<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 1, 1996
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
RENAISSANCE COSMETICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2844 06-1396287
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
955 MASSACHUSETTS AVENUE
CAMBRIDGE, MASSACHUSETTS 02139
(617) 497-5584
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOHN R. JACKSON, ESQ.
955 MASSACHUSETTS AVENUE
CAMBRIDGE, MASSACHUSETTS 02139
(617) 497-5584
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
WITH A COPY TO:
PAUL D. GINSBERG, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 373-3000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the Securities registered on this Form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. / /
If any of the Securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. /X/
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
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- -------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED BE REGISTERED PER SHARE(1) PRICE(1) FEE
- -------------------------------------------------------------------------------------------------------
14.0% Senior Redeemable Preferred
Stock, Series C................. 115,000 shares(2) $1,000 $115 million $39,655
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) The maximum number of shares of Series C Preferred Stock that may be issued
pursuant to this Registration Statement. This Registration Statement also
relates to an indeterminate number of shares of Series C Preferred Stock
that may be issued as dividends payable on shares of Series C Preferred
Stock pursuant to the terms thereof.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
CROSS REFERENCE SHEET
LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY
PART I OF FORM S-4
<TABLE>
<CAPTION>
ITEM NO. CAPTION LOCATION IN PROSPECTUS
- -------- ------- ----------------------
<S> <C> <C>
Item 1 Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.... Facing Page of Registration Statement;
Cross-Reference Sheet; Outside Front
and Inside Front Cover Page of
Prospectus
Item 2 Inside Front and Outside Back Cover Pages of
Prospectus................................ Inside Front Cover Pages of Prospectus;
Available Information; Outside Back
Cover Page
Item 3 Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............. Prospectus Summary; Risk Factors;
Recent Developments; Capitalization;
Summary Selected Financial
Information; Unaudited Pro Forma
Financial Data
Item 4 Terms of the Transaction.................... Prospectus Summary; The Exchange Offer;
Plan of Distribution; Description of
Series C Preferred Stock; Certain
Federal Income Tax Considerations
Item 5 Pro Forma Financial Information............. Unaudited Pro Forma Financial Data
Item 6 Material Contracts with the Company being
Acquired.................................. Not Applicable
Item 7 Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters........................ Plan of Distribution
Item 8 Interests of Named Experts and Counsel...... Legal Opinion; Experts
Item 9 Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
Item 10 Incorporation with Respect to S-3
Registrants............................... Not Applicable
Item 11 Incorporation of Certain Information by
Reference................................. Not Applicable
Item 12 Information with Respect to S-2 or S-3
Registrants............................... Not Applicable
Item 13 Incorporation of Certain Information by
Reference................................. Not Applicable
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ITEM NO. CAPTION LOCATION IN PROSPECTUS
- -------- ------- ----------------------
<S> <C> <C>
Item 14 Information with Respect to Registrants
Other than S-3 or S-2 Registrants......... Prospectus Summary; Risk Factors;
Recent Developments; Use of Proceeds;
Capitalization; Summary Selected
Financial Information; Unaudited Pro
Forma Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business
Item 15 Information with Respect to S-3 Companies... Not Applicable
Item 16 Information with Respect to S-2 or
S-3 Companies............................. Not Applicable
Item 17 Information with Respect to Companies Other
than S-2 or S-3 Companies................. Not Applicable
Item 18 Information if Proxies, Consents or
Authorizations are to Be Solicited........ Not Applicable
Item 19 Information if Proxies, Consents or
Authorizations are Not to Be Solicited, or
in an Exchange Offer...................... Prospectus Summary; Management;
Security Ownership of Certain
Beneficial Owners and Management;
Certain Relationships and Related
Transactions; The Exchange Offer;
Description of Series C Preferred
Stock; Description of Outstanding
Capital Stock; Certain Federal Income
Tax Considerations
</TABLE>
<PAGE> 4
INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS IS SUBJECT TO
COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO
THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY OR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED , 1996
PROSPECTUS
OFFER TO EXCHANGE ALL OUTSTANDING SHARES OF
14.0% SENIOR REDEEMABLE PREFERRED STOCK, SERIES B
FOR SHARES OF
14.0% SENIOR REDEEMABLE PREFERRED STOCK, SERIES C
OF
RENAISSANCE COSMETICS, INC.
------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1996, UNLESS EXTENDED
------------------------
Renaissance Cosmetics, Inc., a Delaware corporation ("RCI" or the
"Company"), hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying letter of transmittal (the "Letter
of Transmittal," and together with this Prospectus, the "Exchange Offer"), to
exchange shares of its 14.0% Senior Redeemable Preferred Stock, Series C, par
value $0.01 per share (the "Series C Preferred Stock"), for any and all of the
outstanding shares of 14.0% Senior Redeemable Preferred Stock, Series B, par
value $0.01 per share (the "Series B Preferred Stock"), of the Company. The
terms of the Series C Preferred Stock are substantially identical to the terms
of the Series B Preferred Stock, except that the shares of Series C Preferred
Stock will have been registered under the Securities Act of 1933, as amended
(the "Securities Act") and will not contain terms restricting the transfer of
such shares.
The Company will accept for exchange any and all shares of Series B
Preferred Stock that are validly tendered on or prior to 5:00 p.m., New York
City time, on the date the Exchange Offer expires, which will be ,
1996, unless the Exchange Offer is extended (the "Expiration Date"). Tenders of
shares of Series B Preferred Stock may be withdrawn at any time prior to 5:00
p.m., New York City time, on the business day prior to the Expiration Date. The
Exchange Offer is not conditioned upon any minimum number of shares of Series B
Preferred Stock being tendered for exchange. However, the Exchange Offer is
subject to certain conditions which may be waived by the Company and to the
terms and provisions of the Registration Rights Agreement (as defined herein).
See "Exchange Offer." The Company has agreed to pay the expenses of the Exchange
Offer.
Holders of shares of Series B Preferred Stock whose shares of Series B
Preferred Stock are not tendered and accepted in the Exchange Offer will
continue to hold such shares of Series B Preferred Stock. Following consummation
of the Exchange Offer, the holders of shares of Series B Preferred Stock will
continue to be subject to the existing restrictions upon transfer thereof and,
except as provided herein, the Company will have no further obligation to such
holders to provide for the registration under the Securities Act of the shares
of Series B Preferred Stock held by them.
(cover continued on next page)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN
RISKS ASSOCIATED WITH AN INVESTMENT IN THE
SERIES C PREFERRED STOCK.
The Company will not receive any proceeds from this Exchange Offer and no
underwriter is being utilized in connection with the Exchange Offer.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1996.
<PAGE> 5
The Series B Preferred Stock was issued and sold on August 15, 1996,
September 16, 1996 and September 27, 1996 in transactions not registered under
the Securities Act, in reliance upon the exemption provided in Section 4(2) of
the Securities Act. Accordingly, the Series B Preferred Stock may not be
offered, resold or otherwise pledged, hypothecated or transferred in the United
States unless so registered or unless an applicable exemption from the
registration requirements of the Securities Act is available. Shares of Series C
Preferred Stock are being offered hereby in order to satisfy the obligations of
the Company under the registration rights agreement relating to the Series B
Preferred Stock (the "Registration Rights Agreement"). See "The Exchange
Offer -- Purpose of the Exchange Offer." Based on no-action letters issued by
the staff of the Securities and Exchange Commission (the "Commission") to third
parties, the Company believes shares of Series C Preferred Stock to be issued
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than (i) a broker-dealer who purchases
such shares of Series C Preferred Stock directly from the Company to resell
pursuant to Rule 144A or any other available exemption under the Securities Act
or (ii) a person that is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such shares
of Series C Preferred Stock are acquired in the ordinary course of such holders'
business and such holders have no arrangements with any person to participate in
the distribution of such shares of Series C Preferred Stock. Eligible holders
wishing to accept the Exchange Offer must represent to the Company that such
conditions have been met. Each broker-dealer that receives shares of Series C
Preferred Stock for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such shares of Series C Preferred Stock. The Letter of Transmittal states that
by so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of shares of Series C
Preferred Stock received in exchange for shares of Series B Preferred Stock
where such shares of Series B Preferred Stock were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. For a period of 90 days following the consummation of the Exchange
Offer, the Company has agreed to use its best efforts to make this Prospectus
available to broker-dealers who have identified themselves as such for use in
connection with resales by such broker-dealers of shares of Series C Preferred
Stock received in exchange for shares of Series B Preferred Stock acquired by
such broker-dealers for their own accounts as a result of market-making or other
trading activities. See "Plan of Distribution."
Dividends on the Series C Preferred Stock, at the rate of 14.0% per annum,
are payable quarterly in arrears on February 15, May 15, August 15 and November
15 of each year (each, a "Dividend Payment Date"), commencing on
(the "First Dividend Payment Date"). Holders of Series B Preferred Stock whose
shares of Series B Preferred Stock are accepted for exchange will be deemed to
have waived the right to receive any payment in respect of any unpaid dividends
on the Series B Preferred Stock that have accumulated or accrued to the date of
the issuance of the Series C Preferred Stock. Consequently, holders who exchange
their shares of Series B Preferred Stock for Series C Preferred Stock will
receive the same dividends on the Series C Preferred Stock that holders of the
Series B Preferred Stock who do not accept the Exchange Offer will receive on
the Series B Preferred Stock. Dividends on the Series C Preferred Stock may be
paid in cash or by issuing fully paid and nonassessable shares of Series C
Preferred Stock as described herein.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF SERIES B PREFERRED STOCK IN ANY
JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE
IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
2
<PAGE> 6
There can be no assurance that an active public or private market for the
Series C Preferred Stock will develop. Whether or not a market for the Series C
Preferred Stock should develop, the shares of Series C Preferred Stock could
trade at a discount from their aggregate liquidation preference. The Company
does not intend to list the Series C Preferred Stock on a national securities
exchange or to apply for quotation of the Series C Preferred Stock through the
National Association of Securities Dealers Automated Quotation System. To the
extent shares of Series B Preferred Stock are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
shares of Series B Preferred Stock could be adversely affected.
The Company has been advised by CIBC Wood Gundy Securities Corp. (the
"Initial Purchaser") that it intends to make a market in the Series C Preferred
Stock; however, it is under no obligation to do so and any market making
activities with respect to the Series C Preferred Stock may be discontinued at
any time.
3
<PAGE> 7
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports and other information with the Commission. Reports and
other information filed by the Company with the Commission pursuant to the
informational requirements of the Exchange Act may be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices located at Seven World Trade Center, Suite 1300, New York, New York
10048; and Northwestern Atrium Center, 500 West Madison Street (Suite 1400),
Chicago, Illinois 60661; and copies of such material may be obtained from the
Public Reference Section of the Commission, at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Commission also maintains
an Internet Web Site at http://www.sec.gov that contains reports and other
information.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus all
documents and reports filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering made hereby.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other document subsequently filed with the Commission which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
OF ANY OR ALL OF THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN (NOT INCLUDING
THE EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE IN SUCH DOCUMENTS). REQUESTS FOR SUCH COPIES SHOULD BE
DIRECTED TO: RENAISSANCE COSMETICS, INC., 955 MASSACHUSETTS AVENUE, CAMBRIDGE,
MASSACHUSETTS 02139; ATTENTION: JOHN R. JACKSON (TELEPHONE NUMBER: (617)
497-5584).
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain statements under the captions Prospectus Summary, Recent
Developments, Use of Proceeds, Management Discussion and Analysis of Financial
Condition and Results of Operations, Business and elsewhere in this Prospectus
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, levels of activity, performance or
achievements of the Company, or industry results, to be materially different
from any future results, levels of activity, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions; the
ability of the Company to implement its business and acquisition strategy; the
ability of the Company to obtain financing; changes in the retail industry;
changes in consumer preferences; competition; availability of key personnel;
foreign currency exchange rates; industry capacity; and changes in, or the
failure to comply with, government regulations (especially environmental laws
and regulations). See "Risk Factors." As a result of the foregoing and other
factors, no assurance can be given as to future results, levels of activity and
achievements and neither the Company nor any other person assumes responsibility
for the accuracy and completeness of these statements.
LaJoie(R), PRO(10)(R), PRO(10) Nail Lacquer(R), Chantilly(R), White
Chantilly(R), Tabu(R), DREAMS BY TABU(TM), Lutece(R), Rafinee(R), Press & Go(R),
Petite Press & Go(R), Sport Press & Go(R), Quik Fit(R), Sculpture Quik(R),
Sculpture Quik II(R), UltraGel(TM), Nail Fetish(TM), Wrap Quik(R), Quikfile(R),
Quikshine(R), Filepro(R), Demi-Jour(R), Monsieur Musk(R), French Garden
Flowers(R), English Waterlilys(R), Parfums Parquet's French Vanilla(R),
Ambush(R), Canoe(R), Canoe-Sport(R), Herbissimo(R), Nat Robbins(R), Lip
Lacquer(R), Ever Sheer(R), Color Intense 24(R), and Stay Put(TM), are trademarks
and brands owned by or licensed to the Company. All other trademarks or service
marks referred to in this Prospectus are the property of their respective owners
and are not the property of the Company.
4
<PAGE> 8
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by reference
to the more detailed information and financial statements (including the notes
thereto) appearing elsewhere in this Prospectus. References contained in this
Prospectus to Fiscal 1994 and Fiscal 1995 mean the fiscal years ended March 31,
1995 and March 31, 1996, respectively. Unless otherwise indicated, all industry
and market share data set forth in this Prospectus are based upon information
supplied by Information Resources, Inc., an independent market research firm
which compiles actual sales data scanned through mass-market retailers' store
registers throughout the United States by its InfoScan service.
THE COMPANY
RCI, together with its wholly-owned subsidiaries, is a leading manufacturer
and marketer of mass-market fragrances, artificial fingernails, lipsticks, eye
makeup, nail polish products and related accessories sold by more than 1,000
retailers in approximately 25,000 locations in the United States, and in 42
foreign countries worldwide. The Company sells its products principally through
the domestic mass-market (or self-select) distribution channel which includes
chain drug stores (such as Walgreen and Revco), mass merchandisers (such as
Wal-Mart and Kmart) and supermarkets and combination supermarket/drug stores
(such as Kroger and Albertson's). During Fiscal 1995 and the three months ended
June 30, 1996, RCI generated net sales of $131.3 million and $30.7 million,
respectively, and EBITDA of $16.5 million and $2.9 million, respectively.(1)
Through its wholly-owned Dana Perfumes Corporation subsidiary, the Company
sells women's and men's fragrances designed to appeal to a broad range of
consumers within the mass-market, including several "classic" brands such as
Chantilly and Tabu, each of which have enjoyed widespread sales and consumer
loyalty for more than 50 years. As of December 31, 1995, the Company's fragrance
brands represented two of the top ten and five of the top 50 brands in the
women's fragrance category sold through the chain drug store channel, which
represents approximately 50% of the drug store and mass merchandiser segment.
The Company's fragrance and related products are marketed under established
brand names including Chantilly, White Chantilly, Tabu, DREAMS BY TABU, Ambush,
Parfums Parquet's French Vanilla, Raffinee, Lutece, Canoe, Herbissimo and
Monsieur Musk.
Through its wholly-owned Cosmar Corporation subsidiary ("Cosmar"), the
Company is the largest domestic manufacturer and marketer of artificial
fingernails and related fingernail care accessories sold through the chain drug
store, mass merchandiser, supermarket and supermarket/drugstore distribution
channels. Cosmar is the leading domestic manufacturer of products in four of the
top seven artificial nail care segments, and its leading market share in the
United States of 30+% in the mass-market channel is almost twice the share of
its nearest competitor. In 1995, the Company successfully entered the $300+
million nail polish/treatment category with the introduction of its line of
PRO(10) nail lacquers. In just one year after its introduction, PRO(10) ranked
as the ninth best-selling nail lacquer brand in the United States. The Company's
artificial fingernails and related products are marketed under the brand names
LaJoie, Press & Go, Sculpture Quik, Quik Fit, PRO(10), UltraGel and Nail Fetish.
Effective with the acquisition of Great American Cosmetics, Inc. ("GAC") on
August 21, 1996, the Company's Cosmar subsidiary has assumed responsibility to
manage the products available under the Nat Robbins brand name. Nat Robbins has
become a leading brand of high quality, mid-priced professionally positioned
lip, eye and nail cosmetic products sold in the mass market distribution
channel. The Company will continue to market multiple Nat Robbins color
cosmetics items including lipliner pencils, lipsticks, eyeliner pencils, eye
shadow, mascara, nail enamel and assorted accessories. In addition to the Nat
Robbins brand
- ---------------
(1) EBITDA is defined as earnings before interest, income taxes, depreciation
and amortization. EBITDA should not be considered as an alternative to net
income or cash flow and is not a measure of performance under generally
accepted accounting principles but provides additional information for
evaluating the Company.
5
<PAGE> 9
name, which appears on all packaging, products are also marketed under the brand
names Lip Lacquer, Stay Put and Color Intense 24.
The Company's principal executive offices are located at 955 Massachusetts
Avenue, Cambridge, Massachusetts 02139, and its telephone number is (617)
497-5584.
THE EXCHANGE OFFER
Securities Offered............... 115,000 shares of 14.0% Senior Redeemable
Preferred Stock, Series C. The terms of the
Series C Preferred Stock are substantially
identical to the terms of the Series B
Preferred Stock except that the Series C
Preferred Stock will have been registered
under the Securities Act and will not
contain terms restricting the transfer of
such stock. See "Description of Series C
Preferred Stock."
The Exchange Offer............... Shares of Series C Preferred Stock are
being offered in exchange for any and all
of the outstanding shares of Series B
Preferred Stock (on a share for share
basis). As of the date hereof, 115,000
shares of Series B Preferred Stock with an
aggregate liquidation preference of $115
million are issued and outstanding. The
Company has agreed to make the Exchange
Offer in order to satisfy its obligations
under the Registration Rights Agreement.
For a description of the procedures for
tendering, see "Exchange
Offer -- Procedures for Tendering Series B
Preferred Stock."
Expiration Date; Withdrawal...... The Exchange Offer will expire at 5:00
p.m., New York City time, on ,
1996, or such later date and time to which
it may be extended in the sole discretion
of the Company (the "Expiration Date").
Shares of Series B Preferred Stock tendered
pursuant to the Exchange Offer may be
withdrawn at any time prior to the
Expiration Date. Any shares of Series B
Preferred Stock not accepted for exchange
for any reason will be returned without
expense to the tendering holders thereof as
promptly as practicable after the
expiration or termination of the Exchange
Offer. See "Exchange Offer -- Expiration
Date; Extensions; Termination; Amendments"
and "Exchange Offer -- Withdrawal Rights."
Conditions to Exchange Offer..... The Exchange Offer is subject to certain
conditions. See "Exchange Offer -- Certain
Conditions to the Exchange Offer." The
Exchange Offer is not conditioned upon any
minimum number of shares of Series B
Preferred Stock being tendered for
exchange.
Certain Federal Income Tax
Considerations................... The exchange of the Series B Preferred
Stock for the Series C Preferred Stock
should not be a taxable event to the holder
for federal income tax purposes, and the
holder should not recognize any taxable
gain or loss as a result of such exchange.
See "Certain Federal Income Tax
Considerations."
Untendered Series B Preferred
Stock............................ Upon consummation of the Exchange Offer,
the holders of Series B Preferred Stock, if
any, will have no further registration or
other rights under the Registration Rights
6
<PAGE> 10
Agreement, except as provided herein.
Holders of shares of Series B Preferred
Stock who do not tender their shares of
Series B Preferred Stock in the Exchange
Offer or whose shares of Series B Preferred
Stock are not accepted for exchange will
continue to hold such shares of Series B
Preferred Stock and will be entitled to all
the rights and preferences thereof and will
be subject to all the limitations
applicable thereto, except for any such
rights or limitations which, by their
terms, terminate or cease to be effective
as a result of this Exchange Offer. All
untendered and tendered but unaccepted
shares of Series B Preferred Stock will
continue to be subject to the restrictions
on transfer provided therein. To the extent
that shares of Series B Preferred Stock are
tendered and accepted in the Exchange
Offer, the trading market for untendered
and tendered but unaccepted shares of
Series B Preferred Stock could be adversely
affected.
TERMS OF THE SERIES C PREFERRED STOCK
The terms of the Series C Preferred Stock are substantially identical to the
terms of the Series B Preferred Stock.
Dividends........................ Holders of the Series C Preferred Stock are
entitled, when, as and if declared by the
Board of Directors out of funds legally
available therefor, to receive dividends on
each outstanding share of Series C
Preferred Stock, at the rate of 14.0% per
annum. Dividends on the Series C Preferred
Stock are payable quarterly in arrears on
February 15, May 15, August 15 and November
15 of each year, commencing on the First
Dividend Payment Date. Dividends on the
Series C Preferred Stock will be cumulative
(whether or not earned or declared) from
the later of (a) the last Dividend Payment
Date on which dividends were paid on the
Series B Preferred Stock surrendered in
exchange therefor or (b) if no dividends
have been paid on the Series B Preferred
Stock, from the date of issuance of the
Series B Preferred Stock. Dividends which
are not declared and paid when due will
compound quarterly at the dividend rate.
Dividends may, at the option of the
Company, be paid on any Dividend Payment
Date in cash or by issuing fully paid and
nonassessable shares of Series C Preferred
Stock with an aggregate liquidation
preference equal to the amount of such
dividends through August 31, 2002, and in
cash thereafter; provided that in the event
that the Company's existing Senior Notes
(as defined herein) are redeemed, dividends
shall be paid in cash on the first Dividend
Payment Date following the earlier of one
year from the date of such redemption or
August 31, 2002. If the Company does not
pay cash dividends after August 15, 1999 or
at any time that it is required to do so,
the per annum dividend rate will be
increased by 0.25% during each quarter
ended on each Dividend Payment Date on
which such non-cash payment
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occurs, unless such non-cash payment has
occurred during more than four quarters, in
which case the per annum dividend rate will
be increased by 0.5% in each additional
quarter in which such non-cash payment
occurs, with a maximum rate of 17% per
annum.
Liquidation Preference........... $1,000 per share.
Board Representation............. Holders of Series C Preferred Stock (acting
together with the holders of the Series B
Preferred Stock, as a single class) will
have the right to nominate three candidates
for consideration for the Company's Board
of Directors. The Company shall use all
reasonable commercial efforts to cause the
election of one of such nominees selected
by the Company.
Voting........................... Holders of the Series C Preferred Stock
have no general voting rights except as
provided by law.
Optional Redemption.............. The Series C Preferred Stock may be
redeemed at the option of the Company, in
whole or in part, at any time on or after
September 1, 1999, initially at 108% of the
liquidation preference, declining ratably
to 100% of the liquidation preference on or
after September 1, 2003, in each case plus
accrued and unpaid dividends thereon. In
addition, at any time prior to September 1,
1999, the Company may redeem (pursuant to
one or more redemptions) up to 35% of the
aggregate liquidation preference of the
Series C Preferred Stock (and the Series B
Preferred Stock, taken together) with net
proceeds received by the Company from one
or more public offerings of equity
securities of the Company at a redemption
price equal to 110% of the liquidation
preference thereof, plus accrued and unpaid
dividends thereon to the date of
redemption. The Company's ability to effect
an optional redemption is subject to the
legal availability at the Company of funds
therefor.
Mandatory Redemption............. The Company is required to redeem all
outstanding shares of Series C Preferred
Stock on August 31, 2006, at a redemption
price equal to the liquidation preference
of $1,000 per share, plus accrued and
unpaid dividends thereon. The Company's
obligation to redeem the Series C Preferred
Stock is subject to the legal availability
at the Company of funds therefor.
Change of Control................ Upon a Change of Control (as defined
herein), the Company shall, only if and
only to the extent permitted by the Senior
Notes, the Existing Credit Facility (as
defined herein), the New Credit Facility
(as defined herein) and any other long term
indebtedness then outstanding, offer to
redeem the outstanding shares of Series C
Preferred Stock at a redemption price equal
to 101% of the liquidation preference
thereof, plus accrued and unpaid dividends
thereon; provided that such offer will not
result in the Series C Preferred Stock
being deemed to be Disqualified Stock (as
defined herein) under the Indenture (as
defined herein). If the Company does not
for any reason make an offer to purchase
the
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<PAGE> 12
Series C Preferred Stock upon a Change of
Control, the dividend rate will increase to
a rate of 17.0% per annum. The Company's
obligation to redeem the Series C Preferred
Stock is subject to the legal availability
of funds therefor.
Ranking.......................... The Series C Preferred Stock will rank
senior to (a) all classes of Common Stock
of the Company, (b) the Cumulative
Exchangeable Preferred Stock (as defined
herein) and (c) each other class of capital
stock issued by the Company after the
Exchange Offer. The Series C Preferred
Stock will rank pari passu with the Series
B Preferred Stock.
Covenants........................ The Certificate of Designation (as defined
herein) imposes certain restrictions on the
ability of the Company to (i) declare and
pay dividends or make any other
distributions or payments with respect to
the capital stock of the Company or its
subsidiaries or purchase, redeem, acquire
or retire any capital stock of the Company
or any of its subsidiaries (other than
certain enumerated exceptions) and (ii)
exercise its option to exchange either in
whole or in part, the Cumulative
Exchangeable Preferred Stock for notes of
the Company.
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<PAGE> 13
RISK FACTORS
Prospective investors in the Series C Preferred Stock should carefully
consider the following in connection with an investment in the Series C
Preferred Stock.
HIGH LEVEL OF INDEBTEDNESS AND LEVERAGE
The Company is and will continue to be highly leveraged due to the
substantial indebtedness it has incurred and intends to incur primarily to
finance acquisitions and expand its operations. The Company had $126.4 million
of total debt as of June 30, 1996 and approximately $119.4 million and $74.9
million, respectively, of pro forma debt as of June 30, 1996 after giving
effect, in the first instance, to the Equity Financing (as defined herein) that
was completed on August 15, 1996, September 16, 1996 and September 27, 1996 and
the GAC Acquisition (as defined herein) that was completed on August 21, 1996
and, in the second instance, to the Equity Financing, the GAC Acquisition, the
MEM Acquisition (as defined herein) and the New Credit Facility, respectively.
Subject to the restrictions that may be in existence on its outstanding
indebtedness, the Company expects to incur additional indebtedness from time to
time to finance acquisitions or capital expenditures or for other corporate
purposes.
The Company experienced net losses applicable to common stockholders of
$13.4 million and $6.2 million in the last two fiscal years, respectively, and
$4.7 million and $1.9 million during the three months ended June 30, 1996 and
June 30, 1995, respectively. Management believes, based upon current operations
and internal growth at historical rates, that the Company's cash flow from
operations and available borrowings under the New Credit Facility will be
sufficient to meet its anticipated requirements for capital expenditures,
working capital and future debt service requirements during the term of the
Series C Preferred Stock. There can be no assurance, however, that the Company
will continue to generate cash flows at levels sufficient to meet these
requirements or be able to enter into the New Credit Facility with sufficient
borrowing availability. See "Risk Factors -- New Credit Facility." The Company's
ability to meet its immediate debt service obligations in the short term are
dependent on its obtaining a New Credit Facility because its existing credit
facility (the "Existing Credit Facility") with Nomura Holding America Inc.
("Nomura") matures on December 22, 1996 and in the long term will be dependent
upon its future performance (including the performance of any acquired
businesses) which, in turn, will be subject to general economic conditions and
to financial, business and other factors affecting the operations of the
Company, many of which are beyond its control. If the Company is unable to
generate sufficient cash flows to service its indebtedness, it may be forced to
adopt an alternative strategy that may include actions such as slowing down or
stopping the Company's acquisition program, reducing or delaying capital
expenditures, selling assets, refinancing all or a portion of its existing
indebtedness or obtaining additional financing. There can be no assurance that
such actions would be possible or successful.
The level of the Company's indebtedness could have important consequences
to holders of the securities offered hereby including: (i) a substantial part of
the Company's cash flow from operations must be dedicated to debt service and
will not be available for other purposes (including paying cash dividends on the
Series C Preferred Stock); (ii) the Company's ability to obtain needed
additional financing in the future may be limited; (iii) the Company's leveraged
position and covenants contained in the Indenture (or any replacement thereof)
and the Existing Credit Facility (or any replacement thereof) could limit its
ability to expand and make capital improvements and acquisitions; and (iv) the
Company's level of indebtedness could make it more vulnerable to economic
downturns, limit its ability to withstand competitive pressures, and limit its
flexibility in reacting to changes in its industry and economic conditions
generally. Certain of the Company's competitors currently operate on a less
leveraged basis and have significantly greater operating and financing
flexibility than the Company.
HOLDING COMPANY STRUCTURE
The Company is a holding company and its assets consist primarily of
investments in its subsidiaries. The Company's ability to pay dividends on the
Series C Preferred Stock and redeem the Series C Preferred Stock
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<PAGE> 14
is dependent primarily upon the earnings of its subsidiaries, and the
distribution or other payment of such earnings to the Company. The Company's
subsidiaries are and likely will remain subject to agreements, such as the
Existing Credit Facility, that restrict their ability to pay dividends to the
Company. The Company's rights and the rights of its stockholders and creditors,
including holders of the Series C Preferred Stock, to participate in the
distribution of assets of any person in which the Company owns an equity
interest upon such person's liquidation or reorganization will be subject to
prior claims of such person's creditors, including trade creditors, except to
the extent that the Company may itself be a creditor with recognized claims
against such person (in which case the claims of the Company would still be
subject to the prior claims of any secured creditor of such person and of any
holder of indebtedness of such person that is senior to that held by the
Company). Accordingly, the rights of holders of the Series C Preferred Stock
will be effectively subordinated to such claims.
RESTRICTIONS ON COMPANY'S ABILITY TO PAY DIVIDENDS
Certain of the Company's debt instruments contain covenants that restrict
the Company's ability to pay, or prevent the payment of, dividends on the Series
C Preferred Stock. In addition, under Delaware law, dividends on capital stock
may only be paid from "surplus" or if there is no surplus, from the
corporation's net profits for the then current or the preceding fiscal year. The
Company does not anticipate having net profits for the foreseeable future and
its ability to pay dividends on the Series C Preferred Stock will require the
availability of adequate "surplus," which is defined as the excess, if any, of
the Company's net assets (total assets less total liabilities) over its capital
(generally the par value of its issued capital stock). There can be no assurance
that adequate surplus will be available to pay dividends on the Series C
Preferred Stock.
DEPENDENCE ON SUCCESSFUL COMPLETION OF ACQUISITIONS
The Company has signed a definitive purchase agreement, subject to
financing, to acquire MEM (as defined herein). However, there can be no
assurance that the Company will consummate the MEM Acquisition. Furthermore,
there can be no assurance that the Company will find other suitable
acquisitions. In addition, increased competition for acquisitions may increase
purchase prices above levels considered appropriate by management, in which case
the Company would be required to rely primarily on growth by existing business
rather than by acquisitions. If the Company is unsuccessful in implementing its
acquisition strategy, the Company's ability to compete with other manufacturers
and marketers of fragrance/cosmetics products could be adversely affected,
especially if the industry continues to move toward further consolidation.
Furthermore, increasing leverage and debt service requirements, diversion of
management time and attention and combining disparate company cultures and
facilities could adversely affect the Company's operating results. The success
of any completed acquisition, including the recently completed acquisition of
GAC, will depend in part on the Company's ability to integrate effectively the
acquired businesses into the Company. The process of integrating such acquired
business may involve unforeseen difficulties and may utilize a substantial
portion of the Company's financial and other resources. Since inception in 1994,
the Company has acquired five companies and/or licenses in the fragrance and
cosmetics industry for cash purchase prices aggregating approximately $119.6
million. No assurance can be given that the MEM Acquisition or other future
acquisitions will be completed or, if completed, will be successful. See "Recent
Developments -- Pending Acquisition of MEM Company, Inc."
The size, timing and integration of possible future acquisitions may cause
substantial fluctuations in operating results from quarter to quarter. As a
result, operating results for any quarter may not be indicative of results that
may be achieved for any subsequent quarter or for a full fiscal year.
NEW CREDIT FACILITY
The Company is in the process of securing a new credit facility (the "New
Credit Facility") in order to refinance the Existing Credit Facility which
matures in December 1996 and to provide capital for acquisitions and general
corporate purposes. The Company is currently in discussions with several
financial institutions. However, the Company has no binding commitment from any
financial institution, and, accordingly, there can be no assurance that the
Company will be able to obtain the New Credit Facility described herein, or any
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<PAGE> 15
similar credit facility. The Company does not expect to consummate the MEM
Acquisition until it obtains the New Credit Facility. If the Company is unable
to obtain a credit facility, it may be required to postpone and/or change
significant elements of its business strategy, including the MEM Acquisition.
Failure to refinance the Existing Credit Facility would have a material adverse
effect on the Company. See "Recent Developments -- New Credit Facility."
RESTRICTIVE DEBT COVENANTS
The indenture under which the Company's outstanding 13.75% Senior Notes due
2001 were issued (the "Indenture") and the Existing Credit Facility contain (and
the New Credit Facility will likely contain) a number of covenants that, among
other things, limit the Company's ability to incur additional indebtedness, pay
certain dividends, prepay indebtedness, dispose of certain assets, create liens,
make capital expenditures, make certain investments or acquisitions and
otherwise restrict corporate activities. The Indenture and Existing Credit
Facility also contain (and the New Credit Facility likely will contain)
provisions relating to a change of control of the Company. The Existing Credit
Facility requires (and the New Credit Facility is expected to require) the
Company to comply with certain financial ratios and tests, under which the
Company is required to achieve certain financial and operating results. The
ability of the Company to comply with such provisions may be affected by events
beyond its control including events such as prevailing economic conditions,
changes in consumer preferences and changes in the competitive environment,
which could have the effect of impairing the Company's operating performance. A
breach of any of these covenants would result in a default under the Existing
Credit Facility or the New Credit Facility and a cross default under the Senior
Notes. In the event of any such default and cross default, the lenders under the
Existing Credit Facility or the New Credit Facility could elect to declare all
amounts borrowed thereunder, together with accrued interest, to be due and
payable and the holders of the Company's existing Senior Notes could likewise
accelerate payment thereof. Acceleration of such indebtedness would have a
material adverse effect on the Company.
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends upon the efforts, abilities and
expertise of its executive officers and other key employees, including in
particular, Thomas V. Bonoma, Chairman, Chief Executive Officer and President of
the Company. The loss of the services of Mr. Bonoma and/or certain other key
individuals could have a material adverse effect on the Company's operations and
could trigger a change of control under the Indenture requiring the Company to
offer to repurchase all of the Senior Notes under the Indenture at 101% of the
principal amount plus accrued and unpaid interest and an event of default under
the Existing Credit Facility. Mr. Bonoma's current employment contract, as
amended, expires on August 18, 2000. Mr. Bonoma's employment agreement will
automatically terminate in the event of a change of control of the Company
resulting in a sale of all or substantially all of the stock or assets of the
Company in which the shareholders of the Company liquidate all or substantially
all their equity interest in the Company. See "Management -- Bonoma Employment
Agreement." The Company currently has key man life insurance on Mr. Bonoma.
However, no assurance can be made that such insurance will be adequate.
CONTROL BY KIDD KAMM
Kidd Kamm Equity Partners, L.P. ("KKEP"), an affiliate of Kidd, Kamm &
Company ("Kidd Kamm"), owns approximately 73.4% of the Company's outstanding
common stock and 39.4% of the Company's common stock on a fully diluted basis.
As a result, KKEP will effectively be able to control the outcome of matters
requiring a stockholder vote, including the election of directors, adopting or
amending provisions of the Company's Certificate of Incorporation and bylaws,
and approving certain mergers or other similar transactions, such as a sale of
substantially all of the Company's assets. In addition, a change of control
under the Company's existing Indenture would be triggered if, for among other
reasons, KKEP and the Company's executive officers own less than 35% of the
voting power of the Company, thereby requiring the Company to offer to
repurchase the Senior Notes at a purchase price equal to 101% of the principal
amount plus accrued and unpaid interest. See "Description of Outstanding
Indebtedness -- Indenture."
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SUBSTANTIAL COMPETITION
The markets for the Company's products are highly competitive and sensitive
to changes in consumer preferences and demands. These markets are characterized
by the frequent introduction of competitive products, typically accompanied by
advertising and promotional campaigns and, in the overall cosmetics/fragrances
market, by the potential entry of other manufacturers as new competitors. The
Company competes against a number of companies, some of which have substantially
greater resources than the Company and many of which sell their products through
broader distribution channels than the Company.
DEPENDENCE ON LICENSE AGREEMENTS; LICENSE AND ROYALTY OBLIGATIONS
Many of the Company's products incorporate other intellectual property
rights, such as trademarks or brand names, that are proprietary to third
parties. In each instance, the Company typically enters into a long term
exclusive license agreement to manufacture, distribute and sell perfume,
fragrance and cosmetic products covered by the trademark, use the trademark in
conjunction with the products in all advertising and letter heads and other
promotional material and use and exploit the know-how of the licensor in the
manufacture of the products in a given territory.
The Company's license agreements typically provide for the retention of
ownership of the trade name, know-how or other intellectual property by the
licensor and the payment of a royalty to the licensor. Such royalty payments
generally are based on the net sales of the licensed product for the duration of
the license and, depending on the revenues generated from the sale of the
licensed product, may be substantial. In addition, such agreements often provide
for a minimum level of royalties that may exceed the actual royalties generated
from net sales of the licensed product. Certain licenses also provide for
minimum net sales requirements.
Most of these licenses have fixed terms and are automatically renewable for
one or several additional terms. Some of these licenses may need to be renewed
or renegotiated prior to their expirations in order for the Company to continue
to sell the licensed product. The termination or non-renewal of a key license
would materially adversely affect the Company's operating results and financial
condition. The Company intends to continue to rely on third party licenses in
connection with the development of its products. There can no assurance that the
Company will be able to obtain additional licenses or renew existing licenses
for trade names or trademarks on commercially reasonable terms. The inability of
the Company to obtain such licenses on commercially reasonable terms could have
a material adverse effect on the Company's operating results and financial
condition.
The Company has entered through its subsidiaries into three license
agreements (the "Houbigant License Agreements") with Houbigant, Inc., a Delaware
corporation ("Houbigant"), that has filed a petition for reorganization under
Chapter 11 of the Federal Bankruptcy Code (the "Bankruptcy Code"). Houbigant has
been authorized and empowered by federal bankruptcy court orders to enter into
each of the Houbigant License Agreements. Except for the Houbigant License
Agreement covering Canada, the licenses provide, and the shareholders of
Houbigant agreed, that in the event that Houbigant determines to file a
subsequent voluntary petition under Chapter 11 of the Bankruptcy Code, the
Company will be entitled to nominate a person to act as its representative on
the board of directors of Houbigant and serve in meetings of the board of
directors, including, without limitation, in connection with any consideration
by the board of directors of Houbigant to authorize the rejection and
disaffirmance of the Houbigant License Agreements pursuant to Section 365 of the
Bankruptcy Code. The Company's representative may also be granted a veto right
in certain circumstances. There can be no assurance that these rights will be
adequate to protect the Company in the case of a new petition under Chapter 11
of the Bankruptcy Code. Further, should Houbigant or any other licensor go
bankrupt, there is a risk that the affected license may be rejected in
bankruptcy as an executory contract, which could have material adverse effect on
the Company. The loss of any of the Houbigant License Agreements would have a
material adverse effect on the Company. See "Business -- Intellectual Property
and -- Legal and Environmental Matters."
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CHANGES IN THE RETAIL INDUSTRY
The retail industry has periodically experienced consolidation and other
ownership changes. Major retailers in the United States and in foreign markets
may in the future consolidate, undergo restructurings or realign their
affiliations, which could decrease the number of stores that sell the Company's
products or increase the ownership concentration within the retail industry.
While such changes in the retail industry to date have not had a material
adverse effect on the Company's business or financial condition, there can be no
assurance as to the future effect of any such changes.
SEASONALITY
Sales of fragrances, which for Fiscal 1995 and for the three months ended
June 30, 1996 represented 63.4% and 59.3%, respectively, of the Company's net
sales, are highly seasonal at retail, with the majority of retail sales
occurring during the calendar year-end holiday season. Accordingly, the Company
expects that its operating results will vary significantly from quarter to
quarter, particularly in the third and fourth quarters, when the majority of
holiday products are shipped, and the first quarter, when a disproportionate
amount of receivables are collected and trade credits are negotiated. In
addition, although indications of interest are provided by retailers earlier in
the year for product shipments for the December holiday season, committed orders
are not placed until later in the year and, even when placed, such orders
generally are cancelable at any time without penalty. Thus, the Company's
working capital and liquidity, including its ability to pay cash dividends, may
fluctuate during the year. In addition, lower than expected sales during the
calendar year-end holiday season would have a material adverse effect upon the
Company's results of operations. Sales of the Company's cosmetics products are
relatively stable throughout the year.
FOREIGN OPERATIONS
The Company has manufacturing facilities and operations in four foreign
countries (including Canada) and sells its products in 42 foreign countries.
Risks inherent in foreign operations include changes in social, political and
economic conditions. Changes in currency exchange rates may affect the relative
prices at which the Company and foreign competitors purchase and sell their
products in the same market. The Company does not hedge its exposure to foreign
currency exchange rate changes. The Company is also exposed to risks associated
with changes in the laws and policies that govern foreign investments in
countries where it has operations as well as, to a lesser extent, changes in
United States laws and regulations relating to foreign trade and investment.
While such changes in laws, regulations and conditions to date have not had a
material adverse effect on the Company's business or financial condition, there
can be no assurance as to the future effect of any such changes.
EXCHANGE OFFER PROCEDURES
Issuance of shares of the Series C Preferred Stock in exchange for shares
of the Series B Preferred Stock pursuant to the Exchange Offer will be made only
after a timely receipt by the Company of such shares of the Series B Preferred
Stock, a properly completed and duly executed Letter of Transmittal and all
other required documents. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of shares of the Series B Preferred
Stock tendered for exchange will be determined by the Company in its sole
discretion, which determination will be final and binding on all parties.
Holders of shares of the Series B Preferred Stock desiring to tender such shares
of the Series B Preferred Stock in exchange for shares of the Series C Preferred
Stock should allow sufficient time to ensure timely delivery. The Company is
under no duty to give notification of defects or irregularities with respect to
the tenders of shares of the Series B Preferred Stock for exchange. Shares of
the Series B Preferred Stock that are not tendered or are tendered but not
accepted will, following the consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof and, except as
provided herein, the Company will have no further obligations to provide for the
registration under the Securities Act of such shares of the Series B Preferred
Stock. In addition, any holder of the Series B Preferred Stock who tenders in
the Exchange Offer for the purpose of participating in a distribution of the
Series C Preferred Stock may be deemed to have received restricted securities,
and if so, will be required to comply with the registration and prospectus
delivery requirements of
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<PAGE> 18
the Securities Act in connection with any resale transaction. To the extent that
shares of the Series B Preferred Stock are tendered and accepted in the Exchange
Offer the trading market for untendered and tendered but unaccepted shares of
the Series B Preferred Stock could be adversely affected. See "Exchange Offer."
ABSENCE OF PUBLIC MARKET
The Series C Preferred Stock is a new security for which there currently is
no market. Although the Initial Purchaser has informed the Company that it
currently intends to make a market in the Series C Preferred Stock, the Initial
Purchaser is not obligated to do so and any market-making with respect to the
Series C Preferred Stock may be discontinued at any time without notice.
Therefore, there can be no assurance as to the liquidity of any trading market
for the Series C Preferred Stock or that an active public market for the Series
C Preferred Stock will develop. The Company does not intend to apply for listing
or quotation of the Series C Preferred Stock on any securities exchange or stock
market.
