortization 1,205 1,155 3,386 3,430
------ ------ ------ ------
Operating income 1,668 2,588 4,116 5,624
Other Income --- --- 750 ---
Interest expense-net (1,289) (1,276) ( 3,724) ( 3,967)
------ ------ ------ ------
Income before income taxes 379 1,312 1,142 1,657
Income tax provision 148 539 445 680
------ ------ ------ ------
Net income $ 231 $ 773 $ 697 $ 977
====== ====== ====== ======
See Notes to Condensed Consolidated Financial Statements
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<PAGE>
J.B. WILLIAMS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In Thousands)
AT SEPTEMBER 30,1997 AT DECEMBER 31, 1996
ASSETS
Current Assets:
Cash and cash equivalents $ 5,662 $21,201
Accounts receivable, net 9,374 8,054
Inventories 12,626 3,235
Other current assets 979 570
Total Current Assets 28,641 33,060
Property and Equipment, Net 1,002 929
Intangible Assets, Net 44,458 39,222
Other Assets 3,454 3,584
TOTAL ASSETS $77,555 $76,795
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Accounts payable $ 2,662 $ 3,579
Accrued expenses 7,336 6,356
Total Current Liabilities 9,998 9,935
Long Term Debt 50,345 50,345
Shareholder's Equity:
Common stock and paid-in capital 9,600 9,600
Retained earnings 7,612 6,915
Total Shareholder's Equity 17,212 16,515
TOTAL LIABILITIES AND
SHAREHOLDER'S EQUITY $77,555 $76,795
See Notes to Condensed Consolidated Financial Statements
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<PAGE>
J.B. Williams Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In Thousands)
NINE MONTHS ENDED SEPTEMBER 30,
1997 1996
OPERATING ACTIVITIES:
Net income $697 $977
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of intangibles and debt
issuance costs 3,084 3,157
Depreciation and amortization of property
and equipment 302 272
Changes in operating assets and liabilities:
Accounts receivable (1,320) 1,684
Inventories (1,230) (157)
Other current asset (409) (472)
Accounts payable (917) 60
Accrued expenses 980 (2,962)
Other assets (85) 68
Net Cash Provided by Operating Activities 1,102 2,627
INVESTING ACTIVITIES
Acquisition of San Francisco Soap Business
and related assets $(11,740)
Acquisition of Viractin Business and
related assets (4,692)
Purchase of property and equipment (245) (497)
Net Cash Used In Investing Activities (16,641) (497)
FINANCING ACTIVITIES - Repurchase
of Senior Notes --- (4,655)
Decreases in Cash and Cash Equivalents (15,539) (2,525)
Cash and cash equivalents, beginning of year 21,201 19,478
Cash and Cash Equivalents, End of Period $5,662 $16,953
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $424 $855
Interest paid $6,401 $6,401
See Notes to Condensed Consolidated Financial Statements
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<PAGE>
J.B. Williams Holdings, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF ACCOUNTING AND ORGANIZATION
The consolidated financial statements include J.B. Williams Holdings, Inc.
and its wholly-owned subsidiaries: J.B. Williams Company, Inc., After Shave
Products Inc., Pre-Shave Products Inc., Hair Care Products Inc., and CEP
Holdings Inc. (collectively the "Company"). Brynwood Partners II L.P., a
private partnership formed under Delaware law, is the owner of all of the
issued and outstanding capital stock of the Company.
The accompanying unaudited condensed consolidated financial statements as
of September 30, 1997 and for the three month and nine month periods ended
September 30, 1997 and 1996 have been prepared in accordance with the
instructions to Form 10-Q. All adjustments which, in the opinion of the
management of the Company, are necessary for a fair presentation of the
condensed consolidated financial statements for the three month and nine month
periods ended September 30, 1997 and 1996 have been reflected. All such
adjustments are of a normal recurring nature. The September 30, 1997 condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended December
31, 1996 included in the Company's Annual Report on Form 10-K.
The results of operations for the period ended September 30, 1997 are not
necessarily indicative of the operating results for the full year.
2. LONG TERM DEBT
Long term debt consists of $50.3 million 12% Senior Notes, due 2004 (the
"Senior Notes").
3. FINANCIAL INFORMATION CONCERNING GUARANTORS
The Senior Notes are guaranteed by each of the Company's wholly-owned
subsidiaries, which constitute all of the Company's direct or indirect
subsidiaries (the "Subsidiary Guarantors"). The Subsidiary Guarantors have
fully and unconditionally guaranteed the Senior Notes on a joint and several
basis; and the aggregate assets, liabilities, earnings and equity of the
Subsidiary Guarantors are substantially equivalent to the assets, liabilities,
earnings and equity of the Company on a consolidated basis. There are no
restrictions on the ability of the Subsidiary Guarantors to make distributions
to the Company. In management's opinion separate financial statements and
other disclosures concerning the Subsidiary Guarantors would not be material to
investors. Accordingly, separate financial statements and other disclosures
concerning the Subsidiary Guarantors are not included herein.
-4-
<PAGE>
4. OTHER INCOME
The Company received a one-time payment of $750,000, in January 1997,
representing a break-up fee payable to the Company pursuant to the terms of a
letter of intent entered into by the Company in connection with a potential
transaction.
5. ACQUISITION OF VIRACTIN BUSINESS
During August 1977, CEP Holdings, Inc., a wholly owned subsidiary of the
Company, acquired from Virotex, Inc. the worldwide rights to the
Viractin<reg-trade-mark> business, consisting of Viractin<reg-trade-mark> cream
and gel treatments for cold sores and fever blisters. The purchase price for
these assets, excluding $.2 million of purchased inventories, was $4.5 million.
6. ACQUISITION OF SAN FRANCISCO SOAP COMPANY BUSINESS
During August 1997 J. B. Williams Company, Inc., a wholly owned subsidiary
of the Company, acquired from Avalon Natural Cosmetics, Inc. the worldwide
rights to the San Francisco Soap Company<reg-trade-mark>,
Body/Body<reg-trade-mark>, Bath & Body Sense<reg-trade-mark> and Spanish
Bath<reg-trade-mark> lines of specialty bath products. The purchase price for
these assets, excluding $5.7 million of purchased inventories, was $6.0
million.
7. RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 financial statements
to conform with the current year's presentation.
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<PAGE>
J. B. Williams Holdings, Inc.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
of Financial Condition and Results of Operations
GENERAL
J. B. Williams Holdings, Inc. (the "Company"), through its subsidiaries,
distributes and sells personal care products (Aqua Velva, Brylcreem, Lectric
Shave, and Williams Mug Soap) in the United States, Canada, and Puerto Rico,
and oral care products (Cepacol) in the United States and Puerto Rico. The
Company acquired its personal care products business in January 1993 and its
oral care products business in February 1994, in each case from certain
affiliates of SmithKline Beecham Corporation (collectively, "SKB").
During August 1997 the Company acquired two new brands. One brand, Viractin,
is a cold sore and fever blister medication that was acquired from Virotex,
Inc. a Houston, Texas based research and development company. This business
will be managed as part of the Company's oral care products business. The
second brand is a line of specialty bath products marketed primarily under the
San Francisco Soap Company brand name. This product line was purchased from
Avalon Natural Cosmetics, Inc. which is a manufacturer located in Petaluma,
California. This business will be managed as part of Company's personal care
products business.
RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1997
The following table sets forth certain operating data for the three months
ended September 30, 1997 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
(In Thousands)
PERSONAL CARE PRODUCTS ORAL CARE PRODUCTS TOTAL COMPANY
1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C>
NET SALES $9,577 $8,561 $5,802 $4,195 $15,379 $12,756
Cost of Goods Sold 4,084 2,348 1,663 1,585 5,747 3,933
------ ------ ------ ------ ------- -------
GROSS MARGIN 5,493 6,213 4,139 2,610 9,632 8,823
Distribution and Cash Discounts 632 528 490 398 1,122 926
Advertising and Promotion 1,844 1,308 1,290 910 3,134 2,218
------ ------ ------ ------ ------- -------
BRAND CONTRIBUTION $3,017 $4,377 $2,359 $1,302 5,376 5,679
Selling, General and Admin. Exp. ====== ====== ====== ====== 2,503 1,936
Depreciation and Amortization 1,205 1,155
------- -------
OPERATING INCOME 1,668 2,588
Interest Expense, Net 1,289 1,276
------- -------
INCOME BEFORE INCOME TAXES 379 1,312
Income Tax Provision 148 539
------- -------
NET INCOME $ 231 $ 773
======= =======
</TABLE>
-6
<PAGE>
For the three month period ended September 30, 1997, net sales increased 20.6%
to $15,379,000 from $12,756,000 for the same period in 1996. Of this increase,
$1,413,000 is related to sales of the newly acquired businesses and the balance
reflects continued strong sales on all other products.
For the three month period ended September 30, 1997, cost of goods sold
increased 46.1% to $5,747,000 from $3,933,000 the same period in 1996. This
increase is primarily related to a combination of the increased sales volumes
and higher manufacturing costs caused by price increases from the Company's
contract manufacturers and component suppliers. Additionally there was a
charge of $896,000 to cost of goods sold related to a write-up of the inventory
purchased as part of the Viractin and San Francisco Soap acquisitions.
For the three month period ended September 30,1997, distribution expenses and
cash discounts increased 21.1% to $1,122,000 from $926,000 for the same period
in 1996. This increase is primarily due to the increased sales activity during
this time period.
For the three month period ended September 30, 1997, advertising and promotion
expenses increased 41.3% to $3,134,000 from $2,218,000 for the same period in
1996. Most of the change versus 1996 is related to increased levels of support
on Aqua Velva and Cepacol as well as spending associated with the recently
acquired San Francisco Soap and Viractin brands.
For the three month period ended September 30, 1997, selling, general, and
administrative expenses increased 29.3% to $2,503,000 from $1,936,000 for the
same period in 1996. Most of this increase is due to expenses associated with
increased staffing and outside professional services related to the new
businesses as well as increased broker commissions resulting from the increase
in net sales.
For the three month period ended September 30, 1997, depreciation and
amortization increased slightly to $1,205,000 from $1,155,000 for the same
period in 1996. This increase is related to increased expenses associated with
the recent acquisitions.
For the three month period ended September 30, 1997, interest expense, net of
interest income, increased 1.0% to $1,289,000 from $1,276,000 for the same
period in 1996. This increase is primarily due to lower interest income as a
result of the expenditure of cash in connection with the acquisition of the San
Francisco Soap and Viractin businesses.
For the three month period ended September 30, 1997, income taxes were $148,000
as compared to $539,000 for the same period in 1996. The effective tax rate
was 39% for the 1997 interim period and 41% for the same period in 1996.