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RECENT DEVELOPMENTS
ACQUISITION OF GREAT AMERICAN COSMETICS, INC.
On August 21, 1996, RCI, through its wholly-owned subsidiary Cosmar,
completed its acquisition of all of the issued and outstanding capital stock of
GAC (the "GAC Acquisition") pursuant to a Stock Purchase Agreement (the "GAC
Acquisition Agreement"), dated June 27, 1996, with GAC and Messrs. Pallini and
Carbone, the sole shareholders of GAC (the "Sellers").
GAC outsources, markets, distributes, advertises, promotes and merchandises
mid-priced, mass-markets lipsticks, eye make-up, nail polish products and
related accessories sold under the Nat Robbins trademark.
The purchase price for the GAC Acquisition was $15,250,000 in cash,
approximately $14,209,000 of which was paid to the Sellers at closing,
approximately $41,000 of which was retained by Cosmar to fund possible
post-closing severance bonuses to certain GAC employees and the remaining $1.0
million of which was placed into escrow to secure the Sellers' post-closing
obligation to indemnify Cosmar for breaches of the Sellers' representations,
warranties and covenants contained in the GAC Acquisition Agreement. Concurrent
with the closing, RCI repaid $796,000 of GAC indebtedness. Immediately prior to
the closing, GAC repaid $184,000 of loans owed to its shareholders. In
connection with the closing, the Company agreed to fund up to $141,000 (with up
to $100,000 of its own funds and up to $41,000 of the purchase price held back
from the Sellers for this purpose) of possible post-closing severance bonuses to
certain GAC employees, if earned.
In connection with the GAC Acquisition, Cosmar has retained Messrs. Pallini
and Carbone as consultants to Cosmar and its affiliates. Mr. Pallini's
consulting agreement is for a term of three (3) years with annual compensation
of $200,000 per year, payable in thirty-six (36) equal monthly installments. Mr.
Carbone's consulting agreement is for a term of one (1) year with annual
compensation of $150,000, payable in twelve (12) equal monthly installments.
PENDING ACQUISITION OF MEM COMPANY, INC.
On August 6, 1996, RCI, its newly-formed wholly owned subsidiary,
Renaissance Acquisition, Inc. ("RAI"), and MEM Company, Inc., a New York
corporation ("MEM"), entered into an Agreement and Plan of Merger (the "MEM
Acquisition Agreement") pursuant to which RAI will be merged into MEM and each
outstanding share of MEM common stock (the "MEM Stock"), other than dissenter's
shares, will be converted into the right to receive $7.50 per share in cash (and
each share subject to a stock option will be converted into the right to receive
the difference between $7.50 per share and the per share exercise price of such
option) (the "MEM Acquisition"). The aggregate consideration for the MEM Stock
(including the purchase price for the outstanding MEM stock options that will be
cashed out in the MEM Acquisition) is approximately $34.3 million, including
repayment of MEM's indebtedness (which estimate is based on the balance of such
indebtedness at June 30, 1996). Due to the seasonality of MEM's business, such
amount of indebtedness could be materially higher depending on the date the MEM
Acquisition is closed.
MEM, a publicly-traded American Stock Exchange company, distributes a
diversified line of fragrances and toiletries in the mass market distribution
channel. MEM's products are marketed under the nationally advertised trademarks
English Leather(R), British Sterling(R), Heaven Sent(R), LOVE's(R),
Tinkerbell(R), Acqua di Selva(R), Timberline(R), Love's Frenzy(R) and Love's
Clean & Natural product lines. Tom Fields, Ltd. ("Tom Fields"), a division of
MEM, manufactures and markets a line of children's cosmetics and accessories
principally under the trademark Tinkerbell(R). A subsidiary, Tom Fields (U.K.)
Ltd., markets this line of children's products in the United Kingdom and
elsewhere in Europe. The principal market for MEM's products is the United
States. According to MEM's management, one national customer accounted for 13%
of net sales in 1995 and 14% of net sales in 1994 and the loss of such customer
would have a material adverse effect. MEM had net sales of approximately $44.8
million and a net loss of approximately $3.0 million for the year ended December
31, 1995. Net sales declined to $9.2 million during the six months ended June
30, 1996 from $11.0 million during the prior year's comparable period and the
net loss for the period increased to $4.4 million from $3.2 million in the prior
year's comparable period.
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The facilities and plant machinery and equipment owned by MEM and its
subsidiaries are, in the opinion of its management, adequate for the conduct of
its business, and are well maintained and in good condition. MEM's executive
offices and main plant are located in a 206,000 square foot building located on
16.3 acres in Northvale, New Jersey and owned by MEM. The Tom Fields plant is
located in a 53,000 square foot building in Northvale, New Jersey and is owned
by a subsidiary of MEM. Manufacturing facilities in Canada are located in a
32,000 square foot plant in Boucherville, Quebec which is owned by MEM Company
(Canada) Ltd. Tom Fields (U.K.) assembles products in leased facilities in
Folkestone, Kent.
The MEM Acquisition Agreement does not provide for indemnification of the
Company for losses suffered as a result of breaches of representations,
warranties, covenants and agreements, and no escrow has been set aside for such
indemnification. The MEM Acquisition Agreement contains standard representations
and warranties for a transaction of this type, all of which will terminate upon
the effectiveness of the MEM Acquisition. Under the terms of the MEM Acquisition
Agreement, at or prior to the closing, the Company is required to establish a
stay bonus program for selected employees of MEM. Also, prior to the closing,
MEM may establish its own stay bonus program, and, if the MEM Acquisition
Agreement is terminated by MEM as a result of the Company's breach of its
obligations thereunder or the MEM Acquisition does not close because the Company
fails to obtain financing, the Company has agreed to reimburse MEM for such
bonus program up to an aggregate amount of $500,000. The consummation of the MEM
Acquisition will be subject to customary closing conditions, including the
approval of the stockholders of MEM, the receipt of requisite regulatory and
third party consents and approvals, the absence of an order, decree or
injunction preventing the transaction, the receipt of a fairness opinion from
MEM's independent investment banking firm, the accuracy of all representations
and warranties, the performance of all covenants and agreements, the receipt of
legal opinions, the absence of material adverse changes and the obtaining by the
Company of financing to complete the MEM Acquisition on terms acceptable to it.
The MEM Acquisition Agreement may be terminated by MEM if the MEM
Acquisition is not completed by November 30, 1996 or at any time (i) if required
by MEM's board of directors in the exercise of its fiduciary duties or (ii) if
the Company has defaulted in the performance of the MEM Acquisition Agreement
and such default remains uncured for 30 days after notice thereof.
If the MEM Acquisition is not consummated because MEM terminates the MEM
Acquisition Agreement as a result of exercising its fiduciary out at a time when
the Company and RAI are in compliance with all of their representations,
warranties, covenants and agreements contained therein and within twelve (12)
months from the date of the MEM Acquisition Agreement, MEM consummates or enters
into an agreement or other arrangement to consummate an acquisition transaction
with any party other than RCI, MEM will be obligated to pay to the Company the
sum of $1.0 million.
If the MEM Acquisition is not consummated because the Company or RAI
terminates the MEM Acquisition Agreement as a result of the failure to close the
financing for the MEM Acquisition, the Company will be obligated to pay MEM the
sum of $1.0 million.
Also on August 6, 1996, the Company entered into a definitive employment
agreement with Gay Mayer, the current Chairman, Chief Executive Officer and
President of MEM, pursuant to which the Company will retain Mr. Mayer as an
officer of the Company following the effective time of the MEM Acquisition. Mr.
Mayer's employment agreement will be for a term of 30 months at an annual salary
of $250,000, payable in equal semi-monthly payments. The Company has agreed to
grant an option to Mr. Mayer to acquire 5,000 shares of the Company common stock
upon the closing of the MEM Acquisition. The per share exercise price of the
option will be equal to $104.00.
The Company does not intend to effect the MEM Acquisition unless and until
it obtains the New Credit Facility.
An action (seeking class action certification) was filed on July 31, 1996
on behalf of the shareholders of MEM against MEM and four of its current and
former directors, alleging that the compensation offered to the shareholders in
the MEM Acquisition is inadequate and grossly unfair and that the defendants
violated their fiduciary duties by not seeking additional potential purchasers
for MEM. The action seeks, among other
17
<PAGE> 21
things, a court order requiring the defendants to seek other purchasers, or, if
the MEM Acquisition is consummated, damages. MEM has advised the Company that
MEM believes that this action is without merit and that it intends to vigorously
defend such action.
The foregoing summary of the material terms of the MEM Acquisition
Agreement and related agreements is qualified in its entirety by reference to
such agreements, copies of which have been filed as exhibits to the Registration
Statement of which this Prospectus is a part. In addition, see the historical
financial statements of MEM appearing elsewhere in this Prospectus.
NEW CREDIT FACILITY
The Company expects to enter into the New Credit Facility in order to
refinance the Existing Credit Facility which matures in December 1996 and to
provide capital for acquisitions and general corporate purposes. Although the
Company has not received a commitment letter from any financial institution or
entered into a binding agreement with respect to the New Credit Facility as of
the date of this Prospectus, the Company has received proposals from and
commenced discussions with prospective lenders. The Company is seeking to obtain
a New Credit Facility with approximately $150.0 million in maximum available
borrowing, including funds for future acquisitions. There can be no assurance
that the Company will be successful in securing the New Credit Facility. See
"Special Note Regarding Forward-Looking Information" and "Risk Factors -- New
Credit Facility."
18
<PAGE> 22
USE OF PROCEEDS
No proceeds will be received by the Company from the Exchange Offer. The
net proceeds of (i) the offering on August 15, 1996, September 16, 1996 and
September 27, 1996 of the Series B Preferred Stock and warrants to purchase
Common Stock of the Company (the "Series B Offering"), including accrued
dividends of $0.4 million, (ii) the sale of Common Stock and the refund of a
portion of the fee paid to CIBC WG Argosy Merchant Fund 2, L.L.C. ("CIBC") in
connection with CIBC's commitment to purchase $20.0 million of the Company's
Senior Redeemable Exchangeable Preferred Stock, Series A (which CIBC purchased
during May and June 1996 (the "Interim Preferred Facility")) which refund
occurred concurrently with the Series B Offering (the "CIBC Financing") and
(iii) the sale of Common Stock in connection with the closing of a portion of
the Series B Offering on September 27, 1996 (the "New Common Stock Sale," and
together with the Series B Offering and the CIBC Financing, the "Equity
Financing"), available to the Company, after deducting expenses incurred in
connection with the Equity Financing, was approximately $119.1 million. Of such
net proceeds, (i) approximately $20.4 million was used to repay the Interim
Preferred Facility, including accrued dividends thereon, (ii) approximately
$15.5 million was used to finance the GAC Acquisition (including repayment of
debt), net of a non-refundable deposit of $0.6 million, and to pay fees and
expenses related to the GAC Acquisition, (iii) approximately $34.3(1) million
(of which $33.8 million was placed in a certificate of deposit) was set aside to
consummate the MEM Acquisition (including the repayment of debt and the payment
of fees and expenses related thereto), which acquisition is subject to, among
other things, the satisfaction of the conditions to closing contained in the MEM
Acquisition Agreement and the Company having entered into the New Credit
Facility, (iv) approximately $7.0 million was used to repay indebtedness under
the Existing Credit Facility and (v) the remaining net proceeds have been used
or are available for general corporate purposes. See "Special Note Regarding
Forward-Looking Information."
The Company does not expect to consummate the MEM Acquisition until it has
entered into the New Credit Facility. In the event that the New Credit Facility
is secured, the Company intends to use borrowings thereunder to repay all
indebtedness outstanding under the Existing Credit Facility and for general
corporate purposes. In the event that the MEM Acquisition is not completed, the
Company expects to use the excess net proceeds from the Equity Financing that
would have been used to finance the MEM Acquisition to repay indebtedness under
the Existing Credit Facility and to finance additional acquisitions that the
Company expects to make in the future. See "Special Note Regarding
Forward-Looking Information."
Under the Existing Credit Facility, dated as of December 21, 1994, as
amended, Nomura has provided to the Company a revolving credit facility in an
aggregate principal amount of $40.0 million, and term loans in an aggregate
principal amount of $30.0 million. Such loans (the "Nomura Notes") bear interest
at variable rates equal to the bank base rate (8.25% at June 30, 1996) plus
4.5%. The weighted average interest rate on indebtedness under the Existing
Credit Facility was 12.19% and 12.25%, respectively, for the year ended March
31, 1996 and the three months ended June 30, 1996. The outstanding principal
under the Existing Credit Facility will mature and become payable in full on
December 22, 1996, together with all interest accrued thereon to such date and
all unpaid fees, expenses and other amounts payable under the Existing Credit
Facility.
- ---------------
(1) Estimate based on outstanding indebtedness at June 30, 1996. The amount of
indebtedness outstanding at MEM to be repaid with the proceeds described herein
is expected to be higher (and could be materially higher) than the balance as of
June 30, 1996 and will depend on the exact timing of the closing of the MEM
Acquisition.
19
<PAGE> 23
CAPITALIZATION
The following table sets forth the historical and pro forma capitalization
of the Company as of June 30, 1996. The pro forma capitalization of the Company
is adjusted to give effect to: (i) in the case of the second column, the Equity
Financing and the use of proceeds therefrom as described under the caption "Use
of Proceeds," and (ii) in the case of the third column, the Equity Financing and
the New Credit Facility and the use of proceeds therefrom as described under the
caption "Use of Proceeds," in each case assuming such transactions had occurred
as of June 30, 1996. The pro forma capitalization is presented for information
purposes only and is not necessarily indicative of the future capitalization of
the Company.
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------------------------
HISTORICAL PRO FORMA(1) PRO FORMA(2)
---------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and Cash Equivalents............................. $ 7,573 $ 84,688 $ 2,000
Existing Credit Facility.............................. $ 59,000 $ 52,000 $ --
New Credit Facility................................... -- -- 7,452
Senior Notes(3)....................................... 63,667 63,667 63,667
Subordinated Seller Notes(4).......................... 3,737 3,737 3,737
Total Debt.................................. 126,404 119,404 74,856
-------- -------- --------
Redeemable Preferred Stock (40,000 shares authorized;
11,884 shares issued and outstanding)(5)............ 12,049 12,049 12,049
Senior Exchangeable Redeemable Preferred
Stock -- Series A (100,000 actual and -0- Pro Forma
shares authorized; 20,000 actual and -0- Pro Forma
shares issued and outstanding)...................... 19,092 -- --
Senior Redeemable Preferred Stock -- Series B (-0-
actual and 350,000 Pro Forma shares authorized; -0-
actual and 115,000 Pro Forma shares issued and
outstanding)(6)..................................... -- 75,003 75,003
-------- -------- --------
Total Preferred Stock....................... 31,141 87,052 87,052
-------- -------- --------
Common stockholders' Equity (3,000,000 actual and Pro
Forma shares authorized; 721,168 actual and 825,086
Pro Forma shares issued and outstanding)(7)......... 1,025 42,642 42,642
-------- -------- --------
Total Capitalization.................................. $ 158,570 $249,098 $204,550
======== ======== ========
</TABLE>
- ---------------
(1) Reflects the closing of the Equity Financing and the use of proceeds
therefrom as described under the caption "Use of Proceeds."
(2) Reflects the closing of the Equity Financing and assumes the closing of the
New Credit Facility and the use of proceeds therefrom as described under
the caption "Use of Proceeds."
(3) The $65.0 million of Senior Notes are shown net of original issue discount
and a discount as a result of an allocation to the common stock warrants
issued in connection therewith.
(4) The Subordinated Seller Notes, initially issued to the selling shareholders
of Cosmar, accrue interest through August 1997 at a rate of 8% per annum
and thereafter at a rate which increases each year up to a maximum of 11%
per annum beginning in the sixth year after issuance. The Subordinated
Seller Notes are due on August 15, 2002 and are shown at estimated fair
market value net of unamortized discount of $1.3 million.
(5) Dividend payable in cash or in kind, at the Company's option, at 10.0% per
annum until August 15, 1997. Dividend rate increases each year thereafter,
subject to certain conditions and commencing on August 16, 1999, the
dividend rate shall be 15%. Mandatory redemption on August 15, 2002.
Exchangeable for Senior Notes, with certain limitations: (i) by RCI at any
time and (ii) under certain circumstances, by the holders thereof on or
after August 15, 1997. See "Description of Outstanding Capital Stock --
Cumulative Exchangeable Preferred Stock."
(6) Reflects proceeds of Series B Preferred Stock net of estimated transaction
fees and expenses of $7,130,000 and allocation of value to Warrants as
discussed in Note (7).
(7) Reflects allocation to Common Stockholders' Equity of a portion of the unit
price attributable to the value of the Warrants (based on an assumed value
of $96.23 per share of Common Stock) issued in connection with the Series B
Offering. In addition, reflects the Common Stock issued in the CIBC
Financing and the New Common Stock Sale, net of estimated transaction fees
and expenses of $250,000.
20
<PAGE> 24
SELECTED FINANCIAL INFORMATION
The selected historical financial information of Cosmar (Predecessor) and
the Company set forth below has been derived from and should be read in
conjunction with the historical financial statements of the Company and the
notes thereto included elsewhere in this Prospectus.
The selected unaudited pro forma financial information has been derived
from the historical financial statements of the Company, GAC and MEM, which are
included in this Prospectus, after giving effect (i), in column (A), to the
Equity Financing and the use of proceeds therefrom to redeem the Interim
Preferred Facility, to complete the GAC Acquisition and to repay indebtedness
under the Existing Credit Facility, as described under the caption "Use of
Proceeds" and (ii), in column (B), in addition to items referred to in clause
(i), to the New Credit Facility and the use of proceeds therefrom to repay all
remaining indebtedness under the Existing Credit Facility and to complete the
MEM Acquisition, as described under the caption "Use of Proceeds," in each case
as if such transactions occurred at June 30, 1996, with respect to the pro forma
balance sheet information, and at April 1, 1995, with respect to the pro forma
statement of operations. MEM and GAC each have fiscal year ends (December 31)
which differ from that of the Company (March 31).
The selected unaudited pro forma financial data should not be considered
indicative of the actual results that would have been achieved had such
transactions been consummated on the dates or for the periods indicated and do
not purport to indicate results of operations as of any future date or for any
future period.
The Selected Financial Information should be read in conjunction with the
historical financial statements of the Company, GAC and MEM and the notes
thereto and the Company's "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Unaudited Pro Forma Financial Data"
included elsewhere in this Prospectus.
21
<PAGE> 25
SELECTED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMPANY
------------------------------------------------------------
HISTORICAL
------------------------------------------------------------
THE COSMAR PREDECESSOR PERIOD FROM
----------------------------------------- APRIL 15, 1994
JANUARY 1 TO (INCEPTION) TO YEAR ENDED THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, AUGUST 17 MARCH 31, 1995 MARCH 31, 1996 JUNE 30,
-------------------------- ------------ ----------------- -------------- ---------------------
1991 1992 1993 1994 1995 1996 1995 1996
------ ------- ------- ------------ ----------------- -------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales......... $9,500 $17,926 $25,844 $ 18,301 $57,714 $131,286 $ 26,635 $ 30,688
Operating
income........... 1,378 3,899 5,063 3,326 2,744 8,450 2,872 682
Interest
expense.......... 14 37 132 61 8,694 19,458 4,434 5,201
Net income
(loss)........... 1,357 3,768 4,801 3,364 (5,459) (12,057) (1,615) (4,193)
Net income (loss)
applicable to
common
stockholders..... 1,357 3,768 4,801 3,364 (6,174) (13,390) (1,905) (4,681)
Net income (loss)
per common
share............ -- -- -- -- $ (8.50) $ (18.62) $ (2.65) $ (6.49)
BALANCE SHEET DATA
(END OF PERIOD):
Total assets...... $3,907 $ 7,216 $ 8,489 -- $162,253 $184,619 $170,721 $193,386
Long-term debt,
excluding current
maturities....... 146 181 294 -- 97,032 67,323(1) 105,895 67,404(1)
Redeemable
preferred
stock............ -- -- -- -- 10,365 11,698 10,655 12,049
Interim preferred
stock............ -- -- -- -- -- -- -- 19,092
Senior redeemable
preferred
stock............ -- -- -- -- -- -- -- --
Common
stockholders'
equity(2)........ 2,973 4,278 5,390 -- 20,189 6,452 18,459 1,025
Net intangible
assets (goodwill
and trademarks).. -- -- -- -- 82,499 76,895 81,744 76,088
Deficiency of
earnings to
combined fixed
charges and
preferred
dividends........ -- -- -- -- $(6,209) $(12,086) $ (1,784) $ (4,837)
SUPPLEMENTAL
INFORMATION
FOR THE COMPANY:
EBITDA(3)......... -- -- -- -- $ 5,576 $ 16,501 $ 4,586 $ 2,919
Depreciation and
amortization..... -- -- -- -- 2,832 8,051 1,714 2,237
Capital
expenditures..... -- -- -- -- 629 8,166 2,174 792
EBITDA/Interest
expense.......... -- -- -- -- 0.64x 0.85x 1.03x 0.56x
<CAPTION>
COMPANY
-----------------------------------------------
PRO FORMA
-----------------------------------------------
YEAR ENDED THREE MONTHS ENDED
MARCH 31, 1996 JUNE 30, 1996
--------------------- ---------------------
A B A B
-------- -------- -------- --------
<S> <C><C> <C> <C> <C>
OPERATING DATA:
Net sales......... $139,172 $183,997 $ 35,336 $ 39,595
Operating
income........... 9,818 8,664 1,701 (911)
Interest
expense.......... 18,728 15,923 4,989 4,375
Net income
(loss)........... (10,568) (8,898) (3,163) (5,118)
Net income (loss)
applicable to
common
stockholders..... (29,727) (28,057) (8,515) (10,470)
Net income (loss)
per common
share............ $ (36.12) $ (34.09) $ (10.32) $ (12.69)
BALANCE SHEET DATA
(END OF PERIOD):
Total assets...... $286,292 $249,139
Long-term debt,
excluding current
maturities....... 67,404 74,856
Redeemable
preferred
stock............ 12,049 12,049
Interim preferred
stock............ -- -- -- --
Senior redeemable
preferred
stock............ -- -- 75,003 75,003
Common
stockholders'
equity(2)........ 42,642 42,642
Net intangible
assets (goodwill
and trademarks).. 89,217 99,304
Deficiency of
earnings to
combined fixed
charges and
preferred
dividends........ $(27,814) $(26,144) $ (8,409) $(10,364)
SUPPLEMENTAL
INFORMATION
FOR THE COMPANY:
EBITDA(3)......... $ 18,427 $ 18,919 $ 4,219 $ 2,025
Depreciation and
amortization..... 8,609 10,255 2,518 2,936
Capital
expenditures..... 8,198 9,144 793 876
EBITDA/Interest
expense.......... 0.98x 1.19x .85 0.46
</TABLE>
- ---------------
(1) Excludes the Existing Credit Facility balance of $57,000 at March 31, 1996,
and $59,000 at June 30, 1996 which is classified within current liabilities
and long-term minimum royalty obligations of $4,686 at March 31, 1996 and
$4,736 at June 30, 1996.
(2) No cash dividends have been paid since April 15, 1994 (Inception).
(3) EBITDA is defined as earnings before interest, income taxes, depreciation
and amortization. EBITDA should not be considered as an alternative to net
income or cash flow and is not a measure of performance under generally
accepted accounting principles but provides additional information for
evaluating the Company.
22
<PAGE> 26
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data have been derived from the
historical financial statements of the Company, GAC and MEM included elsewhere
in this Prospectus by the application of pro forma adjustments giving effect (i)
in column (A) to the Equity Financing and the use of proceeds therefrom to
redeem the Interim Preferred Facility, to complete the GAC Acquisition and to
repay indebtedness under the Existing Credit Facility as described under the
caption "Use of Proceeds" and (ii) in column (B), in addition to items referred
to in clause (i), also to the New Credit Facility and the use of proceeds
therefrom to repay all remaining indebtedness under the Existing Credit Facility
and to complete the MEM Acquisition, as described under the caption "Use of
Proceeds," in each case as if such transactions occurred at June 30, 1996, with
respect to the unaudited pro forma balance sheet information, and as at April 1,
1995, with respect to the pro forma statement of operations. The adjustments are
described in the accompanying notes. MEM and GAC each have fiscal year ends
(December 31) which differ from that of the Company (March 31).
The unaudited pro forma financial data should not be considered indicative
of actual results that would have been achieved had such transactions been
consummated on the dates or for the periods indicated and do not purport to
indicate results of operations as of any future date or for any future period.
The unaudited pro forma financial data should be read in conjunction with the
historical financial statements of the Company, GAC and MEM and the notes
thereto and the Company's "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.
23
<PAGE> 27
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMPANY GAC(1) (A) MEM(1) (B)
HISTORICAL HISTORICAL PRO FORMA (A) HISTORICAL PRO FORMA (B)
MARCH 31, 1996 DEC. 31, 1995 ADJUSTMENTS PRO FORMA DEC. 31, 1995 ADJUSTMENTS PRO FORMA
-------------- ------------- ----------- --------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
NET SALES..................... $131,286 $7,886 -- $139,172 $44,825 -- $183,997
COST OF GOODS SOLD............ 51,169 4,538 -- 55,707 25,618 $ 81,325
-------- ------ ------- -------- ------- ------- --------
GROSS PROFIT.................. 80,117 3,348 -- 83,465 19,207 102,672
OPERATING EXPENSES:
Selling....................... 52,781 838 -- 53,619 15,109 68,728
General and administrative.... 13,679 617 -- 14,296 4,848 -- 19,144
Amortization of intangible and
other assets................ 5,207 224 $ 301(a) 5,732 478 (74)(d) 6,136
-------- ------ ------- -------- ------- ------- --------
Total operating
expenses........... 71,667 1,679 301 73,647 20,435 (74) 94,008
-------- ------ ------- -------- ------- ------- --------
OPERATING INCOME.............. 8,450 1,669 (301) 9,818 (1,228) 74 8,664
INTEREST EXPENSE (INCOME):
Interest expense.............. 19,458 8 (738)(b) 18,728 1,773 (4,578)(e) 15,923
Interest and other income..... (255) -- (255) (19) (274)
-------- ------ ------- -------- ------- ------- --------
INCOME (LOSS) BEFORE INCOME
TAXES....................... (10,753) 1,661 437 (8,655) (2,982) 4,652 (6,985)
INCOME TAX PROVISION
(BENEFIT)................... 1,304 609 -- 1,913 -- -- 1,913
-------- ------ ------- -------- ------- ------- --------
NET INCOME (LOSS)............. (12,057) 1,052 437 (10,568) (2,982) 4,652 (8,898)
PREFERRED STOCK DIVIDENDS..... 1,333 -- 17,826(c) 19,159 -- -- 19,159
-------- ------ ------- -------- ------- ------- --------
NET INCOME (LOSS) APPLICABLE
TO COMMON STOCKHOLDERS)..... $(13,390) $1,052 $(17,389) $(29,727) $(2,982) $ 4,652 $(28,057)
======== ====== ======== ======== ======= ======= ========
NET INCOME (LOSS) PER COMMON
SHARE....................... $ (18.62) $ (36.12) $ (34.09)
======== ======== ========
WEIGHTED AVERAGE SHARES
OUTSTANDING................. 719,138 823,056(f) 823,056(f)
======== ======== ========
</TABLE>
- ---------------
(1) GAC and MEM each have fiscal year ends which end on December 31.
24
<PAGE> 28
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996
(DOLLARS IN THOUSANDS)
(a) Reflects the amortization of approximately $525 of excess purchase costs
paid for the acquired assets and assumed liabilities of GAC, net of $224 of
historical amortization. While the Company has yet to complete the final
allocation of this excess to specific assets acquired and liabilities
assumed or to make a final determination of the useful lives of the assets
acquired, based on its preliminary estimate, the Company believes that the
excess will be allocated principally to trademarks and goodwill which will
be amortized over 25 years.
(b) Reflects the elimination of $8 of GAC historical interest expense and the
elimination of $730 of historical interest expense on the Existing Credit
Facility.
(c) Reflects dividends on the Series B Preferred Stock assuming such shares had
been issued on April 1, 1995. The dividends on the Series C Preferred Stock
will be the same as the dividends on the Series B Preferred Stock.
(d) Reflects the amortization of approximately $404 of excess purchase costs
paid for the stock of MEM acquired, net of $478 of historical amortization.
While the Company has yet to complete the final allocation of this excess to
the specific assets acquired and liabilities assumed or to make a final
determination of the useful lives of the assets acquired, based on its
preliminary estimate, the Company believes that the excess will be allocated
to trademarks and goodwill which will be amortized over 25 years.
(e) Reflects the following adjustments:
<TABLE>
<S> <C>
Elimination of remaining historical interest expense on Existing Credit
Facility............................................................... $(5,218)
Interest expense on New Credit Facility (1).............................. 746
Amortization of deferred financing fees.................................. 1,667
Elimination of MEM historical interest expense........................... (1,773)
-------
Interest expense adjustment............................................ $(4,578)
=======
</TABLE>
- ---------------
(1) Assuming no incremental seasonal borrowings, and an interest rate of
10%, on an average balance of $7,452.
(f) Includes 103,918 shares issued to purchasers in connection with the CIBC
Financing and the New Common Stock Sale.
25
<PAGE> 29
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMPANY GAC MEM
HISTORICAL HISTORICAL (A) HISTORICAL (B)
QUARTER ENDED QUARTER ENDED PRO FORMA (A) QUARTER ENDED PRO FORMA (B)
JUNE 30, 1996 JUNE 30, 1996 ADJUSTMENTS PRO FORMA JUNE 30, 1996 ADJUSTMENTS PRO FORMA
------------- ------------- ----------- --------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
NET SALES............................ $30,688 $4,648 $ -- $35,336 $ 4,259 $ 39,595
COST OF GOODS SOLD................... 11,506 2,686 -- 14,192 2,919 17,111
------- ------ ------- ------- ------- ----- --------
GROSS PROFIT......................... 19,182 1,962 -- 21,144 1,340 -- 22,484
OPERATING EXPENSES:
Selling............................ 11,332 533 -- 11,865 2,246 14,111
General and administrative......... 5,800 279 6,079 1,605 7,684
Amortization of intangible and
other assets..................... 1,368 56 75 (a) 1,499 119 $ (18)(d) 1,600
------- ------ ------- ------- ------- ----- -------
Total operating expenses.... 18,500 868 75 19,443 3,970 (18) 23,395
------- ------ ------- ------- ------- ----- -------
OPERATING INCOME..................... 682 1,094 (75) 1,701 (2,630) 18 (911)
INTEREST EXPENSE (INCOME)............ --
Interest expense..................... 5,201 10 (222)(b) 4,989 347 (961)(e) 4,375
Interest and other income............ (170) (61) (231) (43) (274)
------- ------ ------- ------- ------- ----- --------
INCOME (LOSS) BEFORE INCOME TAXES.... (4,349) 1,145 147 (3,057) (2,934) 979 (5,012)
INCOME TAX PROVISION (BENEFIT)....... (156) 262 106 106
------- ------ ------- ------- ------- ----- --------
NET INCOME (LOSS).................... (4,193) 883 147 (3,163) (2,934) 979 (5,118)
PREFERRED STOCK DIVIDENDS............ 488 4,864 (c) 5,352 5,352
------- ------ ------- ------- ------- ----- --------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS................ $(4,681) $ 883 $(4,717) $(8,515) $(2,934) $ 979 $(10,470)
======= ====== ======= ======= ======= ===== ========
NET INCOME (LOSS) PER COMMON SHARE... $ (6.49) $(10.32) $ (12.69)
======= ======= ========
WEIGHTED AVERAGE SHARES
OUTSTANDING........................ 721,168 825,086 (f) 825,086 (f)
======= ======= ========
</TABLE>
26
<PAGE> 30
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS)
(a) Reflects the amortization of approximately $131 of excess purchase costs
paid for the acquired assets and assumed liabilities of GAC, net of $56 of
historical amortization. While the Company has yet to complete the final
allocation of this excess to specific assets acquired and liabilities
assumed or to make a final determination of the useful lives of the assets
acquired, based on its preliminary estimate, the Company believes that the
excess will be allocated principally to trademarks and goodwill which will
be amortized over 25 years.
(b) Reflects the elimination of $10 of GAC historical interest expense and
elimination of historical interest expense of $212 on the Existing Credit
Facility.
(c) Reflects dividends on the Series B Preferred Stock assuming such shares had
been issued on Aptil 1, 1995. The dividends on the Series C Preferred Stock
will be the same as the dividends on the Series B Preferred Stock.
(d) Reflects the amortization of approximately $101 of excess purchase costs
paid for the stock of MEM acquired, net of $119 of historical amortization.
While the Company has yet to complete the final allocation of this excess to
the specific assets acquired and liabilities assumed or to make a final
determination of the useful lives of the assets acquired, based on its
preliminary estimate, the Company believes that the excess will be allocated
to trademarks and goodwill which will be amortized over 25 years.
(e) Reflects the following adjustments:
<TABLE>
<S> <C>
Elimination of remaining interest on Existing Credit Facility............ (1,579)
Interest expense on New Credit Facility (1).............................. 186
Amortization of deferred financing fees.................................. 779
Elimination of MEM historical interest expense........................... (347)
-------
Interest expense adjustment............................................ $ (961)
=======
</TABLE>
- ---------------
(1) Assuming no incremental seasonal borrowings, an interest rate of 10%
for 90 days on an average balance of $7,452.
(f) Includes 103,918 shares issued to purchasers in connection with the CIBC
Financing and the New Common Stock Sale.
27
<PAGE> 31
UNAUDITED PRO FORMA BALANCE SHEET
JUNE 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMPANY GAC MEM
HISTORICAL HISTORICAL (A) HISTORICAL (B)
JUNE 30, JUNE 30, PRO FORMA (A) JUNE 30, PRO FORMA (B)
1996 1996 ADJUSTMENTS PRO FORMA 1996 ADJUSTMENTS PRO FORMA
---------- --------- ----------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............. $ 7,573 $ 1,020 $76,095(a) $ 84,688 $ 161 $ (82,849)(h) $ 2,000
Marketable securities................. 78 -- -- 78 -- -- 78
Accounts receivable-net............... 28,790 1,608 -- 30,398 5,046 -- 35,444
Inventories........................... 32,583 2,687 -- 35,270 19,421 -- 54,691
Prepaid expenses and other current
assets.............................. 13,735 9 (1,100)(q) 12,644 1,450 -- 14,094
------- ----- ------- ------- ------ ------- -------
Total current assets........... 82,759 5,324 74,995 163,078 26,078 (82,849)(i) 106,307
PROPERTY, PLANT AND
EQUIPMENT-Net......................... 14,458 50 -- 14,508 4,784 -- 19,292
DEFERRED FINANCING COSTS-Net............ 7,907 -- -- 7,907 -- 4,000(n) 11,907
OTHER ASSETS-Net........................ 12,174 8 (600)(r) 11,582 747 -- 12,329
INTANGIBLE ASSETS-Net................... 76,088 1,158 11,971(b) 89,217 9,860 227(i) 99,304
------- ----- ------- ------- ------ ------- -------
TOTAL ASSETS................... $193,386 $ 6,540 $86,366 $286,292 $ 41,469 $ (78,622) $249,139
======= ===== ======= ======= ====== ======= =======
CURRENT LIABILITIES:
Current maturities of long-term
debt................................ $ -- $ 220 $ (220)(c) $ -- $ 1,554 $ (1,554)(j) $ --
Notes payable......................... 59,000 (7,000)(k) 52,000 10,032 (62,032)(p)(j) --
Accounts payable...................... 13,613 738 -- 14,351 5,765 -- 20,116
Accrued expenses...................... 13,627 1,640 -- 15,267 1,630 -- 16,897
Other current liabilities............. 2,700 82 (82)(o) 2,700 -- -- 2,700
------- ----- ------- ------- ------ ------- -------
Total current liabilities...... 88,940 2,680 (7,302) 84,318 18,981 (63,586) 39,713
LONG-TERM LIABILITIES:
Long-term debt........................ 67,404 592 (592)(c) 67,404 2,274 (2,274)(j) 67,404
Other long-term liabilities........... -- -- -- -- --
New Credit Facility................... -- -- -- -- -- 7,452(l) 7,452
Minimum royalty obligation............ 4,735 -- -- 4,735 -- -- 4,735
Deferred tax liability................ 141 -- -- 141 -- -- 141
------- ----- ------- ------- ------ ------- -------
Total long-term liabilities.... 72,280 592 (592) 72,280 2,274 5,178 79,732
------- ----- ------- ------- ------ ------- -------
TOTAL LIABILITIES.............. $161,220 $ 3,272 $(7,894) $156,598 $ 21,255 $ (58,408) $119,445
INTERIM PREFERRED FACILITY.............. 19,092 -- (19,092)(s) -- -- -- --
REDEEMABLE PREFERRED STOCK, SERIES B.... -- -- 75,003(d) 75,003 -- -- 75,003
REDEEMABLE PREFERRED STOCK.............. 12,049 -- -- 12,049 -- -- 12,049
COMMON STOCKHOLDERS' EQUITY:
Common stock.......................... 7 2 327(e) 336 150 (150)(m) 336
Note receivable from sale of common
stock............................... (518) -- -- (518) -- -- (518)
Additional paid-in capital............ 26,787 -- 42,288(f) 69,075 3,090 (3,090)(m) 69,075
Treasury stock, at cost............... (210) -- -- (210) (4,598) 4,598(m) (210)
Retained earnings (deficit)........... (24,245) 3,266 (4,266)(e)(g) (25,245) 22,034 (22,034)(m) (25,245)
Cumulative translation adjustment..... (796) -- -- (796) (462) 462(m) (796)
------- ----- ------- ------- ------ ------- -------
Total common stockholders'
equity....................... 1,025 3,268 38,349 42,642 20,214 (20,214) 42,642
------- ----- ------- ------- ------ ------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY......... $193,386 $ 6,540 $86,366 $286,292 $ 41,469 $ (78,622) $249,139
======= ===== ======= ======= ====== ======= =======
</TABLE>
28
<PAGE> 32
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(DOLLARS IN THOUSANDS)
(a) The adjustment to cash is as follows:
<TABLE>
<S> <C>
Gross proceeds from the Equity Financing........................ $126,100
Repayment of Interim Preferred Facility(1)...................... (20,092)
Purchase Price of GAC including estimated expenses of $71, net
of prepaid deposit of $600.................................... (14,721)
Repayment of GAC debt(2)........................................ (812)
Repayment of portion of Existing Credit Facility................ (7,000)
Estimated transaction fees and expenses......................... (7,380)
--------
Adjustment to cash............................................ $ 76,095
========
</TABLE>
- ---------------
(1) The amount actually required to redeem the Interim Preferred Facility
was $20,440, including $440 of accrued dividends.
(2) Repayment of debt of $812 is based upon debt outstanding at June 30,
1996. The actual debt repaid at closing was $796.
(b) Reflects the preliminary allocation of the excess of cost over net assets
acquired of GAC as follows:
<TABLE>
<S> <C>
Purchase price of GAC including estimated expenses of $71....... $ 15,321
Less: pro forma value of assets acquired........................ (2,192)
--------
Unallocated excess of purchase price over net assets acquired... 13,129
Less: historical intangible assets of GAC....................... (1,158)
--------
Total................................................. $ 11,971
========
</TABLE>
The Company has yet to complete its allocation of this excess to specific
assets acquired and liabilities assumed or to make a final determination of
the useful lives of assets acquired. Based on its preliminary estimate, the
Company believes this excess will be allocated to goodwill and trademarks,
which will be amortized over 25 years.
(c) Reflects the repayment of GAC debt outstanding at June 30, 1996.
(d) Reflects the gross proceeds of the Series B Preferred Stock issued
($115,000), less estimated transaction fees and expenses of $7,130, less an
allocation of proceeds to the warrants issued in the Series B Offering
assuming a market value price of $96.23 per share of Common Stock based on
341,550 shares issuable for the 115,000 Warrants issued.
(e) Reflects the elimination of historical GAC equity.
(f) Reflects the proceeds of the issuance of Common Stock, less estimated
transaction fees of $250.
(g) Represents the write-off of a non-refundable fee on the Interim Preferred
Facility of $1,000.
29
<PAGE> 33
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET -- (CONTINUED)
(h) The adjustment to cash is as follows:
<TABLE>
<S> <C>
Repayment of unpaid portion of Existing Credit Facility............ $ 52,000
Purchase price of MEM including estimated expenses of $750......... 20,441
Repayment of MEM debt(1)........................................... 13,860
Transaction fees and expenses...................................... 4,000
--------
Total use of cash.................................................. 90,301
Less: drawdown on New Credit Facility(2)........................... (7,452)
--------
Use of existing cash.......................................... $ 82,849
========
</TABLE>
- ---------------
(1) Reflects a total debt balance of $13,860 at June 30, 1996. The actual
debt to be repaid at closing is expected to be higher (and could be
materially higher), which will require additional drawdowns on the New
Credit Facility.
(2) Because of seasonal working capital needs, the actual drawdown at
closing is likely to be significantly higher.
(i) Reflects the preliminary allocation of the excess of cost over net assets
acquired of MEM as follows:
<TABLE>
<S> <C>
Purchase price of MEM (including estimated expenses of $750)..... $ 20,441
Less: pro forma value of net assets acquired..................... (10,354)
--------
Unallocated excess of purchase price over net assets acquired.... 10,087
Less: historical intangible assets of MEM........................ (9,860)
--------
Total.................................................... $ 227
========
</TABLE>
The Company has yet to complete its allocation of this excess to specific
assets acquired and liabilities assumed or to make a final determination of
the useful lives of assets acquired. Based on its preliminary estimate, the
Company believes this excess will be allocated to goodwill and trademarks,
which will be amortized over 25 years.
(j) Reflects the repayment of MEM debt as of June 30, 1996. See Note (h)(1)
above.
(k) Reflects the repayment of a portion of the Existing Credit Facility.
(l) Reflects the estimated initial drawdown on the New Credit Facility.
(m) Reflects the elimination of historical MEM equity.
(n) Reflects the estimated transaction fees relating to the New Credit
Facility.
(o) Reflects amounts due to shareholders to be repaid by GAC in connection with
the Acquisition.
(p) Reflects the repayment of the remaining portion of the Existing Credit
Facility.
(q) Reflects the refund of $1,100 fee relating to the Interim Preferred
Facility.
(r) Reflects the application of the $600 prepaid deposit (included in other
assets at June 30, 1996), toward the purchase of GAC.
(s) Reflects the repayment and retirement of the Interim Preferred Facility.
30
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion should be read in conjunction with the historical
financial statements of the Company and the notes thereto included elsewhere in
this Prospectus.
The results of operations of the Company for the periods discussed in this
section may not be comparable as a result of the following acquisitions which
are discussed in greater detail under the caption "Business:"
1. The Houbigant Acquisition (July and August 1994), in which the
Company entered into various license agreements pursuant to which it
obtained certain exclusive rights to manufacture and distribute Chantilly,
Lutece, Alyssa Ashley, Raffinee, Demi-Jour, Parfums Parquest French
Vanilla, and all other mass market fragrances formerly marketed by
Houbigant, Inc. (the "Houbigant Fragrances").
2. The Cosmar Acquisition (August 1994), in which the Company acquired
its artificial fingernail products and related fingernail care accessories.
3. The Dana Acquisition (December 1994), in which the Company acquired
a group of companies engaged in the manufacturing of Tabu, Ambush, Canoe,
Canoe Sport and certain other mass-market fragrance and fragrance products.
4. The ACB Acquisition (December 1994), in which the Company acquired
the rights to manufacture and market the Houbigant Fragrances in Canada and
which, when combined with the Houbigant Acquisition, gave the Company the
worldwide rights to manufacture and market the Houbigant Fragrances.
OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AS COMPARED TO THE THREE
MONTHS ENDED JUNE 30, 1995
Net Sales. The Company's net sales were (in 000's, except %'s):
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995
------------------------ ------------------------
DIVISION NET SALES % OF TOTAL NET SALES % OF TOTAL
-------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Fragrance................................. $10,963 35.7% $12,275 46.1%
Cosmetic.................................. 11,751 38.3% 10,233 38.4%
International............................. 7,974 26.0% 4,127 15.5%
------- ----- ------- -----
$30,688 100.0% $26,635 100.0%
======= ===== ======= =====
</TABLE>
Total Company sales increased 15.2% or $4,053,000, from $26,635,000 to
$30,688,000. Fragrance sales decreased 10.7% from $12,275,000 to $10,963,000 due
in large part to lower than expected sales resulting from the basic Christmas
build programs (program by which the Company increases sales of basic stock to
retailers for the Christmas season in addition to sales of Christmas gift sets)
in June 1996. Management attributes this decline to a corresponding significant
increase (compared to last year) in commitments from retailers for the Company's
Christmas gift sets which began shipping in August. Cosmetic sales increased by
14.8% from $10,233,000 to $11,751,000. Contributing to this increase are current
year sales of new products such as UltraGel and Nail Fetish which were launched
subsequent to last year's period, and continued strong sales of the Company's
existing products. International sales increased 93.2% from $4,127,000 to
$7,974,000 due to the inclusion of sales of Dana's Brazil division which was
acquired during December 1995, and from a 5.1% increase in other International
sales.
31
<PAGE> 35
Gross Profit. The Company's gross profits were (in 000's, except %'s):
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995
------------------------------- -------------------------------
DIVISION GROSS PROFIT % OF NET SALES GROSS PROFIT % OF NET SALES
-------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Fragrance....................... $ 7,512 68.5% $ 8,393 68.4%
Cosmetic........................ 7,011 59.7% 6,464 63.2%
International................... 4,659 58.4% 2,347 56.9%
------ ---- ------ ----
$ 19,182 62.5% $ 17,204 64.6%
====== ==== ====== ====
</TABLE>
Gross profit margin in the Fragrance businesses remained relatively stable
at 68.5% compared with 68.4%. The decrease in gross profit margin in the
Cosmetic business to 59.7% from 63.2% is the result of lower sales of
higher-margin pro-Ten Nail Lacquer (launched during the first quarter of Fiscal
1995) and an increase in lower-margin promotional sales on the Company's base
products done in conjunction with new product launches. The gross profit margin
increase in the International division to 58.4% from 56.9% is attributable to
higher sales and an increase in the proportion of direct international sales
(versus exports) to total international sales.
Selling Expense. The Company's selling expenses in the first quarters of
Fiscal 1996 and Fiscal 1995 were $11,332,000 (36.9% of net sales) and $9,166,000
(34.4% of net sales), respectively. The increase in selling expenses as a
percentage of sales is principally attributable to increased advertising and
promotional spending relating to the Company's strategy of reinvigoration of
existing brand equities and the introduction of complementary new products.
General and Administrative Expense. General and administrative expenses in
the first quarter of Fiscal 1996 and Fiscal 1995 were $5,800,000 (18.9% of net
sales) and $3,977,000 (14.9% of net sales), respectively. The increase in
general and administrative expenses is attributable to higher legal, audit and
other professional fees and to the addition of key personnel by the Company to
both its corporate and operating divisions in anticipation of future operating
needs.
Amortization of Intangibles and Other Assets. Amortization of intangible
and other assets was $1,368,000 (4.5% of net sales) and $1,189,000 (4.5% of net
sales) for the first quarter of Fiscal 1996 and Fiscal 1995, respectively.
Operating Income. Operating income for the first quarters of Fiscal 1996
and 1995 was $682,000 (2.2% of net sales) and $2,872,000 (10.8% of net sales),
respectively. Management believes an additional measurement: earnings before
interest, income, taxes, depreciation and amortization ("EBITDA") is useful and
meaningful to an understanding of the operating performance of the Company.
However, EBITDA should not be considered by the reader as an alternative to net
income (loss) as an indicator of the Company's operating performance or to cash
flows as a measurement of liquidity. EBITDA is detailed in the table below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995
------------------ ------------------
(IN 000'S)
<S> <C> <C>
Operating Income.................................. $ 682 $ 2,872
Add Amortization.................................. 1,368 1,189
Add Depreciation.................................. 869 525
---------- ----------
EBITDA............................................ $ 2,919 $ 4,586
EBITDA % of Net Sales............................. 9.5% 17.2%
</TABLE>
EBITDA declined $1,667,000 in the first quarter of Fiscal 1996 compared to
the first quarter of Fiscal 1995 from $4,586,000 to $2,919,000 as a result of
(i) lower EBITDA at the Company's Dana division in Fiscal 1996 compared to
Fiscal 1995 due primarily to lower than expected sales resulting from the basic
Christmas build program, which management believes is due to a corresponding
significant increase in commitments from retailers for the Company's Christmas
gift sets which began shipping in August, and (ii) an increase in general and
administrative expenses in Fiscal 1996 compared to Fiscal 1995 due to higher
32
<PAGE> 36
legal, audit and professional fees and from the addition of key personnel at the
Company's corporate and operating divisions in anticipation of future operating
needs.
Interest Expense. The Company's total interest expense for the first
quarters of Fiscal Years 1996 and 1995 was $5,201,000 and $4,434,000
respectively; while cash interest for the periods was $4,152,000 and $3,571,000,
respectively. Interest expense consists of:
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995
------------------ ------------------
<S> <C> <C>
Cash Interest Paid or Accrued (in 000's)
Interest on Senior Notes.............................. $2,234 $2,234
Interest on Sellers notes (Payable in 2002)........... 108 100
Interest on Existing Credit Facility.................. 1,791 1,228
Other Interest........................................ 19 9
------- -------
Total Cash Interest Expenses.................. $4,152 $3,571
NON-CASH INTEREST EXPENSES
Accretion of Senior Notes and Seller Notes............ $ 81 $ 62
Amortization of Deferred Financing Costs.............. 726 546
Accretion of Interest on Obligations for
Minimum Royalty Payment............................ 242 255
------- -------
Total Non-Cash Interest Expenses................... $1,049 $ 863
------- -------
Total Interest Expenses....................... $5,201 $4,434
======= =======
</TABLE>
Income Tax (Benefit)/Expense
Income tax (benefit)/expense were ($155,500) and $121,429 for the first
quarter of fiscal 1996 and fiscal 1995, respectively. The effective tax rates
differ from the United States federal income tax rate of 35% due to state and
foreign income taxes and limitations on utilization of federal income tax
benefits.
OPERATIONS FOR THE YEAR ENDED MARCH 31, 1996 AND THE PERIOD APRIL 15, 1994
(INCEPTION) THROUGH MARCH 31, 1995
Net Sales. The Company's net sales (in 000's, except %'s) for the periods
were:
<TABLE>
<CAPTION>
FISCAL 1995
--------------------- FISCAL 1994
NET ----------------------
DIVISION SALES % OF TOTAL NET SALES % OF TOTAL
-------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Fragrance.................................... $ 63,865 48.6% $31,931 55.3%
Cosmetic..................................... 44,511 33.9% 19,514 33.8%
International................................ 22,910 17.5% 6,269 10.9%
-------- --------- -------- ---------
$131,286 100.0% $57,714 100.0%
======== ========= ======= =========
</TABLE>
Total Company sales increased by $73,572,000 (or 127.5%) to $131,286,000.
Approximately $32,700,000 of this increase is attributable to internal growth
through the implementation of focused sales and marketing programs. The
remaining increase is a result of including a full year of operation in Fiscal
1995 compared to a partial year of operations for the prior fiscal year
(depending on the particular timing of each acquisition).
33
<PAGE> 37
Gross Profit. The Company's gross profit (in 000's, except %'s) for the
periods was:
<TABLE>
<CAPTION>
FISAL 1995 FISCAL 1994
----------------------------- -----------------------------
DIVISION GROSS PROFIT % OF NET SALES GROSS PROFIT % OF NET SALES
-------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Fragrance........................... $ 39,338 61.6% $ 18,681 58.5%
Cosmetic............................ 28,501 64.0% 10,998 56.4%
International....................... 12,278 53.6% 3,482 55.5%
-------- ------ -------- ------
$ 80,117 61.0% $ 33,161 57.5%
======== ====== ======== ======
</TABLE>
Gross profit margin improvements in the Fragrance and Cosmetic businesses
are the result of the consolidation of manufacturing operations in the Company's
Mountaintop facility at the Fragrance Division and the introduction of new,
higher-margin products like Pro 10 Nail Lacquer, along with cost containment
efforts in the Cosmetic division. The gross profit margin decrease in the
International Division is attributable to an increase in export sales and sales
of fragrance products that typically carry a lower gross margin than direct
international sales and sales of cosmetic products, respectively, resulting in a
lower total International gross profit margin.
Selling Expense. The Company's selling expenses for Fiscal 1995 and Fiscal
1994 were $52,781,000 (40.2% of Net Sales) and $18,246,000 (31.6% of Net Sales),
respectively. The increase in selling expenses as a percentage of sales is
principally attributable to increased advertising and promotional spending
relating to the Company's strategy of reinvigoration of existing brand equities
and the introduction of complementary new products.
General and Administrative Expense. The Company's general and
administrative expenses for Fiscal 1995 and Fiscal 1994 were $13,679,000 (10.4%
of Net Sales) and $10,127,000 (17.5% of Net Sales), respectively. The decline in
general and administrative expenses as a percentage of sales is attributable to
what management believes is a high fixed component for such expenses and
management's ability to control the increase in such expenses as sales
increased.
Amortization of Intangibles and Other Assets. Amortization of intangible
and other assets for Fiscal 1995 and Fiscal 1994 was $5,207,000 (4.0% of Net
Sales) and $2,044,000 (3.5% of Net Sales), respectively. The increased
amortization in Fiscal 1995 includes a full year of amortization resulting from
acquisitions. Fiscal 1994 includes goodwill amortization only as of the
effective date of the respective acquisitions. In addition, Fiscal 1995 includes
a full year of amortization of the minimum royalty.
Operating Income. Operating Income for Fiscal 1995 and Fiscal 1994 was
$8,450,000 (6.4% of Net Sales) and $2,744,000 (4.8% of Net Sales), respectively.
Management believes that EBITDA as an additional measurement, is useful and
meaningful to an understanding of the operating performance of the Company.
However, EBITDA should not be considered by the reader as an alternative to net
income (loss) as an indicator of the Company's operating performance or to cash
flows as a measurement of liquidity. EBITDA is detailed in the table below:
<TABLE>
<CAPTION>
FISCAL 1995 FISCAL 1994
----------- -----------
000'S
<S> <C> <C>
Operating Income.............................................. $ 8,450 $ 2,744
Add Amortization.............................................. 5,207 2,044
Add Depreciation.............................................. 2,844 788
------- ------
EBITDA........................................................ $16,501 $ 5,576
EBITDA % of Net Sales......................................... 12.6% 9.7%
</TABLE>
34
<PAGE> 38
Interest Expense. The Company's total interest expense, for Fiscal 1995
and Fiscal 1994 was $19,458,000 and $8,694,000 respectively, while cash interest
for the periods was $15,524,000 and $6,834,000, respectively. Interest expense
for the periods consisted of:
<TABLE>
<CAPTION>
FISCAL 1995 FISCAL 1994
----------- -----------
<S> <C> <C>
Cash Interest Paid or Accrued (in 000's)
Interest on Senior Notes...................................... $ 8,943 $ 5,577
Interest on Sellers Notes (Payable in 2002)................... 420 247
Interest on Existing Credit Facility.......................... 5,948 971
Other Interest................................................ 213 39
------- ------
Total Cash Interest Expense......................... $15,524 $ 6,834
Non-Cash Interest Expenses
Accretion of Senior Notes and Seller Notes.................... $ 290 $ 154
Amortization of Deferred Financing Costs...................... 2,623 993
Accretion of Interest on Obligations for Minimum Royalty
Payment..................................................... 1,021 713
------- ------
Total Non-Cash Interest Expenses.................... $ 3,934 $ 1,860
------- ------
Total Interest Expenses............................. $19,458 $ 8,694
======= ======
</TABLE>
Income Tax Expense/(Benefit). Income tax expense/(benefit) for the periods
were $1,304,000 (1.0% of net sales) and ($35,000) respectively. The effective
tax rates differ from the United States federal income tax rate of 34% due to
state and foreign income taxes and limitations on utilization of federal income
tax benefits.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by the Company in operating activities for the three months
ended June 30, 1996 was $13,305,755, consisting primarily of a net loss of
$4,193,058, less the impact of non-cash items impacting net loss of $3,336,043,
an increase in operating assets of inventories and prepaid expenses and other
assets of $2,346,723 and $7,744,857, respectively, and a decrease in accounts
payable and accrued expenses of $5,849,519 and $1,529,876, respectively, less
the impact of decrease in accounts receivable of $5,767,689.
Net cash used in investing activities was $696,649, consisting primarily of
capital expenditures. Net cash provided by financing activities was $20,143,645,
consisting primarily of net proceeds from the Existing Credit Facility of
$2,000,000 and the issuance of Series A Preferred Stock in the Interim Preferred
Facility of $18,955,000. The net increase in cash and cash equivalents was
$6,141,241. As of June 30, 1996, the Company had outstanding institutional
indebtedness of $126.4 million including $59.0 million under its Existing Credit
Facility, $29.0 million of which is related to the revolving credit portion. On
September 8, 1995, the revolving credit portion of the Company's facility was
amended to increase the Company's availability to $30.0 million from $20.0
million and on June 14, 1996, it was amended to increase the availability to
$40.0 million. Due to the nature of the fragrance/cosmetics industry, both the
Company's need for working capital and its income stream are seasonal. The most
significant liquidity requirements occur prior to the sales surge in connection
with the production of inventory and shipment to customers in advance of the
year-end holiday sales season and other events such as new launches. GAC's
working capital needs and income stream are less seasonal than the Company's
fragrance business.
Net cash used by the Company in operating activities for the year ended
March 31, 1996 was $24,176,395, consisting primarily of the net loss of
$12,056,831, less the impact on non-cash items impacting net loss of
$12,019,092; increase in operating assets of accounts receivable, inventory, and
prepaid expenses and other current assets of $16,635,634, $7,560,525, and
$2,977,456, respectively; decrease in accrued expenses of $3,288,380, less the
impact of increase in accounts payable of $6,284,133.
Net cash used in investing activities for the year ended March 31, 1996 was
$6,140,629, consisting primarily of capital expenditures. Net cash provided by
financing activities was $24,747,663, consisting
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<PAGE> 39
primarily of net proceeds from the Existing Credit Facility. The net decrease in
cash and cash equivalents was $5,569,361.
The Existing Credit Facility matures in December 1996. The Company is
currently pursuing several financing alternatives, including both equity and
debt financing to replace the Existing Credit Facility and provide funds for new
acquisitions. The Company is currently in discussions with several financial
institutions and believes that it will be able to obtain such financing.
However, the Company has no binding commitment from any financial institution,
and accordingly, there can be no assurance that such additional financing
alternatives will be available to the Company. If the Company is unable to
obtain the financing, it may be required to postpone and/or change significant
elements of its business strategy, including the MEM Acquisition. In addition,
although management believes that the Company has made significant progress in
improving sales and operating efficiency, there can be no assurance that the
Company's future performance will not be adversely affected by economic,
financial, and business factors not subject to its control.
Pursuant to the Series B Offering which closed on August 15, 1996,
September 16, 1996 and September 27, 1996, the Company sold 115,000 units
consisting of $115 million aggregate liquidation preference Series B Preferred
Stock and Warrants to purchase approximately 23% of its outstanding common stock
on a fully-diluted basis as of the date of such issuance. The Company used the
net proceeds from this sale, together with approximately $10 million of proceeds
it received from sales of its Common Stock concurrent with these issuances, to
redeem the Interim Preferred Facility, to finance the Company's previously
announced acquisitions, to repay indebtedness and for general corporate
purposes.
Dividends on the Series B Preferred Stock are payable at the rate of 14%
per year in cash or by issuance of additional shares of Series B Preferred
Stock, at the Company's option, through August 31, 2002, and in cash thereafter;
providing that dividends shall be paid in cash on the first dividend date
following the earlier of one year from the redemption of the Company's existing
Senior Notes or August 31, 2002.
As of August 8, 1996 and September 27, 1996, Nomura waived certain
provisions of the Existing Credit Facility in order to permit the Company to
retain $112.1 million of the $119.1 million of Net Cash Proceeds (as defined in
the Existing Credit Facility) from the Equity Financing, of which $20.4 million
has been used to redeem the Interim Preferred Facility fee, $15.5 million of
which has been used to consummate the GAC Acquisition, and the remainder of
which has been or will be used for general corporate purposes. The Company also
purchased a certificate of deposit for $33.8 million and granted Nomura a first
priority perfected lien on such certificate of deposit.
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<PAGE> 40
BUSINESS
GENERAL
The Company, together with its wholly-owned subsidiaries, is a leading
manufacturer and marketer of mass-market fragrances, artificial fingernails,
lipsticks, eye make-up, nail polish products and related accessories sold by
more than 1,000 retailers in approximately 25,000 locations in the United
States, and in 42 foreign countries worldwide. The Company sells its products
principally through the domestic mass-market (or self-select) distribution
channel which includes chain drug stores (such as Walgreen and Revco), mass
merchandisers (such as Wal-Mart and Kmart) and supermarkets and combination
supermarket/drug stores (such as Kroger and Albertson's). During Fiscal 1995 and
the three months ended June 30, 1996, the Company generated net sales of $131.3
million and $30.7 million, respectively, and EBITDA of $16.5 million and $2.9
million, respectively.(1)
Through its wholly-owned Dana Perfumes Corporation subsidiary, the Company
sells women's and men's fragrances designed to appeal to a broad range of
consumers within the mass-market, including several "classic" brands such as
Chantilly and Tabu, each of which have enjoyed widespread sales and consumer
loyalty for more than 50 years. As of December 31, 1995, the Company's fragrance
brands represented two of the top ten and five of the top 50 brands in the
women's fragrance category sold through the chain drug store channel, which
represents approximately 50% of the drug store and mass merchandiser segment.
The Company's fragrance and related products are marketed under established
brand names including Chantilly, White Chantilly, Tabu, DREAMS BY TABU, Ambush,
Parfums Parquet's French Vanilla, Raffinee, Lutece, Canoe, Herbissimo and
Monsieur Musk.
Through Cosmar, the Company is the largest domestic manufacturer and
marketer of artificial fingernails and related fingernail care accessories sold
through the chain drug store, mass merchandiser, supermarket and
supermarket/drugstore distribution channels. Cosmar is the leading domestic
manufacturer of products in four of the top seven artificial nail care segments,
and its leading market share in the United States of 30+% in the mass-market
channel is almost twice the share of its nearest competitor. In 1995, the
Company successfully entered the $300+ million nail polish/treatment category
with the introduction of its line of PRO(10) nail lacquers. In just one year
after its introduction, PRO(10) ranked as the ninth best-selling nail lacquer
brand in the United States. The Company's artificial fingernails and related
products are marketed under the brand names LaJoie, Press & Go, Sculpture Quik,
Quik Fit, PRO(10), UltraGel and Nail Fetish.
Effective with the acquisition of GAC on August 21, 1996, the Company's
Cosmar subsidiary has assumed responsibility to manage the products available
under the Nat Robbins brand name. Nat Robbins has become a leading brand of high
quality, mid-priced professionally positioned lip, eye and nail cosmetic
products sold in the mass market distribution channel. The Company will continue
to market multiple Nat Robbins color cosmetics items including lipliner pencils,
lipsticks, eyeliner pencils, eye shadow, mascara, nail enamel and assorted
accessories. In addition to the Nat Robbins brand name, which appears on all
packaging, products are also marketed under the brand names Lip Lacquer, Stay
Put and Color Intense 24.
- ---------------
(1) EBITDA is defined as earnings before interest, income taxes,
depreciation and amortization. EBITDA should not be considered as an alternative
to net income or cash flow and is not a measure of performance under generally
accepted accounting principles but provides additional information for
evaluating the Company.
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<PAGE> 41
The following table breaks down the Company's net sales for Fiscal 1995 and
the three months ended June 30, 1996 between fragrances and cosmetics:
<TABLE>
<CAPTION>
NET SALES % OF TOTAL
---------------------------------- ----------------------------------
THREE MONTHS ENDED THREE MONTHS ENDED
FISCAL 1995 JUNE 30, 1996 FISCAL 1995 JUNE 30, 1996
----------- ------------------ ----------- ------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Fragrances............ $ 83.2 18.2 63.4% 59.3%
Cosmetics/Nail Care... 48.1 12.5 36.6% 40.7%
------ ----- ------ ------
Total....... $ 131.3 $ 30.7 100.0% 100.0%
====== ===== ====== ======
</TABLE>
The Company was formed in April 1994 by Kidd Kamm, together with Thomas V.
Bonoma, Chairman, Chief Executive Officer, and President of the Company. Prior
to forming the Company, Mr. Bonoma was chief executive officer of Benckiser
America ("Benckiser"), a subsidiary of Joh. A. Benckiser, GmbH, a $3.0 billion
privately-held German producer of packaged goods in the fragrance, cosmetics and
cleaning products industries ("Benckiser, GmbH"). During Mr. Bonoma's tenure at
Benckiser, he, along with his team of senior managers (eleven of which have
since joined him at the Company), were directly responsible for building
Benckiser's North and Latin American-based operations from inception in 1986 to
worldwide sales in excess of $700 million by 1993. This increase was
accomplished through both internal growth and the acquisition and integration of
seven companies. Mr. Bonoma and his management team improved the sales and cash
flow of these acquired companies by, among other things, reducing administrative
overhead, rationalizing operations and developing cost-effective advertising and
marketing programs to restore and expand such prominent fragrance brands such as
Jovan, Coty and Stetson, and soap brands such as ElectraSol and Jet-Dry. At the
time of Mr. Bonoma's departure from Benckiser in mid-1993, fragrances under his
management represented six of the top 25 women's fragrances and ten of the top
25 men's fragrances in the United States.
At inception, the Company's strategic plan was to build a substantial
fragrance and cosmetics company within five years with annual sales in excess of
$750 million by implementing Mr. Bonoma's previously successful growth strategy
of acquiring and successfully integrating underperforming brands or companies
and restoring and expanding brand equities through the initiation or expansion
of focused marketing programs. In May 1994, KKEP invested $22.5 million in the
common equity of the Company, which represents the largest investment ever made
by Kidd Kamm or any of its principals. Management and certain other investors
invested an additional $4.0 million cash in common equity of the Company.
In July and August 1994, Cosmar through a subsidiary entered into long-term
exclusive license agreements with Houbigant for the manufacturing, distribution,
use and sale throughout the world but excluding Canada, of twelve of the
mass-market fragrances formerly marketed by Houbigant. These fragrances included
such well known brands as Chantilly, Parfums Parquet's French Vanilla, Lutece,
and Raffinee. In December 1994, the Company acquired through a subsidiary the
assets of ACB Mercantile, Inc. and related companies (collectively, "Houbigant
ACB") through which the Company acquired certain rights to manufacture,
distribute, use and sell the Houbigant fragrances in Canada for an aggregate
consideration of $6.0 million, and entered into a new license agreement with
Houbigant in August 1996, which superseded and restated its prior rights
acquired from Houbigant ACB and which, when combined with the previous Houbigant
license agreements, gave the Company the exclusive worldwide right to
manufacture and market the Houbigant fragrances. In August 1994, the Company
acquired certain exclusive western hemisphere rights to the fragrances marketed
under the Alyssa Ashley and Robert Ashley names. In August 1994, the Company
purchased the operations of Cosmar (the "Cosmar Acquisition"), the largest
manufacturer and marketer in the United States of artificial fingernails and
related fingernail care products, for an aggregate purchase price of $66.3
million. In December 1994, the Company acquired Les Parfums de Dana, Inc. and
related companies (collectively, "Dana"), which manufacture mass-market
fragrances and related products (the "Dana Fragrances") sold in the United
States and in 20 other countries worldwide, for an aggregate cash purchase price
of $21.9 million (the "Dana Acquisition"). The Dana Fragrances include such
classic brands as Tabu, Canoe and Ambush. Through the GAC Acquisition in August
1996, the Company acquired the rights to the Nat Robbins trademark.
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The mass-market distribution channel in the United States, where the
Company's products are sold, generated sales of approximately $4 billion in 1995
and is the largest and fastest growing segment of the estimated $7 billion
domestic fragrance/cosmetics market. Management believes that this growth is
attributable to a recent trend by consumers of seeking increased value per
dollar spent. Mass-market retailers account for approximately 57% of total
domestic fragrance and cosmetics sales, with department/specialty stores
accounting for the remaining 43%. In recent years there has been a substantial
consolidation within the mass-market distribution channel. As a result of such
consolidation, large chains such as Wal-Mart and Revco have been driving smaller
independent general merchandise stores and drug stores out of existence.
Management believes that such consolidation has been driving a similar
consolidation in the manufacturing sector of the fragrance/cosmetics industry
because smaller companies typically lack the management skills, technical
expertise, worldwide marketing capability and capital resources necessary to:
(1) introduce new products into the market;
(2) provide the financial reporting and management information systems
necessary to satisfy stringent mass-market retailer service requirements;
(3) develop, fund and utilize the sophisticated advertising and
marketing programs required to compete in the mass-market;
(4) provide sophisticated "category management" services (described
herein) to retailers designed to maximize the profitability of their
shelfspace; and
(5) establish effective international distribution networks.
Management believes that the Company is positioned to take advantage of
both the retail and manufacturer consolidations previously mentioned due to its
management team -- a team experienced in acquiring, integrating and reviving
established but underperforming brand equities under a common overhead
structure. The Company's substantial category management expertise, strong brand
marketing skills, ability to reinvigorate established brands, focused brand
"flanking" and streamlined information systems make it a desirable partner for
retailers. Further, management believes that significant acquisition targets
exist, and, as the fragrance/cosmetics industry consolidation accelerates,
substantially fewer fringe players will be able to maintain a market presence as
stand-alone entities.
Fragrance and cosmetics products sold through the department/specialty
store channel, in contrast to mass-market products, are generally characterized
as "prestige" brands whose sales are primarily based upon perceived image and
quality rather than on price. For example, fragrances sell at an average retail
price point of approximately $35 per one-ounce size in department stores, which
is substantially higher than the $14 average for fragrances sold in the
mass-market. Consequently, product offerings in the department/specialty store
channel tend to be much more sensitive to changes in fashion than those in the
mass-market, resulting in more new product introductions, less brand stability
and less consumer loyalty over time for "prestige" products vs. mass-market
products. In contrast, products sold in the mass-market, where the Company
operates, are characterized by: (i) lower prices; (ii) lower packaging costs;
(iii) more frequent purchases/uses; (iv) sales that are less affected by
changing fashions; and (v) faster inventory turnover than "prestige" brands.
Management believes that these characteristics enable the Company's mass-market
products to achieve, on average, greater customer loyalty and less seasonal
sales fluctuations than "prestige" products.
The Company's management team intends to continue to capitalize on the
opportunities in the mass-market segment of the fragrance/cosmetics industry,
through both internal growth and acquisitions, and to maximize sales and EBITDA
by implementing a strategy based on the following elements:
- The Acquisition and Reinvigoration of Underperforming and/or
Undermarketed Fragrance and Cosmetics Brands. The Company intends to
continue to acquire, and then subsequently reinvigorate, successively
larger sets of underperforming and/or undermarketed established brands
by: (i) reestablishing trust and reliability with the buyers of the
Company's retail accounts that may have been lacking under previous
ownership; (ii) restoring the quality of acquired fragrances by using
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<PAGE> 43
original formulations and applying advanced technology to improve its
cosmetics products; (iii) redesigning the packaging and advertising of
the acquired brand to modernize its image and refocus it towards its
target market; and (iv) initiating or expanding a focused advertising and
promotional program for each brand. Advertising and marketing support is
particularly important in the mass-market due to minimal in-store support
of products by sales personnel or manufacturer representatives.
Management believes that the Company's marketing personnel possess the
skills necessary to provide the broad-based consumer advertising
necessary to support new product introductions and to motivate consumers
to "pull" the Company's products off of the shelf.
- Integration of Acquired Companies into Existing Company
Infrastructure. Following its acquisition of brands or companies, the
Company hopes to reduce the operating costs of the acquired
brands/companies by: (i) eliminating redundant overhead; (ii)
consolidating plants (where applicable); (iii) selling the acquired
brands through the Company's existing sales force; and (iv) using common
components (i.e., the same type of bottle for many brands) to reduce
manufacturing costs.
- Focused Flanking of Established Brand Equities. Rather than introduce
completely new products into the mass-market, the Company has specialized
in the launch of new products that leverage off the strong name
recognition and brand equity ("trust") of the Company's portfolio of
classic brands. These new products, known as "focused flankers," draw on
the consumer recognition and heritage of the Company's existing brand
equities while simultaneously enhancing and revitalizing the "mother"
products being flanked. The Company's flanker introductions are strongly
related to their "mothers" but are targeted toward a different consumer
segment, enabling the Company to increase shelf space allocated to the
expanded brand family. In 1995, the Company successfully completed the
launches of two focused flanker products (White Chantilly as a flanker of
the classic Chantilly brand and DREAMS BY TABU as a flanker of the
classic Tabu brand), both of which successfully leveraged off the equity
of the classic "mother" brands. Management believes that the
reinvigoration of existing brands and the launch of focused flanker
products typically generate more predictable sales and require less
advertising and promotional expenditures than "cold" launches of
completely new products.
- Introduction of Complementary Products. Similar to its focused flanker
approach to fragrances, the Company also introduces complementary new
cosmetics products. For example, the Company enhanced its leadership
position in the artificial nail care market in fiscal 1995 through the
introduction of products targeting new segments of the market, including
UltraGel (patented gel nails with built-in color targeted towards salon
users) and Nail Fetish (a line of artificial nail care products targeting
teenage consumers). In addition, in 1995 the Company successfully entered
the $300+ million nail polish/treatment category with the launch of its
PRO(10) line of nail lacquers. PRO(10) ranks as the ninth best-selling
nail lacquer brand in the United States only one year following its
introduction.
- Use of Category Management Techniques to Increase RCI's Sales by
Increasing its Allocation of Shelf Space and Enhancing Relationships with
Retailers. Due to the consolidation in the mass-market retail industry,
the allocation of retail shelf space has become increasingly more
important. Since mass-market retailers depend upon the self-selection of
products by consumers and employ only a minimal amount of in-store sales
personnel, the allocation of existing retail shelf space is critical and
is the most important means of gaining consumer exposure in the
mass-market. To increase shelf space allocated to the Company's products
and to build stronger retailer alliances, the Company spends in excess of
$1.0 million annually to purchase consumer sales data derived from
in-store checkout scanners and maintains a five person in-house staff
dedicated to analyze such data. With these data, the Company has the
ability to mathematically quantify sales results for its own products as
well as all of its competitors' products in the categories in which it
competes. Using the purchased data, the Company analyzes the sales
dynamics of categories, manufacturers, brands and specific stock keeping
units (SKUs) at the national, regional and account level, enabling the
Company to recommend to its major retail customers an optimal mix of its
own and competing products to boost category sales, profits and consumer
satisfaction.
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The Company engages in account-specific category management by offering
to be a retailer's "category captain," a role that most retailers fill by
electing one manufacturer per category. The category captain assists the
retailer in deciding which products it will sell within the shelf space
dedicated to a specific category. In 1995 and 1996, the Company was
designated category captain by many of it major accounts and, as a
result, has successfully secured a greater allocation of shelf space for
its existing and new products by recommending the selection of SKUs to
retailers that maximize their total shelf space profitability for a given
category.
Management believes that retailers generally elect only one category
captain, and because the Company has made a significant investment in
data, systems and people for its category management program, the Company
should maintain a significant competitive advantage in this area that
will be difficult for its competitors to overcome should they choose to
offer similar category management services in the future.
- The Expansion of the Number of Retail Outlets and Alternative
Distribution Channels that Sell the Company's Products. The Company
continually seeks to expand its sales and distribution network, currently
over 1,000 retailers with approximately 25,000 locations domestically,
for its existing and acquired products. Due to management's long-standing
relationships with retail buyers, extensive domestic retailer network,
ability to reinvigorate brands and category management expertise, the
Company has been able to significantly increase the sales of its acquired
brands by integrating them into its existing distribution network. The
Company is also continually exploring alternative channels of
distribution through which to sell its products. In addition, the Company
is expanding its worldwide "doors" through the expansion of the number of
countries to which it sells its products. The Company currently sells its
products in 42 foreign countries, which management is projecting to
increase to over 50 countries during the 1996 fiscal year.
During the current fiscal year ending March 31, 1997 (Fiscal 1996), the
Company intends to continue to capitalize upon the success of its previous
fragrance and cosmetics product launches, market share gains and close working
relationships with mass-market retailers to launch additional focused flanker
fragrance products and two new patented artificial nail care products.
Management believes that the Company has the management talent and corporate
infrastructure in place to implement its proven growth strategy and effectively
manage future growth. The Company intends to continue to expand and diversify
its product lines by acquiring companies in related areas of the
fragrance/cosmetics industry in the United States and internationally including
the lip, eye and other makeup segments. In accordance with its growth strategy,
the Company has consummated the GAC Acquisition and entered into the MEM
Acquisition Agreement. See "Special Note Regarding Forward-Looking Information"
and see "Recent Developments" for additional information regarding the
Acquisitions.
INDUSTRY OVERVIEW
General. Based on management's estimates, the worldwide
fragrance/cosmetics industry is approximately $15 billion in size and is growing
at a rate of approximately 3%-5% per year due to the emergence of new markets
and increased penetration in existing markets. The domestic portion of the
fragrance/cosmetics industry represents approximately $7 billion in annual sales
(47% of the world-wide market). The mass-market distribution channel of the
domestic fragrance/cosmetics industry represents an estimated $4 billion in
annual revenues, accounting for 57% of total domestic industry revenues, and is
growing at the rate of approximately 2%-3% per year. The domestic mass-market
fragrance/ cosmetics industry is divided into six major product categories:
men's and women's fragrances (13% and 23%, respectively), face makeup (20%),
nail care (16%), eye makeup (15%) and lip products (13%), and is comprised of
three distinct channels: chain drug stores, mass merchandisers and supermarkets.
The domestic mass-market distribution channel is growing at a faster rate than
the domestic fragrance/cosmetics industry as a whole as it continues to take
market share from the department/specialty store segment due to a shift in
consumer preferences towards more value-oriented products.
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Management believes that the fragrance/cosmetics industry is highly
fragmented, with over 500 companies each generating annual sales of less than
$50 million. As the importance of the mass-market distribution channel continues
to increase, the fragrance/cosmetics industry consolidation should accelerate
because smaller private companies typically lack the management skills,
technical expertise, worldwide marketing capabilities and capital resources
necessary to: (i) introduce new products into the market; (ii) provide the
financial reporting and management information systems necessary to satisfy
stringent mass-market retailer service requirements; (iii) develop, fund and
utilize the sophisticated advertising and marketing programs required to compete
in the mass-market; (iv) provide sophisticated category management services to
retailers designed to maximize the profitability of their shelf space; and (v)
establish effective international distribution networks.
Distribution. According to industry estimates, the fragrance/cosmetics
industry relies on two primary channels of distribution: mass-market retailers,
which account for approximately 57% of total industry sales, and
department/specialty stores, which account for the remaining 43%. These two
channels have materially different sales and marketing processes because of the
contrasting economic, demographic, demand and usage characteristics of their
consumers. In recent years, the mass-market, where the Company sells its
products, has been expanding and capturing retail market share from the
department/specialty store segment as consumers continue to place more emphasis
on value.
The mass-market distribution channel is characterized by value-oriented
products with more emphasis placed on price than on image. Since mass-market
retailers depend on self-selection of products by consumers and employ only a
nominal amount of in-store sales support personnel, the allocation and placement
of retail shelf space is critical and is one of the most important means of
gaining consumer awareness in this channel. Accordingly, mass-market retailers
are becoming more aware of the benefits of sophisticated category management
systems, such as those utilized by the Company, to maximize the sales generated
by their existing shelf space. Retailers are therefore reluctant to allow new
products to displace proven high-volume products without the guarantee of
extensive advertising support to generate consumer interest. As a result,
introducing new products into the mass-market is more difficult and relatively
more expensive than in the department/specialty store segment. Manufacturers of
mass-market products must provide broad-based consumer advertising to support
new product introductions and to get consumers to "pull" products off of the
shelf. These characteristics of the mass-market limit the number of new product
offerings, enabling proven products to retain existing shelf space and creating
barriers to entry. As a result, the mass-market distribution channel for
fragrances and cosmetics is generally characterized by greater brand stability
and consumer loyalty than is the department/specialty store channel.
In contrast to the mass-market, fragrance and cosmetics products sold
through the department/specialty store channel are generally characterized as
"prestige" brands which are primarily sold based upon perceived image and
quality at substantially higher price points (average retail price point of $35
for fragrances) than those sold in the mass-market channel (average retail price
point of $14 for fragrances). Consequently, product offerings in the
department/specialty store channel tend to be much more sensitive to changes in
fashion and popular trends than those sold in the mass-market. This fashion
consciousness results in a greater number of product introductions in this
channel than in the mass-market. The introduction of new products in
department/specialty stores is facilitated, in part, by a greater level of
personal customer service during the sales process through the use of sales
personnel or in-store manufacturer representatives who "push" new products to
consumers. In addition, department/specialty retailers generally reallocate
their selling space and product mix several times per year to accommodate
changing fashion trends, whereas mass-market retailers generally do so only once
per year. As a result, manufacturers are able to introduce new products more
easily and frequently in the department/specialty store distribution channel, as
well as depend on in-store direct selling efforts rather than broad-based
consumer advertising to attract consumers. While this reallocation results in
greater flexibility to change product offerings to match current fashion trends,
it also reduces brand stability and consumer loyalty over time.
As the department store channel selling "prestige" fragrances has been
consolidating, there has been increasing pressure to introduce certain
fragrances which were historically sold in department stores into mass-market
channels. Management believes, however, that increased penetration by department
store fragrances
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into the mass-market is not a material competitive threat to those mass-market
brands supported by strong management, marketing and advertising because: (i) a
significant portion of prestige products sold in the mass-market have been
diverted from their normal distribution channels, thus constituting an unsteady
supply source; (ii) such prestige fragrances are often marketed toward different
consumers than mass-market fragrances; and (iii) the "push" and promotional
marketing support (i.e., gift with a purchase, high sales and display intensity)
typically associated with prestige brands is not replicable in the self-select,
mass-market channel. Certain prestige marketers have attempted to adopt
mass-market methods of less intensive sales support, lower packaging quality and
broader distribution. However, management believes that the resulting pressure
for price discounts on these prestige product has threatened the perception of
exclusivity associated with their up-market trademarks.
Fragrance Market. The domestic fragrance market, which generated sales of
approximately $4 billion in 1995, is growing at a rate of approximately 3%-5%
per year. The domestic mass-market segment of the retail fragrance industry
generated sales of $1.4 billion in 1995. The market for both men's and women's
fragrances is highly fragmented, with the most popular brand in each segment
commanding a share of less than 5% of the total market (although there are large
competitors with significant aggregate market shares). The mass-market fragrance
industry is recession resistant due to its low average price point ($14) and
more frequent usage of the product which is evidenced by industry growth rates
which have only varied between negative 5% to positive 5% over the last ten
years. Fragrance products sold in the mass-market, where the Company operates,
typically have the following characteristics in relation to prestige brands: (i)
lower prices; (ii) lower packaging costs; (iii) more frequent purchase/use; (iv)
sales that are less affected by changing fashions which results in fewer new
product introductions; and (v) faster inventory turnover. Management believes
that these characteristics enable the Company's products to achieve, on average,
greater customer loyalty and more stable sales volume than prestige products.
Prestige products are sold primarily based upon perceived image and quality
at substantially higher price points than mass-market products. To survive in
the mass-market, fragrance brands must generate a high level of repeat
purchases. Management believes that "classic" fragrance products, which
generally have more than 20 years of sales history and are characterized by
extensive brand name recognition and customer loyalty, obtain such status based
upon the performance of their scents. Management estimates that less than 1% of
all fragrance brands introduced each year achieve such "classic" status. The
Company currently markets seven of these classic brands.
In addition to "prestige" fragrance products sold in the mass-market
channel, the Company competes with alternative designer fragrances ("ADFs"),
which are impostors of designer/prestige fragrances. ADFs began capturing market
share from both designer/prestige fragrances and mass-market products in 1990.
Since 1992, however, sales of ADFs and prestige fragrances in the mass-market
have been declining as consumers have retreated to classic fragrances that offer
greater value for their money. For example, in 1995, sales of ADFs declined by
16%, and sales of prestige fragrances sold in drugstores and mass merchandisers
declined by 8%.
Cosmetics/Nail Care Market. The domestic mass-market segment of the
artificial nail category, which generated retail sales of approximately $160
million in 1995, is the fastest growing segment of the $670 million domestic
retail nail care market. Management believes that the compound annual growth
rate in the domestic mass-market segment of the artificial nail category
exceeded 18% from 1984 to 1995. Management attributes the rapid growth in this
market primarily to a greater acceptance of artificial nail products and a shift
in consumer preferences from more expensive salon services to significantly less
expensive self-application products such as those manufactured by the Company.
Other factors causing the shift include improved product quality (e.g., a more
natural appearance), simplified product application and a greater selection of
products. The retail nail care market is divided into four major product
categories: (i) nail polish/treatment (45%); (ii) artificial nail care (24%);
(iii) nail implements (20%); and (iv) nail polish removers (11%).
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<PAGE> 47
Although the domestic mass-market artificial nail care market has many
participants, the top three brands generate over 60% of total category sales. As
the following table indicates, Cosmar brands dominate the artificial nail care
products category as measured by total sales dollars:
ARTIFICIAL NAIL CARE MARKET (DRUG/MASS MERCHANDISER)
<TABLE>
<CAPTION>
CONSOLIDATED MARKET SHARE
BRAND OWNER 52 WEEKS ENDED 3/24/96
----- ----- -------------------------
<S> <C> <C>
Cosmar.............................. RCI 30.9%
Nailene............................. Pacific World Corp. 17.7
Jonel............................... Barristo Ltd. 13.9
Kiss Professional................... Dae Do 9.8
Sally Hansen........................ Del Laboratories 8.0
Fing'rs............................. Entrecap Corp. 7.4
IBD................................. Intl. Beauty Distributors 4.4
Lee Fancy Fingers................... Lee Pharmaceutical 2.9
All Other Brands.................... Various 5.0
-------
Total Category 100.0%
=======
</TABLE>
- ---------------
Source: InfoScan, Total U.S. Drug + Mass Merchandisers, Company Fiscal Year
1995.
Repeat purchases by consumers, who typically purchase 10 to 15 packages per
year, as well as high inventory turnover have resulted in increased retail shelf
space allocation and market stability for artificial nail products. It is
expected that in the future there will be less opportunity for niche players in
the artificial nail market, with more shelf space being allocated to the major
players such as the Company that drive category sales.
The domestic artificial nail market is expected to continue to grow as
consumer penetration throughout the United States expands. The total domestic
market for artificial nail and fingernail related products, including those sold
in salons, has grown from approximately $1.4 billion in 1989 to $3.0 billion in
1995. Approximately 31% of all American women use artificial nail tips, with the
majority of users under the age of 35, and 77% of all American women use nail
glue. However, over 60% of artificial nail product users still have their nails
done at salons at an average cost of approximately $30, representing a
significant opportunity for considerable growth in the retail nail care market,
where an average mass-market application costs approximately $10. Additional
growth opportunities exist in the United States, as well as abroad, to attract
the millions of potential new users that currently do not use artificial nail
care products.