-7
<PAGE>
Results of Operations for the Nine Month Period Ended September 30, 1997
The following table sets forth certain operating data for the nine months
ended September 30, 1997 and 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
(In Thousands)
PERSONAL CARE PRODUCTS ORAL CARE PRODUCTS TOTAL COMPANY
1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C>
NET SALES $24,641 $20,821 $14,251 $11,130 $38,892 $31,951
Cost of Goods Sold 8,045 5,394 4,738 4,110 12,783 9,504
------ ------ ------ ------ ------- -------
GROSS MARGIN 16,596 15,427 9,513 7,020 26,109 22,447
Distribution and Cash Discounts 1,694 1,344 1,434 1,132 3,128 2,476
Advertising and Promotion 5,877 3,202 2,944 2,435 8,821 5,637
------ ------ ------ ------ ------- -------
BRAND CONTRIBUTION $ 9,025 $10,881 $ 5,135 $ 3,453 14,160 14,334
====== ====== ====== ====== ======= =======
Selling, General and Admin. Exp. 6,658 5,280
Depreciation and Amortization 3,386 3,430
------- -------
OPERATING INCOME 4,116 5,624
Other Income 750 ---
Interest Expense, Net (3,724) (3,967)
------- -------
INCOME BEFORE INCOME TAXES 1,142 1,657
Income Tax Provision 445 680
------- -------
Net Income $ 697 $ 977
======= =======
</TABLE>
For the nine month period ended September 30, 1997, net sales increased 21.7%
to $38,892,000 from $31,951,000 for the same period in 1996. This increase
is a result of the newly acquired businesses ($1,414,000) and the continued
strong performance of the Company's original brands ($5,527,000). All of the
Company's original brands reflect sales increases as compared to 1996.
For the nine month period ended September 30, 1997, cost of goods sold
increased 34.5% to $12,783,000 from $9,504,000 for the same period in 1996.
This increase is primarily related to the higher sales volumes combined with
higher manufacturing costs caused by price increases from the Company's
contract manufacturers and component suppliers. Additionally there was a
charge of $896,000 to cost of goods sold related to a write-up of the
inventory purchased as part of the Viractin and San Francisco Soap
acquisitions.
For the nine month period ended September 30,1997, distribution expenses and
cash discounts increased 26.3% to $3,128,000 from $2,476,000 for the same
period in 1996. This increase is associated with a combination of higher
sales volumes and the expenses related to a consolidation of the Company's
distribution operations.
For the nine month period ended September 30, 1997, advertising and promotion
expenses increased 56.5% to $8,821,000 from $5,637,000 for the same period in
1996. This reflects higher levels of marketing support on both the personal
care and oral care businesses well as the promotional spending associated with
the newly acquired businesses.
For the nine month period ended September 30, 1997, selling, general, and
administrative expenses increased by 26.1% to $6,658,000 from $5,280,000 for
the same period in 1996. This increase is
-8
<PAGE>
primarily related to increased levels of staffing and associated expenses and
higher broker commission payments resulting from the increased sales levels.
For the nine month period ended September 30, 1997, depreciation and
amortization decreased slightly by 1.3% to $3,386,000 from $3,430,000 for the
same period in 1996.
For the nine month period ended September 30, 1997, interest expense, net of
interest income, decreased 6.1% to $3,724,000 from $3,967,000 for the same
period in 1996. This reduction is primarily due to lower interest expense as
a result of the reduction in the outstanding principal amount of the Senior
Notes as a result of the repurchase by the Company of $4,655,000 in
outstanding principal amount. See "Liquidity and Capital Resources."
For the nine month period ended September 30, 1997, income taxes were $445,000
versus $680,000 for the same period in 1996. The effective tax rate was 41%
for 1997 and 39% for the 1996 interim period.
LIQUIDITY AND CAPITAL RESOURCES
The following chart summarizes the net funds provided and/or used in
operating, financing and investing activities for the periods ended September
30, 1997 and 1996 (in thousands).
NINE MONTHS ENDED SEPTEMBER 30,
1997 1996
Net cash provided by operating activities $1,102 $2,627
Net cash used in investing activities (16,641) (497)
Net cash used in financing activities --- (4,655)
Decrease in cash and cash equivalents $(15,539) $(2,525)
The principal adjustments to reconcile net income of $697,000 for the nine
month period ended September 30, 1997 to net cash used in operating activities
of $1,102,000 are depreciation and amortization of $3,386,000, offset by a net
increase in working capital requirements of $2,981,000. The working capital
increase is primarily due to higher levels of accounts receivables and
inventories.
Cash used in investing activities for the nine months period ending September
30, 1997 consists of $16.4 million in payments made by the Company as part of
the acquisition of the San Francisco Soap Company ($11.7 million) and Viractin
brands ($4.7 million). Capital expenditures, which were $.2 million for the
nine months ended September 30, 1997, are generally not significant in the
Company's business and the Company currently has no material commitments for
future capital expenditures.
As a result of the Senior Notes, the Company had $50.3 million of total debt
outstanding as of September 30, 1996. Management expects that cash on hand
and internally generated funds will provide sufficient capital resources to
finance the Company's operations and meet interest requirements on the Senior
Notes, both in respect of the short term as well as during the long term.
However, as a result of the cash expenditures made in connection with the
Company's acquisition of the San Francisco Soap and Viractin businesses, cash
and cash equivalents decreased from $21,201,000 on December 31, 1996, to
-9-
<PAGE>
$5,662,000 on September 30, 1997. Since there can be no guarantee that the
Company will generate internal funds sufficient to finance its operations and
debt requirements, the Company has arranged for a secured line of credit with
the Bank of New York through August 31, 1998 to provide funds, should they be
required, in order for the Company to meet its liquidity requirements. The
line of credit is in the maximum amount of $5,000,000, with the amount
available being subject to reduction based on certain criteria relative to the
Company's accounts receivable and inventory.
-10-
<PAGE>
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
- Exhibit 27 - Financial Data Schedule
- Exhibit 10 - Secured Credit Line dated August 29, 1997, between
J.B. Williams Company, Inc. and Bank of New York,
N.A., together with Master Promissory Note.
(b) Reports on Form 8-K
- The Company filed a report on Form 8-K on November 4, 1997,
covering the acquisition by the Company of the San Francisco
Soap Company business. No financial statements were required
to be included in this report
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
J.B. WILLIAMS HOLDINGS, INC.
Date: NOVEMBER 12, 1997 /S/ KEVIN C. HARTNETT
--------------------------------------
Name: Kevin C. Hartnett
Title: Vice President and Chief
Financial Officer
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE J.B.
WILLIAMS HOLDINGS, INC. FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,662
<SECURITIES> 0
<RECEIVABLES> 9,714
<ALLOWANCES> 340
<INVENTORY> 12,626
<CURRENT-ASSETS> 28,641
<PP&E> 2,300
<DEPRECIATION> 1,298
<TOTAL-ASSETS> 77,555
<CURRENT-LIABILITIES> 9,998
<BONDS> 50,345
0
0
<COMMON> 9,600
<OTHER-SE> 7,612
<TOTAL-LIABILITY-AND-EQUITY> 77,555
<SALES> 38,892
<TOTAL-REVENUES> 38,892
<CGS> 12,783
<TOTAL-COSTS> 12,783
<OTHER-EXPENSES> 21,993
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,724
<INCOME-PRETAX> 1,142
<INCOME-TAX> 445
<INCOME-CONTINUING> 1,142
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 697
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
Exhibit 10
August 29, 1997
J.B. Williams Company, Inc.
65 Harristown Road
Glen Rock, NJ 07452
Attention:
Gentlemen/Ladies:
The Bank of New York (the "Bank") is pleased to confirm that it
holds available to J.B. Williams Company, Inc. (the "Company") a
$5,000,000 secured line of credit, to be available for direct borrowings
by the Company and the issuance by the Bank of commercial letters of
credit for the account of the Company with an expiration date not later
than six months after the date of issuance thereof.
Notwithstanding the foregoing, the aggregate outstanding principal
amount of all extensions of credit under this line of credit shall not
exceed the lesser of $5,000,000 or an amount (as set forth in the most
recent borrowing base certificate delivered to the Bank) equal to the sum
of the following:
1. 75% of each of the accounts receivable of the Company in
respect of which each of the following is satisfied:
.
a. The account debtor thereon either (i) is located in the
United States or (ii) is not located in the United States and,
in addition in respect of this clause (a)(ii), either (A) the
obligations of such account debtor are supported by a letter of
credit which (x) is issued by a person which is satisfactory to
the Bank and (y) is otherwise satisfactory in form and
substance to the Bank or (B) such account debtor is a
subsidiary of a person located in the United States;
b. The Bank has a perfected first priority security
interest therein;
c. No amounts are unpaid (i) for more than 90 days (or
such other greater or lesser period as the Bank may specify
with respect to any account debtor) past the related invoice
date with respect to accounts originated during the months of
January through July, or (ii) for more than 30 days (or such
other greater or lesser period as the Bank may specify with
respect to any account debtor) past the related due date with
respect to accounts originated during the months of August
through December; and
<PAGE>
d. No more than 25% of the accounts receivable of the
related account debtor have amounts unpaid (i) for more than 90
days past the related invoice date with respect to accounts
originated during the months of January through July, or (ii)
for more than 30 days past the related due date with respect to
accounts originated during the months of August through
December; PLUS
2. The least of (a) $2,000,000 or (b) 50% of all inventory of
the Company in respect of which the Bank has a perfected first
priority security interest.
Extensions of credit under this line of credit in the form of direct
borrowings by the Company shall be evidenced by, shall be payable as
provided in, and shall bear interest at the rate specified in, a
promissory note of the Company in the form included with this letter
With respect to each commercial letter of credit, if any, issued by
the Bank under this line of credit, the Company will pay to the Bank,
quarterly in arrears, an issuance fee of 1% per annum on the average
daily undrawn face amount of such letter of credit and will also pay all
other fee(s) of the Bank in effect thereforfrom time to time. Each
request for a letter of credit under this line of credit shall be
accompanied by a completed application and agreement for such letter of
credit on the Bank's then standard form therefor, duly executed by the
Company, and the issuance of any such letter of credit shall be subject
to the terms and conditions set forth in such application and agreement.
All obligations of the Company to the Bank with respect to this line
of credit shall be jointly and severally guaranteed by J.B. Williams
Holdings, Inc., CEP Holdings, Inc., After Shave Products, Inc., Pre-Shave
Products, Inc. and Hair Care Products, Inc. pursuant to guarantees in the
respective forms included with this letter. All obligations of the
Company to the Bank with respect to this line of credit shall be secured,
pursuant to a security agreement in the form included with this letter,
executed by the Company, which grants the Bank a first and prior security
interest in all accounts receivable and inventory of the Company.