Lipstick/Eye Make-up Market. The domestic lipstick and eye make-up market
is highly competitive and dependent on strong brand recognition, consumer trust
in product quality, product selections aligned with current fashion/color trends
and distinct price brackets that meet particular consumer needs and
demographics. Within the approximately $1.2 billion lipstick and eye make-up
mass-market, there are higher priced brands, generally priced at $3.25 and
higher per unit, followed by mid-priced brands at $2.00 to $3.75 per unit and
lower-priced brands at $.99 to $1.79 per unit. The Company has focused on the
mid-priced segment, through the acquisition of GAC. In general, the Company
believes that the lipstick and eye make-up market have experienced strong growth
over the past year because of enhancements in color cosmetics technology and
formulations coupled with a renewed emphasis on fashion-conscious color
selections. The most prevalent trends include longer lasting applications, such
as "smudge-free" lipstick, healthier products, such as moisturizing and
vitamin-added formulas and "hot" color ranges, such as browns and purples. In
addition, manufacturers are now utilizing point-of-purchase displays or "wall
units" that emphasize products, features and educate consumers on the use of
cosmetics in an attempt to further stimulate category expansion.
44
<PAGE> 48
PRODUCTS
Fragrances: The Company manufactures and markets a wide variety of men's
and women's fragrances, which include some of the oldest, most recognized
"classic" brand names in the industry. Classic brands, which generally have more
than 20 years of sales history, are typically characterized by extensive brand
name recognition and strong consumer loyalty. The Company estimates that less
than 1% of all fragrance brands introduced each year achieve such classic
status. The Company currently manufactures seven of these classic brands. The
Company markets its women's fragrance brands under such names as Chantilly,
Tabu, White Chantilly, DREAMS BY TABU, Classic Gardenia, Lutece, Raffinee, and
Ambush. The Company markets its men's fragrance brands under such names as
Canoe, Monsieur Musk, Herbissimo and the soon-to-be-released Navigator from
Canoe.
The Company produces and markets men's and women's fragrances through its
wholly-owned Dana subsidiary. Among the Company's most well-known brand names
are Chantilly and Tabu. Introduced in 1941 and 1931, respectively, Chantilly and
Tabu are two of the oldest "classic" fragrances in the United States. Chantilly
is merchandised as a high-end mass-market product with price points ranging from
$5 to $30. Both the Chantilly and Tabu brand families include a complete line of
products including perfumes, colognes, bath gels, powders and lotions. The
Chantilly family of products is marketed in packaging designed to appeal to
women of all ages. Based upon Chantilly's and Tabu's longevity in the market and
market share, the Company believes that the Chantilly and Tabu brands enjoy
significant consumer loyalty and name recognition.
Following the four acquisitions completed by the Company in 1994,
management was able to regain the confidence of its retail customers by
supporting its brands with increased advertising and promotional expenditures,
reestablishing efficient production scheduling and shipping processes,
maintaining adequate inventory levels and creating responsive order fulfillment
practices. Under current management's leadership, the Chantilly and Tabu brands
have risen to the 4th and 8th highest share of the domestic women's fragrance
market, respectively. In addition to the Company's growth in its existing
product lines, the Company also grew through the launch of new brands such as
Classic Gardenia and the Fall 1995 launch of White Chantilly, a flanker product
for the core Chantilly brand. In Fiscal 1995, White Chantilly generated $11.6
million in gross sales in addition to $16.4 million of Chantilly sales due to
its significant product differentiation and marketing focus targeting more
youthful consumers. White Chantilly was nominated for a 1995 FiFi (Fragrance
Foundation) award as new product of the year.
Within its current portfolio of classic and established brands, the Company
focuses on reinvigorating its largest and most recognized brands. For its
smaller brands, the Company applies various cost-reduction methods resulting in
major production savings by utilizing less expensive common componentry and
standard packaging. Additionally, the Company minimizes advertising and
promotion costs by offering these products in the same packaging on a year-round
basis. The Company passes along these cost-savings by offering value pricing to
customers with primary advertising occurring only in-store, leaving the majority
of advertising funds to be spent on its larger, more well known brands.
In men's fragrances, the Company manufactures and markets Canoe, a classic
men's fragrance introduced by Dana in the late 1950's. The Company recently
successfully completed the relaunch of Canoe after completely repackaging the
product and creating a new advertising campaign. In the Fall of 1996, the
Company will be launching a new men's focused flanker product, Navigator from
Canoe. Based on the number of pre-packs sold to date, initial trade response for
the new launch has been extremely positive. The Company also sells the
Herbissimo line for men, which was originally introduced in Spain but has since
been introduced in the United States.
The Company's Ambush line for women was introduced in 1962, and the Company
intends to relaunch this classic fragrance in the Spring of 1997. The Company's
Raffinee fragrance was introduced in 1982 as a department store fragrance and
was marketed as a high-end fragrance within the mass-market segment beginning in
1994. In 1984, Lutece was launched as a follow-on to the Raffinee line, designed
and created to address the upscale, glamour segment within the mass-market.
45
<PAGE> 49
The Company's other fragrance lines include Parfums Parquet's French
Vanilla, English Waterlilys, French Garden Flowers and Demi-Jour. These
fragrances are generally marketed in a variety of formats including sprays,
pour-bottles, powders and lotions. The Company believes its fragrances have
multi-ethnic and multi-generational appeal to buyers in the mass-market.
Sales of fragrances are highly seasonal at retail, with over one-half of
the mass-market fragrance industry's sales occurring during the calendar
year-end holiday season from October to December. Thus, lower-than-expected
sales during this period could have a material adverse effect upon the Company's
operating results. However, the Company's fragrance division had the strongest
1995 holiday sales in the category, outpacing all other competitors and the
category as a whole. The Company's year-end holiday season fragrance sales
increased 14.1% in 1995 over the prior year while its nearest competitor's
increased by only 4.1%. The Company maintained strong sales growth throughout
the year in 1995 and increased its market share in the drugstore segment of the
women's fragrance industry from 5.1% in the fourth quarter of 1994 to 8.4% as of
May 1996. As demonstrated in the following table, two of the Company's products
command the 4th and 8th highest market share of all domestic women's fragrances
sold through chain drug-stores:
WOMEN'S FRAGRANCE MARKET (DRUG STORES)
<TABLE>
<CAPTION>
CONSOLIDATED MARKET SHARE
BRAND OWNER 52 WEEKS ENDED 3/24/96
- ----- ----- -------------------------
<S> <C> <C>
Vanilla Fields......... Coty, Inc. 4.1%
Jean Nate.............. Revlon, Inc. 3.2
Vanderbilt............. Cosmair 2.9
Chantilly.............. RCI 2.8
E.T. White Diamond..... Parfums International (Unilever) 2.5
Charlie................ Revlon, Inc. 2.3
Jovan Musk............. Coty, Inc. 2.0
Tabu................... RCI 2.0
Exclamation............ Coty, Inc. 2.0
Sunflower.............. Elizabeth Arden (Unilever) 1.9
</TABLE>
- ---------------
Source: InfoScan, Total Drug, Company Fiscal Year 1995.
Cosmetics/Nail Care. Through its wholly-owned Cosmar subsidiary, the
Company is the largest manufacturer and marketer of artificial fingernails and
nail care products sold through the mass-market channel, with net sales for
Fiscal 1995 of $48.1 million worldwide. The Company's nail products include
full-length, artificial press-on or glue-on fingernails, artificial fingernail
tips, fingernail sculpting kits, nail lacquer, natural fingernail cuticle
treatments and strengtheners and related accessories. The Company markets its
products under such brand names as LaJoie (Sculptures Quik, Press & Go and Quik
Fit) and PRO(10), UltraGel and Nail Fetish. The LaJoie line is an easy-to-use
line of artificial fingernail products, acrylic applications and accessories
targeted at the consumer who generally does not visit a professional fingernail
salon. The PRO(10) line has established itself as a leading professional
"salon-standard" fingernail care line sold through retailers. This line includes
artificial fingernail tips, a selection of nail sculpturing applications and
abrasives. These products are similar to those commonly used by professional
nail technicians, but are designed, formulated, and packaged for retail
purchase. This line of products also permits customers to maintain their natural
nails with professional quality nail strengtheners, nail builders, finish coats
and cuticle creams.
The general nail sculpturing application in both of the LaJoie and PRO(10)
lines includes products that permit customers to apply an overlay, or a coating,
onto the natural fingernail, or the natural fingernail as extended by an
artificial tip, in order to harden and smooth the fingernail surface. The LaJoie
line offers both hard acrylic and more flexible gel overlays while the PRO(10)
line offers a fuller range of acrylic, silk wrap and gel overlay products. Once
the overlay has been applied, it is then typically filed and buffed until it is
thin, smooth and natural looking. The overlay is then shaped and finished with
nail polish. Certain of the
46
<PAGE> 50
Company's products have patented designs that eliminate one or more of the
above-mentioned steps (i.e., products sold under the Company's UltraGel brand
name, which are complete gel nails with built-in color that eliminate the need
for buffing and the application of nail polish). In addition, for extremely easy
applications, the Company's Press & Go colored nails dominate the instant nail
care segment (originally pioneered by Lee) with an 84% market share.
Throughout Fiscal 1995, the Company continued to enhance growth in its nail
care segment through increased marketing and improved packaging of existing
brands and the introduction of new products. In February 1995, the Company
entered the approximately $300+ million nail polish/treatment market with the
introduction of a line of nail lacquer under the PRO(10) name. After only one
year following its introduction, the PRO(10) nail lacquer is the ninth best
selling nail enamel in the United States. Later in Fiscal 1995, the Company
targeted new users and younger women with its Nail Fetish brand. In February
1996, the Company launched a revolutionary new line of products under the
UltraGel brand name that offers a unique two-step gel nail process with built-in
color. In addition, the Company will be launching two new patented products in
the coming year. Management believes that these new product introductions will
contribute to Cosmar's continued sales growth and market share gains. See
"Special Note Regarding Forward-Looking Information."
Cosmetics/Lipstick and Eye Make-up. Resulting from the acquisition of GAC,
the Company is a leading marketer of high quality, mid-priced lip and eye
cosmetic products sold through the mass-market channel, with net sales under the
prior management of GAC of $7.9 million for the year ended December 31, 1995.
The Company's lip and eye cosmetics include lipliner pencils, lipstick,
lipgloss, eyeliner pencils, eye shadow, mascara and assorted accessories. While
under the previous owners of GAC, the Nat Robbins brand successfully achieved a
leading position among mid-priced cosmetics by offering high quality, consumer-
friendly products "sold only by professionals." Prior to the introduction of the
Nat Robbins line of products, the cosmetics category was characterized by
extreme differences in quality and price between mass-market higher priced
brands at $3.25-$7.00 per item vs. lower priced brands at $.99 to $1.79 per
item, with few product offerings in between. Building on its professional image
and quality, GAC has positioned Nat Robbins in the middle of the higher and
lower price ranges for lip and eye cosmetics with selling prices for its
products ranging from $2.00-$3.75. GAC believes that it has attracted loyal
consumers who trust the name Nat Robbins and associate the brand with not only
year-round color selections, but also with season-specific color selections. The
Company expects to continue to add new formulations and colors to the Nat
Robbins brand in an attempt to realize continued sales growth and market share
gains. See "Special Note Regarding Forward-Looking Information."
INTERNATIONAL OPERATIONS
The Company has manufacturing operations in Canada, Argentina, Brazil and
Spain and currently sells its products in 42 countries throughout the world. In
Fiscal 1995 and for the three month period ended June 30, 1996, net sales from
the Company's products sold abroad was $22.9 million ($6.9 million of which are
U.S. dollar-denominated export sales from the United States) and $8.0 million
($1.8 million of which are U.S. dollar -- denominated export sales from the
United States), respectively, accounting for approximately 17.4% and 26.0%,
respectively, of its total sales for Fiscal 1995 and for the three month period
ended June 30, 1996.
In December 1995, the Company exercised its option to acquire the Brazilian
operations of Les Parfums de Dana for $0.1 million. Prior to the acquisition,
the Company received management fees from the operations of the Brazilian
subsidiary. Management believes that this operation alone should contribute
approximately $18.0 million in sales in Fiscal 1996 which, when combined with
other expected international growth, should generate increases in international
sales of over 110% in Fiscal 1996 over Fiscal 1995. See "Special Note Regarding
Forward-Looking Information."
During the last eighteen months, the Company has restructured and
significantly improved the operations of its four wholly-owned foreign
subsidiaries. Information systems have been improved and performance
measurements have been established. Additionally, further investments are
planned that are expected to increase capacity, improve productivity and lead to
higher volume growth. The Canadian subsidiary, acquired through the Houbigant
ACB Acquisition, has been successfully restructured and, as a result, operating
profit
47
<PAGE> 51
has increased approximately 300% over Fiscal 1994. In the Spanish and
Argentinean subsidiaries acquired in the Dana Acquisition, management has been
restructured successfully, which has resulted in improvements in sales and
profits. The Brazilian subsidiary is being re-engineered and is expected to add
substantially to the results of the Company's international operations.
The Company remains committed to actively expanding its sales effort
abroad. The Company will continue to capitalize on its strong brand equities to
tap foreign markets and will consolidate selling efforts between its fragrance
and cosmetics/nail care subsidiaries. Accordingly, the Company is seeking
substantial growth in this arena and expects to eventually achieve foreign sales
equal to 30% of total Company sales. See "Special Note Regarding Forward-Looking
Information."
The following table provides a breakdown of the Company's international
sales between export sales and local foreign subsidiary sales:
<TABLE>
<CAPTION>
FOR THE THREE MONTH
FOR THE FISCAL YEAR ENDED PERIOD ENDED
MARCH 31, 1996 JUNE 30, 1996
------------------------- -------------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Export Sales:
Fragrance.................................. $ 3.3 $ .9
Cosmetics.................................. 3.6 .9
----- ----
Total Export Sales................. 6.9 1.8
Local Foreign Subsidiary Sales:(1)
Fragrance.................................. 8.0 4.7
Cosmetics.................................. 0.0 0.0
----- ----
Total Local Foreign Subsidiary..... 8.0 4.7
Canadian Sales:
Fragrance.................................. 8.0 1.5
Cosmetics.................................. 0.0 0.0
----- ----
Total Canada Sales................. 8.0 1.5
----- ----
Total International................ $22.9 $8.0
===== ====
</TABLE>
- ---------------
(1) Includes Brazil, Spain and Argentina.
PRODUCT DEVELOPMENT AND NEW PRODUCT LAUNCHES
The Company's management has demonstrated an ability to identify potential
new products and product lines for development. New product concepts are
evaluated to determine whether or not they can be successfully launched in
conjunction with existing Company product promotion, packaging and strategic
objectives. In developing new products, the Company has also sought to build on
its growing brand values, expanding customer base, increasing allocation of
retail shelf space and point-of-sale consumer access. The Company believes its
existing fragrance and cosmetics/nail care businesses will provide a basis for
product extensions into additional segments of the mass-market, including lip,
eye and face makeup.
The Company's product development activity is primarily conducted in-house
and utilizes feedback from consumer focus groups, tests in fingernail care
salons for nail care products, and consumer questionnaires. The cycle of market
research, product conceptualization, product design and development, consumer
testing and package design typically requires approximately six months for the
Company. The Company believes that the average cycle for the industry is between
12 to 18 months. The Company has invested $548,000 and $526,000 in Fiscal 1994
and Fiscal 1995, respectively, on new product development.
Since inception, management believes that it has successfully reestablished
trust and a reputation for reliability with the buyers of the Company's retail
accounts resulting from the Company's reinvigoration of previously
underperforming fragrances acquired in 1994 and the successful launch of focused
flankers
48
<PAGE> 52
designed to both benefit from the brand name recognition of the Company's
established brands and enhance and revitalize the "mother" product they flank.
This retail acceptance is evidenced by the Company's receipt of several
awards/honors including the Sears Roebuck & Company "Partner in Progress" award
in 1995, the appointment to the "Sears Retail Advisory Council" for 1996,
recognition as "Best Small Fragrance Vendor" in a Goldman, Sachs & Co. survey
and being named the "Best Cosmetics Vendor of the Year" by Rite Aid Corporation.
The success of management's strategy is evidenced by a steady increase in the
number of pre-packaged in-store promotional display units ("pre-packs")
containing either trial-size or full-size units of the Company's products
(typically 18-27 units) sold to mass-market retailers in connection with the
launch of the Company's fragrance products. Management believes that the
allocation of retail shelf space for new products presents one of the greatest
hurdles to a successful product launch. A large number of pre-packs sold during
the pre-launch and launch phases, together with strong sell-through to
consumers, facilitates future product launches and enables manufacturers to
capture an ongoing allocation of shelf space for their new products following
the launch period. Since the Company's inception in 1994, the number of
pre-packs sold in connection with each successive RCI women's fragrance launch
has increased substantially, demonstrating increasing retailer confidence in the
Company's new product launches.
In October 1994, the Company launched its Parfums Parquet's French Vanilla
line. The product was created and designed to address the emerging demand for
fragrances based on the scent of vanilla extract. In the Spring of 1995, the
Company successfully introduced a new fragrance line, Classic Gardenia, which is
targeted to women over 25 years of age and is positioned as a romantic
fragrance. In August 1995, the Company launched White Chantilly as a flanker of
its "classic" Chantilly brand. With a lighter scent and prestige-like packaging
at a mass-market price, White Chantilly targets a younger audience than
Chantilly. In February 1996, the Company launched DREAMS BY TABU, a lighter
fragrance that capitalizes on the strong consumer recognition of its classic
Tabu brand. The Company has devoted significant resources and marketing dollars
to this new fragrance that is targeted at a younger market than Tabu. The
Company sold $5.5 million of DREAMS BY TABU to retailers in the first two months
after introduction, and sell-through at retail has exceeded management's
expectations. During August 1996, the Company launched NAVIGATOR BY CANOE, a
light, green men's fragrance, devoted to today's young man with control over his
own direction. The Company will devote significant national advertising and
in-store promotional activities in support of this launch.
In March 1995, Cosmar introduced a new line of nail lacquer and other
products for the natural nail care category under the PRO(10) brand name that
has become one of the top ten brands in the $300+ million nail polish/treatment
market. In February 1996, the Company introduced Nail Fetish, a line of
artificial nails, nail art, files and glues targeted at teenage users. The
Company also introduced UltraGel, the first major innovation in the nail care
market in several years. This breakthrough nail product is the first all-in-one
gel nail system with color built into the gel activator, making it possible for
women to strengthen their nail tips and apply color in one quick, easy
application. Sales of UltraGel began in February 1996 and have exceeded
management's expectations in the first few months after introduction. As of July
1996, sales of these two products alone represented a 6.4% market share of the
artificial nail category. The Company is planning to introduce two new patented
nail care products in the coming year. These additions to the Company's existing
product line will include artificial fingernail treatment applications, cuticle
removers and treatments.
DISTRIBUTION
The Company's products are sold principally through the domestic
mass-market, or self-select, distribution channel, and through international
subsidiaries and distributors. The mass-market distribution channel, with
domestic sales of $4 billion in 1995, is the largest and fastest growing
distribution channel in the estimated $7 billion domestic fragrance/cosmetics
market. This channel includes chain drug stores (such as Revco and Walgreen),
mass merchandisers and discount stores (such as Wal-Mart and Kmart) and
supermarkets and combination supermarket/drug stores (such as Kroger and
Albertson's). The Company's brands are sold domestically to over 1,000 retailers
with approximately 25,000 locations. The Company also sells a limited amount of
its artificial fingernail products to professional salon owners.
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<PAGE> 53
The following table sets forth the Company's top ten mass-market customers
in each category for the year ended March 31, 1996:
<TABLE>
<CAPTION>
FRAGRANCE COSMETICS
TOTAL PRODUCTS PRODUCTS
---------- ---------- ----------
CUSTOMER % OF SALES % OF SALES % OF SALES
-------- ---------- ---------- ----------
<S> <C> <C> <C>
Customer A.......................................... 8.9 8.0 10.8
Customer B.......................................... 7.7 6.4 10.2
Customer C.......................................... 4.8 3.2 7.9
Customer D.......................................... 4.3 3.3 6.3
Customer E.......................................... 4.0 2.3 7.6
Customer F.......................................... 3.3 3.1 3.7
Customer G.......................................... 3.3 4.9 0.0
Customer H.......................................... 2.9 2.0 4.9
Customer I.......................................... 2.3 1.6 3.7
Customer J.......................................... 1.8 0.0 5.3
</TABLE>
In addition to direct sales through distribution channels in U.S., Canada,
Spain, Argentina and Brazil, the Company's products are sold in 42 foreign
countries worldwide through distributors based in the United States and
overseas. The Company has been rapidly expanding its U.S. dollar-denominated
export sales and expects to be selling its products in over 60 countries within
two years.
SALES AND MARKETING
To induce consumers' trial and repeat purchases, the Company relies
primarily on price, quality, effective product packaging and distinctive
in-store displays that are generally provided to retailers free-of-charge. In
addition to these proven advertising and promotion methods, the Company's
management has instituted significant promotions for the Company's products
through ongoing trade advertising for its artificial nail and fragrance products
directed toward chain drug retailers, mass merchandisers and supermarket chains.
The Company also advertises through many national women's magazines including
Cosmopolitan, Glamour, Harper's Bazaar, Mademoiselle, People, Seventeen and
Vogue and runs focused television advertising campaigns during new product
launches or relaunches of existing brands. In its nail care business, RCI's
national advertising campaigns represent a significant level of total category
spending, which enhances the Company's trade relationships and leads to better
shelf space allocation and increased distribution.
The Company's fragrance and cosmetics/nail care products are sold primarily
through an integrated in-house sales force comprised of a dedicated staff of 15
people, including 5 territory sales representatives, 6 regional managers, 2 key
account managers and 2 vice presidents of sales. Additional sales are generated
by a network of over 75 independent sales representatives, who are compensated
solely on a commission basis. These sales representatives are supervised by the
Company's internal sales personnel who specialize in understanding retailer
needs in specific segments of the mass-market distribution channel.
Domestically, the Company communicates directly with its nail care product
consumers through its Consumer Assistance Hotline. The Company's toll-free
number for consumer assistance is displayed on each nail care product package.
Consumers are assisted on any questions that arise as they use the Company's
products by a licensed, in-house nail technician and manicurist. The Company
believes that its toll-free number has enhanced the Company's customer loyalty.
The Company's fragrances are currently sold abroad in Europe, Asia, South
America, Central America, the United Kingdom, Canada, Australia, New Zealand,
the Middle East and Africa through licensees. The Company sells products
directly in Brazil, Spain and Argentina where Dana has subsidiary operations.
The Company's artificial fingernail products are currently sold abroad by local
distributors in Europe, Canada, Mexico, Puerto Rico, Paraguay, Australia and
China.
Management believes that opportunities exist to cross-distribute the
Company's fragrance and nail care product lines in Europe and Latin America,
areas where the Company's products are either undermarketed or
50
<PAGE> 54
under-represented. The Company plans to pursue these opportunities in the
fragrance market through the European and Latin American manufacturing
facilities acquired in the Dana Acquisition.
As of August 31, 1996 and August 31, 1995, the Company had an immaterial
amount of backlog orders.
COMPETITION
The fragrance and cosmetics business is characterized by vigorous
competition throughout the world. Brand recognition, together with product
quality, performance and price and the extent to which consumers are educated
about specific product attributes have a marked influence on consumers' choices
among competing products and brands. Advertising, promotion, merchandising,
packaging and the timing of new and focused flanker product introductions also
have a significant impact on buying decisions. Further, the structure and
quality of the manufacturer's sales force affects product reception, in-store
position, permanent display space and inventory levels in retail outlets. The
Company competes in most of its product categories against a large number of
companies, some of which have substantially greater resources than the Company.
In addition to products sold in the mass-market and department/ specialty store
distribution channels, the Company's products also compete with similar products
sold door-to-door or through mail order or telemarketing by representatives of
direct sales companies.
In the fragrance market, the Company competes with numerous companies
domestically and internationally, including more than 500 brands competing for
market share in the mass-market chain drug store segment. The Company's
principal competitors include Benckiser GmbH, Revlon, Inc., The Proctor & Gamble
Company, Cosmair, Unilever N.V. and Estee Lauder, Inc.
The domestic artificial nail market is dominated by Cosmar with its 30+%
market share, making it almost twice the size of its nearest competitor. For the
last three years, Cosmar has virtually driven the category's growth via new
product launches and has realized significant shelf space gains as a result of
such launches, category management expertise and strong in-store promotional
support. Cosmar has made these gains against competitors such as Nailene
(Pacific World Corp.), Jonel (a division of Barristo Ltd.), Kiss Professional
Fingernail Products (Dae Do, a Korean manufacturer), Sally Hansen (Del
Laboratories), Fing'rs (a division of Entrecap Corp.), Lee (Lee Pharmaceutical)
and Kristy Wells in the mass-market distribution channel and several companies
such as International Beauty Distributors and Orly that sell its professional
salon products into the retail market.
While its competitors operate under a single brand name, Cosmar has been
able to target three distinct consumer markets -- teens, women wanting quick and
easy product applications and women seeking "professional" products -- by
successfully marketing three distinct brand lines: Nail Fetish, LaJoie and
PRO(10), respectively. Management believes that this selling and marketing
approach enables the Company to address a wider consumer base than any of its
competitors and tailor its new product development and promotions to such a base
to achieve greater support from its retail accounts. In addition, Cosmar's size
allows it to advertise and promote its brands with greater resources than any of
its smaller competitors via both trade and consumer advertising media, trade
promotional spending and the creation and use of its proprietary category
management database. Such advertising results in strong brand awareness among
consumers relative to the competition and in the Company being designated by
many of its retail accounts as their "category captain."
The Company's principal competitors in the nail lacquer category include
Revlon, Inc., Del Laboratories, L'Oreal S.A., Maybelline, Inc., Estee Lauder,
Inc., Helene Curtis Industries, Inc., Unilever N.V., and The Proctor & Gamble
Company.
The Company believes that GAC's products occupy a leading position within
the mid-priced lipstick/eye make-up segment because they offer superior quality
consumer-friendly products. GAC's competitors include Lancetti Cosmetics, and
Eco Beauty Inc., both makers of mid-priced lipstick/eye make-up products. GAC
also competes with Revlon, Inc., L'Oreal S.A., Maybelline, The Proctor and
Gamble Company and Pavion, Ltd.
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<PAGE> 55
Management believes that the Company is well positioned to compete
effectively in its markets and to continue to gain market share as a result of
the established brand names and quality of its nail care products, the pricing
of its products, the strength of the Company's relationships with
mass-merchandisers, its retailer marketing programs, its category management
services and its state-of-the-art information systems. See "Special Note
Regarding Forward-Looking Information."
CATEGORY MANAGEMENT
Management believes that RCI's use of category management is unsurpassed in
the industry and represents a significant competitive advantage for the Company.
Category management involves strategic partnering with retailers whereby
manufacturers such as RCI utilize state-of-the-art mathematical modeling tools
to understand the sales dynamics of categories, brands and specific SKUs so that
retailers can offer the best mix of products to boost category sales, profits
and customer satisfaction. Management believes that RCI is the category captain
in almost all of its top fragrance and nail accounts. As category captain, RCI
works with retailers to define optimum space allocation for their fragrance and
nail care product categories. RCI has invested significant resources in category
management with a staff of five people dedicated specifically to the process and
annual expenditures of approximately $2.0 million for payroll and purchased
data. The Company commits significant funds each year to Information Resources
Inc. ("IRI") to track weekly sales data on all products it sells through
mass-market channels. Management believes that RCI is one of the few companies
in the industry to employ this degree of information utilization to analyze
sales data. By utilizing the information available through IRI, the Company
enhances its relationships with its retail accounts by supplying them with key
selling information presented in a user-friendly manner for both the Company's
and its competitors' products.
Category management allows the Company to work with retailers to: (i)
assist the retailers in determining the optimal product mix for each category;
(ii) recommend the SKUs in the entire category that the retailer should carry;
and (iii) monitor the sales results, both for the Company's products and its
competitors' products, on a weekly basis. These steps, when combined with the
Company's dedicated category management staff, allow the Company to, whenever
possible, replace less profitable competitors' products with its own brands,
leading to better shelf space allocation and increased sales volume for the
Company. In addition, the Company is able to penetrate different functional
areas within retailers' accounts, thereby strengthening its relationship with
retailers and contributing favorably to future sales and marketing efforts. The
Company's category management program also enables the Company's marketing
department to perform a variety of functions including: (i) real time
understanding of relaunch marketing effectiveness; (ii) gauging new product
success rates for the Company and competitor products; and (iii) amassing
competitive intelligence about consumer buying patterns.
MANUFACTURING
Fragrances. The Company's fragrance and related products sold in the
United States and in selected export markets are manufactured in one facility in
Mountaintop, Pennsylvania where the production of the Houbigant and Dana
fragrances were successfully consolidated in 1995 to achieve economies of
manufacturing scale and cost reduction. Additionally, four facilities abroad in
Canada, Spain, Argentina and Brazil manufacture fragrances and related products
for local markets and for export. The Spanish and Brazilian facilities are being
upgraded to become regional production/export facilities.
The Company's strategy for sourcing, producing and distributing its
fragrance products consists of: (i) conducting operations in-house that add
significant value to the Company's products and that can be executed
economically based upon volume efficiencies; (ii) sourcing component materials
and products from outside vendors when reliable, ongoing and multiple sources
can be secured at competitive prices; and (iii) least-cost sourcing for local
markets whereby international subsidiary facilities will become regional
producers of products for export to their regional markets.
Key supplies in the manufacturing and packaging of fragrances, including
bottles, scents and packages, are all sourced from a network of reliable vendors
which is consolidated following each acquisition to achieve
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<PAGE> 56
purchasing economies of scale. Final assembly of finished products, warehousing
and shipping of fragrance products to customers is performed at the Mountaintop
and foreign subsidiary facilities.
Cosmetics/Nail Care. The Company's strategy for sourcing, producing and
distributing its cosmetics/nail care products consists of: (i) maintaining
centralized coordination of these operations in the Company's Huntington Beach,
California facilities; (ii) conducting operations in-house that add significant
value to the Company's products and that can be executed economically based on
volume efficiencies; and (iii) sourcing from outside vendors component materials
and products when reliable, ongoing and multiple sources can be secured at
competitive prices. The Company uses an injection molding process to manufacture
all artificial nails and tips for the LaJoie product line at its
state-of-the-art manufacturing facility in Sparks, Nevada. All glues, hardeners
and other chemical compounds included in the Company's artificial nail kits are
supplied to the Company by third-party contract manufacturers. Most of the raw
materials and components sourced externally are readily available through
standard industry sources and represent small percentages of unit manufacturing
costs.
Cosmetics/Lipstick and Eye Make-up. GAC outsources substantially all of
its raw materials, manufacturing and distribution needs. By sourcing from
industry-leading color cosmetic suppliers that also service large manufacturers
such as Revlon and Estee Lauder, GAC believes it can purchase the latest
technologically advanced components at reasonable prices.
See "Facilities" for additional information regarding the Company's
manufacturing facilities.
SUPPLIERS AND RAW MATERIAL
The principal raw materials used by the Company in the manufacture of its
nail care products are common polymers, waxes, pigments, dyes and other
processing components, such as bottles and brushes, all of which are readily
available. The principal raw materials for the Company's fragrance products are
fragrance oils which are either purchased from third parties or manufactured by
the Company from individual raw materials as well as bottles, caps, pumps and
sprayers. The principal materials that GAC sources from industry-leading color
cosmetics suppliers include waxes, pigments and silicone commonly used to
manufacture lipstick and eye make-up products. While all raw materials are
purchased from outside sources, the Company is not dependent upon a single
supplier in any of its operations for any materials essential to its business
that are not otherwise commercially available to the Company. Historically, the
Company has been able to obtain an adequate supply of raw materials, and no
shortage of such materials is currently anticipated.
MANAGEMENT INFORMATION SYSTEMS
Since inception in April 1994, management has invested over $3.5 million in
its MIS infrastructure ($.3 million in Fiscal 1994 and $3.2 million in Fiscal
1995), installing new corporate information systems, sales/marketing systems,
personal computers and communication systems throughout the Company. The new MIS
platform is based on an IBM AS/400 mini computer with personal computers on
local and wide area networks. This platform allows the Company to: (i) connect
more than 200 of its key employees via e-mail and Lotus Notes groupware
programs; (ii) conduct electronic data interchange (EDI) with its top customers
which enables customers to place orders electronically; (iii) enable sales
force/accounts receivable managers to process and track orders and returns; (iv)
provide sophisticated inventory management and distribution capabilities; and
(v) install corporate-wide measurement systems which yield accurate and timely
information regarding sales, costs/profits, accounting functions, customer
service and asset management.
The Company also uses a sales order processing system ("SOP"), developed by
JD Edwards, along with a sales order pick management system ("PKMS") developed
by Manhattan Associates. The integration of these two systems allows the Company
to closely manage each step of the selling process (i.e., from a sales order to
the distribution and actual delivery of products).
Management believes that its investment in state-of-the-art information
systems has established a strong platform for both organic growth and growth
through acquisitions. Such a platform provides the capacity base and
capabilities of rapid integration of acquired companies into an established and
effective information
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<PAGE> 57
management structure, reducing costs and increasing the effectiveness of RCI's
manufacturing and product distribution process.
EMPLOYEES
At August 1, 1996, the Company employed 955 people, of whom 252 were
general and administrative personnel and 61 were sales and marketing personnel.
All of the Company's production employees at its Mountaintop, Pennsylvania
manufacturing facility, as well as the plants located in Spain, Argentina and
Brazil, are covered by a collective bargaining agreement. The Company considers
its relations with its employees to be good. The following table provides
information relating to the Company's employees:
<TABLE>
<CAPTION>
PRODUCTION
----------------------
LOCATION G&A SALES PERMANENT SEASONAL TOTAL
-------- --- ----- --------- -------- -----
<S> <C> <C> <C> <C> <C>
RCI Corporate............................. 22 -- -- -- 22
Cosmar -- California...................... 26 5 53 64 148
Cosmar -- Nevada.......................... -- -- 63 123 186
Dana -- New York.......................... 15 14 -- -- 29
Dana -- Pennsylvania...................... 53 -- 122 112 287
Dana -- Brazil............................ 77 12 58 -- 147
Dana -- Argentina......................... 17 4 10 -- 31
Dana -- Spain............................. 22 10 2 9 43
Houbigant -- Canada....................... 15 15 22 4 56
GAC....................................... 5 1 0 0 6
--- -- --- --- ---
Total 252 61 330 312 955
</TABLE>
FACILITIES
The Company's artificial fingernail business, Cosmar, occupies two
facilities in Huntington Beach, California with an aggregate of approximately
42,000 square feet pursuant to lease agreements that expire in 1996, and a new
assembly and distribution center located in a 95,000 square-foot leased facility
in Garden Grove, California pursuant to an agreement of sublease that expires on
December 31, 1997. The new facility houses management, sales and marketing,
warehouse and production assembly operations. The Company does not intend to
renew the leases of the Huntington facilities. The Company performs most of its
manufacturing for its artificial fingernail business at its Sparks, Nevada
facility which has approximately 44,000 square feet and is leased pursuant to an
agreement that expires on December 31, 1996. The Company intends to renew the
lease on the Sparks, Nevada facility and is in the process of negotiating a five
year extension of the lease.
The Company manufactures its fragrances at its 155,000 square-foot
Mountaintop, Pennsylvania facility and at its facilities in Buenos Aires,
Argentina, Sao Paulo, Brazil, Granollers, Spain and Chomedey (Laval), Canada.
Each of these facilities contains production, warehouse and office facilities.
The Company owns the facilities in Pennsylvania, Argentina, Brazil and Spain and
leases the facility in Canada. In addition, the Company's subsidiary, Dana, also
leases warehouse facilities in Ridgefield, New Jersey and a building in
Ridgefield, New Jersey which the Company uses as its company store pursuant to a
lease agreement that will expire in February 1997. The Company also leases or
subleases facilities in New York City, Cambridge, Massachusetts and Greenwich,
Connecticut at which it conducts executive and administrative activities. The
Company currently utilizes its facilities fully.
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<PAGE> 58
The following table provides information on each of the Company's operating
facilities:
<TABLE>
<CAPTION>
APPROX.
YEAR LAST SIZE LEASED/
SUBSIDIARY LOCATION OPENED EXPANSION (SQ. FT.) OWNED
- ----------- -------- ------ --------- --------- ------
<S> <C> <C> <C> <C> <C>
Dana Mountaintop, PA 1963 1996 155,000 Owned
Dana Chomedey (Laval), Canada 1994 -- 43,087 Leased
Dana Granollers, Spain 1971 -- 67,500 Owned
Dana Sao Paolo, Brazil 1954 1984 20,810 Owned
Dana Buenos Aires, Argentina 1955 -- 24,600 Owned
Dana Ridgefield, NJ 1995 -- 15,000 Leased
Cosmar Huntington Beach, CA* 1991 -- 22,133 Leased
Cosmar Huntington Beach, CA* 1992 -- 19,835 Leased
Cosmar Sparks, NV* 1987 -- 43,859 Leased
Cosmar Garden Grove, CA** 1996 -- 95,320 Leased
-------
507,144
=======
</TABLE>
- ---------------
* Cosmar assumed these leases in 1994.
** Sublease
INTELLECTUAL PROPERTY
The Company believes that the trademarks relating to its brand and product
names and patents are important to both its fragrance and artificial nail
products businesses. In addition to "Cosmar," an unregistered brand name used in
its artificial fingernail products business, the Company's principal product
trademarks which it owns or licenses are "Chantilly," "White Chantilly,"
"Lutece," "Raffinee," "Tabu," "DREAMS BY TABU," "Ambush," "Parfums Parquet's
French Vanilla," "Classic Gardenia," "Canoe," and "Herbissimo" with respect to
its fragrance products, "Press & Go," "PRO(10)," "Sculpture Quik," "UltraGel,"
"Nail Fetish," "Quik Fit," and "LaJoie" with respect to its artificial
fingernail products and "Nat Robbins," "Lip Lacquer," "Ever Sheer," "Color
Intense" and "Stay Put" with respect to its lipstick and eye make-up products.
The Company's application to register Lutece and LaJoie in the United States are
currently pending. The Company's other principal trademarks are registered in
the United States and several are registered in other countries.
In July and August 1994, the Company entered into two long-term license
agreements pursuant to which it obtained certain exclusive rights to
manufacture, sell, use and distribute 12 mass-market fragrances formerly
marketed by Houbigant, Inc., including "Chantilly", "Lutece", "Raffinee" and
"Parfums Parquet's French Vanilla" (the "Houbigant Fragrances") worldwide
(excluding Canada). The Company acquired similar rights for the Houbigant
Fragrances in Canada in December 1994 through the purchase of the assets of
Houbigant ACB and the execution of a new license agreement with Houbigant in
August 1996, which superseded and restated its prior rights acquired from
Houbigant ACB. Each of these licenses is with Houbigant, Inc. and has an initial
term ending in 2001 with options for seven additional five-year terms, or a
total extension of 35 years if all of the options are exercised. Since November
18, 1993, Houbigant, Inc. has been the subject of a proceeding under Chapter 11
of the United States Bankruptcy Code. Houbigant has been authorized and
empowered to enter into each license by the federal bankruptcy court. In August
1994, the Company entered into an assumption and assignment agreement with
Houbigant and Harby's Corporation NV under which it was granted exclusive
western hemisphere rights to the fragrances that are marketed under the Alyssa
Ashley and Robert Ashley names (including Alyssa Ashley, Alyssa Ashley Musk and
French Garden Flowers) for a total term of 25 years if all options for
additional terms are exercised. The assignment was authorized by the federal
bankruptcy court.
The Company has various pending applications and patent rights in
connection with its cosmetics/nail care business including: (i) an artificial
nail sizing ring which allows for manufacturing efficiencies and ease of
measurement and application by women; (ii) a clam shell package design that
displays artificial nails in a unique manner; (iii) an artificial nail tip
design that enables the tips to fit more comfortably and adhere better to a
woman's nail bed; and (iv) an artificial nail file/buffer that is more
comfortable for a woman to use due to
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its unique cushion and plastic core. In addition, Cosmar is the exclusive
licensee for two patented artificial nail sculpturing applications.
LEGAL AND ENVIRONMENTAL MATTERS
Legal
Atlantis Litigation. The Company is a defendant in a lawsuit filed in New
York State Supreme Court in March 1995 by Atlantis International, Ltd.
("Atlantis") and Brian Appel. The complaint alleges defamation conspiracy,
unfair competition, intentional interference with Atlantis's contractual and
business relationships, prima facie tort and breach of warranty and seeks
damages allegedly suffered in the amount of $6.0 million and punitive damages in
the amount of $1.0 million. The Company has been given an indefinite extension
of time to answer or move against the complaint but intends to vigorously defend
this lawsuit and believes that it has substantial and meritorious defenses.
ACB Litigation. In April 1995, the Company and Houbigant, Inc. secured a
temporary restraining order barring the importation or sale in the United States
of certain trademarked goods in an action (the "New York action") commenced in
the United States District Court for the Southern District of New York against
ACB Fragrances and Cosmetics, Inc., and ACB Mercantile Inc. (the "ACB
Companies"), the principals of the ACB Companies, and V&B Distributors, Harold
Schiff, A. Rosenblum Sales, Inc. and Bernard Rosenblum (the "Resellers"). The
claims against the Resellers have been settled. In June 1995, the ACB Companies
filed an answer asserting counterclaims for, inter alia, defamation, conspiracy,
and cancellation of trademarks. In October 1995 and January 1996 the court
granted the Company's motion to dismiss as to all counts of the ACB Companies'
counterclaims against the Company and its affiliates except for three counts
against the Company's Canadian affiliate, Houbigant (1995) Ltee ("PPI-Canada"),
for breach of contract and tortious interference with business relations, and
two counts against the Company and its affiliates for tortious interference.
In May 1995, PPI-Canada filed suit in the Superior Court of the District of
Montreal, Canada against the ACB Companies and the principals of the ACB
Companies, seeking damages and/or restitution in the amount of approximately $8
million (Canadian) for breach of contract and fraud in connection with the
Company's acquisition of substantially all of the assets of the ACB Companies in
December 1994 (the "Canadian action").
The parties to the New York action and the Canadian action have entered
into a settlement agreement with respect to all the litigation. Under the
settlement, ACB dismissed its remaining counterclaims against the Company and
its affiliates and on August 21, 1996 a payment was made to the Company in the
sum of $0.8 million. Also on August 21, 1996, the Company paid $2.7 million in
connection with the purchase of certain inventory from Houbigant in 1994.
The Company is involved from time to time in various legal proceedings
arising from the ordinary course of business. The Company believes that the
outcome of all pending legal proceedings in the aggregate will not have a
material effect on the financial condition or results of operations of the
Company.
Environmental and Other Regulation
Due to the nature of the Company's business, its operations are subject to
a variety of environmental laws relating to the storage, discharge, handling,
emission, generation, manufacture, use and disposal of chemicals, solid and
hazardous waste and other toxic and hazardous materials used to manufacture the
Company's products. The Company believes that it has been operating its
facilities in substantial compliance in all material respects with existing laws
and regulations.
Compliance with federal, state and local laws and regulations pertaining to
the discharge of materials into the environment, or otherwise relating to the
protection of the environment, is not anticipated to have a material effect upon
the operations of the Company.