For so long as the Company has any obligations outstanding under
this line of credit, there shall be delivered to the Bank the following:
I. Within 45 days after the end of each quarter of each
fiscal year of the Company, financial statements of the
Company as of the end of and for such quarter and for the
period of the then current fiscal year of the Company then
ended, as prepared by management of the Company, and in
form and content satisfactory to the Bank;
<PAGE>
II. Within 90 days after the end of each fiscal year of the
Company, audited financial statements of the Company as of
the end of and for such fiscal year as prepared by
independent certified public accountants selected by the
Company, and acceptable to the Bank;
III. Within 15 days after the end of each month, a borrowing
base certificate and an aging schedule of the accounts
receivable of the Company, in each case as of the last
business day of such month and in form and content
satisfactory to the Bank; and
IV. Such other information as the Bank may reasonably request
from time to time;
As you know lines of credit are cancellable at any time by either
party and, in addition, (x) any extension of credit under this line of
credit is subject to the Bank's satisfaction, at the time of such
extension of credit, with the condition (financial and otherwise),
business, prospects and operations of the Company and (y) the issuance by
the Bank of any commercial letter of credit for the account of the
Company is subject to the satisfaction of the Bank, at the time of such
issuance, with the expiry date and all other terms of such letter of
credit. Unless cancelled earlier as provided in the first sentence of
this paragraph, this line of credit shall be held available until
August 31, 1998.
Very truly yours,
THE BANK OF NEW YORK
/S/ BANK OF NEW YORK
---------------------
<PAGE>
MASTER PROMISSORY NOTE
$5,000,000.00 August 29, 1997
For Value Received, the undersigned (the "Borrower") hereby promises
to pay to the order of THE BANK OF NEW YORK (the "Bank"), at its 10 Mason
Street, Greenwich, Connecticut office, the principal sum of Five Million
and 00/100 Dollars ($5,000,000.00) or the aggregate unpaid principal
amount of all advances made by the Bank to the Borrower (which aggregate
unpaid principal amount shall be equal to the amount duly endorsed and
set forth opposite the date last appearing on the schedule attached
hereto), whichever is less.
Each advance hereunder (an "Advance") shall bear interest at a rate
per annum equal to (1) the Alternate Base Rate (as hereinafter defined)
or (2) provided that the outstanding principal amount thereof is not less
than $100,000, a Eurodollar Rate (as hereinafter defined), but, in each
case, in no event in excess of the maximum rate permitted by law. Any
Advance which shall not be paid when due shall bear interest, payable on
demand, at a rate per annum equal to the Alternate Base Rate plus 2%, but
in no event in excess of the maximum rate permitted by law.
As used in this note:
"Alternate Base Rate" shall mean, for any day, a rate per annum
equal to the higher of (i) the Prime Rate in effect on such day and (ii)
the Federal Funds Rate in effect on such day plus one-half of one percent
(1/2%);
"Alternate Base Rate Advance" shall mean any Advance which bears
interest at the Alternate Base Rate;
"Business Day" shall mean (i) any day other than a Saturday, Sunday
or other day on which commercial banks in New York New York or Greenwich,
Connecticut are required or permitted by law to close and (ii) with
respect to Eurodollar Rate Advances, any day specified in clause (i) of
this definition which is also a day on which commercial banks are open
for domestic and international business, including dealings in Dollar
deposits, in London, England and New York New York;
"Dollar" and "$" shall mean lawful money of the United States of
America;
"Eurodollar Interest Period" shall mean, with respect to any
Eurodollar Rate Advance, a period selected by the Borrower and acceptable
to the Bank commencing on the date such Eurodollar Rate Advance is made
and ending one (1) month, two (2) months or three (3) months thereafter;
provided, however, that (i) any Eurodollar Interest
<PAGE>
Period which would otherwise end on a day which is not a Business Day
shall be extended to the immediately succeeding Business Day unless such
Business Day falls in another calendar month (in which case such
Eurodollar Interest Period shall end on the immediately preceding
Business Day), (ii) no Eurodollar Interest Period shall end after the
date until which the line of credit under which Advances may be made is
held available to the Borrower, (iii) if any Eurodollar Interest Period
begins on the last Business Day of a calendar month or on a day for which
there is no numerically corresponding day in the calendar month during
which such Eurodollar Interest Period is to end, such Eurodollar Interest
Period shall end on the last Business Day of such calendar month, and
(iv) no Eurodollar Interest Period shall be less than one (1) month;
"Eurodollar Rate" shall mean, with respect to any Eurodollar Rate
Advance for the then current Eurodollar Interest Period applicable
thereto, a rate per annum equal to, during such Eurodollar Interest
Period, the sum of 1-1/2% plus LIBOR for such Eurodollar Interest Period;
"Eurodollar Rate Advance" shall mean any Advance which bears
interest at a Eurodollar Rate;
"Federal Funds Rate" shall mean, for any day, the weighted average
of the rates on overnight Federal funds transactions with the members of
the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or if such day is not a Business Day, for the
immediately preceding Business Day) by the Federal Reserve Bank of New
York, or if such rate is not so published for any day which is a Business
Day, the average of quotations for such day on such transactions received
by the Bank from three Federal funds brokers of recognized standing
selected by the Bank;
"LIBOR" shall mean, with respect to any Eurodollar Rate Advance for
the then current Eurodollar Interest Period relating thereto, the rate
per annum at which the Bank offers deposits in Dollars to leading banks
in the London interbank market on the date two (2) Business Days prior to
the commencement of such Eurodollar Interest Period for a period equal to
such Eurodollar Interest Period and in an amount equal to the amount of
such Eurodollar Rate Advance;
"Maturity Date" shall mean, with respect to any Eurodollar Rate
Advance, the last Business Day of the Eurodollar Interest Period
applicable to such Eurodollar Rate Advance;
"Obligations" shall mean and include any and all present or future
obligations or liabilities of any Obligor to the Bank, whether incurred
by such Obligor as maker, indorser, drawer, acceptor, guarantor,
accommodation party, counterparty, purchaser, seller or otherwise, and
whether due or to become due, secured or unsecured, absolute or
contingent, joint and/or several, and howsoever and whensoever acquired
by the Bank;
<PAGE>
"Obligor" shall mean and include the Borrower, any guarantor hereof
or any hypothecator of any collateral securing this note; and
"Prime Rate" shall mean, for any day, a rate per annum equal to the
prime commercial lending rate of the Bank as publicly announced to be in
effect from time to time, such rate to be adjusted automatically, without
notice, on the effective date of any change in such rate. The Borrower
acknowledges that the Prime Rate is not the lowest rate at which the Bank
may make loans or other extensions of credit.
Each Alternate Base Rate Advance shall be payable ON DEMAND and may
be prepaid in whole at any time or in part from time to time. Each
Eurodollar Rate Advance shall be payable on the Maturity Date of such
Eurodollar Rate Advance and, except as otherwise provided herein, the
Borrower shall not have the right to prepay such Eurodollar Rate Advance.
Interest shall be computed on the basis of a 360-day year for the
actual number of days elapsed. Interest on each Alternate Rate Advance
shall be payable monthly on the last day of each month and at maturity.
Interest on each Eurodollar Rate Advance shall be payable on the Maturity
Date thereof. Upon any prepayment of Alternate Base Rate Advances, the
Borrower shall pay interest on the amount so prepaid to the date of such
prepayment.
If any payment hereof becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding
Business Day; provided, however, that in the case of a payment in respect
of the principal amount of a Eurodollar Rate Advance, if such next
succeeding Business Day falls in another calendar month, such payment
shall be due on the immediately preceding Business Day. If the date for
any payment of principal is so extended, interest thereon shall be
payable for the extended time.
Whenever the Borrower desires the Bank to make an Advance, the
Borrower shall give the Bank irrevocable notice (i) in the case of any
Alternate Base Rate Advance, on or prior to the date of such Advance and
(ii) in the case of any Eurodollar Rate Advance, at least three (3)
Business Days prior to the date of such Advance, of its intention to
borrow, specifying the date of such Advance, the interest rate to be
applicable to such Advance, and, if such Advance is to be a Eurodollar
Rate Advance, the requested Eurodollar Interest Period for such Advance
(which shall comply with the definition of Eurodollar Interest Period
above). If, on any day on which the Borrower requests a Eurodollar Rate
Advance, the Bank and the Borrower are unable to agree on the Eurodollar
Interest Period applicable to such Advance, such Advance shall be an
Alternate Base Rate Advance. Each Eurodollar Rate Advance shall be in an
integral multiple of $100,000.
If either:
<PAGE>
(i) The Bank and the Borrower are unable to agree on the
Eurodollar Interest Period applicable to a Eurodollar Rate
Advance, or
(ii) The Eurodollar Interest Period applicable to a Eurodollar Rate
Advance is not in conformity with the definition of Eurodollar
Interest Period above, or
(iii) The amount of any Eurodollar Rate Advance is not an integral
multiple of $100,000; or
(iv) The Bank shall determine at any time that (a) the Eurodollar
Rate cannot be determined for any Eurodollar Interest Period,
(b) deposits of the relevant amount and term are not available
in the London interbank Eurodollar market with respect to the
making of a Eurodollar Rate Advance, (c) the rate at which
deposits are offered to the Bank in the relevant market will
not accurately reflect the cost to the Bank of making or
maintaining a Eurodollar Rate Advance, or (d) by reason of any
adoption of or change in any applicable law or regulation or
any change in the interpretation or application thereof it has
become unlawful for the Bank to make any Eurodollar Rate
Advance,
then no Eurodollar Rate Advances shall be available hereunder (and any
requested Eurodollar Rate Advance shall be made as an Alternate Base Rate
Advance) until the Bank has given the Borrower written notice of the
termination of such condition.
Notwithstanding any other provision hereof, if any applicable law,
treaty, regulation or directive of any government or any agency,
instrumentality or authority thereof, or any change therein or in the
interpretation or application thereof, shall make it unlawful for the
Bank (or the office or branch where the Bank makes or maintains any
Eurodollar Rate Advance) to maintain any Eurodollar Rate Advance, the
Borrower shall, if any Eurodollar Rate Advance is then outstanding,
promptly upon request from the Bank, either prepay such Eurodollar Rate
Advance, together with accrued interest on the amount prepaid to the date
of prepayment, or, at the Borrower's option, convert such Eurodollar Rate
Advance into an Alternate Base Rate Advance. If any such prepayment or
conversion of any Eurodollar Rate Advance is made on a day that is not
the Maturity Date thereof, the Borrower shall also compensate the Bank,
as provided in the second succeeding paragraph, as a result of such
prepayment or conversion.