The Company is subject to regulation by the United States Food and Drug
Administration. The Company's advertising and sales practices are subject to the
jurisdiction of the Federal Trade Commission. In addition, the Company is
subject to numerous federal, state and local laws relating to marketing and to
the content, labeling and packaging of its products.
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MANAGEMENT
The following table sets forth certain information concerning the executive
officers, directors and certain key employees of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C> <C>
Thomas V. Bonoma................. 50 Chairman and Chief Executive Officer and
President, and Director
Norbert Becker................... 48 Group Vice President, Administration
Ronald D. Bowen.................. 53 Group Vice President, International
Albert E. DeChellis.............. 46 Group Vice President and General Manager
Sean E. Greene................... 56 Group Vice President, Sales
Eric R. Hamburg.................. 33 Director
John R. Jackson.................. 38 Vice President, General Counsel and
Secretary
Kurt L. Kamm..................... 53 Director
Thomas T.S. Kaung................ 59 Group Vice President and Chief Financial
Officer
William J. Kidd.................. 55 Director
John H. Lynch.................... 43 Director
E. Mark Noonan................... 44 Director
Marc L. Rovner................... 44 General Manager, Cosmar
Terry M. Theodore................ 33 Director
Keith H. Wagner.................. 47 Group Vice President, Operations
Daniel D. Villanueva............. 58 Director
</TABLE>
Thomas V. Bonoma, Chairman, Chief Executive Officer, President and a
director, is responsible for the overall administration and direction of the
Company. From 1987 to 1993, Mr. Bonoma was employed by Benckiser, GmbH, a $3
billion privately-held international manufacturer of fragrances, cosmetics and
cleaning products, as the chief executive officer of its business in the United
States, Canada and Latin America. In this capacity Mr. Bonoma directed the
acquisition of seven businesses with aggregate annual gross revenues in excess
of $800 million. Products under this management while at Benckiser, GmbH
included Coty, Jovan and Quintessence brands in the fragrances and cosmetics
business and Calgon Bubble Bath, Cling Free Fabric Softener, and Jet-Dry, in the
cleaning products business. Since 1987, Mr. Bonoma has been a partner of BGI, a
consulting firm. From 1979 to 1990, he was Professor of Business Administration
at the Harvard Business School. Mr. Bonoma is a director of Griffin Corp., an
agricultural chemicals company.
Norbert Becker, Group Vice President, Administration, joined the Company in
July, 1996. From April 1981 to 1996, Mr. Becker held a number of positions with
Benckiser, GmbH in different countries. His last position was as President and
Chief Executive Officer of Lancaster Group USA, the American subsidiary of
Benckiser, GmbH, selling and marketing prestige fragrances in the United States.
Previously, Mr. Becker was Chief Operating Officer of Lancaster Group USA and
Executive Vice President for Finance and Administration for Lancaster Worldwide,
a division of Benckiser, GmbH. Mr. Becker is a graduate of Frankfurt University,
in Frankfurt, Germany.
Ronald D. Bowen, Group Vice President, International, joined the Company in
June 1994. From 1988 to 1994, Mr. Bowen served as Benckiser, GmbH's Vice
President of Operations. In this capacity Mr. Bowen supervised all of Benckiser,
GmbH's North American production activities, including manufacturing, logistics
and distribution and was actively involved in acquiring and restructuring
facilities and implementing production policies for certain businesses acquired
by Benckiser, GmbH. Mr. Bowen worked closely with Mr. Bonoma on the acquisition
and integration of Beecham Household Products (Calgon), Germaine Monteil
(Revlon), Quintessence, Inc. and Coty, Inc. For seven years prior to joining
Benckiser, GmbH, Mr. Bowen was employed by General Foods Corporation in
manufacturing, logistics, marketing and MIS positions and as
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<PAGE> 61
a Vice President of Calinova Group, a General Foods Corporation subsidiary. Mr.
Bowen is a graduate of Harvard University's Program for Management Development
and the United States Military Academy.
Albert E. DeChellis, Group Vice President, General Manager, joined the
Company in June 1994. From 1992 to 1994, Mr. DeChellis was the President and
Chief Operating Officer of Benckiser, GmbH Consumer Products. Previously, Mr.
DeChellis was Benckiser, GmbH's Vice President of Sales. Mr. DeChellis was
integrally involved with Mr. Bonoma in the acquisition and restructuring of
several companies while at Benckiser, GmbH. Mr. DeChellis helped orchestrate the
acquisition and restructuring of Calgon, Inc., Quintessence, Inc. and Coty,
Inc., and was directly responsible for the restructuring of the sales
organizations for each of those acquired companies. Prior to 1987, Mr. DeChellis
was employed by Ecolab in various sales capacities for almost 15 years, where he
held positions such as District Manager, Assistant Vice President of Regional
Sales and Vice President of Eastern Area Sales. Mr. DeChellis is a graduate of
Kent State University.
Sean E. Greene, Group Vice President, Sales, joined the Company in June
1994. From 1991 to 1994, Mr. Greene served as Vice President of Sales of
Quintessence, Inc., which was acquired by Benckiser, GmbH in 1991. In 1994, Mr.
Greene became Senior Vice President of Sales for Coty, Inc., another Benckiser,
GmbH subsidiary. Prior to joining Benckiser, GmbH, Mr. Greene was Senior Vice
President of the Fine Fragrance Division of Faberge, Inc. and a Vice President
of Mary Quant Cosmetics, an international cosmetics and fragrance company. Mr.
Greene is a graduate of Belvedere College in Dublin, Ireland.
Eric R. Hamburg, Director, was elected as a director in October 1994. He is
currently a partner at Kidd, Kamm & Company, which he joined in 1993 after
serving as a senior manager with Andersen Consulting from 1985 to 1993. While at
Andersen Consulting, Mr. Hamburg led the design and implementation of numerous
business turnarounds and profit improvement initiatives in a wide variety of
industries. He has extensive experience in just-in-time manufacturing,
distribution, management information systems and plant startups. Mr. Hamburg
holds a B.S. degree in Operations Research and Industrial Engineering from
Cornell University.
John R. Jackson, Vice President and General Counsel and Secretary, joined
the Company in June 1995. From 1994 to 1995, Mr. Jackson was the Vice President
of Acquisitions and General Counsel and Secretary for Brothers Gourmet Coffees,
Inc. From 1983 to 1988, he was engaged in the practice of law at the Denver
office of Kirkland and Ellis. From 1988 to 1994, Mr. Jackson was engaged in the
practice of law at the Denver, Colorado office of the firm of Ballard Spahr
Andrews & Ingersoll, where he became a partner in 1990. While engaged in private
practice, Mr. Jackson focused on merger and acquisition transactions and private
and public financing. Mr. Jackson taught Business Planning as an adjunct
professor of law at the University of Denver Law School. He holds a B.A. degree
from Davidson College and a J.D. degree from Vanderbilt Law School.
Kurt L. Kamm, Director, was elected as a director in October 1994. Mr. Kamm
graduated from Brown University in 1964 and received an LL.B. degree from the
Columbia University School of Law in 1967. He is a member of the New York Bar
and practiced law with the firm of Baker & McKenzie for approximately one year
following his graduation from law school. From 1968 to 1971, Mr. Kamm was
employed by the investment banking firm, Glore Forgan, Wm. R. Staats & Co. From
1971 to 1974, he was a member of Cumberland Associates, a private investment
firm specializing in venture capital and hedge fund management where he became a
partner in 1973. From 1974 to 1979, Mr. Kamm was associated with American
European Associates, a private investment group now known as AEA Investors. In
1979, he joined Lineberger Kidd Kamm & Company. He helped to establish Kidd,
Kamm & Company in 1987 and has continued there to present. Mr. Kamm is a
director of Wright Medical Technology, Inc., a manufacturer and marketer of
orthopaedic implant devices.
Thomas T.S. Kaung, Group Vice President and Chief Financial Officer, joined
the Company in July 1995. From 1991 to 1995, Mr. Kaung was President of River
International, Inc., a consulting firm. From 1990 to 1991 he was the Executive
Vice President and Chief Financial Officer for Zale Corporation, which operates
a large national chain of fine jewelry stores. Prior thereto, he spent 12 years
at Cole National Corporation, a leading specialty retailer, where he served as
Executive Vice President, Administration and Chief Financial
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Officer. In addition, Mr. Kaung rose to the position of Divisional Vice
President for Finance for the Dayton Hudson Corporation after ten years of
service. Mr. Kaung holds a B.S. degree from Southwestern University and an M.S.
degree from the University of Iowa.
William J. Kidd, Director, was elected as a director in May 1994. Mr. Kidd
graduated from Cornell University in 1963 and was awarded an MBA degree from its
Graduate School of Business and Public Administration in 1964. Immediately
thereafter, he was employed for approximately one year by the Securities and
Exchange Commission. From 1966 to 1970, Mr. Kidd was employed by, and ultimately
became an officer of, Morgan Guaranty Trust Company of New York. During his last
year of employment there, Mr. Kidd was a senior operating officer of the bank's
venture capital subsidiary. He left in 1970 to become an associate of
Lineberger, Lowe & Company. In 1974, Mr. Kidd helped to form and became a
principal of Lineberger, Kidd & Company which, in turn, became Lineberger Kidd
Kamm & Company in 1979. In 1987, Mr. Kidd helped to establish Kidd, Kamm &
Company and has continued there to the present. Mr. Kidd is a director of Wright
Medical Technology, Inc., a manufacturer and marketer of orthopaedic implant
devices.
John H. Lynch, Director, was elected as a director in March 1995. Mr. Lynch
has been the Vice Chairman and President since 1994 of Knoll Inc., a firm
engaged in the manufacture of office furniture. He has been a partner since 1987
of BGI, a consulting firm. From 1982 to 1990, Mr. Lynch was employed by the
Harvard Business School, as Assistant Dean and Director of the MBA program from
1982 to 1986 and as Associate Dean from 1988 to 1990. Mr. Lynch is a graduate of
the University of New Hampshire, Harvard Business School and Georgetown
University Law Center. Mr. Lynch has been elected to the board of directors
pursuant to the right of Mr. Bonoma, under his employment agreement, to
designate one additional director.
E. Mark Noonan, Director, has been a Managing Director since 1990 of
Triumph Capital Group, Inc., a firm engaged in investment banking and investment
management. He served as a Managing Director of Drexel Burnham Lambert from 1984
to 1990. Mr. Noonan is a graduate of Harvard College and Harvard Business
School. Mr. Noonan has been elected to the board of directors pursuant to the
right of the holders of the Company's Cumulative Exchangeable Preferred Stock to
elect one director under the Company's restated certificate of incorporation. In
connection with the Equity Financing, Triumph Connecticut Limited Partnership, a
partnership in which Mr. Noonan serves as a general partner of the general
partner, received a finders fee of $575,000 from the Initial Purchaser.
Marc L. Rovner, General Manager of Cosmar, joined the Company in June 1995.
Mr. Rover's background spans 16 years of international sales and marketing
experience with Fortune 500 companies -- International Paper, Unilever and
Benckiser, GmbH. From 1992 to 1995, he served as U.K. General Manager at
Benckiser, GmbH. From 1981 to 1992, Mr. Rovner served as Divisional Category
Manager at Unilever, where he directed the launch of ten major detergent and
personal care products, both in the United States and Japan. From 1978 to 1980,
he served as Product Manager at International Paper, where he was responsible
for the introduction of its first consumer products' ad campaign. Mr. Rovner
holds a B.A. degree from the University of Pennsylvania and an M.A. degree from
the University of Chicago.
Terry M. Theodore, Director, was elected as a director in May 1994. Mr.
Theodore, a partner at Kidd Kamm & Company, joined Kidd, Kamm & Company in 1989
after serving in the Financial Institutions Group of Bear, Stearns & Co. from
1988 to 1989. Prior to 1988, Mr. Theodore focused on the development and
implementation of capital raising strategies for both financial and corporate
acquirors at The First Boston Corporation. He holds a B.A. in Economics from the
University of California in Los Angeles.
Keith H. Wagner, Group Vice President, Operations, joined the Company in
June 1994. From 1991 to 1993, Mr. Wagner served as Quintessence, Inc.'s Vice
President of Operations and as Coty, Inc's Vice President of Packaging and
Purchasing from 1993 to 1994. From 1983 to 1990, Mr. Wagner served in the
additional capacity of director of manufacturing during the period of ownership
by Beecham PLC. From 1979 to 1983, he served as director of engineering for
Jovan, Inc. Mr. Wagner is a graduate of Loyola University and Bradley
University.
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<PAGE> 63
Daniel D. Villanueva, Director, was elected as a director in September
1996. Mr. Villanueva has been the Chairman and Managing Director since 1990 of
Bastion Capital Corporation, a minority controlled private equity investment
firm specializing in management-led buyouts of leading middle market companies
and related transactions. He has served since April 1996 on the Board of
Directors of Telemundo Group, Inc., a publicly traded Spanish-language
television company. Mr. Villanueva previously served as a partner and director
of the Univision Spanish language television group from 1988 to 1990. Mr.
Villanueva received a B.A. degree from New Mexico State University in 1960. Mr.
Villanueva has been elected to the board of directors as the designee selected
by the holders of a majority of the shares of Series B Preferred Stock.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information with respect to the
annual and long-term compensation for services rendered in all capacities earned
by the Company's Chief Executive Officer and the four most highly compensated
executive officers (collectively, the "Named Executive Officers") during the
fiscal period from April 15, 1994 (Inception) to March 31, 1995 and the fiscal
year ended March 31, 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL SHARES
COMPENSATION UNDERLYING
FISCAL -------------------- OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION PERIOD SALARY BONUS GRANTED COMPENSATION
--------------------------- ------ -------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Thomas V. Bonoma......................... 1995 $400,000 -- --
Chairman, Chief Executive Officer and 1994 233,338 -- 93,182 --(1)
President
Sean E. Greene........................... 1995 250,000 -- --
Group Vice President, Sales 1994 145,836 $175,000 9,318 62,500(2)
Albert E. DeChellis...................... 1995 225,000 -- -- --
Group Vice President and General 1994 131,250 125,000 9,318 37,500(2)
Manager
Thomas T.S. Kaung........................ 1995(3) 177,385 -- 9,318 --
Group Vice President and Chief
Financial Officer
Ronald D. Bowen.......................... 1995 166,667 -- -- --
Group Vice President, International 1994 93,333 125,000 9,318 40,000(2)
</TABLE>
- ---------------
(1) Does not include $85,000 paid to a company controlled by Mr. Bonoma during
May through July 1994 for consulting services.
(2) Represents amounts paid in respect of services rendered as a consultant
prior to the individual's employment by the Company.
(3) Mr. Kaung joined the Company during the fiscal year ended March 31, 1996.
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<PAGE> 64
OPTION GRANTS IN FISCAL YEAR 1995
The following table sets forth information with respect to grants of stock
options during the fiscal period from April 1, 1995 to March 31, 1996 to the
Named Executive Officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
NUMBER
OF PERCENT OF MARKET POTENTIAL REALIZABLE VALUE
SHARES TOTAL PRICE AT ASSUMED ANNUAL RATES
UNDER- OPTIONS EXERCISE ON DATE OF STOCK APPRECIATION FOR
LYING GRANTED PRICE OF OPTION TERM (1)
OPTIONS TO PER GRANT EXPIRATION ----------------------------
NAME GRANTED EMPLOYEES SHARE ($/SH) DATE 0% 5% 10%
---- ------ ---------- -------- ------- ---------- --- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas V. Bonoma............ -0-
Sean E. Greene.............. -0-
Albert E. DeChellis......... -0-
Thomas T.S. Kaung........... 9,318 (2) 29.7% $37.17 $37.17 7/1/05 0% $58,755 $148,897
Ronald D. Bowen............. -0-
</TABLE>
- ---------------------
(1) The 0%, 5% and 10% assumed annual rates of appreciation are mandated by the
rules of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of the future Common Stock price.
(2) This option is not currently exercisable.
DIRECTORS
Directors of the Company are elected annually and hold office until the
next annual meeting of shareholders or until their successors are duly elected
and qualified. Officers of the Company are appointed by and serve at the
discretion of the Board of Directors of the Company. Under the Company's
restated certificate of incorporation, the holders of the outstanding shares of
the Company's cumulative exchangeable preferred stock have the right to elect
one member of the Company's board of directors. Mr. Noonan has been elected to
the board of directors pursuant to this right. In addition, pursuant to Mr.
Bonoma's employment agreement with the Company, Mr. Bonoma has been elected a
director and has the right to designate one additional director. Mr. Lynch has
been elected to the board of directors pursuant to this right. Holders of the
Series C Preferred Stock (acting together with the holders of the Series B
Preferred Stock, as a single class) will have the right to nominate three
candidates for consideration for the Company's Board of Directors. The Company
shall use all reasonable commercial efforts to cause the election of one of such
nominees selected by the Company (the "Series C Preferred Nominee"). Mr.
Villanueva has been elected to the board of directors pursuant to this right.
Pursuant to the Securities Purchase Agreement, dated as of September 27, 1996,
between the Company and Bastion Capital Fund, L.P. ("Bastion"), the Company has
agreed in the event that Bastion is not entitled to designate the Series C
Preferred Nominee, the Company will include one person selected by Bastion in
its nominations for the Company's Board of Directors and to use all reasonable
commercial efforts to cause the election of such person to the Board, so long as
Bastion owns 75% (in value) of (i) the shares of Common Stock purchased pursuant
to the New Common Stock Sale and (ii) the Units purchased by Bastion pursuant to
the Series B Offering (the "Minimum Share Amount"). In addition, pursuant to a
Voting Agreement, dated as of September 27, 1996, Kidd, Kamm Equity Partners,
L.P. ("KKEP") agreed that, in the event that Bastion is not entitled to
designate the Series C Preferred Nominee, KKEP will vote its shares of Common
Stock in favor of a nominee designated by Bastion for election to the Company's
Board of Directors provided that Bastion has the Minimum Share Amount.
Directors of the Company are not compensated for their services as
directors. All non-employee directors of the Company are reimbursed for ordinary
and necessary expenses incurred in attending board or committee meetings.
STOCK OPTION PLAN
The Company's 1994 Stock Option Plan (the "Plan") was approved by the
Company's Board of Directors and stockholders in January 1995. The Company has
reserved 111,320 shares of its common stock,
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<PAGE> 65
par value $0.01 per share (the "Common Stock"), under the Plan. Options granted
under the Plan may include those qualified as incentive stock options and under
Section 422 of the Internal Revenue Code of 1986, as amended, and non-qualified
stock options. All regular employees and all directors are eligible to
participate in the Plan. Non-employees may receive only nonqualified options.
There are currently outstanding options under the Plan with respect to 102,964
shares of Common Stock. These options generally become exercisable with respect
to 25% of their shares in each of the four years 1995 through 1998, and expire
in January 2005.
The Plan is administered by a Stock Option Committee of the Board of
Directors (the "Committee") consisting of Mr. Bonoma and Mr. Kidd. The Committee
has wide latitude in determining the recipients of options and numerous other
terms and conditions of the options.
The exercise price for the shares purchased upon exercise of all options
granted under the Plan is determined by the Committee. The exercise price of an
incentive stock option must be at least equal to the fair market value of the
Common Stock on the date such option is granted (110% of the fair market value
for stockholders who, at the time the option is granted, own more than 10% of
the total combined classes of stock of the Company or any subsidiary).
No option may have a term of more than ten years (five years for incentive
stock options granted to 10% or greater stockholders). Options generally may be
exercised only if the option holder remains continuously associated with the
Company or a subsidiary from the date of grant to the date of exercise. However,
options may be exercised within certain specified periods following termination
of employment or ceasing to be a director by reason of death, disability or
retirement of the optionee (other than termination of employment for cause or
without the consent of the Company).
EMPLOYMENT AND NON-COMPETE AGREEMENTS
The Company has entered into an employment agreement (the "Bonoma
Employment Agreement"), dated as of August 6, 1996, with Thomas V. Bonoma, which
agreement supersedes his prior employment agreement with the Company. Pursuant
to the Bonoma Employment Agreement, Mr. Bonoma is employed as the chief
executive officer of the Company and each of its present and future subsidiaries
and is responsible for managing the day-to-day affairs of the Company and its
subsidiaries.
Mr. Bonoma will receive a base salary of $500,000 per year and will be
eligible to receive an additional annual bonus of 100% of his annual base salary
if certain objectives, to be established by the Board of Directors of the
Company, are met. If Mr. Bonoma's employment is terminated without cause or if
Mr. Bonoma terminates his employment for good reason, Mr. Bonoma will be
entitled to the greater of his annual base salary for the remaining term of his
employment or for one year, and to a bonus equal to the greater of 75% of his
annual base salary for the remaining term of his employment or for one year.
The Bonoma Employment Agreement will expire on August 18, 2000 and is
automatically renewable for additional one-year periods unless Mr. Bonoma or the
Company, upon 90 days notice, decides not to renew it. The Bonoma Employment
Agreement will automatically terminate in the event of a change of control of
the Company resulting in a sale of all or substantially all of the stock or
assets of the Company in which the shareholders of the Company liquidate all or
substantially all their equity interest in the Company.
The Company and Mr. Gay A. Mayer entered into an employment agreement dated
August 6, 1996, pursuant to which Mr. Mayer will be employed as Group Vice
President of Market Development of the Company following the effective time of
the MEM Acquisition. Mr. Mayer will receive an annual gross salary of $250,000
and will be eligible to participate in all bonus programs for executives of the
Company, on the same terms and conditions as such executives. The Company also
granted Mr. Mayer an option to purchase 5,000 shares of the Company under the
Company's stock option plan at a per share exercise price of $104.00. Mr.
Mayer's employment will terminate 30 months after consummation of the MEM
Acquisition.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Bonoma and Mr. Kidd functionally act as the Company's compensation
committee. Mr. Bonoma's salary is established by his employment agreement with
the Company. Mr. Bonoma and Mr. Kidd constitute the Stock Option Committee of
the Board of Directors. Messrs. Kidd, Lynch and Noonan constitute the Audit
Committee of the Board of Directors. There are no other committees of the Board
of Directors.
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<PAGE> 66
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 30, 1996, information with
respect to the beneficial ownership of shares of the Company's Common Stock by
(i) each stockholder known by the Company to be the beneficial owner of more
than 5% of such shares, (ii) each director of the Company, the Company's Chief
Executive Officer and each of the other named executive officers in the Summary
Compensation Table contained herein and (iii) directors and executive officers
of the Company as a group.
<TABLE>
<CAPTION>
NAME OF STOCKHOLDER NO. OF SHARES PERCENT
- ------------------- ------------- -------
<S> <C> <C>
Kidd, Kamm Equity Partners, L.P.......................................... 605,286 73.4%
c/o Kidd, Kamm & Company
Three Pickwick Plaza
Greenwich, Connecticut 06830
William J. Kidd(1)....................................................... 605,286 73.4%
c/o Kidd, Kamm & Company
Three Pickwick Plaza
Greenwich, Connecticut 06830
Kurt L. Kamm (1)......................................................... 605,286 73.4%
c/o Kidd, Kamm & Company
9454 Wilshire Boulevard
Beverly Hills, California 90212
Terry M. Theodore(1)..................................................... 605,286 73.4%
c/o Kidd, Kamm & Company
9454 Wilshire Boulevard
Beverly Hills, California 90212
Eric R. Hamburg(1)....................................................... 605,286 73.4%
c/o Kidd, Kamm & Company
Three Pickwick Plaza
Greenwich, Connecticut 06830
Thomas V. Bonoma(2)...................................................... 26,902 3.3%
Ronald D. Bowen.......................................................... 3,632 *
Albert E. DeChellis...................................................... 6,053 *
Sean E. Greene........................................................... 8,070 1.0%
Thomas T.S. Kaung........................................................ 2,690 *
John H. Lynch............................................................ 2,690 *
E. Mark Noonan(3)........................................................ 59,825 6.8%
Triumph Connecticut Limited Partnership(3)............................... 59,825 6.8%
60 State Street, 21st Floor
Boston, Massachusetts 02109
Daniel D. Villanueva(4).................................................. 95,766 11.0%
Bastion Capital Corporation
Suite 2960
1999 Avenue of the Stars
Los Angeles, CA 90067
CIBC WG Argosy Merchant Fund 2, L.L.C.(5)................................ 51,959 6.3%
c/o CIBC Wood Gundy Securities Corp.
425 Lexington Avenue, 3rd Floor
New York, NY 10017
All directors and executive officers as a group (14 persons)............. 810,914 87.3%
</TABLE>
- ---------------
* Less than 1%.
(1) William J. Kidd, Kurt L. Kamm, Terry M. Theodore and Eric R. Hamburg are
principals of Kidd, Kamm & Company, an entity affiliated with Kidd, Kamm
Equity Partners, L.P., and for purposes of this report may be deemed to
beneficially own the shares owned of record by Kidd, Kamm Equity Partners,
L.P.
(2) Includes 26,902 shares held by a trust for the benefit of Thomas V. Bonoma
but excludes 93,182 shares of common stock issuable to Mr. Bonoma under a
stock option which is not currently exercisable.
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<PAGE> 67
(3) Represents shares issuable upon exercise of common stock purchase warrants
acquired by Triumph-Connecticut Limited Partnership ("Triumph-Connecticut")
in connection with the purchase by that entity of shares of the Company's
Cumulative Exchangeable Preferred Stock. Does not include 175 shares
issuable upon exercise of warrants held by Jeffrey Lane and Meri Lane
(collectively, the "Lanes"), as trustees of a trust that is not affiliated
with Triumph-Connecticut. Jeffrey Lane is affiliated with
Triumph-Connecticut. Mr. Noonan is a Managing Director of Triumph Capital
Group Inc., a general partner of Triumph-Connecticut Capital Advisors,
Limited Partnership, the general partner of Triumph-Connecticut, and for
purposes of this report Mr. Noonan may be considered to be the owner of
these shares. As of June 30, 1996, Triumph-Connecticut and the Lanes also
hold approximately 11,842,000 shares and approximately 41,600 shares,
respectively, of the Cumulative Exchangeable Preferred Stock.
(4) Represents 51,959 shares of common stock acquired by Bastion in the New
Common Stock Sale and includes 43,807 shares of common stock issuable upon
exercise of common stock warrants acquired by Bastion in the Series B
Offering. Mr. Villanueva is the Chairman and Managing Director of Bastion
and for purposes of this report Mr. Villanueva may be considered to be the
owner of such shares.
(5) The Initial Purchaser, an affiliate of CIBC WG Argosy Merchant Fund 2,
L.L.C., may from time to time hold a position in the Units, including the
Warrants.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management Ownership and Compensation. In August 1994, Thomas V. Bonoma,
together with other members of senior management, acquired 68,922 shares of the
Common Stock of the Company in consideration of the payment of approximately $3
million. In addition, the Company has granted options to officers and other
employees under the Plan referred to above under the caption "Stock Option Plan"
and additional options may be granted under the Plan to directors, officers and
other employees.
On August 16, 1994 the Company has entered into a Management Agreement (the
"Management Agreement") with Kidd Kamm. Pursuant to the Management Agreement,
Kidd Kamm received a fee of $675,000 upon the closing of the Cosmar Acquisition
and, subject to certain restrictions contained in the Indenture governing the
Company's senior notes due August 2001, will receive an annual management fee of
$675,000 subject to increases as determined by the board of directors of the
Company, plus out-of-pocket expenses incurred for management, consulting and
related services to be rendered to the Company. Such management fee was not paid
during the fiscal year ended March 31, 1996 as a result of certain restrictions
on such payments contained in the Indenture. Principals of Kidd Kamm organized
KKEP which is the owner of 73.4% of the Company's currently outstanding Common
Stock. Each of Messrs. Hamburg, Kamm, Kidd and Theodore are principals of Kidd
Kamm.
Stockholders Agreement. Management, Kidd Kamm and certain other equity
holders have entered into a stockholders agreement, dated August 18, 1994 with
the Company (the "Stockholders Agreement"), whereby each of such equity holders
of the Company are restricted in the transfer of his shares of Common Stock of
the Company for a period of eight years from that date unless such transfer is
made in accordance with the Stockholders Agreement.
Bastion Securities Purchase Agreement. On September 27, 1996, the Company
entered into a Securities Purchase Agreement (the "Bastion Securities Purchase
Agreement") with Bastion pursuant to which it sold 51,959 shares of Common Stock
to Bastion for an aggregate purchase price of $5,000,000. Pursuant to the terms
of the Bastion Securities Purchase Agreement, the Company has agreed to include
one person selected by Bastion in its nominations for the Company's Board of
Directors and to use all reasonable commercial efforts to cause the election of
such person to the Board, so long as Bastion owns 75% (in value) of the shares
of Common Stock purchased thereunder and of the Units purchased by Bastion
pursuant to the Series B Offering. Bastion agreed that the Common Stock
purchased thereunder shall be bound by the terms of the Stockholders Agreement.
In addition, pursuant to a Voting Agreement, dated as of September 27,
1996, Kidd, Kamm Equity Partners, L.P. ("KKEP") agreed that, in the event that
Bastion is not entitled to designate the Series C Preferred Nominee, KKEP will
vote its shares of Common Stock in favor of a nominee designated by Bastion for
election to the Company's Board of Directors provided that Bastion has the
Minimum Share Amount.
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<PAGE> 68
Brokerage Fee. Certain principals of Kidd Kamm, in their individual
capacities, have an equity interest in W.E. Myers & Co., which received
brokerage fees of $1.7 million in connection with the Company's initial
acquisitions. The Company believes that the fees paid to W.E. Myers & Co. were
fair, reasonable, and consistent with the terms of transactions the Company
would otherwise have entered into with third party non-affiliated entities for
comparable services.
EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the Exchange Offer), to exchange shares of Series C
Preferred Stock for any and all of the outstanding shares of Series B Preferred
Stock (on a share for share basis) properly tendered on or prior to the
Expiration Date and not withdrawn as permitted pursuant to the procedures
described below.
PURPOSE OF THE EXCHANGE OFFER
Pursuant to the Series B Offering which closed on August 15, 1996,
September 16, 1996 and September 27, 1996, the Company issued 115,000 shares of
the Series B Preferred Stock. The issuances of Series B Preferred Stock were not
registered under the Securities Act in reliance upon the exemption provided in
Section 4(2) of the Securities Act.
In connection with the issuance and sale of the Series B Preferred Stock,
the Company entered into the Registration Rights Agreement, which requires the
Company to (i) use its best efforts to cause to be filed with the Commission
within 74 days after the date of the original issuance of the Series B Preferred
Stock (August 15, 1996), a registration statement (the "Exchange Offer
Registration Statement") relating to a registered Exchange Offer for the Series
B Preferred Stock under the Securities Act and (ii) use its best efforts to have
the Exchange Offer Registration Statement declared effective under the
Securities Act within 149 days after the date of the original issuance of the
Series B Preferred Stock. As soon as practicable after the effectiveness of the
Exchange Offer Registration Statement, the Company will offer to the holders of
the Series B Preferred Stock who are not prohibited by any law or policy of the
Commission from participating in the Exchange Offer the opportunity to exchange
their Series B Preferred Stock for Series C Preferred Stock. The Company will
keep the Exchange Offer open for not less than 30 days (or longer, if required
by applicable law) after the date notice of the Exchange Offer is mailed to the
holders of the Series B Preferred Stock. In the event that applicable
interpretations of the staff of the Commission do not permit the Company to
effect the Exchange Offer or do not permit any holder of the Series B Preferred
Stock (including the Initial Purchaser) to participate in the Exchange Offers,
or if the Initial Purchaser has not sold all the securities bought subsequently
to the Expiration Date and requests it, or if the Exchange Offer is commenced
and not consummated within 209 days of issuance of the Series B Preferred Stock,
the Company will file with the Commission a shelf registration statement (the
"Shelf Registration Statement") to cover resales of the Series B Preferred Stock
by such holders who satisfy certain conditions relating to, among other things,
the provision of information in connection with the Shelf Registration
Statement. In the event that (i) the Exchange Offer Registration Statement or
the Shelf Registration Statement is not filed within 74 days after the date of
original issuance of the Series B Preferred Stock, (ii) the Exchange Offer
Registration Statement or the Shelf Registration Statement is not declared
effective within 149 days after the date of original issuance of the Series B
Preferred Stock or (iii) the Exchange Offer Registration Statement ceases to be
effective prior to the time that the Exchange Offer is consummated, or the
Company has not exchanged the Series C Preferred Stock for all Series B
Preferred Stock validly tendered under the Exchange Offer or a Shelf
Registration Statement is not declared or ceases to be effective within 209 days
following the date of the issuance of the Series B Preferred Stock (each, a
"Registration Default"), the annual dividend rate borne by the Series B
Preferred Stock will immediately increase by 0.5% per annum and the dividend
rate will increase by an additional 0.25% for each subsequent 90-day period
during which the Registration Default remains uncured up to a maximum additional
dividend rate of 2.0% per annum. Upon the Registration Default being
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<PAGE> 69
cured the dividend rate borne by the Series B Preferred Stock will be reduced to
the original dividend rate. The Exchange Offer is being made by the Company to
satisfy its obligations under the Registration Rights Agreement.
Based on no action letters issued by the staff of the Commission to third
parties, the Company believes that the Series C Preferred Stock issued pursuant
to the Exchange Offer in exchange for Series B Preferred Stock may be offered
for resale, resold and otherwise transferred by holders thereof (other than (i)
a broker-dealer who purchases such Series C Preferred Stock directly from the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an affiliate of the Company within
the meaning of Rule 405 under the Securities Act), without compliance with the
registration and prospectus delivery requirements of the Securities Act provided
that such shares of Series C Preferred Stock are acquired in the ordinary course
of such holders' business and such holders have no arrangement with any person
to participate in the distribution of such Series C Preferred Stock. Any holder
of Series B Preferred Stock who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Series C Preferred Stock could not rely
on such interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Thus, any shares of Series C Preferred
Stock acquired by such holders will not be freely transferable except in
compliance with the Securities Act. Each broker-dealer that receives shares of
Series C Preferred Stock for its own account in exchange for shares of Series B
Preferred Stock acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Series C Preferred Stock. See
"Plan of Distribution."
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer will expire at 5:00 P.M., New York City time, on
, 1996, unless the Company, in its sole discretion, has extended the
period of time (as described below) for which the Exchange Offer is open (such
date, as it may be extended, is referred to herein as the "Expiration Date").
The Expiration Date will be at least 20 business days after the commencement of
the Exchange Offer in accordance with Rule 14e-1(a) under the Exchange Act. The
Company expressly reserves the right, at any time or from time to time, to
extend the period of time during which the Exchange Offer is open, and thereby
delay acceptance for exchange of any shares of Series B Preferred Stock by
giving oral notice (confirmed in writing) or written notice to the Exchange
Agent (as defined herein) and by giving written notice of such extension to the
holders thereof or by timely public announcement communicated, unless otherwise
required by applicable law or regulation, by making a release through the Dow
Jones News Service, in each case, no later than 9:00 A.M. New York City time, on
the next business day after the previously scheduled Expiration Date. Such
announcement may state that the Company is extending the Exchange Offer for a
specified period of time. During any such extension, all shares of Series B
Preferred Stock previously tendered will remain subject to the Exchange Offer.
In addition, the Company expressly reserves the right to terminate or amend
the Exchange Offer and not to accept for exchange any shares of Series B
Preferred Stock not theretofore accepted for exchange upon the occurrence of any
of the events specified below under "-- Certain Conditions to the Exchange
Offer." If any such termination or amendment occurs, the Company will notify the
Exchange Agent and will either issue a press release or give oral or written
notice to the holders of the Series B Preferred Stock as promptly as
practicable.
For purposes of the Exchange Offer, a "business day" means any day other
than Saturday, Sunday or a federal holiday, and consists of the time period from
12:01 A.M. through 12:00 midnight, New York City time.
PROCEDURES FOR TENDERING SERIES B PREFERRED STOCK
The tender to the Company of shares of Series B Preferred Stock by a holder
thereof as set forth below and the acceptance thereof by the Company will
constitute a binding agreement between the tendering holder
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<PAGE> 70
and the Company upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal.
A holder of shares of Series B Preferred Stock may tender the same by (i)
properly completing and signing the Letter of Transmittal or a facsimile thereof
(all references in this Prospectus to the Letter of Transmittal shall be deemed
to include a facsimile thereof) and delivering the same, together with the
certificate or certificates representing the shares of Series B Preferred Stock
being tendered and any required signature guarantees, to the Exchange Agent at
its address set forth below on or prior to 5:00 p.m., New York City time, on the
Expiration Date (or complying with the procedure for book-entry transfer
described below) or (ii) complying with the guaranteed delivery procedures
described below.
THE METHOD OF DELIVERY OF SHARES OF SERIES B PREFERRED STOCK, LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, OR AN OVERNIGHT OR HAND
DELIVERY SERVICE, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
INSURE TIMELY DELIVERY. NO SHARES OF SERIES B PREFERRED STOCK OR LETTER OF
TRANSMITTAL SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the shares of Series B Preferred Stock
surrendered for exchange pursuant thereto are tendered (i) by a registered
holder of the shares of Series B Preferred Stock who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
the Letter of Transmittal or (ii) for the account of an Eligible Institution (as
defined herein). In the event that signatures on a Letter of Transmittal or a
notice of withdrawal, as the case may be, are required to be guaranteed, such
guarantees must be by a firm which is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or by a commercial bank or trust company having an office or
correspondent in the United States (each an "Eligible Institution"). If shares
of Series B Preferred Stock are registered in the name of a person other than a
signer of the Letter of Transmittal, the shares of Series B Preferred Stock
surrendered for exchange must be endorsed by, or be accompanied by a written
instrument or instruments of transfer or exchange, in satisfactory form as
determined by the Company in its sole discretion, duly executed by the
registered holder with the signature thereon guaranteed by an Eligible
Institution.
The Exchange Agent will make a request promptly after the date of this
Prospectus to establish accounts with respect to the Series B Preferred Stock at
the book-entry transfer facility, The Depository Trust Company, for the purpose
of facilitating the Exchange Offer, and subject to the establishment thereof,
any financial institution that is a participant in the book-entry transfer
facility's system may make book-entry delivery of shares of Series B Preferred
Stock by causing such book-entry transfer facility to transfer such shares of
Series B Preferred Stock into the Exchange Agent's account with respect to the
shares of Series B Preferred Stock in accordance with the book-entry transfer
facility's procedures for such transfer. Although delivery of shares of Series B
Preferred Stock may be effected through book-entry transfer in the Exchange
Agent's account at the book-entry transfer facility, an appropriate Letter of
Transmittal with any required signature guarantee and other required documents
must in each case be transmitted to and received or confirmed by the Exchange
Agent at its address set forth below on or prior to the Expiration Date, or, if
the guaranteed delivery procedures described below are complied with, within the
time period provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or shares of Series B Preferred Stock to reach the
Exchange Agent before the Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if the
Exchange Agent has received at its address or facsimile number set forth below
on or prior to the Expiration Date a letter, telegram or facsimile from an
Eligible Institution setting forth the name and address of the tendering holder,
the name in which the shares of Series B Preferred Stock are registered and, if
possible, the certificate number or numbers of the certificate or certificates
representing the shares of Series B Preferred Stock to be tendered, and stating
that the tender is being made thereby and guaranteeing that within three
business days after the Expiration Date the shares of Series B Preferred Stock
in proper form for transfer (or a confirmation of book-entry transfer of such
shares of Series B Preferred Stock into the Exchange Agent's account at the
book-entry
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transfer facility), will be delivered by such Eligible Institution together with
a properly completed and duly executed Letter of Transmittal (and any other
required documents). Unless shares of Series B Preferred Stock being tendered by
the above-described method are deposited with the Exchange Agent within the time
period set forth above (accompanied or preceded by a properly completed Letter
of Transmittal and any other required documents), the Company may, at its
option, reject the tender. Copies of a Notice of Guaranteed Delivery which may
be used by an Eligible Institution for the purposes described in this paragraph
are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the shares of Series B Preferred Stock (or a confirmation of
book-entry transfer of such shares of Series B Preferred Stock into the Exchange
Agent's account at the book-entry transfer facility) is received by the Exchange
Agent, or (ii) a Notice of Guaranteed Delivery or letter, telegram or facsimile
to similar effect (as provided above) from an Eligible Institution is received
by the Exchange Agent. Issuances of shares of Series C Preferred Stock in
exchange for shares of Series B Preferred Stock tendered pursuant to a Notice of
Guaranteed Delivery or letter, telegram or facsimile to similar effect (as
provided above) by an Eligible Institution will be made only against deposit of
the Letter of Transmittal (and any other required documents) and the tendered
shares of Series B Preferred Stock.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of shares of Series B Preferred Stock tendered for
exchange will be determined by the Company in its sole discretion, which
determination will be final and binding on all parties. The Company reserves the
right to reject any and all tenders of any particular shares of Series B
Preferred Stock not properly tendered or reject any particular shares of Series
B Preferred Stock the acceptance of which might, in the judgment of the Company
or its counsel, be unlawful. The Company also reserves the absolute right to
waive any defects or irregularities or condition of the Exchange Offer as to any
particular shares of Series B Preferred Stock either before or after the
Expiration Date (including the right to waive the ineligibility of any holder
who seeks to tender shares of Series B Preferred Stock in the Exchange Offer).
The interpretation of the terms and conditions of the Exchange Offer (including
the Letter of Transmittal and the instructions thereto) by the Company shall be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of shares of Series B Preferred Stock for exchange
must be cured within such time as the Company shall determine. Neither the
Company nor any other person shall be under any duty to give notification of
defects or irregularities with respect to tenders of shares of Series B
Preferred Stock for exchange, nor shall any of them incur any liability for
failure to give such notification.
If the Letter of Transmittal or any shares of Series B Preferred Stock or
powers of attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, proper evidence satisfactory to the Company of
their authority to so act must be submitted.
By tendering, each holder that is not a broker-dealer or is a broker-dealer
but is not receiving shares of Series C Preferred Stock for its own account will
represent to the Company that, among other things, the shares of Series C
Preferred Stock acquired pursuant to the Exchange Offer are being obtained in
the ordinary course of such holder's business, that such holder has no
arrangement or understanding with any person to participate in the distribution
of such shares of Series C Preferred Stock and that such holder is not an
"affiliate" of the Company as defined in Rule 405 under the Securities Act or,
if it is an affiliate, such holder will comply with the registration and
prospectus delivery requirements of the Securities Act, to the extent
applicable. Each broker-dealer that is receiving shares of Series C Preferred
Stock for its own account in exchange for shares of Series B Preferred Stock
that were acquired as a result of market-making or other trading activities will
represent to the Company that it will deliver a prospectus in connection with
any resale of such shares of Series C Preferred Stock.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any shares of Series B Preferred Stock that remain
outstanding subsequent to Expiration Date, or, as set forth under "-- Certain
Conditions to the Exchange Offer," to terminate the Exchange Offer and (b) to
the extent permitted by applicable law, purchase shares of Series B Preferred
Stock in the open market, in privately
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negotiated transactions or otherwise. The terms of any such purchases or offers
may differ from the terms of the Exchange Offer.