In the event that any applicable law, treaty or governmental
regulation (whether now or hereafter in effect), or any change therein or
in the interpretation or application thereof, or compliance by the Bank
with any request or directive (whether or not having the force of law)
from any central bank or other financial, monetary or other authority,
shall (i) subject the Bank to any tax of any kind whatsoever with respect
to this note or any Eurodollar Rate Advance or change the basis of
taxation of payments to the Bank of principal, interest, fees or any
other amount payable under this note (except for changes
<PAGE>
in the rate of tax on the overall net income of the Bank by the
jurisdiction in which the Bank maintains its principal office), (ii)
impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in
or for the account of, advances or loans by, or other credit extended by,
any office of the Bank, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System, or
(iii) impose on the Bank or the London interbank Eurodollar market any
other condition with respect to this note or any Eurodollar Rate Advance,
and the result of any of the foregoing is to increase the cost to the
Bank of making or maintaining any Eurodollar Rate Advance by an amount
that the Bank deems to be material or to reduce the amount of any payment
(whether of principal, interest or otherwise) in respect of any
Eurodollar Rate Advance by an amount that the Bank deems to be material,
then, in any such case, the Borrower shall promptly pay to the Bank for
its account, upon its demand, such additional amount as will compensate
the Bank for such additional cost or such reduction, as the case may be;
provided, however, that the foregoing shall not apply to increased costs
which are reflected in a Eurodollar Rate.
The Borrower agrees to indemnify the Bank and to hold the Bank
harmless from and against all losses and expenses that the Bank may
sustain or incur (i) if the Borrower makes any payment or prepayment of
the principal of, or converts, any Eurodollar Rate Advance on a day other
than the Maturity Date thereof (whether as a result of acceleration of
the maturity of such Advance, pursuant to or as a result of the second
preceding paragraph, or otherwise) or (ii) if the Borrower, for any
reason whatsoever, fails to complete a borrowing of any Eurodollar Rate
Advance on the date specified therefor after notice thereof has been
given and the Bank has determined to make such Eurodollar Rate Advance
(including, without limitation, in each case, any interest payable by the
Bank to lenders of funds obtained by the Bank in order to make or
maintain such Eurodollar Rate Advance).
A certificate of the Bank setting forth such amount or amounts as
shall be necessary to compensate the Bank as specified in the immediately
preceding two paragraphs, submitted by the Bank to the Borrower, shall be
conclusive absent manifest error, and the obligations of the Borrower
under the immediately preceding two paragraphs shall survive payment of
this note and all Advances.
If the Bank shall make a new Advance on a day on which the Borrower
is to repay an Advance, the Bank shall apply the proceeds of the new
Advance to make such repayment and only the amount by which the amount
being advanced exceeds the amount being repaid shall be made available to
the Borrower in accordance with the terms of this note.
The Borrower hereby authorizes the Bank to accept telephonic
instructions from a duly authorized representative of the Borrower to
make an Advance or receive a payment hereof, and to endorse on the
schedule attached hereto the amount of all Advances and all principal
payments hereof received by the Bank, the interest rate applicable to
each Advance and the Maturity Date of each Eurodollar Rate Advance.
<PAGE>
The Bank is hereby authorized to charge any deposit account of the
Borrower maintained at the Bank for each principal prepayment hereof on
the date made, and for each principal payment and for each interest
payment due hereunder on the due date thereof. The Bank shall credit the
Borrower's deposit account maintained at the Bank in the amount of each
Advance on the date of such Advance, which credit will be confirmed to
the Borrower by standard advice of credit or notation in the monthly
statement sent to the Borrower in connection with such account. The
Borrower agrees that the actual crediting of the amount of any Advance to
the Borrower's deposit account maintained at the Bank shall constitute
conclusive evidence that such Advance was made, and neither the failure
of the Bank to indorse on the schedule attached hereto the amount of any
Advance, the *merest rate applicable to any Advance or the Maturity Date
of any Eurodollar Rate Advance nor the failure of the Bank to forward an
advice of credit to the Borrower or note any Advance in the monthly
statement sent to the Borrower shall affect the Borrower's obligations
hereunder.
All payments hereof shall be made in lawful money of the United
States of America and in immediately available funds.
The Bank shall have a lien on the balances of the Borrower now or
hereafter on deposit with or held as custodian by the Bank and the Bank
shall have full authority to set off such balances against the
indebtedness evidenced by this note or any other Obligation of the
Borrower and may at any time, without notice, to the extent permitted by
law, apply the same to the Advances or such other Obligations, whether
due or not.
All obligations of the Borrower to the Bank under this note are
secured pursuant to the terms of the security agreement executed by the
Borrower in favor of the Bank dated of even date herewith as such
agreement may be amended or modified from time to time and any other
security agreement that the Borrower shall have executed or shall at any
time execute in favor of the Bank, and the Bank is entitled to all the
benefits thereof.
The Borrower acknowledges that the Alternate Base Rate Advances are
payable on demand and payment thereof may be demanded by the Bank at any
time for any reason in the sole and absolute discretion of the Bank, and
such right of the Bank shall not be affected or impaired by any
condition, event or circumstance whatsoever.
All Advances together with all accrued interest thereon shall become
immediately and automatically due and payable, without demand,
presentment, protest or notice of any kind, upon the commencement by or
against any Obligor of a case or proceeding under any bankruptcy,
insolvency or other law relating to the relief of debtors, the
readjustment, composition or extension of indebtedness or reorganization
or liquidation.