WITHDRAWAL RIGHTS
Tenders of shares of Series B Preferred Stock may be withdrawn at any time
prior to the Expiration Date. For a withdrawal to be effective, a written notice
of withdrawal sent by letter, telegram or facsimile must be received by the
Exchange Agent prior to the Expiration Date at its address or facsimile number
set forth below. Any such notice of withdrawal must (i) specify the name of the
person having tendered the shares of Series B Preferred Stock to be withdrawn
(the "Depositor"), (ii) identify the shares of Series B Preferred Stock to be
withdrawn (including the certificate number or numbers of the certificate or
certificates representing such shares of Series B Preferred Stock and number of
shares of such Series B Preferred Stock), (iii) be signed by the holder in the
same manner as the original signature on the Letter of Transmittal by which such
shares of Series B Preferred Stock were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
permit the Transfer Agent with respect to the shares of Series B Preferred Stock
to register the transfer of such shares of Series B Preferred Stock into the
name of the person withdrawing the tender and (iv) specify the name in which any
such shares of Series B Preferred Stock are to be registered, if different from
that of the Depositor. All questions as to the validity, form and eligibility
(including time of receipt) of such withdrawal notices will be determined by the
Company in its sole discretion, which determination will be final and binding on
all parties. Any shares of Series B Preferred Stock so withdrawn will be deemed
not to have been validly tendered for purposes of the Exchange Offer and no
shares of Series C Preferred Stock will be issued with respect thereto unless
the shares of Series B Preferred Stock so withdrawn are validly retendered. Any
shares of Series B Preferred Stock which have been tendered but which are
withdrawn will be returned to the holder thereof without cost to such holder as
soon as practicable after such withdrawal. Properly withdrawn shares of Series B
Preferred Stock may be retendered by following one of the procedures described
above under "-- Procedures for Tendering Series B Preferred Stock" at any time
prior to the Expiration Date.
ACCEPTANCE OF SERIES B PREFERRED STOCK FOR EXCHANGE; DELIVERY OF SERIES C
PREFERRED STOCK
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all shares of
Series B Preferred Stock properly tendered and will issue the shares of Series C
Preferred Stock promptly after acceptance of the Exchange Offer. See "-- Certain
Conditions to the Exchange Offer" below. For purposes of the Exchange Offer, the
Company will be deemed to have accepted properly tendered shares of Series B
Preferred Stock for exchange when the Company has given oral or written notice
thereof to the Exchange Agent.
In all cases, issuance of the shares of Series C Preferred Stock in
exchange for shares of Series B Preferred Stock pursuant to the Exchange Offer
will be made only after timely receipt by the Company of such shares of Series B
Preferred Stock, a properly completed and duly executed Letter of Transmittal
and all other required documents. If any tendered shares of Series B Preferred
Stock are not accepted for exchange for any reason set forth in the terms and
conditions of the Exchange Offer, such unaccepted shares of Series B Preferred
Stock will be returned without expense to the tendering holder thereof as
promptly as practicable after the rejection of such tender or the expiration or
termination of the Exchange Offer.
UNTENDERED SERIES B PREFERRED STOCK
Holders of shares of Series B Preferred Stock whose shares of Series B
Preferred Stock are not tendered or are tendered but not accepted in the
Exchange Offer will continue to hold such shares of Series B Preferred Stock and
will be entitled to all the rights and preferences and subject to the
limitations applicable thereto. Following consummation of the Exchange Offer,
the holders of shares of Series B Preferred Stock will continue to be subject to
the existing restrictions upon transfer thereof and, except as provided herein,
the Company will have no further obligation to such holders to provide for the
registration under the Securities Act of the shares of Series B Preferred Stock
held by them. To the extent that shares of Series B Preferred
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Stock are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted shares of Series B Preferred Stock could
be adversely affected.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or issue shares of Series C Preferred Stock
in exchange for, any shares of Series B Preferred Stock, and may terminate or
amend the Exchange Offer, if at any time before the acceptance of such shares of
Series B Preferred Stock for exchange, any of the following events shall occur:
(A) an injunction, order or decree shall have been issued by any court
or governmental agency that would prohibit, prevent or otherwise materially
impair the ability of the Company to proceed with the Exchange Offer; or
(B) there shall occur a change in the current interpretation of the
staff of the Commission which current interpretation permits the shares of
Series C Preferred Stock issued pursuant to the Exchange Offer in exchange
for the shares of Series B Preferred Stock to be offered for resale, resold
and otherwise transferred by holders thereof (other than (i) a
broker-dealer who purchases such Series C Preferred Stock directly from the
Company to resell pursuant to Rule 144A or any other available exemption
under the Securities Act or (ii) a person that is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such shares of Series C Preferred Stock are
acquired in the ordinary course of such holders' business and such holders
have no arrangement with any person to participate in the distribution of
shares of Series C Preferred Stock.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any shares of Series B
Preferred Stock and return any shares of Series B Preferred Stock that have been
tendered to the holders thereof, (ii) extend the Exchange Offer and retain all
shares of Series B Preferred Stock tendered prior to the Expiration Date,
subject to the rights of such holders of tendered shares of Series B Preferred
Stock to withdraw their tendered shares of Series B Preferred Stock, or (iii)
waive such termination event with respect to the Exchange Offer and accept all
properly tendered shares of Series B Preferred Stock that have not been
withdrawn. If such waiver constitutes a material change in the Exchange Offer,
the Company will disclose such change by means of a supplement to this
Prospectus that will be distributed to each registered holder of shares of
Series B Preferred Stock, and the Company will extend the Exchange Offer for a
period of five to ten business days, depending upon the significance of the
waiver and the manner of disclosure to the registered holders of the shares of
Series B Preferred Stock, if the Exchange Offer would otherwise expire during
such period.
In addition, the Company will not accept for exchange any Series B
Preferred Stock tendered, and no Series C Preferred Stock will be issued in
exchange for any such Series B Preferred Stock, if at any time any stop order
shall be threatened by the Commission or in effect with respect to the
Registration Statement.
The Exchange Offer is not conditioned on any minimum number of shares of
Series B Preferred Stock being tendered for exchange.
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EXCHANGE AGENT
The Firstar Trust Company ("Firstar") has been appointed as Exchange Agent
for the Exchange Offer. Questions regarding Exchange Offer procedures and
requests for additional copies of this Prospectus or the Letter of Transmittal
should be directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Mail: By Hand or Overnight Delivery:
Firstar Trust Company Firstar Trust Company
Corporate Trust Services Corporate Trust Services
615 E. Michigan Street, 4th Floor 615 E. Michigan Street, 4th Floor
Milwaukee, WI 53201-2077 Milwaukee, WI 53201-2077
Attention: Suzanne P. Norman Barnes Attention: Suzanne P. Norman Barnes
</TABLE>
By Facsimile:
(414) 276-4226
Confirm by Telephone:
(414) 287-3971
Firstar is also the Transfer Agent for the Series B Preferred Stock and the
Series C Preferred Stock.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or other
persons soliciting acceptances of the Exchange Offer. The Company, however, will
pay the Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith. The cash expenses to be incurred by the Company in
connection with the Exchange Offer will be paid by the Company.
No person has been authorized to give any information or to make any
representation in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of shares of Series B Preferred Stock in
any jurisdiction in which the making of the Exchange Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the exchange
of shares of Series B Preferred Stock pursuant to the Exchange Offer. If,
however, certificates representing shares of Series C Preferred Stock or shares
of Series B Preferred Stock not tendered or accepted for exchange are to be
delivered to, or are to be registered or issued in the name of, any person other
than the registered holder of the shares of Series B Preferred Stock tendered,
or if tendered shares of Series B Preferred Stock are registered in the name of
any person other than the person signing the Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of shares of
Series B Preferred Stock pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the Company
upon the consummation of the Exchange Offer. Expenses incurred in connection
with the issuance of the Series C Preferred Stock will be amortized by the
Company over the term of the Series C Preferred Stock under generally accepted
accounting principles.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives shares of Series C Preferred Stock for its
own account in exchange for shares of Series B Preferred Stock acquired as a
result of market-making or other trading activities must acknowledge that it
will deliver a prospectus in connection with any resale of such shares of Series
C Preferred Stock. For a period of 90 days after the Expiration Date, this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of such shares of Series C
Preferred Stock. During such 90-day period, the Company will use its best
efforts to make this Prospectus available to any broker-dealer for use in
connection with such resale, provided that such broker-dealer indicates in the
Letter of Transmittal that it is a broker-dealer.
The Company will not receive any proceeds from any sale of shares of Series
C Preferred Stock by broker-dealers. Shares of Series C Preferred Stock received
by broker-dealers for their own account pursuant to the Exchange Offer may be
sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the shares
of Series C Preferred Stock or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through broker-dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such shares of Series C Preferred
Stock. Any broker-dealer that resells shares of Series C Preferred Stock that
were received by it for its own account pursuant to the Exchange Offer and any
person that participates in the distribution of such shares of Series C
Preferred Stock may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of shares of Series C Preferred
Stock and any commissions or concessions received by any such broker-dealers may
be deemed to be underwriting compensation under the Securities Act. The Letter
of Transmittal states that a broker-dealer, by acknowledging that it will
deliver and by delivering a prospectus, will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The Company will indemnify the holders of the Series C Preferred Stock
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
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DESCRIPTION OF SERIES C PREFERRED STOCK
The Series C Preferred Stock will be issued pursuant to a certificate of
designation (the "Certificate of Designation"). The summary contained herein of
certain provisions of the Series C Preferred Stock does not purport to be
complete and is qualified in its entirety by reference to the provisions of the
Certificate of Designation.
GENERAL
Subject to limitations imposed by law or the Company's Certificate of
Incorporation, the Board of Directors is empowered to determine with respect to
the Company's preferred stock (a) the designation of such series, the number of
shares to constitute such series; (b) whether the shares of such series shall
have voting rights, in addition to any voting rights provided by law, and, if
so, the terms of such voting rights; (c) the annual rate or amount of dividends,
if any, payable on the shares of such series, the conditions and dates upon
which such dividends shall be payable, and whether such dividends shall be
cumulative or non-cumulative; (d) whether the shares of such series shall be
subject to redemption by the Company, and, if made subject to redemption, the
times, prices and other terms and conditions of such redemption; (e) the amount
or amounts payable upon shares of such series, and rights of the holders of
shares of such series upon the voluntary or involuntary liquidation, dissolution
or winding up, of the Company; (f) whether or not the shares of such series
shall be convertible into, or exchangeable for, shares of stock of any other
class or classes, or of any other series of the same class, and if so
convertible or exchangeable, the terms and conditions thereof, including the
date or dates of conversion or exchange and the method, if any, of adjusting the
same; (g) the conditions or restrictions, if any, upon the creation or
indebtedness of the Company or upon the issuance of any additional stock
including additional shares of such series or of any other series or of any
other class; and (h) any other designations, preferences and relative,
participating, optional and other special rights or qualifications, limitations
or restrictions thereof. The Series C Preferred Stock when issued in exchange
for the Series B Preferred Stock in accordance with the terms of the Exchange
Offer will be fully paid and non-assessable, and the holders thereof will have
no subscription or preemptive rights related thereto.
The Board of Directors has adopted resolutions (i) authorizing the issuance
of up to 350,000 shares of the Series C Preferred Stock, which consist of up to
115,000 shares of Series C Preferred Stock to be issued in the Exchange Offer
plus additional shares of Series C Preferred Stock which may be used to pay
dividends on the Series C Preferred Stock if the Company elects to pay dividends
in additional shares of the Series C Preferred Stock, and (ii) authorizing the
Company to file the Certificate of Designation and the Certificate of Increase
with respect to the Series C Preferred Stock with the Secretary of State of the
State of Delaware as required by Delaware law. The Certificate of Increase was
filed on September 27, 1996, with the consent of holders of a majority of the
outstanding shares of the Series B Preferred Stock and the Series C Preferred
Stock, treated as a single series and class, to increase the number of
authorized shares of Series C Preferred Stock from 325,000 shares to 350,000
shares.
Ranking
The Series C Preferred Stock, with respect to dividends and distributions
upon the liquidation, winding-up and dissolution of the Company, ranks senior to
(a) all classes of Common Stock of the Company, (b) the Cumulative Exchangeable
Preferred Stock and (c) each other class of capital stock issued by the Company
after the Exchange Offer. The Series C Preferred Stock will rank pari passu with
the Series B Preferred Stock.
Dividends
Holders of Series C Preferred Stock are entitled, when, as and if declared
by the Board of Directors out of funds legally available therefor, to receive
dividends on each outstanding share of Series C Preferred Stock, at the rate of
14.0% per annum. Dividends on the Series C Preferred Stock are payable quarterly
in arrears on February 15, May 15, August 15 and November 15 of each year,
commencing on the later of (a) the last Dividend Payment Date on which dividends
were paid on the Series B Preferred Stock surrendered in
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exchange therefor, or (b) if no dividends have been paid on the Series B
Preferred Stock, from the date of issuance of the Series B Preferred Stock.
Dividends on the Series C Preferred Stock will be cumulative (whether or not
earned or declared) from the date of issuance of the Series C Preferred Stock.
Dividends which are not declared and paid when due will compound quarterly on
each Dividend Payment Date at the dividend rate until payment is made.
Dividends may, at the option of the Company, be paid on any Dividend
Payment Date either in cash or by issuing fully paid and nonassessable shares of
Series C Preferred Stock with an aggregate liquidation preference equal to the
amount of such dividends through August 31, 2002, and in cash thereafter;
provided that in the event that the outstanding Senior Notes are redeemed,
dividends shall be paid in cash at the earlier of one year from the date of such
redemption or August 31, 2002. If the Company does not pay cash dividends after
August 15, 1999 or at any other time that it is required to do so, the per annum
dividend rate will be increased by 0.25% during each quarter ended on each
Dividend Payment Date on which non-cash payment occurs, unless such non-cash
payment has occurred during more than four quarters, in which case the per annum
dividend rate will be increased by 0.5% in each additional quarter in which such
non-cash payment occurs, with a maximum rate of 17.0% per annum.
Optional Redemption
The Series C Preferred Stock will be redeemable, at the Company's option,
in whole or in part, at any time and from time to time on or after September 1,
1999, subject to the legal availability of funds therefor, upon not less than 30
days nor more than 60 days prior notice mailed by first-class mail to each
holder's registered address, at the following redemption prices (expressed in
percentages of liquidation preference), plus accrued and unpaid dividends, if
any, to the redemption date, if redeemed during the 12-month period set forth
below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
------ ----------------
<S> <C>
September 1, 1999 to and including August 31, 2000................. 108%
September 1, 2000 to and including August 31, 2001................. 106%
September 1, 2001 to and including August 31, 2002................. 104%
September 1, 2002 to and including August 31, 2003................. 102%
September 1, 2003 and thereafter................................... 100%
</TABLE>
In addition, at any time prior to September 1, 1999 the Company may redeem
(pursuant to one or more redemptions) up to 35% of the aggregate liquidation
preference of the Series C Preferred Stock (and the Series B Preferred Stock,
taken together) with net proceeds received from one or more public offerings of
equity securities of the Company at a redemption price equal to 110% of the
liquidation preference thereof, plus accrued and unpaid dividends thereon to the
date of redemption. Any such redemption will be required to occur on or prior to
120 days after the receipt of such net proceeds.
Mandatory Redemption
The Company is obligated to redeem all shares of the Series C Preferred
Stock outstanding on August 31, 2006 (the "Mandatory Redemption Date"), at a
redemption price equal to the liquidation preference of the Series C Preferred
Stock, payable in cash, plus accrued and unpaid dividends, which shall also be
payable in cash (whether or not otherwise payable in cash), to the date of
redemption. The Company's obligation to redeem the Series C Preferred Stock is
subject to the legal availability at the Company of funds therefor.
Change of Control
Upon a Change of Control of the Company, the Company shall, only if and
only to the extent permitted by the Senior Notes, the Existing Credit Facility,
the New Credit Facility and any other long term indebtedness outstanding at such
time, make an offer to purchase the outstanding shares of the Series C Preferred
Stock at a purchase price equal to 101% of the liquidation preference of the
Series C Preferred Stock, plus accrued and unpaid dividends, if any, to the
purchase date; provided, that, such offer will not result
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in the Series C Preferred Stock being deemed to be Disqualified Stock under the
Indenture. If the Company does not make an offer to purchase the Series C
Preferred Stock upon a Change of Control, the dividend rate will be increased to
an annual rate of 17% per annum. The Company's obligation to redeem the Series C
Preferred Stock will be subject to the legal availability of funds therefor. A
"Change of Control" of the Company will be deemed to have occurred at such time
as (i) any person other than KKEP, Thomas V. Bonoma, the heirs, executors,
administrators testamentary, trustees, legatees or beneficiaries of KKEP or
Thomas V. Bonoma, a trust the beneficiaries of which include only persons
described above and their respective spouses and lineal descendants, the general
partner and each limited partner of KKEP and any subsidiary of either KKEP or
Thomas V. Bonoma or both of them jointly (collectively, the "Permitted
Holders"), becomes the beneficial owner of 50% or more of the total voting power
of the Company's Common Stock; (ii) prior to a public equity offering of Common
Stock, Permitted Holders collectively dispose of more than 50% of the shares of
the Common Stock owned by the Permitted Holders in the aggregate as of the date
hereof (excluding dispositions made to any other Permitted Holders); (iii) any
person other than a Permitted Holder becomes the beneficial owner of more than
35% of the total voting power of the Company's Common Stock and the Permitted
Holders together with officers and employees of the Company beneficially own, in
the aggregate, a lesser percentage of the total voting power of the Common Stock
of the Company than such other person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors of the Company; (iv) there shall be
consummated any consolidation or merger of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which the Common
Stock of the Company would be converted into cash, securities or other property,
other than a merger or consolidation of the Company in which the holders of the
Common Stock of the Company outstanding immediately prior to the consolidation
or merger hold, directly or indirectly, at least a majority of the Common Stock
of the surviving corporation immediately after such consolidation or merger; or
(v) subsequent to a public equity offering of Common Stock during any period of
two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election by the stockholders of the Company has been approved by
66 2/3% of the directors then still in office who either were directors at the
beginning of such period or whose election or recommendation or election was
previously so approved) cease to constitute a majority of the Board of Directors
of the Company.
Procedure for Redemption
On and after a redemption date, unless the Company defaults in the payment
of the applicable redemption price, dividends will cease to accrue on shares of
the Series C Preferred Stock called for redemption and all rights of holders of
such shares will terminate except for the right to receive the redemption price,
without interest. The Company will send a written notice of redemption by first
class mail, postage prepaid, to each holder of record of shares of the Series C
Preferred Stock, not fewer than 30 days nor more than 60 days prior to the date
fixed for such redemption. Shares of the Series C Preferred Stock issued and
reacquired will, upon compliance with the applicable requirements of Delaware
law, have the status of authorized but unissued shares of preferred stock of the
Company undesignated as to series and may with any and all other authorized but
unissued shares of preferred stock of the Company be designated or redesignated
and issued or reissued, as the case may be, as part of any series of preferred
stock of the Company, except that any issuance or reissuance of shares of the
Series C Preferred Stock must be in compliance with the Certificate of
Designation.
In the event of partial redemptions of the Series C Preferred Stock, the
shares to be redeemed will be determined pro rata or by lot, as determined by
the Company, except that the Company may redeem such shares held by any holder
of fewer than 100 shares (or shares held by holders who would hold less than 100
shares as a result of such redemption), as may be determined by the Company.
Liquidation Preference
In the event of any liquidation, dissolution or winding-up of the Company,
holders of the Series C Preferred Stock will be entitled to receive a
preferential amount equal to $1,000 per share, plus all accrued and
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unpaid dividends thereon to the date fixed for liquidation, dissolution or
winding-up of the Company (including an amount equal to a prorated dividend from
the last Dividend Payment Date to the date fixed for liquidation, dissolution or
winding-up), before any distribution is made on any capital stock, including,
without limitation, on any Common Stock other than the Series B Preferred Stock.
If upon any voluntary or involuntary liquidation, dissolution or winding-up of
the Company, the amounts payable with respect to the Series C Preferred Stock
are not paid in full, the holders of the Series C Preferred Stock and the Series
B Preferred Stock will share equally and ratably in any distribution of assets
of the Company in proportion to the full liquidation preference to which each is
entitled. After payment of the full amount of the liquidation preferences to
which they are entitled, the holders of shares of the Series C Preferred Stock
will not be entitled to any further participation in any distribution of assets
of the Company. However, neither the sale, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the Company nor the consolidation
or merger of the Company with one or more corporations shall be deemed to be a
liquidation, dissolution or winding-up of the Company.
The Certificate of Designation for the Series C Preferred Stock does not
contain any provision requiring funds to be set aside to protect the liquidation
preference of the Series C Preferred Stock, although such liquidation preference
will be substantially in excess of the par value of such shares of Series C
Preferred Stock. In addition, the Company is not aware of any provision of
Delaware law or any controlling decision of the courts of the State of Delaware
(the state of incorporation of the Company) that requires a restriction upon the
surplus of the Company solely because the liquidation preference of the Series C
Preferred Stock will exceed its par value. Consequently, there will be no
restriction upon any surplus of the Company solely because the liquidation
preference of the Series C Preferred Stock will exceed the par value and there
will be no remedies available to holders of the Series C Preferred Stock before
or after the payment of any dividend, other than in connection with the
liquidation preference of the Company, solely by reason of the fact that such
dividend would reduce the surplus of the Company to an amount less than the
difference between the liquidation preference of the Series C Preferred Stock
and its par value.
Voting Rights
Holders of the Series C Preferred Stock (acting together with the holders
of the Series B Preferred Stock, as a single class) will have the right to
nominate three candidates for directors on the Company's Board of Directors. The
Company shall use all reasonably commercial efforts to cause the election of one
of such nominees selected by the Company. Holders of the Series C Preferred
Stock otherwise have no general voting rights except as provided by law.
Under Delaware law, holders of Series C Preferred Stock will be entitled to
vote as a class upon a proposed amendment to the certificate of incorporation,
whether or not entitled to vote thereon by the certificate of incorporation, if
the amendment would increase or decrease the par value of the shares of such
class, or alter or change the powers, preferences or special rights of the
shares of such class so as to affect them adversely.
Covenants
The Certificate of Designation generally imposes certain restrictions on
the ability of the Company to declare dividends or make distributions with
respect to, or purchase, or redeem or exchange any capital stock of the Company
other than the Series C Preferred Stock and the Series B Preferred Stock, except
in or for capital stock (other than capital stock which matures or is
mandatorily redeemable prior to the latest maturity date of the Senior Notes or
the Series C Preferred Stock ("Disqualified Capital Stock")), unless dividends
on the Series C Preferred Stock have been paid in cash for the most recent
quarterly period and the payments made on capital stock shall not in the
aggregate exceed 50% of consolidated net income less 100% of consolidated net
loss of the Company from August 31, 1996 to the date of such payment. Such
restrictions do not prohibit (i) the retirement of shares of capital stock in
exchange for shares of capital stock (other than Disqualified Capital Stock) or
out of the net proceeds of substantially concurrent sales of capital stock
(other than Disqualified Capital Stock), (ii) the retirement of Disqualified
Capital Stock by exchange of shares of Disqualified Capital Stock or out of net
proceeds of substantially concurrent sales of Disqualified Capital
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Stock, (iii) the payment of cash dividends on the Cumulative Exchangeable
Preferred Stock if dividends have been paid in cash on the Series C Preferred
Stock for the most recently ended quarterly period, or (iv) the payment of
management or advisory fees to KKEP or to its affiliates in an amount that, when
taken with all such previous amounts paid since April 15, 1994, does not exceed
an average annual amount of $675,000.
The Certificate of Designation prohibits the Company from exercising its
option to exchange, either in whole or in part, the Cumulative Exchangeable
Preferred Stock for notes without the prior consent of the holders of the
majority in aggregate liquidation of the Series C Preferred Stock and the Series
B Preferred Stock, voting as a single class.
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or Section 15(d) of the Exchange Act, the Company
will be obligated to provide to the holders of the Series C Preferred Stock all
annual and quarterly reports and other documents which the Company would have
been required to file with the Commission pursuant to such Sections 13(a) and
15(d) had it been so subject and provide to all holders of Series C Preferred
Stock, without costs to such holders, copies of such reports and documents.
Transfer Agent and Registrar
Firstar Trust Company is the transfer agent and registrar for the Series C
Preferred Stock.
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DESCRIPTION OF OUTSTANDING INDEBTEDNESS
The following summary of the material terms of agreements governing certain
of the outstanding long-term indebtedness of the Company does not purport to be
complete and is qualified in its entirety by reference to the provisions of such
agreements, copies of which have been filed as exhibits to the Registration
Statement of which this Prospectus is a part.
EXISTING CREDIT FACILITY
The Company entered into the Existing Credit Facility pursuant to a Note
Purchase Agreement, dated as of December 21, 1994, as amended, among the
Company, Cosmar and Nomura under which Nomura has provided to Cosmar a revolving
note purchase facility in an aggregate maximum principal amount of up to $40.0
million of Variable Rate Senior Secured Revolving Notes due 1996, and has
purchased Variable Rate Senior Secured Term Notes due 1996 (collectively, the
"Nomura Notes") in an aggregate principal amount of $30.0 million. Capitalized
terms used in this section and not otherwise defined herein shall have the
meaning set forth in the Existing Credit Facility.
The Nomura Notes bear interest at variable rates equal to the bank base
rate (8.25% at March 31, 1996) plus 4.5% since July 1, 1996. Interest is payable
monthly in arrears. The Nomura Notes will mature and become payable in full on
December 22, 1996 together with all interest accrued thereon to such date and
all unpaid fees, expenses and other amounts payable under the Existing Credit
Facility. The Existing Credit Facility is secured by substantially all of assets
of the Company and its subsidiaries, including by a pledge of the capital stock
of the Company's subsidiaries. Proceeds allocated for the purchase of MEM,
including to refinance assumed indebtedness, as described in the caption "Use of
Proceeds," are subject to a security interest of Nomura under the Existing
Credit Facility.
The Existing Credit Facility provides for mandatory prepayments of the
Nomura Notes upon receipt of proceeds resulting from (i) the sale of capital
stock of the Company, (ii) the incurrence by the Company or its subsidiaries of
debt for borrowed money, (iii) the sale, lease, license, transfer or other
disposition of any property of the Company or its subsidiaries, other than as
permitted under the Existing Credit Facility or in the ordinary course of
business, or (iv) in the event that the aggregate unpaid principal amount of the
revolving credit facility exceeds the amount of the Revolver Borrowing Base then
in effect or the aggregate unpaid principal amount of the Nomura Notes exceeds
the amount of the Total Credit Base then in effect. Nomura has waived the
prepayment requirement described under clause (i) above with respect to the
proceeds of the Series B Offering. Cosmar has the option to prepay any part of
the outstanding unpaid principal balance of the Nomura Notes at any time,
without prepayment charge, premium or penalty.
The Existing Credit Facility contains numerous affirmative and negative
covenants that restrict the operations of the Company, including restrictions
on, among other things, (i) the incurrence, assumption, guarantee or existence
of certain indebtedness, (ii) the incurrence, assumption or existence of certain
liens and other encumbrances, (iii) certain sale and leaseback transactions,
(iv) certain mergers or transfers, leases, licenses or other dispositions of
assets, (v) sales with recourse, discounts or at less than face value, of the
respective accounts or notes receivable of the Company or its subsidiaries, (vi)
the engagement by the Company or its subsidiaries in businesses or activities
other than those engaged in at the time of the execution of the Existing Credit
Facility, (vii) certain payments and investments, (viii) certain issuances of
capital stock, (ix) certain transactions with affiliates, (x) certain capital
expenditures, and (xi) certain leases and contracts.
The Company is also subject to certain financial covenants including (i) a
minimum ratio of Consolidated Current Assets to Consolidated Current
Liabilities, (ii) a minimum Consolidated Net Worth of (a) $18.0 million plus (b)
100% of the aggregate amount of the Consolidated Net Income of the Company for
each fiscal quarter ending on or after March 31, 1995, with respect to which the
Company's Consolidated Net Income was greater than zero, (iii) a maximum ratio
of outstanding Debt of the Company and its subsidiaries to Consolidated Net
Worth, (iv) a minimum Consolidated EBITDA, (v) a minimum Interest Expense
Coverage Ratio, and (vi) a minimum Senior Interest Expense Coverage Ratio.
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Events of Default under the Existing Credit Facility include, among other
things, (i) defaults in the due and punctual payment or prepayment of principal
or interest on any Nomura Note; (ii) defaults in the performance or observance
by the Company or Cosmar of any of the covenants, agreements or conditions of
the Existing Credit Facility; (iii) defaults by the Company, Cosmar or any of
their subsidiaries in the payment of any principal of or interest on any
outstanding indebtedness aggregating $250,000 or more, including defaults in
payments under the Senior Notes, or the occurrence of any event or the existence
of any condition specified in such agreement or instrument if the effect of such
event or condition is to permit the acceleration of the maturity of such debt or
to permit the holders of such debt to cause such debt to become due prior to
such debt's stated maturity; (iv) certain events of bankruptcy, insolvency or
dissolution; (v) the entry against the Company, Cosmar or any of their
subsidiaries of any final judgment or judgments for the payment of money in
excess of $100,000 if such judgment or judgments are not discharged or stayed
within 30 days from the entry thereof; (vi) the breach of any representation,
warranty or material statement made by or on behalf of the Company, Cosmar, any
of their subsidiaries or any officer of the Company, Cosmar or any of their
subsidiaries in the Existing Credit Facility or any of the Related Documents, or
in any financial statement, certificate or other instrument or document
delivered pursuant to the Existing Credit Facility and Related Documents; (vii)
the occurrence of certain material events relating to ERISA or other employee
benefit plans related matters; (viii) the fact that a provision under the
Existing Credit Facility, the Nomura Notes or the Related Documents not be,
cease to be or be asserted by the Company, Cosmar or their subsidiaries not to
be in full force and effect, valid, binding and enforceable; (ix) the fact that
the Security Documents not give or cease to give the liens, the rights, powers
and privileges purported to be created on the collateral by the Existing Credit
Facility; (x) the fact that the debt and obligations created under the Existing
Facility and Related Documents be deemed not to be "Senior Indebtedness", as
defined under the Indenture, by a court or arbitrator, the Company, Cosmar or
any of their subsidiaries; and (xi) the occurrence of a Change of Control.
Upon the occurrence of an Event of Default described in (iv), the unpaid
principal amount of all the Nomura Notes, together with the interest accrued
thereon and all fees, costs and other expenses payable under the Existing Credit
Facility and Related Documents will automatically become due and payable. Upon
the occurrence of any other Event of Default, the holders of a majority in
principal amount of the Nomura Notes may declare the unpaid principal amount
immediately due and payable, together with the interest accrued thereon and all
fees, costs and expenses and other amounts payable under the Existing Credit
Facility and Related Documents.
INDENTURE
In August 1994, the Company issued $65.0 million of 13.75% Senior Notes due
2001 and 2002 (the "Senior Notes") under the Indenture, dated as of August 18,
1994, between the Company, American Bank National Association as trustee (the
"Trustee") and subsidiaries of the Company. Capitalized terms used in this
section and not otherwise defined herein shall have the meaning set forth in the
Indenture.
The Senior Notes are irrevocably and unconditionally guaranteed, on a
subordinated basis, as to principal and interest, jointly and severally by all
present and future subsidiaries of the Company. Interest on the Senior Notes is
payable semi-annually in arrears on each February 15 and August 15, commencing
on February 15, 1995.
The Senior Notes are not entitled to any mandatory redemption or sinking
fund payments and are not redeemable at the Company's option prior to August 15,
1998. Thereafter, the Senior Notes will be redeemable in whole or in part at the
option of the Company, at redemption prices set forth in the Indenture plus
accrued and unpaid interest thereon, if any, to the applicable date of
redemption. Notwithstanding the foregoing, prior to August 15, 1998, the Company
may redeem up to 35% of the aggregate principal amount of the Senior Notes at a
redemption price equal to 112% of the aggregate principal amount of the Senior
Notes plus accrued and unpaid interest thereon, if any, to the date of
redemption with the net proceeds of an offering of common or preferred stock
(other than Disqualified Stock) of the Company; provided, that (i) such offering
of common or preferred stock of the Company results in net proceeds to the
Company of at least $20 million, (ii) such redemption shall occur within 30 days
of the date of the closing of such offering of common
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or preferred stock of the Company and (iii) none of such proceeds are obtained,
directly or indirectly, from a subsidiary of the Company.
Upon a Change of Control, the Company will be required to offer to
repurchase the Senior Notes at a purchase price equal to 101% of the aggregate
principal amount of the Senior Notes plus accrued and unpaid interest thereon to
the date of repurchase. For purposes of the Indenture, a Change of Control will
be deemed to have occurred upon (i) the sale, lease or transfer of all or
substantially all of the Company's assets to any person or entity other than
KKEP or Thomas Bonoma (collectively, the "Principals"), (ii) the liquidation or
dissolution of the Company, (iii) the acquisition by any person or entity other
than the Principals of a direct or indirect majority interest of the aggregate
voting power of the voting stock of the Company by way of merger, consolidation
or otherwise, (iv) the occurrence of any transaction the result of which is that
Thomas Bonoma, Sean Greene, Ronald Bowen and Albert DeChellis (collectively, the
"Executive Officers") and the Principals, beneficially own less, directly or
indirectly, than 35% of the aggregate voting power of the voting stock of the
Company or (v) the failure of at least three of the Executive Officers to be
actively engaged in the day-to-day operations of the Company or its subsidiaries
on a full time basis, unless both of Mr. Bonoma and Mr. Greene are so engaged.
Except as described with respect to a Change of Control, the Indenture does not
contain other provisions that permit the holders of Senior Notes to require that
the Company repurchase or redeem the Senior Notes in the event of a takeover,
recapitalization or similar restructuring.
The Indenture contains numerous affirmative and negative covenants that
restrict the activities of the Company in many respects. Among other things, the
Indenture provides that the Company may not and may not permit any of its
subsidiaries to, directly or indirectly (i) declare or pay any dividend or make
any distribution on account of the Company's or its subsidiaries' capital stock
(other than dividends payable in capital stock that is not Disqualified Stock);
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of the Company, its subsidiaries or affiliates; (iii) purchase,
redeem, defease or otherwise acquire or retire for value any portion of the
Seller Note, or voluntarily purchase, redeem, defease or otherwise acquire or
retire for value any other indebtedness that is pari passu with or subordinated
to the Senior Notes; or (iv) make certain investments that are not expressly
permitted under the Indenture, unless (a) no Event of Default has occurred or
would occur as a consequence thereof; (b) immediately after such payment and
after giving effect thereto on a pro forma basis, the Consolidated Net Worth of
the Company would be at least $50 million and the Company would be permitted to
incur at least $1.00 of additional indebtedness pursuant to the Fixed Charge
Coverage Ratio requirements of the Indenture; and (c) such payments, together
with the aggregate of all such payments made after the date of the Indenture, do
not exceed certain limits set forth in the Indenture. The Indenture further
provides that, subject to certain exceptions, (i) the Company may not and may
not permit any of its subsidiaries to, directly or indirectly, create, incur,
issue, assume, guaranty or otherwise become directly or indirectly liable with
respect to any Indebtedness and that the Company may not issue any Disqualified
Stock or permit any of its subsidiaries to issue any shares of Preferred Stock
(as such term is defined in the Indenture), unless no Event of Default shall
have occurred and be continuing or would occur as a consequence thereof and
certain Fixed Charge Coverage Ratio requirements are met. "Disqualified Stock"
means (ii) Cumulative Exchangeable Preferred Stock and (iii) any other capital
stock which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the final date of maturity of the Senior Notes.
The Indenture restricts sales, leases, transfers or other dispositions of a
significant subsidiary of the Company or assets or properties of the Company
with an aggregate value of at least $5 million, other than sales of inventory
and materials in the ordinary course of business, and sales of equity securities
of any of the Company's subsidiaries for net proceeds in excess of $1 million
unless the Company receives consideration at least equal to fair market value of
the assets disposed of and at least 80% of the consideration received is in the
form of cash. Proceeds from such sales must be used to, among others, reduce the
outstanding principal amount of the Existing Credit Facility and make an offer
to repurchase the Senior Notes if the amount of aggregate Excess Proceeds
available for the repurchase of the Senior Notes exceeds $2 million. The
Indenture limits the capacity of the Company and of its subsidiaries (i) to
create, incur, assume or suffer to exist certain
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liens, (ii) to create or otherwise cause to exist or become effective
encumbrances or restrictions on the ability of any subsidiary to make certain
payments, or, (iii) enter into certain transactions with Affiliates.
In addition, the Indenture provides that the Company shall not permit its
Consolidated Net Worth as of the end of each of two consecutive fiscal quarters
commencing December 31, 1994 to be less than the then applicable Minimum
Consolidated Net Worth. Minimum Consolidated Net Worth means for each quarter
ending (i) on or prior to December 31, 1994, $20 million; and (ii) after
December 31, 1994, $20 million plus 50% of the Company's Adjusted Consolidated
Net Income for the quarter ended March 31, 1995 and for each quarter thereafter
for which internal financial information is available, in which the Company's
Adjusted Consolidated Net Income for such quarter was greater than zero.
The Company and its subsidiaries acting as guarantors under the Indenture
may not consolidate or merge with or into, or sell, assign, transfer, lease or
otherwise dispose of all or substantially all of their properties or assets
unless, among others (i) the Company, or the subsidiary as the case may be, is
the surviving corporation, or the transferee or surviving corporation is a
corporation organized or existing under the laws of the United States; (ii) the
transferee or surviving corporation assumes all the obligations of the Company
or subsidiary under the Indenture and the guarantors confirm their guarantees;
and (iii) no Event of Default exists; (iv) the surviving corporation or
transferee meets certain Consolidated Net Worth and Fixed Charge Coverage Ratio
requirements.
Events of Default under the Indenture include, among other things, (i)
continuing defaults in the payment of interest on the Senior Notes during a
period of five days; (ii) defaults in the payment of the principal (or premium,
if any) of the Senior Notes when due and payable; (iii) continuing failure to
comply with any of the Company's or subsidiaries agreements or covenants or
provisions of the Indenture or the Senior Notes after the receipt of a notice of
default; (iv) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its subsidiaries if
such default results from the failure to pay principal or interest or as a
result of such default the maturity of such Indebtedness has been accelerated
and the principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness with respect to which a default has
occurred, or the maturity of which has been so accelerated, exceeds $2 million
in the aggregate; (v) the fact that a guarantee from a subsidiary ceases to be,
or is asserted by such subsidiary not to be, in full force and effect and
enforceable in accordance with its terms; (vi) failure to pay a final judgment
or final judgments entered by a court against the Company or any of its
subsidiaries aggregating in excess of $1 million, which judgments are not stayed
or discharged within 60 days after their entry; and (vii) the occurrence of
certain events of insolvency, bankruptcy, liquidation. Upon the occurrence of an
Event of Default described in (vii) the unpaid principal of and any accrued
interest on the Senior Notes will become immediately due and payable. Upon the
occurrence of any of the other Events of Default, the Trustee or the holders of
at least 25% in principal of the outstanding Senior Notes may declare the unpaid
principal of and accrued interest on the Senior Notes to be due and payable.
The Senior Notes were issued in units with warrants to purchase shares of
Common Stock. The Senior Notes and warrants were detached in December 1994 prior
to the filing of the Company's registration statement with respect to the Senior
Notes. See "Description of Outstanding Capital Stock -- Initial Warrants."
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DESCRIPTION OF OUTSTANDING CAPITAL STOCK
The following summary of the outstanding capital stock of the Company does
not purport to be complete and is qualified in its entirety by reference to the
detailed provisions of the following documents: (i) the Company's Restated
Certificate of Incorporation (the "Certificate of Incorporation") and (ii) the
Company's by-laws.
GENERAL
Under the Company's Certificate of Incorporation, the Company is authorized
to issue 4,000,000 shares of capital stock, of which 3,000,000 shares are common
stock, par value $0.01 per share (the "Common Stock"), and 1,000,000 shares are
preferred stock, par value $0.01 per share (the "Serial Preferred Stock"). As of
September 30, 1996, 825,086 shares of Common Stock were issued and outstanding,
180,000 shares are reserved for issuance pursuant to the Initial Warrant
Agreement (as defined below), 341,550 shares are reserved for issuance pursuant
to the Series B Warrant Agreement (as defined below), 204,502 shares are
reserved for issuance in connection with the Company's stock option plan and
agreements and the Company has issued options to purchase 190,487 shares
pursuant to such plan and agreements.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share of
Common Stock on all matters voted on by stockholders of the Company. Subject to
any preferential rights of any outstanding series of preferred stock designated
by the Board of Directors, the holders of Common Stock are entitled to receive
such dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available therefor. In the event of liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to receive pro rata all assets of the Company available for
distribution to such holders after distribution in full of the preferential
amount to be distributed to holders of shares of Serial Preferred Stock. All
outstanding shares of Common Stock are validly issued, fully paid and
nonassessable. The Common Stock has no preemptive or conversion rights or other
subscription rights and there are no redemption or sinking fund provisions
applicable to the Common Stock.
SERIAL PREFERRED STOCK
The Board of Directors has the authority to issue up to 1,000,000 shares of
Serial Preferred Stock in one or more series and to fix the number of shares
constituting any such series, the voting powers, designation, preferences and
relative participation, option or other special rights and qualifications,
limitations or restrictions thereof, including the dividend rights and dividend
rate, terms of redemption (including sinking fund provisions), redemption price
or prices, conversion rights and liquidation preferences of the shares
constituting any series, without further vote or action by the shareholders. The
issuance of Serial Preferred Stock by the Board of Directors could affect the
rights of holders of Common Stock. For example, such issuance could result in a
class of securities outstanding that would have preferences with respect to
voting rights and dividends, and in liquidation, over the Common Stock, and
could (upon conversion or otherwise) enjoy all of the rights appurtenant to
Common Stock. The authority possessed by the Board of Directors to issue Serial
Preferred Stock could potentially be used to discourage attempts by others to
obtain control of the Company through a merger, tender offer, proxy contest or
otherwise by making such attempts more difficult to achieve or more costly.
Cumulative Exchangeable Preferred Stock
40,000 shares have been designated in the Certificate of Incorporation as
Cumulative Exchangeable Preferred Stock (the "Cumulative Exchangeable Preferred
Stock" or "Redeemable Preferred Stock"). The Company originally issued 10,000
shares of Cumulative Exchangeable Preferred Stock with a par value of $0.01 per
share. The outstanding liquidation preference of the Cumulative Exchangeable
Preferred Stock at June 30, 1996 was $12.049 million. The Cumulative
Exchangeable Preferred Stock was issued in units with warrants to purchase
50,000 shares of Common Stock. See "-- Warrants."
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Dividends on shares of Cumulative Exchangeable Preferred Stock are
cumulative from the date of issue and are payable quarterly in arrears on
February 15, May 15, August 15 and November 15 of each year, commencing November
15, 1994, at an initial dividend rate per share of 10% per annum. Dividends are
payable in (i) cash, (ii) additional shares of Cumulative Exchangeable Preferred
Stock or (iii) any combination thereof, at the option of the Company, up to and
including the August 15, 1997 dividend, and in cash thereafter. Commencing on
August 16, 1999, the dividend rate per share will be 15% per annum.
At any time after August 15, 1997, and prior to August 16, 1999, if (i) the
Cumulative Exchangeable Preferred Stock is not exchangeable into Senior Notes
(as described below) because the Fixed Charge Coverage Ratio (as described in
the Indenture) for the Company's most recently ended four full fiscal quarters
for which internal financial information is available is less than 2.0:1, or
(ii) in the event that a cash dividend is not declared and paid when due and the
Cumulative Exchangeable Preferred Stock is not then exchangeable into Senior
Notes for any reason, then, in each case, the dividend rate thereafter shall be
12 1/2% per annum for the period from August 16, 1997 until August 15, 1998 and
13 1/4% per annum for the period from August 16, 1998 to August 15, 1999.
The Company may at any time exchange all, but not less than all, of the
then outstanding Cumulative Exchangeable Preferred Stock for Senior Notes (due
2001 and 2002) to be issued under the Indenture. On or after August 15, 1997,
holders of Cumulative Exchangeable Preferred Stock may demand the exchange of
any or all of their shares for Senior Notes if (i) the Connecticut-based
employees of the Company have not increased to a minimum of 30 persons and (ii)
the Fixed Charge Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial information is available is greater
than or equal to 2.0:1.
The Cumulative Exchangeable Preferred Stock is redeemable at any time at
the option of the Company, in whole or in part, at $1,000 per share plus all
accumulated and unpaid dividends, if any, to the date of redemption. The Company
must redeem all outstanding Cumulative Exchangeable Preferred Stock on August
15, 2002.
So long as the Cumulative Exchangeable Preferred Stock is outstanding, the
holders of the Cumulative Exchangeable Preferred Stock, by the affirmative vote
of the holders of at least a majority of all outstanding Cumulative Exchangeable
Preferred Stock, voting separately as a class, will have the exclusive right to
elect one director to the Board of Directors of the Company. The holders of
Cumulative Exchangeable Preferred Stock will have no other voting rights with
respect to their Cumulative Exchangeable Preferred Stock except as may be
required by applicable law.
The Company has agreed to make an offer to purchase shares of Cumulative
Exchangeable Preferred Stock to the extent permitted by the Indenture, (i) upon
the consummation of an Asset Sale Offer, with any Excess Proceeds from an Asset
Sale that exceed the aggregate purchase price of the Senior Notes tendered
pursuant to such Asset Sale Offer, or (ii) upon the consummation of a Change of
Control Offer, in either case, at $1,000 per share plus all accumulated and
unpaid dividends, if any, to the date of such purchase. (All capitalized terms
used herein and not otherwise defined shall have the meaning set forth in the
Indenture.)
Series B Preferred Stock
350,000 shares have been designated in the Certificate of Incorporation as
Series B Preferred Stock. The Company issued 115,000 shares of Series B
Preferred Stock with a par value of $0.01 per share on August 15, 1996,
September 16, 1996 and September 27, 1996. The terms of the Series B Preferred
Stock are substantially identical to the terms of the Series C Preferred Stock,
except that the shares of Series B Preferred Stock have not been registered
under the Securities Act and contain terms restricting the transfer of such
shares.
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<PAGE> 87
WARRANTS
Initial Warrants
The Company issued warrants to purchase shares of Common Stock of the
Company (the "Initial Warrants") under a Warrant Agreement, dated as of August
18, 1994, between the Company and American Bank National Association as warrant
agent (the "Initial Warrant Agreement"), as part of the issuance of the Senior
Notes and Cumulative Exchangeable Preferred Stock and has reserved 180,000
shares of Common Stock for issuance pursuant to the Initial Warrants. Each
Initial Warrant, when exercised, will entitle the holder thereof to receive the
number of shares of the Company's Common Stock set forth in such Initial Warrant
at $0.01 per share. The number of shares of Common Stock into which an Initial
Warrant is convertible (the "Warrant Shares") may be subject to adjustment in
certain cases referred to below and detailed in the Initial Warrant Agreement.
The Initial Warrants are exercisable at any time on or after their date of
issuance and unless exercised, will automatically expire at 5:00 p.m. Eastern
Standard Time on August 15, 2001. The Initial Warrants and the Warrant Shares
have not been registered under the Securities Act and are subject to certain
transfer restrictions.
The holders of the Initial Warrants have no right to vote on matters
submitted to the shareholders of the Company and have no right to receive
dividends. The holders of the Initial Warrants are not entitled to share in the
assets of the Company in the event of liquidation, dissolution or the winding up
of the affairs of the Company.
If the Company (i) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock or other shares of its capital stock, (ii)
subdivides its outstanding shares of Common Stock into a greater number of
shares, (iii) combines its outstanding shares of Common Stock into a smaller
number of shares, or (iv) issues by reclassification of its Common Stock any
shares of its capital stock, then the number of shares of Common Stock issuable
upon exercise of each Initial Warrant immediately prior to such action shall be
proportionately adjusted so that the holder of any Initial Warrant thereafter
exercised may receive the aggregate number and kind of shares of capital stock
of the Company that such holder would have owned immediately following such
action if such Initial Warrant had been exercised immediately prior to such
action.
If the Company distributes to all holders of its Common Stock any of its
assets (including but not limited to cash), securities (other than capital
stock), or any rights or warrants to purchase securities (including but not
limited to Common Stock) of the Company, the Company will make the same
distribution to holders of the Initial Warrants as though, immediately prior to
the record date with respect to such distribution, each such holder owned the
number of shares of Common Stock such holder could have purchased upon the
exercise of the Initial Warrants held by such holder.
Subject to certain exceptions set forth in the Initial Warrant Agreement,
if the Company issues (i) shares of Common Stock for a consideration per share
less than the Current Market Price per share (as defined in the Initial Warrant
Agreement), or (ii) any securities convertible into or exchangeable for Common
Stock for a consideration per share of Common Stock initially deliverable upon
conversion or exchange of such securities that is less than the Current Market
Price per share on the date of issuance of such securities, the Company shall
offer to sell to each holder of Initial Warrants, at the same price and on the
same terms offered to all other prospective buyers (provided that the holders of
Initial Warrants shall not be required to buy any other security in order to buy
such Common Stock or convertible securities), a portion of such Common Stock or
convertible securities that is equal to such holder's portion of the Common
Stock then outstanding if immediately prior thereto all the Initial Warrants had
been exercised. Each such holder may elect to buy all or any portion of the
Common Stock or convertible securities offered or may decline to purchase any.
Notwithstanding the foregoing, no adjustment or action need be made for (i)
a change solely in the par value or no par value of the Common Stock, provided
that the Company shall not increase the par value to exceed the exercise price
of the Initial Warrants, (ii) the conversion or exchange (other than pursuant to
a reclassification), in any case on a share-for-share basis, of Common Stock for
non-voting common stock that has rights (other than voting rights) identical to
the Common Stock, or of such non-voting stock for Common
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<PAGE> 88
Stock, (iii) shares of Common Stock (or options to purchase such shares) issued
to employees of the Company or any of its Subsidiaries pursuant to certain stock
option agreements (as described in the Initial Warrant Agreement) or (iv) the
exercise of the Initial Warrants.
In case of certain consolidations or mergers of the Company, or the sale of
all or substantially all of the assets of the Company to another corporation,
each Initial Warrant will thereafter be exercisable for the right to receive the
kind and amount of shares of stock or other securities or property to which such
holder would have been entitled as a result of such consolidation, merger or
sale had the Initial Warrants been exercised immediately prior thereto.
Except under certain circumstances including, without limitation, an
underwriter's market cut-back and registration of shares to be offered pursuant
to an employee benefit plan, an exchange offer or certain merger transactions,
whenever the Company proposes to register any shares of its Common Stock under
the Securities Act, the Company will notify each holder of the Initial Warrants
or Warrant Shares of the proposed filing and if so requested by such holders,
the Company will use its best efforts to register Warrant Shares under the
Securities Act.
The holders of Initial Warrants and Warrant Shares are entitled, with
certain limitations, to demand registration rights with respect to the Warrant
Shares at any time after 90 days following an initial public offering of the
Common Stock, provided that the managing underwriter may require such period to
be extended to up to 180 days following such initial public offering.
Series B Warrants
The Company issued warrants to purchase shares Common Stock of the Company
(the "Series B Warrants") under a Warrant Agreement, dated as of August 15,
1996, between the Company and Firstar Trust Company as warrant agent, as amended
(the "Series B Warrant Agreement"), as part of the issuance of the Series B
Preferred Stock and has reserved 341,550 shares of Common Stock for issuance
pursuant to the Series B Warrants. Each Series B Warrant, when exercised, will
entitle the holder thereof to purchase 2.970 shares of Common Stock of the
Company (each such share, a "Series B Warrant Share") at an exercise price equal
to $0.01 per share (the "Exercise Price"). The number of Series B Warrant Shares
may be adjusted from time to time upon the occurrence of certain events as
provided in the Series B Warrant Agreement. The Series B Warrants are
exercisable at any time on or after the date of issuance and, unless exercised,
will automatically expire on August 31, 2006. The Series B Warrants are
detachable from the Series B Preferred Stock and separately transferable,
subject to compliance with applicable federal and state securities laws. The
Series B Warrants and the Series B Warrant Shares have not been registered under
the Securities Act and are subject to certain transfer restrictions.
The holders of Series B Warrants have no right to vote on matters submitted
to the shareholders of the Company and have no right to receive dividends. The
holders of the Series B Warrants will not be entitled to share in the assets of
the Company in the event of dissolution, liquidation or the winding up of the
affairs of the Company.
The number of shares of Common Stock issuable upon the exercise of each
Series B Warrant (the "Series B Exercise Rate") will be subject to adjustment
from time to time in certain events including (i) the payment or distribution of
a dividend on the Common Stock in shares of the Common Stock or other capital
stock of the Company; (ii) subdivisions, combination or reclassification of the
outstanding shares of Common Stock; (iii) the issuance of shares of Common Stock
or distribution of any right, options or warrants to any person entitling them
to purchase shares of Common Stock, or securities convertible into or
exchangeable for Common Stock, at a price per share less than the current market
value; (iv) the distribution to all holders of its Common Stock of any evidences
of indebtedness of the Company or of its subsidiaries; (v) distribution of any
assets of the Company or any of its subsidiaries (other than cash dividends or
other cash distributions or distributions from current or retained earnings and
earned surplus); or (vi) distribution of any rights, options or warrants to
acquire any of the foregoing referred to in clauses (iv) and (v).
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<PAGE> 89
In case of certain consolidations or mergers of the Company, or the sale of
all or substantially all of the assets of the Company to another corporation,
each Series B Warrant shall thereafter be exercisable for the right to receive
the kind and amount of shares of stock or other securities or property to which
such holders would have been entitled as a result of such consolidation, merger
or sale had the Series B Warrants been exercised immediately prior thereto.
If, at any time prior to the Company's public offering of stock resulting
in gross proceeds to the Company of at least $10 million (the "Drag-Along
Termination Date"), holders of Common Stock and/or rights, warrants, options,
convertible securities or convertible indebtedness, exchangeable securities or
exchangeable indebtedness, or other rights, exercisable for or convertible or
exchangeable into Common Stock, whether at the time or upon the occurrence of
some future event (collectively, "Common Stock Equivalents") determine to sell
shares of Common Stock and/or Common Stock equivalents representing more than
50% of the shares of Common Stock outstanding and the shares of Common Stock
into or for which rights, options, warrants or other securities outstanding are
exercisable or convertible (other than the Series B Warrants) (collectively, the
"Fully Diluted Shares"), the holders of a majority of such shares shall have the
right to require holders of the Series B Warrants (including any Series B
Warrant Shares) to sell their shares on a pro rata basis on the same terms.
If, at any time, prior to the earlier of the Drag-Along Termination Date or
August 31, 2002, any holder of Series B Warrants and/or Series B Warrant Shares
transfer more than 5% of the Fully Diluted Shares, the holders of the Series B
Warrants shall be entitled to sell the Series B Warrants and/or the Series B
Warrant Shares on a pro rata basis and on the same terms.
Five years following the date of issuance of the Series B Warrants, the
holders of 25% of the Series B Warrants and/or Series B Warrant Shares will have
the right, subject to the Company's right to purchase such shares at their fair
market value, to demand registration of not less than 25% of the Series B
Warrant Shares, such offering to be consummated by a nationally recognized
investment banking firm selected by the Company and reasonably acceptable to the
holders of the Series B Warrants. The holders of the Series B Warrants also
shall be entitled to piggyback registration rights if at any time after the
Company's initial public offering of Common Stock, the Company proposes to file
a registration statement under the Securities Act with respect to an offering by
the Company (other than certain enumerated exceptions) subject to cutback by
underwriters.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of certain of the anticipated federal income tax
consequences of an exchange of the Series B Preferred Stock for Series C
Preferred Stock and of the purchase, ownership, and disposition of the Series C
Preferred Stock and Warrants is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the final, temporary, and
proposed regulations promulgated thereunder, and administrative rulings and
judicial decisions now in effect, all of which are subject to change (possibly
with retroactive effect) or different interpretations. This summary does not
purport to deal with all aspects of federal income taxation that may be relevant
to a particular investor, nor any tax consequences arising under the laws of any
state, locality, or foreign jurisdiction, and it is not intended to be
applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance companies, tax-exempt organizations, foreign
persons, persons that hold Series C Preferred Stock or Warrants as part of a
straddle or conversion transaction, or holders subject to the alternative
minimum tax, may be subject to special rules. In addition, the summary is
limited to persons that will hold the Series C Preferred Stock and Warrants as
"capital assets" (generally, property held for investment) within the meaning of
Section 1221 of the Code. ALL INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISERS REGARDING THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF
THE EXCHANGE AND THE OWNERSHIP AND DISPOSITION OF SERIES C PREFERRED STOCK AND
WARRANTS.
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<PAGE> 90
TAXATION OF HOLDERS ON EXCHANGE
Although the matter is not free from doubt, an exchange of shares of Series
B Preferred Stock for shares of Series C Preferred Stock should not be a taxable
event to holders of Series B Preferred Stock, and holders should not recognize
any taxable gain or loss as a result of such an exchange. Accordingly, a holder
would have the same adjusted basis and holding period in the Series C Preferred
Stock as it had in the Series B Preferred Stock immediately before the exchange.
Further, the tax consequences of ownership and disposition of any shares of
Series C Preferred Stock should be the same as the tax consequences of ownership
and disposition of shares of the Series B Preferred Stock.
ALLOCATION OF PURCHASE PRICE
The purchase of the Series B Preferred Stock with the Warrants was treated
as the purchase of an investment unit for Federal income tax purposes. In order
to determine the issue price for each security, the aggregate issue price of the
Series B Preferred Stock and Warrants was allocated between each of the
securities based on their relative fair market values on the date of issuance.
The issue price of the Series C Preferred Stock should be the same as the issue
price of the Series B Preferred Stock (adjusted to take into account any
constructive distributions on the Series B Preferred Stock under Section 305 of
the Code, as described below) immediately before the exchange.
DISTRIBUTIONS ON SERIES C PREFERRED STOCK AND EXCESS REDEMPTION PRICE
The amount of any distribution with respect to the Series C Preferred Stock
will be equal to the amount of cash or the fair market value of the shares of
Series C Preferred Stock distributed. A stockholder's initial tax basis in any
additional shares of Series C Preferred Stock distributed by the Company will be
equal to the fair market value of such additional shares of Series C Preferred
Stock on the date of distribution. A stockholder's holding period for such
additional shares of Series C Preferred Stock will commence on the day following
the date of distribution and will not include such stockholder's holding period
for the shares of Series C Preferred Stock with respect to which the additional
shares of Series C Preferred Stock were distributed. The amount of any
distribution with respect to the Series C Preferred Stock, whether paid in cash
or in additional shares of Series C Preferred Stock, will be a dividend, taxable
as ordinary income to the recipient thereof, to the extent of the Company's
current or accumulated earnings and profits ("earnings and profits") as
determined under U.S. federal income tax principles. To the extent that the
amount of such a distribution exceeds the current and accumulated earnings and
profits of the Company, such excess will be treated as a nontaxable recovery of
the holder's basis in the stock in respect of which the distribution is made (to
the extent thereof), with any remaining excess treated as a gain from the sale
or exchange of such stock.
In addition, under Section 305 of the Code and the Treasury Regulations
authorized thereunder, if the redemption price of preferred stock exceeds its
issue price by more than a de minimis amount, such excess may under certain
circumstances, be taxable as a constructive distribution to the holder (treated
as a dividend to the extent of the Company's current and accumulated earnings
and profits and otherwise subject to the treatment described above for
distributions in excess of current and accumulated earnings and profits). A
holder of such preferred stock is required to treat such excess as a
constructive distribution received by the holder over the life of the preferred
stock under a constant interest (economic yield) method that takes into account
the compounding of yield. The excess of the liquidation preference over the
issue price of the Series C Preferred Stock will be treated as a constructive
distribution, as described above, by a holder on a constant yield basis over its
term. In the case of the Series C Preferred Stock initially issued to the
purchaser, the issue price will be determined as described above under
"-- Allocation of Purchase Price." In the case of any additional shares of
Preferred Stock distributed by the Company in lieu of a cash payment, the issue
price generally will equal the fair market value of such shares of Series C
Preferred Stock on the date of distribution, with the result that the amount of
any redemption premium, and the tax consequences thereof, may need to be
separately determined for each such distribution. Holders should consult their
own tax advisers regarding the application of the redemption premium rules to
their particular situation.
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DIVIDENDS TO CORPORATE SHAREHOLDERS
In general, an actual or constructive distribution that is treated as a
dividend for federal income tax purposes and that is made to a corporate
shareholder with respect to the Series C Preferred Stock will qualify for the
70% dividends-received deduction. Holders should note, however, that the Company
does not currently have any accumulated earnings and profits and that there can
be no assurance regarding the amount of current or accumulated earnings and
profits of the Company in the future. As a result, there can be no assurance
that the dividends-received deduction will apply to distributions on the Series
C Preferred Stock.
In addition, there are many exceptions and restrictions relating to the
availability of such dividends-received deduction such as restrictions relating
to (i) the holding period of stock the dividends on which are sought to be
deducted, (ii) debt-financed portfolio stock, (iii) dividends treated as
"extraordinary dividends" for purposes of Section 1059 of the Code, and (iv)
taxpayers that pay alternative minimum tax. Corporate shareholders should
consult their own tax advisers regarding the extent, if any, to which such
exceptions and restrictions may apply to their particular factual situation.
Additionally, recently proposed legislation would reduce the applicable
dividends-received deduction from 70% to 50% and could also affect the
availability of such deduction to corporate shareholders that do not meet
applicable holding period requirements. It is uncertain whether or in what form
such legislation will be enacted into law. Corporate shareholders should consult
their own tax advisers regarding the extent, if any, to which any such
legislation may apply to their particular factual situation.
REDEMPTION, SALE, OR EXCHANGE OF PREFERRED STOCK
Upon a sale or other disposition (other than a redemption) of the shares of
Series C Preferred Stock, a holder will generally recognize capital gain or loss
equal to the difference between the sum of the amount of cash and the fair
market of any property received by the holder and such holder's adjusted tax
basis in such shares. Such gain or loss will be long-term if the holding period
for such shares is more than one year.
A holder's initial tax basis in the Series C Preferred Stock will equal its
tax basis in the Series B Preferred Stock, as described above under "Taxation of
Holders on Exchange." Thereafter, such initial tax basis will be (i) increased
by the amount (if any) of any constructive distributions the holder is treated
as having received pursuant to the rules described above under "Distributions on
Series C Preferred Stock and Excess Redemption Price" and (ii) decreased by the
portion of any (actual or constructive) distribution that is treated as a
tax-free recovery of basis as described above under "Distributions on Series C
Preferred Stock and Excess Redemption Price."
Upon a redemption of the shares of Series C Preferred Stock in a situation
where the holder has no other interest in the Company, actually or
constructively, following such redemption, the holder will generally recognize
capital gain or loss (except to the extent of cash payments received on the
exchange that are attributable to declared dividends which will be treated in
the same manner as distributions described above). If the holder does continue
to own an interest in the Company, actually or constructively, the redemption
payment could be treated as a dividend subject to the rules described above.
BACKUP WITHHOLDING
In general, a noncorporate holder of Series C Preferred Stock or Warrant
will be subject to backup withholding at the rate of 31% with respect to
reportable payments of dividends accrued with respect to, or the proceeds of a
sale, exchange, or redemption of, Series C Preferred Stock or Warrants, if the
holder fails to provide a taxpayer identification number or certification of
foreign or other exempt status or fails to report in full dividend and interest
income. Amounts paid as backup withholding do not constitute an additional tax
and will be credited against the holder's federal income tax liabilities.
THE UNITED STATES FEDERAL TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY OR MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISERS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE EX-
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CHANGE OF SERIES B PREFERRED STOCK FOR SERIES C PREFERRED STOCK AND OF THE
OWNERSHIP AND DISPOSITION OF THE SERIES C PREFERRED STOCK AND THE WARRANTS,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
LEGAL OPINION
Certain legal matters in connection with the exchange of the Series B
Preferred Stock for the Series C Preferred Stock will be passed upon for the
Company by Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York.
EXPERTS
The financial statements of the Company as of March 31, 1996 and 1995 and
for the years then ended and of Cosmar Corporation and Affiliate for the period
from January 1, 1994 to August 17, 1994, included in this Prospectus and the
related financial statement schedules included elsewhere in the registration
statement have been audited by Deloitte & Touche, LLP, independent auditors, as
stated in their reports appearing herein and elsewhere in the registration
statement, and have been so included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
The financial statements of the Cosmar Corporation and affiliate (the prior
owners of the assets of the Company's Cosmar subsidiary) as of December 31, 1993
and for the year then ended included in this Prospectus have been audited by
Windes & McClaughry Accountancy Corporation, independent auditors, as stated in
their report appearing herein and elsewhere in the registration statement, and
have been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The financial statements of GAC as of December 31, 1995 and for the year
then ended included in this Prospectus have been audited by Deutsch, Marin &
Company, independent auditors, as stated in their report appearing herein and
elsewhere in the registration statement, and have been so included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The consolidated financial statements of MEM at December 31, 1995 and 1994
and for each of the three years in the periods ended December 31, 1995, 1994 and
1993 appearing in this Prospectus and Registration Statement have been audited
by Ernst & Young, LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
RENAISSANCE COSMETICS INC. AND SUBSIDIARIES:
Consolidated Balance Sheets -- June 30, 1996 (Unaudited) and March 31, 1996........... F-2
Consolidated Statements of Operations -- Three Months Ended June 30, 1996 and 1995
(Unaudited)......................................................................... F-3
Consolidated Statements of Cash Flows -- Three Months Ended June 30, 1996 and 1995
(Unaudited)......................................................................... F-4
Notes to Consolidated Financial Statements (Unaudited)................................ F-5
Independent Auditors' Report.......................................................... F-8
Consolidated Balance Sheets -- March 31, 1996 and 1995................................ F-9
Consolidated Statements of Operations -- Year Ended March 31, 1996 and Period from
April 15, 1994 (Inception) to March 31, 1995........................................ F-10
Consolidated Statements of Stockholders' Equity -- Year Ended March 31, 1996 and
Period
from April 15, 1994 (Inception) to March 31, 1995................................... F-11
Consolidated Statements of Cash Flows -- Year Ended March 31, 1996 and
Period from April 15, 1994 (Inception) to March 31, 1995............................ F-12
Notes to Consolidated Financial Statements............................................ F-13
COSMAR CORPORATION AND AFFILIATE (PREDECESSOR):
Independent Auditors' Report.......................................................... F-26
Combined Statement of Operations of Assets Acquired and Liabilities Assumed and
Changes in Excess of Assets Acquired Over Liabilities Assumed -- Period from January
1, 1994 to
August 17, 1994..................................................................... F-27
Combined Statement of Cash Flows of Assets Acquired and Liabilities Assumed -- Period
from January 1, 1994 to August 17, 1994............................................. F-28
Notes to the Combined Financial Statements............................................ F-29
Independent Auditors Report........................................................... F-31
Combined Statement of Income -- For the Year Ended December 31, 1993.................. F-32
Combined Statement of Cash Flows -- For the Year Ended December 31, 1993.............. F-33
Notes to the Combined Financial Statements............................................ F-34
GREAT AMERICAN COSMETICS, INC.:
Balance Sheet -- June 30, 1996 (Unaudited)............................................ F-36
Statements of Income and Retained Earnings -- For the six months ended June 30, 1996
and 1995 (Unaudited)................................................................ F-37
Statements of Cash flows -- For the six months ended June 30, 1996 and 1995
(Unaudited)......................................................................... F-38
Notes to Financial Statements......................................................... F-39
Report of Independent Accountants..................................................... F-40
Balance Sheet -- December 31, 1995.................................................... F-41
Statements of Income and Retained Earnings -- For the year ended December 31, 1995.... F-42
Statements of Cash Flows -- For the year ended December 31, 1995...................... F-43
Notes to Financial Statements......................................................... F-44
MEM COMPANY INC. AND SUBSIDIARIES:
Consolidated Balance Sheet -- June 30, 1996 (Unaudited) and December 31, 1995......... F-47
Consolidated Statements of Operations -- Six Months Ended June 30, 1996 and 1995
(Unaudited)......................................................................... F-48
Consolidated Statements of Cash Flows -- Six Months Ended June 30, 1996 and 1995
(Unaudited)......................................................................... F-49
Report of Independent Auditors........................................................ F-50
Consolidated Statements of Operations -- Years Ended December 31, 1995, 1994 and
1993................................................................................ F-51
Consolidated Balance Sheets -- December 31, 1995 and 1994............................. F-52
Consolidated Statements of Changes in Stockholders' Equity -- Years Ended December 31,
1995, 1994 and 1993................................................................. F-53
Consolidated Statements of Cash Flows -- Years Ended December 31, 1995, 1994 and
1993................................................................................ F-54
Notes to Consolidated Financial Statements............................................ F-55
</TABLE>
F-1
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RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1996 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................... $ 7,573,050 $ 1,431,809
Marketable securities........................................... 78,452 173,604
Accounts receivable -- net...................................... 28,789,720 34,557,409
Inventories..................................................... 32,583,462 30,236,739
Prepaid expenses and other current assets....................... 13,734,579 6,539,828
------------ ------------
Total current assets......................................... 82,759,263 72,939,389
PROPERTY, PLANT AND EQUIPMENT -- Net.............................. 14,457,830 14,535,363
DEFERRED FINANCING COSTS -- Net................................... 7,907,363 8,006,782
OTHER ASSETS -- Net............................................... 12,174,123 12,242,090
INTANGIBLE ASSETS -- Net.......................................... 76,087,760 76,895,294
------------ ------------
TOTAL ASSETS...................................................... $193,386,339 $184,618,918
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable................................................... $ 59,000,000 $ 57,000,000
Accounts payable................................................ 13,613,349 19,462,868
Accrued expenses................................................ 13,627,251 15,157,127
Other current liabilities....................................... 2,700,000 2,700,000
------------ ------------
Total current liabilities.................................... 88,940,600 94,319,995
------------ ------------
LONG-TERM LIABILITIES
Long-term debt.................................................. 67,403,749 67,322,944
Minimum royalty obligation...................................... 4,735,562 4,686,039
Deferred tax liability.......................................... 140,619 140,619
------------ ------------
Total long-term liabilities.................................. 72,279,930 72,149,602
------------ ------------
TOTAL LIABILITIES................................................. 161,220,530 166,469,597
------------ ------------
COMMITMENTS AND CONTINGENCIES
SENIOR EXCHANGEABLE REDEEMABLE PREFERRED STOCK -- SERIES A:
Par value $.01 -- authorized, 100,000 shares; issued 20,000
shares at June 30, 1996, net of issuance costs............... 19,091,667
REDEEMABLE PREFERRED STOCK:
Par value $.01 -- authorized 40,000 shares; issued, 11,884
shares at June 30, 1996; 11,594 shares at March 31, 1996..... 12,048,897 11,697,624
COMMON STOCKHOLDERS' EQUITY:
Common stock, par value $.01 -- authorized, 3,000,000 shares;
issued 726,818 shares........................................ 7,268 7,268
Notes receivable from sale of common stock...................... (517,609) (517,609)
Additional paid-in capital...................................... 26,786,732 26,786,732
Treasury stock, at cost (5,650 shares).......................... (210,000) (210,000)
Deficit......................................................... (24,244,736) (19,563,738)
Cumulative translation adjustment............................... (796,410) (50,956)
------------ ------------
Total common stockholders' equity............................ 1,025,245 6,451,697
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................ $193,386,339 $184,618,918
============ ============
</TABLE>
See notes to consolidated financial statements.
F-2
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RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
(UNAUDITED)
NET SALES....................................................... $30,687,893 $26,634,548
COST OF GOODS SOLD.............................................. 11,506,087 9,430,183
----------- -----------
Gross profit.................................................. 19,181,806 17,204,365
----------- -----------
OPERATING EXPENSES:
Selling....................................................... 11,332,298 9,165,946
General and administrative.................................... 5,799,903 3,977,056
Amortization of intangible and other assets................... 1,367,545 1,189,026
----------- -----------
Total operating expenses................................... 18,499,746 14,332,028
----------- -----------
OPERATING INCOME................................................ 682,060 2,872,337
INTEREST EXPENSE (INCOME):
Interest expense.............................................. 5,200,987 4,434,301
Interest income............................................... (170,369) (68,234)
----------- -----------
LOSS BEFORE INCOME TAXES........................................ (4,348,558) (1,493,730)
INCOME TAX (BENEFIT)/PROVISION.................................. (155,500) 121,429
----------- -----------
NET LOSS........................................................ (4,193,058) (1,615,159)
PREFERRED STOCK DIVIDENDS....................................... 487,940 289,785
----------- -----------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS...................... $(4,680,998) $(1,904,944)
=========== ===========
NET LOSS PER COMMON SHARE....................................... $ (6.49) $ (2.65)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING............................. 721,168 720,093
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 96
RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
--------------------------
1996 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.......................................................... $(4,193,058) $(1,615,159)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation.................................................... 869,334 524,365
Amortization of intangible assets............................... 807,534 802,436
Amortization of minimum royalty and other assets................ 618,073 386,590
Amortization of deferred financing costs........................ 726,187 545,766
Accrued interest on senior notes, subordinated seller notes and
minimum royalty obligation................................... 314,915 317,454
Changes in operating assets and liabilities, net of effects of
acquisitions:
Accounts receivable............................................. 5,767,689 (6,046,162)
Inventories..................................................... (2,346,723) (5,558,562)
Prepaid expenses and other assets............................... (7,744,857) (1,542,723)
Accounts payable................................................ (5,849,519) (1,858,075)
Accrued expenses................................................ (1,529,876) 2,649,485
Other........................................................... (745,454) 127,149
----------- -----------
Net cash used in operating activities........................ (13,305,755) (11,267,436)
=========== ===========
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities................................. -- (96,868)
Sale of marketable securities..................................... 95,152 14,950
Capital expenditures.............................................. (791,801) (2,173,587)
----------- -----------
Net cash used in investing activities........................ (696,649) (2,255,505)
=========== ===========
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from notes payable................................. 2,000,000 8,800,000
Payment of minimum royalty obligation........................... (184,587) --
Net proceeds of issuance of redeemable preferred stock --
Series A..................................................... 18,955,000 --
Payment of deferred financing costs............................. (626,768) --
----------- -----------
Net cash provided by financing activities.................... 20,143,645 8,800,000
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............. 6,141,241 (4,722,941)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.................... 1,431,809 7,001,170
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.......................... $ 7,573,050 $ 2,278,229
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest..................................................... $ 1,806,534 $ 1,168,106
=========== ===========
Income taxes................................................. $ 26,657 $ 458,151
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING TRANSACTIONS:
Accrued dividends and accretion on redeemable preferred
stocks....................................................... $ 487,940 $ 289,785
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 97
RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements of Renaissance Cosmetics, Inc. (the
"Company") include the accounts of the Company and its wholly-owned
subsidiaries, Cosmar Corporation, Houbigant Ltee, and Dana Perfumes Corporation
("Dana"). All significant intercompany activity has been eliminated. The results
of operations for the three months ended June 30, 1996 are not necessarily
indicative of the results to be expected for any other interim period or for the
entire year.
In the opinion of management, all adjustments (consisting solely of normal
recurring adjustments) necessary to present fairly the consolidated financial
position, results of operations and cash flows of the Company have been made on
a consistent basis. Certain information and footnote disclosures included in
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The unaudited financial
statements should be read in conjunction with management's discussion and
analysis of financial condition and results of operation and the consolidated
financial statements included in the Company's Annual Report on Form 10K for the
year ended March 31, 1996 filed with the Securities and Exchange Commission.
Certain reclassifications were made to the 1995 financial statements to conform
to the current presentation.
2. INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Raw material and advertising supplies...................... $19,072,547 $16,956,874
Work in process............................................ 1,594,037 2,860,139
Finished goods............................................. 11,916,878 10,419,726
----------- -----------
$32,583,462 $30,236,739
=========== ===========
</TABLE>
The above components are shown net of excess and obsolete inventory
reserves of $1,623,000 and $1,540,000 at June 30, 1996 and March 31, 1996,
respectively. At June 30, 1996 and March 31, 1996 approximately 62.8% and 60.7%,
respectively, of the Company's inventories are stated at the lower of LIFO cost
or market. The excess of current replacement cost over the stated LIFO value was
$0 at June 30, 1996 and March 31, 1996, respectively.
3. NEW ACCOUNTING PRONOUNCEMENT
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based
Compensation, which is effective for the Company beginning January 1, 1996. SFAS
No. 123 requires expanded disclosures of stock-based compensation arrangements
with employees in Notes to Annual Financial Statements and encourages (but does
not require) compensation cost to be measured based on the fair value of the
equity instrument awarded. Companies are permitted, however, to continue to
apply APB Opinion No. 25, which recognizes compensation cost based on the
intrinsic value of the equity, instrument awarded. The Company will continue to
apply APB Opinion No. 25 to its stock-based compensation awards to employees and
will disclose the required pro forma effect on net income and earnings per share
in its annual financial statements.
F-5
<PAGE> 98
RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
4. SUBSEQUENT EVENTS
a. Pending Acquisitions
On August 21, 1996, RCI through its wholly-owned subsidiary Cosmar,
completed its acquisition of all of the issued and outstanding capital stock of
GAC pursuant to a Stock Purchase Agreement (the "GAC Acquisition Agreement"),
dated June 27, 1996, with GAC and Messrs. Pallini and Carbone, the sole
shareholders of GAC (the "Sellers").
GAC outsources, markets, distributes, advertises, promotes and merchandises
mid-priced, mass-marketed lipsticks, eye make-up, nail polish products and
related accessories sold under the Nat Robbins trademark.
The purchase price for the GAC Acquisition was $15,250,000 in cash,
approximately $14,209,000 of which was paid to the Sellers at closing,
approximately $41,000 of which was retained by Cosmar to fund possible
post-closing severance bonuses to certain GAC employees and the remaining
$1,000,000 of which was placed into escrow to secure the Sellers' post-closing
obligation to indemnify Cosmar for breaches of the Sellers' representations,
warranties and covenants contained in the GAC Acquisition Agreement. Concurrent
with the closing, RCI repaid $796,000 of GAC indebtedness. Immediately prior to
the closing, GAC repaid $184,000 of loans owed to its shareholders. In
connection with the closing, the Company agreed to fund up to $141,000 (with up
to $100,000 of its own funds and up to $41,000 of the purchase price held back
from the Sellers for this purpose) of possible post-closing severance bonuses to
certain GAC employees, if earned.
In connection with the GAC Acquisition, Cosmar has retained Messrs. Pallini
and Carbone as consultants to Cosmar and its affiliates. Mr. Pallini's
consulting agreement is for a term of three (3) years with annual compensation
of $200,000 per year, payable in thirty-six (36) equal monthly installments. Mr.
Carbone's consulting agreement is for a term of one (1) year with annual
compensation of $150,000, payable in twelve (12) equal monthly installments.
On August 6, 1996, RCI, its newly-formed wholly owned subsidiary,
Renaissance Acquisition, Inc. ("RAI"), and MEM Company, Inc., a New York
corporation ("MEM"), entered into an Agreement and Plan of Merger (the "MEM
Acquisition Agreement") pursuant to which RAI will be merged into MEM and each
outstanding share of MEM common stock (the "MEM Stock"), other than dissenter's
shares, will be converted into the right to receive $7.50 per share in cash (and
each share subject to a stock option will be converted into the right to receive
the difference between $7.50 per share and the per share exercise price of such
option) (the "MEM Acquisition"). The aggregate consideration for the MEM Stock
(including the purchase price for the outstanding MEM stock options that will be
cashed out in the MEM Acquisition) is approximately $33.8 million, including
repayment of MEM's indebtedness (which estimate is based on the balance of such
indebtedness at June 30, 1996). Due to the seasonality of MEM's business, such
amount of indebtedness could be materially higher depending on the date the MEM
Acquisition is closed.
Also on August 6, 1996, the Company entered into a definitive employment
agreement with Gay Mayer, the current Chairman, Chief Executive Officer and
President of MEM, pursuant to which the Company will retain Mr. Mayer as an
officer of the Company following the effective time of the MEM Acquisition. Mr.
Mayer's employment agreement will be for a term of 30 months at an annual salary
of $250,000, payable in equal semi-monthly payments. The Company has agreed to
grant an option to Mr. Mayer to acquire 5,000 shares of the Company common stock
upon the closing of the MEM Acquisition. The per share exercise price of the
option will be equal to $104.00.
Additionally, an action (seeking class action certification) was filed on
July 31, 1996 on behalf of the shareholders of MEM against MEM and four of its
current and former directors, alleging that the compensation offered to the
shareholders in the MEM Acquisition is inadequate and grossly unfair and that
the defendants violated their fiduciary duties by not seeking additional
potential purchasers for MEM. The action seeks, among other things, a court
order requiring the defendants to seek other purchasers, or, if the
F-6
<PAGE> 99
RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
MEM Acquisition is consummated, damages. MEM has advised the Company that MEM
believes that this action is without merit and that it intends to vigorously
defend such action.
b. Series B Preferred Stock Financing
In August 1996, the Company entered into a securities purchase agreement
with certain investors pursuant to which the Company will issue to those
investors up to 115,000 Units, each of which consists of one share of the
Company's 14.0% Senior Redeemable Preferred Stock, Series B, par value $0.01 per
share (the "Series B Preferred Stock"), and 341,550 Warrants to purchase 2.970
shares of the Company's Common Stock. On August 14, 1996 85,000 units were sold,
prior to the closing of the GAC Acquisition noted above. The remaining units
were sold in September 1996.
The net proceeds from the sale of the Units were to redeem the outstanding
shares of the Company's Series A Preferred Stock, including accrued dividends
thereon, to finance the GAC Acquisition to repay approximately $7.0 million of
indebtedness under the Existing Credit Facility, approximately $33.8 million was
placed in escrow for the MEM Acquisition, and the remaining net proceeds used
for general corporate purposes.
c. Litigation
In April 1995, the Company and Houbigant, Inc. secured a temporary
restraining order barring the importation or sale in the United States of
certain trademarked goods in an action (the "New York action") commenced in the
United States District Court for the Southern District of New York against ACB
Fragrances and Cosmetics, Inc., and ACB Mercantile Inc. (the "ACB Companies"),
the principals of the ACB Companies, and V&B Distributors, Harold Schiff, A.
Rosenblum Sales, Inc. and Bernard Rosenblum (the "Resellers"). The claims
against the Resellers have been settled. In June 1995, the ACB Companies filed
an answer asserting counterclaims for, inter alia, defamation, conspiracy, and
cancellation of trademarks. In October 1995 and January 1996 the court granted
the Company's motion to dismiss as to all the counts of ACB Companies'
counterclaims against the Company and its affiliates except for three counts
against the Company's Canadian affiliate, Houbigant (1995) Ltee ("PPI-Canada"),
for breach of contract and tortious interference with business relations, and
two counts against the Company and its affiliates for tortious interference.
In May 1995, PPI-Canada filed suit in the Superior Court of the District of
Montreal, Canada against the ACB Companies and the principals of the ACB
Companies, seeking damages and/or restitution in the amount of approximately $8
million (Canadian) for breach of contract and fraud in connection with the
Company's acquisition of substantially all of the assets of the ACB Companies in
December 1994 (the "Canadian action").
The parties to the New York action and the Canadian action have entered
into a settlement agreement with respect to all the litigation. Under the
settlement, ACB dismissed its remaining counterclaims against the Company and
its affiliates and on August 21, 1996, a payment was made to the Company in the
sum of $0.8 million. Also on August 21, 1996, the Company paid $2.7 million in
connection with the purchase of certain inventory from Houbigant in 1994.