All Eurodollar Rate Advances, together with all accrued interest
thereon, shall become immediately and automatically due and payable,
without demand, presentment, protest or notice of any kind, upon the
occurrence of any of the following events:
<PAGE>
A. Failure of any Obligor in the performance of any of such
Obligor's covenants herein or in any instrument, document or
agreement delivered in connection herewith; or
B. Default by any Obligor in the payment or performance of any
Obligation; or
C. Failure of any Obligor to pay when due any other
indebtedness for borrowed money, acceleration of the maturity of
such indebtedness or the occurrence of any event which with notice
or lapse of time, or both, would permit acceleration of such
indebtedness; or
D. The death or incompetence of any Obligor who is an
individual; or
E. The dissolution, merger or consolidation of, or the sale or
disposal of all or substantially all of the assets of, any Obligor
which is not an individual without the prior written consent of the
Bank; or
F. The financial condition or credit standing of any Obligor
shall be or become materially impaired in the sole opinion of the
Bank or any of its officers; or
G. Commencement of any proceeding, procedure or other remedy
supplemental to the enforcement of a judgment against any Obligor;
or
H. Any representation or warranty made by any Obligor or any
financial or other statement of any Obligor delivered to the Bank by
or on behalf of any Obligor proves to be untrue, incorrect or
incomplete when made or delivered; or
I. The death of the insured under any life insurance policy
held as collateral by the Bank for the Obligations of any Obligor
with respect to this note, or the non-payment of any premiums on any
such life insurance policy; or
J. The validity or enforceability of this note, any guarantee
hereof or any other document delivered in connection herewith shall
be contested or declared null and void or any Obligor shall deny it
has any liability or obligation under or with respect to this note,
any guarantee hereof or any other document delivered by it in
connection herewith; or
K. Any Obligor shall make payment on account of any
indebtedness subordinated to the indebtedness evidenced by this note
in contravention of the terms of such subordination; or
<PAGE>
L. Cancellation of the line of credit under which such Advances
were made.
The Borrower does hereby forever waive presentment, demand, protest,
notice of protest and notice of nonpayment or dishonor of this note.
The Borrower agrees to pay all costs and expenses incurred by the
Bank incidental to or in any way relating to the Bank's enforcement of
the obligations of the Borrower hereunder or the protection of the Bank's
rights hereunder, including, but not limited to, reasonable attorneys'
fees and expenses, whether or not litigation is commenced.
Promptly upon the Bank's request, the Borrower agrees to furnish to
the Bank such information (including, without limitation, financial
statements and tax returns of the Borrower) and to permit the Bank to
inspect and make copies of its books and records, as the Bank shall
reasonably request from time to time.
The Borrower waives, in any litigation relating to this note or the
transactions contemplated hereby any right to claim or interpose any
counterclaim or set-off of any kind.
This note may not be amended, and compliance with its terms may not
be waived, orally or by course of dealing, but only by a writing signed
by an authorized officer of the Bank.
This note may be assigned or indorsed by the Bank and its benefits
shall inure to the successors, indorsees and assigns of the Bank.
The Borrower authorizes the Bank to date this note and to complete
any blank space herein according to the terms upon which any Advances
were granted.
No failure on the part of the Bank to exercise, and no delay in
exercising, any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Bank of
any right, remedy or power hereunder preclude any other or future
exercise thereof or the exercise of any other right, remedy or power.
Each and every right, remedy and power hereby granted to the Bank or
allowed it by law or other agreement shall be cumulative and not
exclusive the one of any other right, remedy or power, and may be
exercised by the Bank from time to time.
Every provision of this note is intended to be severable; if any
term or provision of this note shall be invalid, illegal or unenforceable
for any reason whatsoever, the validity, legality and enforceability of
the remaining provisions hereof shall not in any way be affected or
impaired thereby.
<PAGE>
The Borrower represents and warrants that the Borrower is a
corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation and is duly qualified to do
business in the State of New York; that the execution, delivery and
performance of this note are within the Borrower's corporate powers and
have been duly authorized by all necessary action of its board of
directors and shareholders; and that each person executing this note has
the authority to execute and deliver this note on behalf of the Borrower.
THE PROVISIONS OF THIS NOTE SHALL BE CONSTRUED AND INTERPRETED, AND
ALL RIGHTS AND OBLIGATIONS HEREUNDER DETERMINED, IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CONNECTICUT WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICT OF LAWS. THE BORROWER SUBMITS TO THE JURISDICTION OF STATE AND
FEDERAL COURTS LOCATED IN THE STATE OF CONNECTICUT AND THE CITIES OF
STAMFORD OR BRIDGEPORT IN PERSONAM AND AGREES THAT ALL ACTIONS AND
PROCEEDINGS RELATING DIRECTLY OR INDIRECTLY TO THIS NOTE SHALL BE
LITIGATED ONLY IN SAID COURTS OR COURTS LOCATED ELSEWHERE AS SELECTED BY
THE BANK AND THAT SUCH COURTS ARE CONVENIENT FORUMS. THE BORROWER WAIVES
PERSONAL SERVICE UPON IT AND CONSENTS TO SERVICE OF PROCESS BY MAILING A
COPY THEREOF TO IT BY REGISTERED OR CERTIFIED MAIL.
THE BORROWER AND THE BANK WAIVE THE RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF OR IN ANY WAY CONNECTED
TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY.
J.B. WILLIAMS COMPANY, INC. Address:
65 Harristown Road
Glen Rock, NJ 07452
Attention:
/S/ J.B. WILLIAMS COMPANY, INC.
- -------------------------------
<PAGE>
<TABLE>
<CAPTION>
Schedule to
Promissory Note - J.B. Williams Company, Inc.
<S> <C> <C> <C> <C> <C> <C>
Date of Amount of Type of Maturity Date Interest Amount of Aggregate Unpaid
Advance Advance Advance of Advance Rate Payment Principal Amount
</TABLE>