F-7
<PAGE> 100
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Renaissance Cosmetics, Inc.:
We have audited the accompanying consolidated balance sheets of Renaissance
Cosmetics, Inc. and subsidiaries as of March 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year ended March 31, 1996 and for the period from April 15, 1994 (Inception)
to March 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Renaissance Cosmetics, Inc. and
subsidiaries as of March 31, 1996 and 1995, and the results of their operations
and their cash flows for the year ended March 31, 1996 and the period from April
15, 1994 (Inception) to March 31, 1995 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
New York, New York
June 14, 1996
F-8
<PAGE> 101
RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................... $ 1,431,809 $ 7,001,170
Marketable securities........................................... 173,604 814,554
Accounts receivable -- net...................................... 34,557,409 15,557,859
Inventories..................................................... 30,236,739 21,906,326
Prepaid expenses and other current assets....................... 6,539,828 4,030,231
----------- -----------
Total current assets......................................... 72,939,389 49,310,140
PROPERTY, PLANT AND EQUIPMENT -- Net.............................. 14,535,363 8,508,123
DEFERRED FINANCING COSTS -- Net................................... 8,006,782 9,590,535
OTHER ASSETS -- Net............................................... 12,242,090 12,345,686
INTANGIBLE ASSETS -- Net.......................................... 76,895,294 82,498,616
----------- -----------
TOTAL ASSETS...................................................... $184,618,918 $162,253,100
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable................................................... $ 57,000,000 $ --
Accounts payable................................................ 19,462,868 12,699,355
Accrued expenses................................................ 15,157,127 13,008,982
Other current liabilities....................................... 2,700,000 2,700,000
----------- -----------
Total current liabilities.................................... 94,319,995 28,408,337
----------- -----------
LONG-TERM LIABILITIES:
Long-term debt.................................................. 67,322,944 67,032,468
Notes payable................................................... -- 30,000,000
Minimum royalty obligation...................................... 4,686,039 6,158,000
Deferred tax liability.......................................... 140,619 100,000
----------- -----------
Total long-term liabilities.................................. 72,149,602 103,290,468
----------- -----------
TOTAL LIABILITIES................................................. 166,469,597 131,698,805
----------- -----------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK:
Par value $01 -- authorized, 40,000 shares, issued, 11,594
shares at March 31, 1996; 10,503 shares at March 31, 1995.... 11,697,624 10,364,802
COMMON STOCKHOLDERS' EQUITY:
Common stock, par value $.01 -- authorized 3,000,000 shares:
issued 726,818 shares........................................ 7,268 7,268
Notes receivable from sale of common stock...................... (517,609) (517,609)
Additional paid-in capital...................................... 26,786,732 26,786,732
Treasury stock, at cost (1996 -- 5,650 shares; 1995 -- 6,725
shares)...................................................... (210,000) (250,000)
Deficit......................................................... (19,563,738) (6,174,085)
Cumulative translation adjustment............................... (50,956) 337,187
----------- -----------
Total common stockholders' equity............................ 6,451,697 20,189,493
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................ $184,618,918 $162,253,100
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE> 102
RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 15, 1994
YEAR ENDED (INCEPTION)
MARCH 31, TO MARCH 31,
1996 1995
----------- --------------
<S> <C> <C>
NET SALES....................................... $131,285,624 $57,714,409
COST OF GOODS SOLD.............................. 51,169,043 24,552,991
------------ -----------
GROSS PROFIT.................................... 80,116,581 33,161,418
------------ -----------
OPERATING EXPENSES:
Selling....................................... 52,780,737 18,245,950
General and administrative.................... 13,679,180 10,127,482
Amortization of intangible and other assets... 5,207,046 2,043,960
------------ -----------
Total operating expenses................... 71,666,963 30,417,392
------------ -----------
OPERATING INCOME................................ 8,449,618 2,744,026
INTEREST EXPENSE (INCOME):
Interest expense.............................. 19,458,278 8,693,822
Interest income............................... (255,500) (455,431)
------------ -----------
LOSS BEFORE INCOME TAXES........................ (10,753,160) (5,494,365)
INCOME TAX PROVISION (BENEFIT).................. 1,303,671 (35,081)
------------ -----------
NET LOSS........................................ (12,056,831) (5,459,284)
PREFERRED STOCK DIVIDENDS....................... 1,332,822 714,801
------------ -----------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS...... $(13,389,653) $(6,174,085)
============ ===========
NET LOSS PER COMMON SHARE....................... $ (18.62) $ (8.50)
============ ===========
WEIGHTED AVERAGE SHARES OUTSTANDING............. 719,138 726,374
============ ===========
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE> 103
RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NOTES
RECEIVABLE ADDITIONAL TREASURY STOCK CUMULATIVE TOTAL COMMON
FROM SALE OF PAID-IN ------------------- TRANSLATION STOCKHOLDERS'
SHARES AMOUNT COMMON STOCK CAPITAL SHARES AMOUNT DEFICIT ADJUSTMENT EQUITY
------- ------ ------------ ----------- ------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
stock........... 726,818 $7,268 $(517,609) $27,010,341 -- $ -- $ -- $ -- $26,500,000
Issuance of
warrants in
conjunction with
senior notes and
redeemable
preferred
stock........... -- -- -- 1,260,000 -- -- -- -- 1,260,000
Accrued dividend,
and accretion on
redeemable
preferred
stock........... -- -- -- -- -- -- (714,801) -- (714,801)
Predecessor basis
accounting
adjustment...... -- -- -- (1,489,609) -- -- -- -- (1,483,609)
Purchase of
treasury
stock........... -- -- -- -- 6,725 (250,000) -- -- (250,000)
Cumulative
translation
adjustment...... -- -- -- -- -- -- -- 337,187 337,187
Net loss.......... -- -- -- -- -- -- (5,459,284) -- (5,459,284)
------- ------ --------- ----------- ------ --------- ------------ --------- -----------
BALANCE, MARCH 31,
1995............ 726,818 7,268 (517,609) 26,786,732 6,725 (250,000) (6,174,085) 337,187 20,189,493
Accrued dividends
and accretion on
redeemable
preferred
stock........... -- -- -- -- -- -- (1,332,822) -- (1,332,822)
Purchase of
treasury
stock........... -- -- -- -- 3,632 (135,000) -- -- (135,000)
Sale of treasury
stock........... -- -- -- -- (4,707) 175,000 -- -- 175,000
Cumulative
translation
adjustment...... -- -- -- -- -- -- -- (388,143) (388,143)
Net loss.......... -- -- -- -- -- -- (12,056,831) -- (12,056,831)
------- ------ --------- ----------- ------ --------- ------------ --------- ------------
BALANCE, MARCH 31,
1996............ 726,818 $7,268 $(517,609) $26,786,732 5,650 $(210,000) $(19,563,738) $ (50,956) $ 6,451,697
======= ====== ========= =========== ====== ========= ============ ========= ============
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE> 104
RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 15,
1994
(INCEPTION)
YEAR ENDED TO MARCH
MARCH 31, 31,
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................................ $(12,056,831) $(5,459,284)
Adjustments to reconcile net loss to net cash used in operating
activities:
Deferred taxes.................................................. 40,619 (96,927)
Depreciation.................................................... 2,843,535 787,733
Amortization of intangible assets............................... 3,208,320 1,860,310
Amortization of minimum royalty and other assets................ 1,998,726 183,650
Amortization of deferred financing costs........................ 2,616,472 993,307
Accrued interest on senior notes, subordinated seller notes and
minimum royalty obligation................................... 1,311,420 866,802
Changes in operating assets and liabilities, net of effects of
acquisitions:
Accounts receivable............................................. (16,635,634) (8,520,720)
Inventories..................................................... (7,560,525) (6,802,298)
Prepaid expenses and other current assets....................... (2,977,456) (1,026,695)
Other assets.................................................... 427,349 (477,344)
Accounts payable................................................ 6,284,133 2,135,227
Accrued expenses................................................ (3,288,380) 5,605,116
Other current liabilities....................................... -- (1,881,420)
Other........................................................... (388,143) 304,605
----------- -----------
Net cash used in operating activities........................ (24,176,395) (11,527,938)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of businesses, net of cash acquired................ 1,384,120 (100,707,219)
Sale of marketable securities................................... 640,950 134,863
Capital expenditures............................................ (8,165,699) (629,062)
----------- -----------
Net cash used in investing activities........................ (6,140,629) (101,201,418)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock........................................ -- 26,500,000
Issuance of senior notes........................................ -- 63,378,900
Net proceeds from notes payable................................. 27,000,000 30,000,000
Payment of minimum royalty obligation........................... (1,259,618) (225,000)
Issuance of redeemable preferred stock.......................... -- 9,650,000
Issuance of warrants............................................ -- 1,260,000
Payment of deferred financing costs............................. (1,032,719) (10,583,374)
Purchase of treasury stock...................................... (135,000) (250,000)
Sale of treasury stock.......................................... 175,000 --
----------- -----------
Net cash provided by financing activities.................... 24,747,663 119,730,526
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS.............. (5,569,361) 7,001,170
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.................... 7,001,170 --
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.......................... $ 1,431,809 $ 7,001,170
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest..................................................... $14,603,651 $51,111,171
=========== ===========
Income taxes................................................. $ 880,415 $ 93,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING TRANSACTIONS:
Accrued dividends and accretion on redeemable preferred stock... $ 1,332,822 $ 714,801
Sale of common stock for notes.................................. $ -- $ 517,609
Issuance of seller notes........................................ $ -- $ 3,500,000
Other current liability -- installment obligation for purchase
of inventory and accounts receivable from Houbigant, Inc..... $ -- $ 2,700,000
Other liability -- present value of minimum royalties........... $ 1,398,080 $ 6,623,283
</TABLE>
See notes to consolidated financial statements.
F-12
<PAGE> 105
RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY
The consolidated financial statements of Renaissance Cosmetics, Inc. (the
"Company") include the accounts Of the Company for the period from April 15,
1994 (date of Inception), and its wholly-owned subsidiaries from their
respective dates of acquisition, Cosmar Corporation from August 18, 1994,
Parfums Parquet Incorporated ("Parfums Parquet") from July 1, 1994, Houbigant
Ltee from December 13, 1994, Dana Perfumes Corporation ("Dana") from December
23, 1994 and Perfums Dana Do Brasil ("Dana Brazil") from December 31, 1995. All
significant intercompany activity has been eliminated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business -- The Company manufactures and sells its fragrance and
nail care products principally through the mass-market or self-select
distribution channel which includes drug stores, mass merchandisers, discount
stores, supermarkets and combination supermarket/drug stores, throughout the
United States.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and the reported amounts of revenues and expenses during the
reporting period The preparation of financial statements in conformity with
generally accepted accounting principles also requires management to make
estimates and assumptions that affect the disclosures of contingent assets and
liabilities at the date of the financial statements Actual results could differ
from those estimates.
Cash Equivalents -- Cash equivalents consist of highly liquid investments
with an original maturity of three months or less.
Marketable Securities -- The Company classifies its investments in debt and
equity securities as available for sale, and accordingly, reflects unrealized
holding gains and losses as a separate component of stockholders' equity.
Inventories -- Inventories are stated at the lower of cost (on the
first-in, first-out (FIFO) and last-in, first-out (UFO) methods) or market.
Property, Plant and Equipment -- Property, plant and equipment additions
are stated at cost and depreciation is computed using the straight-line and the
declining-balance methods over the estimated useful lives of the assets, ranging
from three to forty years. Amortization of leasehold improvements is computed
using the straight-line and the declining-balance methods over the lesser of the
estimated useful lives of the assets or the remaining life of the lease.
Deferred Financing Costs -- Deferred financing costs represent direct costs
relating to closing on the long-term debt and notes payable. These costs are
being amortized over the life of the related debt.
Foreign Currency Translation -- For the Company's international operations,
assets and liabilities are translated at year-end exchange rates and income
statement amounts are translated at average exchange rates prevailing during the
year. Gains and losses resulting from translating foreign currency financial
statements are recorded as a separate component of stockholders' equity.
Transaction gains and losses are included in results of operations and were not
material for any period presented.
Intangible Assets -- Costs of acquisitions of net tangible assets acquired
are stated at cost less accumulated amortization and include trademarks and
goodwill. These costs are being amortized using the straight-line method over
the periods benefited, ranging from 25 to 40 years. The Company assesses the
recoverability of these costs on a regular basis by evaluating the carrying
value of the intangible assets based upon projected net income and undiscounted
future cash flows.
F-13
<PAGE> 106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition -- Sales are recognized when goods are shipped. An
accrual for customer returns is recorded based upon historical experience
Income Taxes -- The Company uses an asset and liability approach to the
computation of income taxes. Under the asset and liability method, deferred tax
assets and liabilities are recognized for the estimated future tax consequences
of temporary differences between the financial reporting and tax bases of assets
and liabilities based upon enacted tax rates in effect when such amounts are
expected to be realized or settled. The effects of changes in tax laws or rates
on deferred tax assets and liabilities are recognized in the period that
includes the enactment date.
Loss Per Common Share -- Loss per common share is based on the weighted
average number of common shares outstanding during the year. The dilutive effect
of stock options and warrants were not considered since the effect would be
antidilutive.
Fair Value of Financial Instruments -- The carrying values of cash and cash
equivalents, marketable securities, accounts receivable, accounts payable and
accrued expenses approximate fair value because of the short-term maturities of
those instruments. The fair values of the Company's long-term debt, notes
payable and preferred stock are disclosed in the notes.
Accounting Pronouncements -- In March 1995, the Financial Accounting
Standards Board issued SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of. This statement is effective
for fiscal years beginning after December 15, 1995. The Company does not expect
that the adoption of this statement will have a material affect on its
consolidated financial condition or results of operations.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, Accounting for Stock-Based Compensation. This statement is effective for
fiscal years beginning after December 15, 1995. The new standard defines a "fair
value" method of accounting for stock options and other equity instruments.
Under the fair value method, compensation cost is measured at the grant date
based on the fair value of the award and is recognized over the service period,
which is usually the vesting period.
Pursuant to this Standard, companies are encouraged, but not required, to
adopt the fair value method of accounting for employee stock-based transactions
The new standard also requires increased footnote disclosures, regardless of the
method chosen to measure and recognize compensation, for employee stock-based
arrangements. The Company has not yet determined if it will elect to change to
the fair value method, nor has it determined the effect the new Standard will
have on net loss and loss per share should it elect to make such a change.
Reclassifications -- Certain reclassifications were made to the 1995
financial statements to conform to the current year's presentation.
3. ACQUISITIONS
The Company, Houbigant, Inc. ("Houbigant") and other parties entered into
license and sublicense agreements (the "Agreements"), the first of which became
effective as of July 1, 1994, whereby the Company has obtained certain exclusive
rights to manufacture and sell on a worldwide basis (excluding Canada -- see
below) certain fragrance products owned and licensed by Houbigant (the
"Houbigant Fragrances"), for initial periods of five and seven years. The
Company agreed to pay royalties generally at the rate of seven percent of net
sales, with annual minimums aggregating $2,730,000 during the initial terms of
the Agreements. Total minimum payments under the terms of the Agreements are
$15,360,000, including the $5,000,000 prepayment. The Company has the option to
renew the Agreements generally for up to seven successive five-year periods.
During each renewal period, annual minimum royalties are adjusted based on
increases in the Consumer Price index.
F-14
<PAGE> 107
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Additionally, under the terms of the Agreements, the Company also agreed to
pay $6,000,000, in installments, for the existing inventory, certain trade
receivables and all product returns received subsequent to the closing date of
the Agreements. As of March 31, 1996, $3,300,000 has been paid.
On August 18, 1994, the Company purchased certain assets and assumed
certain liabilities of Cosmar Corporation and its affiliate, Precision Molded
Plastics, Inc. ("Cosmar") for $64,827,978. Consideration consisted of
$61,327,978 in cash and sellers notes with a face value of $5,000,000 and an
estimated market value of $3,500,000 based on an effective interest rate of
14.48%. Because the acquisition qualifies as a highly-leveraged transaction and
certain shareholders of Cosmar have or had a continuing interest as shareholders
of the Company, application of leveraged buyout accounting resulted in a
predecessor basis adjustment to common stockholders' equity of $1,483,609.
On December 13, 1994, the Company acquired substantially all of the assets
of Houbigant Ltee for an aggregate purchase price of $5,800,000. Houbigant Ltee
includes three companies engaged in the manufacture and sales of Houbigant
Fragrances in Canada. There are no minimum royalties required to be paid in
connection with these license rights.
On December 23, 1994, Dana purchased the assets and business of a group of
companies that manufactured and marketed internationally the Dana line of
fragrance products, for an aggregate cash purchase price of $21,900,000. Such
transaction was financed through term loan borrowings from a financial
institution, with an aggregate value of $30,000,000.
On December 31,1995, Dana exercised its option to purchase the assets and
liabilities of Dana Brazil for $100,000.
The above acquisitions were all accounted for by the purchase method of
accounting for business combinations.
The following unaudited pro forma summary presents the consolidated results
of operations as if the acquisitions had occurred at the beginning of each
period and do not purport to be indicative of what would have occurred had the
acquisitions been made as of that date or of results which may occur in the
future.
<TABLE>
<CAPTION>
PRO FORMA
----------------------------
PERIOD FROM
APRIL 15, 1994
YEAR ENDED (INCEPTION)
MARCH 31, TO MARCH 31,
1996 1995
----------- --------------
<S> <C> <C>
Net sales................................................. $140,741,000 $ 109,912,000
============ =============
Net loss.................................................. $(12,645,000) $ (17,313,000)
============ =============
Net loss per common share................................. $ (17.58) $ (23.83)
============ =============
</TABLE>
4. MARKETABLE SECURITIES
Marketable securities consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Mutual funds.............................................. $ 173,604 $ 772,554
Bonds..................................................... -- 42,000
----------- -----------
$ 173,604 $ 814,554
=========== ===========
</TABLE>
At March 31, 1996 and 1995, fair value of marketable securities
approximated cost.
F-15
<PAGE> 108
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
MARCH 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Raw materials and advertising supplies.................... $16,956,874 $11,859,958
Work in process........................................... 2,860,139 1,423,799
Finished goods............................................ 10,419,726 8,622,569
---------- ----------
$30,236,739 $21,906,326
========== ==========
</TABLE>
The above components are shown net of excess and obsolete inventory
reserves of approximately $1,540,000 and $3,449,000 at March 31, 1996 and 1995,
respectively. Al March 31, 1996 and 1995, 60.7% and 27.5%, respectively, of the
Company's inventories are stated at the lower of LIFO cost or market. The excess
of current replacement cost over the stated LIFO value was $-0- at March 31,
1996 and 1995.
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
------------------------
1996 1995
----------- ----------
<S> <C> <C>
Land................................................................. $ 476,691 $ 182,297
Buildings............................................................ 4,896,008 5,570,042
Machinery and equipment.............................................. 7,451,977 3,145,677
Computer equipment................................................... 4,880,815 --
Leasehold improvement................................................ 461,140 397,840
---------- ---------
18,166,631 9,295,856
Accumulated depreciation............................................. 3,631,268 787,733
---------- ---------
$14,535,363 $8,508,123
========== =========
</TABLE>
7. INTANGIBLE ASSETS
Intangible assets consist of the following
<TABLE>
<CAPTION>
MARCH 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Trademarks................................................ $42,144,000 $42,144,000
Goodwill.................................................. 39,819,924 42,214,926
----------- -----------
81,963,924 84,358,926
Accumulated amortization.................................. 5,068,630 1,860,310
----------- -----------
$76,895,294 $82,498,616
=========== ===========
</TABLE>
Trademarks relate principally to Cosmar and Dana and are being amortized,
on a straight-line basis, over their estimated useful lives, 25 and 40 years,
respectively. Goodwill represents the excess of the cost of purchased businesses
over the fair value of their net assets at date of acquisition and is being
amortized by the straight-line method over a 25-year period. Upon completion of
all the required valuations associated with the acquisitions, goodwill increased
during the period from April 15, 1994 (Inception) to March 31, 1995 by
approximately $5,000,000 from the Company's original estimate. Negative goodwill
of approximately $2.3 million which was generated as a result of the acquisition
of Dana Brazil, and is being amortized over a life of 5 years, is also included
in goodwill above.
F-16
<PAGE> 109
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. ACCRUED EXPENSES
Accrued expenses consist of the following
<TABLE>
<CAPTION>
MARCH 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Current portion of minimum royalty obligation............. $ 3,597,884 $ 966,000
Accrued interest payable.................................. 2,380,384 1,675,176
Acquired plant consolidation and restructuring costs...... 244,000 1,842,000
Accrued marketing and advertising expenses................ 2,492,720 1,424,952
Accrued financing and acquisition costs................... -- 1,955,000
Other..................................................... 6,442,139 5,145,854
----------- -----------
$15,157,127 $13,008,982
=========== ===========
</TABLE>
9. LONG-TERM DEBT
Long-term debt consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Senior notes............................................ $63,623,473 $63,465,317
Subordinated seller notes............................... 3,699,471 3,567,151
----------- -----------
$67,322,944 $67,032,468
=========== ===========
</TABLE>
The Senior notes are senior unsecured obligations of the Company with a
principal amount of $65,000,000 at a stated interest rate of 13 3/4% with
interest payable semi-annually beginning February 15, 1995 and due August 15,
2001. The notes were issued in units with warrants to purchase 130,000 shares of
common stock. The notes were issued with an original discount of $711,100 and
were further discounted as a result of an allocation of $910,000 to the common
stock warrants. The effective interest rate on the Senior notes is 14.33%.
The Senior notes and warrants were detached in December 1994 prior to the
filing of the Company's registration statement with respect to the Senior notes.
The warrants are exercisable at any time and expire on August 15, 2001. The
exercise price of the warrants is $.01 per share.
The Senior notes are fully and unconditionally guaranteed, on a
subordinated basis, as to principal and interest, jointly and severally by all
present and future subsidiaries of the Company.
The Seller notes are subordinated promissory notes of the Company amounting
to $5,000,000 and accruing interest at 8% initially and escalating to 11% over
an eight-year period with a balloon payment of principal and accrued interest on
August 15, 2002. Based on an estimate of their fair market value, these notes
were recorded at a discount of $1,500,000, yielding an effective interest rate
of 14.48%.
The fair value of the Senior notes at March 31, 1996 and 1995 were
$65,000,000 and $61,750,000, respectively. The fair value of the warrants at
March 31, 1996 and 1995 were $2,925,000 and $1,950,000, respectively. Such fair
values are estimated based on quoted market prices for such notes and warrants.
The fair value of the subordinated seller notes is estimated based on rates
currently available to the Company for debt with similar terms and remaining
maturities. Such fair value was approximately $4,617,000 and $3,721,000 at March
31, 1996 and 1995, respectively.
F-17
<PAGE> 110
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. NOTES PAYABLE
On December 22, 1994, as amended, the Company and a financial institution
entered into a note purchase agreement (the "Current Credit Facility"), which
provides for revolving credit in an aggregate principal amount of $30,000,000,
and term loans in an aggregate principal amount of $30,000,000. Such loans bear
interest at the bank base rate (8.25% at March 31, 1996) plus 3% until June 30,
1995, 3.5% thereafter until December 31, 1995, 4% thereafter until June 30, 1996
and 4.5% thereafter. The weighted average interest rates on the notes payable
were 12.19% and 11.66% for the year ended March 31, 1996 and for the period from
December 23, 1994 to March 31, 1995, respectively. The Company paid a commitment
fee of $500,000, a structuring fee of $500,000 and a funding fee of $600,000
which was equal to 2% of the aggregate unpaid principal of the term notes in
excess of fees already paid. During fiscal 1996 the Company paid funding fees on
the available portion of the original revolving credit of $20,000,000,
aggregating $400,000. On September 8, 1995, the Company paid an additional
commitment fee of $400,000. The Company paid a continuation fee of $100,000 on
each of July 1, 1995 and January 2, 1996 and will be required to pay an
additional continuation fee of $100,000 on July 1, 1996 unless the loans have
been terminated.
Borrowings under the revolving credit portion are subject to a borrowing
base availability consisting of eligible inventory and receivables. As of March
31, 1996, $3,000,000 of the revolving credit portion of the Current Credit
Facility was available to the Company for additional borrowings.
The Current Credit Facility includes numerous affirmative and negative
covenants applicable to the Company, including restrictions on indebtedness and
payment of dividends, liens and capital expenditures, and compliance with net
worth, operating earnings and various other financial ratios and covenants.
Based on rates currently available to the Company for debt with similar
terms and remaining maturities, fair value of the notes payable is estimated to
be $29,638,000 at March 31, 1995. At March 31, 1996, carrying value of the notes
payable approximated fair value.
The Current Credit Facility matures in December 1996 and is collateralized
by substantially all of the assets of the Company. The Company is currently
pursuing several financing alternatives, including both equity and debt
financing to replace the Current Credit Facility and to provide funds for new
acquisitions. The Company is currently in discussions with several financial
institutions and believes that it will be able to obtain such financing.
However, the Company has no binding commitment from any financial institution,
and accordingly, there can be no assurance that such additional financing
alternatives will be available to the Company. If the Company is unable to
obtain the financing, it may be required to postpone and/or change significant
elements of its business strategy.
11. INCOME TAXES
The Company records deferred tax liabilities and assets for estimated
future tax consequences attributable to temporary differences. Such temporary
differences exist when the tax basis differs from the financial reporting amount
of assets or liabilities. A valuation allowance is recorded to reduce deferred
tax assets to amounts which, in management's judgment, are more likely than not
to be realized.
The income tax expense is comprised of state tax in the amount of $311,467
and foreign taxes of $1,270,993, and a federal income tax benefit of $278,789
resulting from a carryback of a net operating loss. There is no Federal tax
liability as a result of Federal tax operating losses in the amount of
approximately $13,677,000. Such losses expire in accordance with provisions of
applicable tax law and expire beginning in 2010 as follows:
<TABLE>
<CAPTION>
EXPIRATION DATE AMOUNT
--------------- ----------
<S> <C>
2010.................................................... $3,646,000
2011.................................................... 10,031,000
</TABLE>
F-18
<PAGE> 111
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The income tax expense (benefit) is composed of the following:
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 15, 1994
YEAR ENDED (INCEPTION)
MARCH 31, TO MARCH 31,
1996 1995
---------- --------------
<S> <C> <C>
Current:
Federal.................................................. $ (278,789) $ (200,000)
State.................................................... 411,467 251,605
Foreign.................................................. 1,111,025 10,241
---------- ----------
1,243,703 61,846
---------- ----------
Deferred:
Federal.................................................. -- (175,000)
State.................................................... (100,000) 78,073
Foreign.................................................. 159,968 --
---------- ----------
59,968 (96,927)
---------- ----------
Total income tax expense (benefit)......................... $1,303,671 $ (35,081)
========== ==========
</TABLE>
The following reconciles the income tax expense (benefit) computed at the
Federal statutory income tax rate to the benefit recorded in the statements of
operations:
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 15,
1994
(INCEPTION)
YEAR ENDED TO
MARCH 31, MARCH 31,
1996 1995
----------- -----------
<S> <C> <C>
Federal benefit at statutory rate......................... $(3,656,074) $(1,923,028)
Limitation of utilization of tax benefits................. 5,164,532 1,528,300
Benefit of carryback not previously recorded.............. (278,790) --
State income taxes........................................ 311,467 329,678
Foreign income............................................ (1,508,457) --
Foreign income taxes...................................... 1,270,993 10,241
Other..................................................... -- 19,728
----------- -----------
$ 1,303,671 $ (35,081)
=========== ===========
</TABLE>
F-19
<PAGE> 112
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The significant components of the Company's deferred tax liabilities and
assets are as follows:
<TABLE>
<CAPTION>
MARCH 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Current deferred income tax assets (liabilities):
Allowance for sales returns............................. $ 2,195,425 $ 1,297,280
Inventory reserves...................................... 697,305 (207,500)
Other non-deductible reserves........................... 1,997,260 539,500
Royalties............................................... 866,485 --
Other, net.............................................. 46,630 --
----------- -----------
5,803,105 1,629,280
Less valuation allowance................................ (5,803,105) (1,629,280)
----------- -----------
$ -- $ --
=========== ===========
Non-current deferred income tax assets (liabilities):
Depreciation............................................ (1,091,625) (1,522,220)
Amortization of intangible assets....................... (1,058,915) (654,455)
Federal net operating loss carryforwards................ 4,650,170 1,647,590
State net operating loss carryforwards.................. 1,276,565 --
Foreign tax credit carryforwards........................ 790,065 --
Other -- net............................................ -- 749,075
----------- -----------
4,566,260 219,990
Less valuation allowance................................ (4,566,260) (219,990)
----------- -----------
$ -- $ --
=========== ===========
Deferred state tax liability.............................. $ -- $ 100,000
=========== ===========
Deferred foreign tax liability............................ $ 140,619 $ --
=========== ===========
</TABLE>
Foreign pretax income (loss) was $4,446,593 and $(551,200) for the year
ended March 31, 1996 and for the period from April 15, 1994 (inception) to March
31, 1995.
12. CAPITAL STOCK
a. Serial Preferred Stock--The Board of Directors has the authority to
issue up to 1,000,000 shares of Preferred Stock in one or more series of which
40,000 shares have been designated as redeemable preferred stock.
b. Stock Option Plan--The Company's sock option plan provides for
nonqualified stock options for employees. All options have been granted at
exercise prices at or above fair market value at the date of grant and vest over
periods of up to ten years. At March 31, 1996, 4,762 shares were available for
future grants under the plan.
F-20
<PAGE> 113
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the activity of options in the stock option
plan:
<TABLE>
<CAPTION>
SHARES PRICE
------- ------
<S> <C> <C>
Options granted................................................... 75,181 $37.17
Options canceled.................................................. (9,318) 37.17
------- ------
Total options outstanding at March 31,1995........................ 65,863 37.17
Options granted................................................... 31,377 37.17
Options canceled.................................................. (13,512) 37.17
------- ------
Total options outstanding at March 31, 1996....................... 83,728 37.17
======= ======
Total exercisable options at March 31, 1996....................... 14,832 $37.17
======= ======
</TABLE>
No compensation expense was recognized in 1996 or 1995 relating to such
options.
13. REDEEMABLE PREFERRED STOCK
The Company issued for $10,000,000, 10,000 shares of cumulative
exchangeable preferred stock with a par value of $.01 per share. Such preferred
stock has an initial dividend of 10% per annum. Commencing August 16, 1999 the
dividend rate changes to 15% per annum. The preferred stock was issued in units
with warrants to purchase 50,000 shares of common stock. Dividends are payable
in cash, additional shares of redeemable preferred stock or any combination
thereof, at the option of the Company, up to and including the August 15, 1997
dividend, and in cash thereafter. The proceeds from issuance of the preferred
stock were reduced by an allocation of $350,000, to the common stock warrants.
Such warrants are exercisable at any time and expire on August 15, 2001. These
warrants have an exercise price of $.01 per share. The effective dividend rate
on the preferred stock is approximately 12.01%.
The redeemable preferred stock must be redeemed on August 15, 2002 for
$10,000,000, plus all accumulated and unpaid dividends. The redeemable preferred
stock is exchangeable for senior notes by the Company at any time and under
certain circumstances by the holders of the preferred stock on or after August
15, 1997.
Based on rates currently available to the Company for debt with similar
terms, the fair value of the redeemable preferred stock is estimated to be
$10,907,000 and $8,673,000 at March 31, 1996 and 1995, respectively. Based on
quoted market prices at March 31, 1996 and 1995 of the warrants, the fair value
is estimated to be $1,125,000 and $750,000, respectively.
14. COMMITMENTS AND CONTINGENCIES
a. Leases -- The Company leases certain warehouses, office facilities, and
automobiles, under operating lease agreements, certain of which are subject to
escalation, expiring at various dates through 2001.
Future minimum lease payments under noncancellable operating leases as of
March 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31, AMOUNT
--------------------- ----------
<S> <C>
1997................................................... $1,914,119
1998................................................... 1,486,949
1999................................................... 1,155,570
2000................................................... 748,700
2001................................................... 471,677
----------
$5,770,015
==========
</TABLE>
F-21
<PAGE> 114
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Rent expense associated with operating leases for the year ended March 31,
1996 and the period from April 15, 1994 (Inception) to March 31, 1995 was
$1,998,893 and $336,945, respectively.
b. Royalties -- Future minimum royalty payments at March 31, 1996, which
resulted from acquisitions of companies, together with the present value of
minimum royalty payments, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31, AMOUNT
--------------------- -----------
<S> <C>
1997................................................................... $ 3,597,884
1998................................................................... 3,017,500
1999................................................................... 550,000
2000................................................................... 462,500
2001................................................................... 2,572,500
Thereafter............................................................. 562,500
-----------
10,762,884
Amounts representing interest.......................................... 2,478,961
-----------
Present value of minimum royalty payments.............................. 8,283,923
Current portion........................................................ 3,597,884
-----------
Long-term portion...................................................... $ 4,686,039
===========
</TABLE>
Royalty expense totaled $1,930,785 and $1,489,465 for the year ended March
31, 1996 and the period from April 15, 1994 (Inception) to March 31, 1995,
respectively.
c. Other Employee Stock Options -- Mr. Thomas V. Bonoma has been granted
stock options whereby he has the right to acquire a total of 93,182 shares of
Common Stock of the Company. The earliest date on which these options can become
exercisable generally is August 18, 1997, based on the value of the Company's
equity reaching certain thresholds; however, the valuation date is accelerated
prior to that date (and if the thresholds are reached the options become
exercisable) upon a sale or merger of the Company or public offering of the
Company's Common Stock. Notwithstanding whether the earnings of the Company meet
any of the tests enunciated in the stock option agreement, Mr. Bonoma will be
entitled to exercise these options commencing on August 18, 2000. The exercise
price for each purchasable share under this stock option is $37.17237.
The above sock options have been authorized by the Board of Directors and
granted outside of the Company's stock option plan. No options have been
exercised as of March 31, 1996.
15. LEGAL PROCEEDINGS
a. In April 1995 the Company and Houbigant Inc. commenced an action against
the ACB Companies (the former holders of Houbigant's Canadian licenses) and
their agents (the "Resellers"), alleging that the ACB companies manufactured and
sold Houbigant trademarked products in the US through the Resellers. This
violated both Houbigant's and the Company's rights pursuant to the Agreements,
as well as certain US federal laws. The claims against the Resellers were
settled. The ACB Companies filed counterclaims, most of which were subsequently
dismissed.
Additionally, in May 1995, Houbigant Ltee filed an action against the ACB
companies for approximately $8,000,000 (Canadian) for breach of contract and
fraud. The ACB companies have not as yet asserted any counter claims. The
parties to both of the above cases have agreed in principle to a settlement
whereby the ACB companies will dismiss its remaining asserted and unasserted
counterclaims, and will pay $850,000 to the Company in settlement of all the
remaining claims.
The Company does not believe that this litigation will have a material
adverse effect on its financial condition or its results of operations.
F-22
<PAGE> 115
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
b. The Company is a defendant in a lawsuit where the plaintiff alleges
defamation and interference with business relationships, and is seeking
$7,000,000 in damages. The Company intends to vigorously defend this lawsuit and
believes it has substantial and meritorious defenses. Management believes that
the outcome of this litigation will not have a material effect on the results of
operations or financial condition of the Company.
c. The Company is subject to legal proceedings and claims which arise in
the normal course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position or results of operations of the Company.
16. RETIREMENT PROGRAMS
In June 1995, the Company established a 401(k) Pension Plan (the "Company
Plan") for all U.S. employees, with the exception of Dana union members for
which the Company maintains a separate 401(k) plan. The prior plan covering Dana
non-union members was merged into the Company Plan. Plans are available to all
employees who have been employed continuously for at least one year. The
participants contribution ceiling is 20% of their annual compensation, as
defined, and a matching contribution is provided by the Company at 50% of the
first 6% of the participants' salary for the non-union members and 12 1/2% of
the first 6% of the participants' salary for the union plan. The participants
become fully vested after four years of service. The contributions made by the
Company during the year ended March 31, 1996 and the three months ended March
31, 1995 (for the Dana Plans) were $166,290 and $11,705, respectively. Certain
of the administrative expenses are paid by the Company, the Plans' sponsor.
17. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and trade accounts
receivable. The Company places its cash with high quality financial
institutions.
Credit risk with respect to trade accounts receivable is generally
diversified due to the large number of entities comprising the Company's
customer base and their dispersion throughout the United States. The Company
generally does not require collateral, and the majority of its trade receivables
are unsecured. The Company does, however, perform ongoing credit evaluations of
its customers' financial condition.
The Company sells a significant portion of its products through third-party
drug store and discount retailers and as a result, maintains individually
significant accounts receivable balances with major retailers. If the financial
condition and operation of these retailers deteriorate below critical levels,
the Company's operating results could be adversely affected. An allowance for
doubtful accounts and sales returns is maintained at a level which management
believes is sufficient to cover potential credit losses. The ten largest
accounts receivable balances collectively represented 54% and 50% of total
accounts receivable at March 31, 1996 and 1995, respectively. Sales to ten
customers represented 50% and 46% of gross revenues during the year ended March
31, 1996 and the period April 15, 1994 (Inception) to March 31, 1995. No single
customer accounted for greater than 10% of the Company's revenues for the year
ended March 31, 1996 or for the period April 15, 1994 (inception) to March 31,
1995.
18. RELATED PARTIES
Pursuant to a management agreement, the Company pays management fees to
Kidd, Kamm & Company ("KK & Co."), a related party, subject to certain operating
and financial ratios being met. During the year ended March 31, 1996 and the
period April 15, 1994 (Inception) to March 31, 1995, the Company paid $-0- and
$225,000, respectively, in management fees to KK & Co. Deferred financing costs
include approximately $675,000 of financing fees paid to KK & Co.
In December 1995, the holders of the subordinated sellers notes sold such
notes to a third party who is a holder of a substantial portion of the Company's
redeemable preferred stock (the "Holder"). In a related
F-23
<PAGE> 116
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
transaction, the Company signed an agreement with the Holder, whereby in
exchange for $225,000, the Company agreed not to pursue any claims against the
Holder relating to the acquisition of Cosmar. All other terms and provisions of
the sellers' note remained the same.
19. INFORMATION CONCERNING FINANCIAL REPORTING FOR SEGMENTS AND OPERATIONS IN
GEOGRAPHIC AREAS
The Company is engaged in two main businesses, the manufacturing and
marketing of fragrances and associated products and the manufacturing and
marketing of artificial fingernail care products.
<TABLE>
<CAPTION>
FRAGRANCES NAIL CARE CORPORATE CONSOLIDATED
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Year ended March 31, 1996:
Net sales (A)....................... $83,152,748 $48,132,876 $ -- $131,285,624
============= ============= ============= =============
Operating income (loss)............. $7,607,931 $9,159,638 $(8,317,951) $ 8,449,618
Interest expense -- net............. 3,738,863 12,169,302 3,294,613 19,202,778
Income tax provision (benefit)...... 1,328,163 3,593 (28,085) 1,303,671
------------- ------------- ------------- -------------
Net income (loss)................... $2,540,905 $(3,013,257) $(11,584,479) $(12,056,831)
============= ============= ============= =============
Identifiable assets................. $90,709,215 $83,074,198 $10,835,505 $184,618,918
============= ============= ============= =============
Depreciation and amortization....... $4,534,781 $3,304,496 $ 211,304 $ 8,050,581
============= ============= ============= =============
Capital expenditures................ $4,338,514 $1,942,510 $ 1,884,675 $ 8,165,699
============= ============= ============= =============
Period April 15, 1994 (Inception) to
March 31, 1995:
Net sales (A)....................... $33,602,772 $24,111,637 $ -- $57,714,409
============= ============= ============= =============
Operating (loss).................... $2,889,464 $4,387,301 $(4,532,739) $ 2,744,026
Interest expense -- net............. 665,192 924,145 6,649,054 8,238,391
Income tax provision (benefit)...... -- -- (35,081) (35,081)
------------- ------------- ------------- -------------
Net income (loss)................... $2,224,272 $3,463,156 $(11,146,712) $(5,459,284)
============= ============= ============= =============
Identifiable assets................. $71,092,482 $74,730,544 $16,430,074 $162,253,100
============= ============= ============= =============
Depreciation and amortization....... $ 878,383 $1,953,310 $ 993,307 $ 3,825,000
============= ============= ============= =============
Capital expenditures................ $ 33,243 $ 478,197 $ 117,622 $ 629,062
============= ============= ============= =============
</TABLE>
- ---------------
(A) There were no material intersegment sales during the year ended March 31,
1996 and the period from April 15, 1994 (Inception) to March 31, 1995.
Information related to the Company's operations in different geographic
areas is shown below:
<TABLE>
<CAPTION>
UNITED LATIN
STATES CANADA AMERICA EUROPE CONSOLIDATED
----------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1996:
Net sales (B)(C)........ $115,299,244 $8,026,473 $4,824,576 $3,135,331 $131,285,624
=========== ========= ========= ========== ===========
Net income (loss)....... $(15,332,431) $ 260,038 $1,435,796 $1,579,766 $(12,056,831)
=========== ========= ========= ========== ===========
Identifiable assets..... $156,951,317 $9,674,562 $7,107,409 $10,885,630 $184,618,918
=========== ========= ========= ========== ===========
</TABLE>
F-24
<PAGE> 117
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
UNITED LATIN
STATES CANADA AMERICA EUROPE CONSOLIDATED
----------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Period April 15, 1994 (Inception) to March 31, 1995:
Net sales (B)(C)........ $ 56,152,467 $ 633,411 $ 385,392 $ 543,139 $ 57,714,409
============ ========= ========== ========== ============
Net income (loss)....... $ (5,145,843) $(277,611) $ (185,732) $ 149,902 $ (5,459,284)
============ ========= ========== ========== ============
Identifiable assets..... $155,389,035 $ 609,403 $1,891,969 $4,362,693 $162,253,100
============ ========= ========== ========== ============
</TABLE>
(B) There were no material intercompany sales between geographic areas during
the year ended March 31, 1996 and the period from April 15, 1994
(Inception) to March 31, 1995.
(C) The above mentioned revenues for the United States include export sales of
$6,924,161 and $4,706,980 during the year ended March 31, 1996 and the
period from April 15, 1994 (Inception) to March 31, 1995 respectively.
20. SUBSEQUENT EVENTS
On May 29, 1996, the Company entered into a Securities Purchase Agreement
with an investor, under which the Company can issue up to $20,000,000 of Senior
Exchangeable Preferred stock, Series A. On May 30, 1996, the Company issued
$10,000,000 of such preferred stock. The Preferred Stock has a dividend rate of
12% per annum, payable quarterly, in cash or additional preferred stock, at the
option of the Company. If the Preferred Stock remains outstanding on or after
August 31, 1998, it will be exchangeable, at the option of the Company into an
equal amount of Senior Notes. Under certain circumstances the Holder of the
Preferred Stock, may exercise an option to acquire Common Stock in exchange for
a portion of the Preferred Stock held.
On June 14, 1996, the financial institution with which the Company has its
Current Credit Facility, has agreed to increase its revolving credit from the
current $30,000,000 aggregate principal amount to $40,000,000, upon the issuance
of $20,000,000 of Senior Exchangeable Preferred Stock, Series A.
F-25
<PAGE> 118
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Cosmar Corporation and Affiliate
We have audited the accompanying combined statements of operations of
assets acquired and liabilities assumed and changes in excess of assets acquired
over liabilities assumed and of cash flows of the assets acquired and
liabilities assumed of Cosmar Corporation and Affiliate (the "Company") for the
period from January 1, 1994 to August 17, 1994. These combined financial
statements are the responsibility of the Company's management. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the results of operations and cash flows of the assets
acquired and liabilities assumed of Cosmar Corporation and Affiliate for the
period from January 1, 1994 to August 17, 1994, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Long Beach, California
October 28, 1994
F-26
<PAGE> 119
COSMAR CORPORATION AND AFFILIATE
COMBINED STATEMENT OF OPERATIONS OF ASSETS
ACQUIRED AND LIABILITIES ASSUMED
AND CHANGES IN EXCESS OF ASSETS ACQUIRED OVER LIABILITIES ASSUMED
PERIOD FROM JANUARY 1, 1994 TO AUGUST 17, 1994
<TABLE>
<S> <C>
NET SALES (Note 1).............................................................. $18,300,944
COST OF SALES................................................................... 7,394,576
-----------
GROSS PROFIT.................................................................... 10,906,368
-----------
OPERATING EXPENSES:
Selling and marketing......................................................... 3,876,975
Shipping and warehousing...................................................... 729,212
General and administrative (Note 3)........................................... 2,272,700
Research and development (Note 1)............................................. 701,513
-----------
Total operating expenses................................................... 7,580,400
-----------
OPERATING INCOME................................................................ 3,325,968
-----------
OTHER INCOME (EXPENSE):
Interest expense.............................................................. (60,500)
Other income, net (Note 1).................................................... 185,988
-----------
Total other income......................................................... 125,488
-----------
INCOME BEFORE PROVISION FOR INCOME TAXES........................................ 3,451,456
PROVISION FOR INCOME TAKES (Note 1)............................................. 87,297
-----------
NET INCOME...................................................................... $ 3,364,159
Distributions to shareholders................................................... (2,151,871)
-----------
BALANCE, JANUARY 1, 1994 (Note 1)............................................... $ 3,296,371
BALANCE, AUGUST 17, 1994........................................................ $ 4,508,659
===========
</TABLE>
See accompanying notes to combined financial statements
F-27
<PAGE> 120
COSMAR CORPORATION AND AFFILIATE
COMBINED STATEMENT OF CASH FLOWS OF ASSETS
ACQUIRED AND LIABILITIES ASSUMED
PERIOD FROM JANUARY 1, 1994 TO AUGUST 17, 1994
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................. $ 3,364,159
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for doubtful accounts and sales returns........................ 105,719
Depreciation............................................................. 337,784
Changes in operating assets and liabilities:
Accounts receivable.................................................... 1,136,778
Inventory.............................................................. (390,079)
Prepaid expenses and other current assets.............................. 8,181
Other assets........................................................... 1,149
Accounts payable....................................................... 941,241
Accrued expenses....................................................... 478,584
Deferred income........................................................ (43,750)
-----------
Net cash provided by operating activities........................... 5,939,766
-----------
CASH FLOWS FROM INVESTING ACTIVITIES --
Purchase of property and equipment.......................................... (247,682)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of line of credit................................................. (1,300,000)
Repayment of notes payable.................................................. (466,059)
Cash distributions.......................................................... (2,151,871)
-----------
Net cash (used in) financing activities............................. (3,917,930)
-----------
NET INCREASE IN CASH.......................................................... 1,774,154
CASH, BEGINNING OF PERIOD..................................................... 140,426
-----------
CASH, END OF PERIOD, NOT ACQUIRED (Note 1).................................... $ 1,914,580
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
Cash paid during the period for:
Interest................................................................. $ 60,500
===========
Income taxes............................................................. $ 67,231
===========
</TABLE>
See accompanying notes to combined financial statements.
F-28
<PAGE> 121
COSMAR CORPORATION AND AFFILIATE
NOTES TO THE COMBINED FINANCIAL STATEMENTS
PERIOD FROM JANUARY 1, 1994 TO AUGUST 17, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General -- On August 18, 1994, CP Holding Company acquired substantially
all of the assets and assumed substantially all of the liabilities of Cosmar
Corporation and its Affiliate, Precision Molded Plastics ("PMP"), who are
engaged in the manufacture and marketing of artificial nail care products and
related accessories. The assets acquired and liabilities assumed comprised all
of the operating assets and liabilities of Cosmar Corporation and PMP except for
cash and certain other assets of $2,043,541 and certain legal claims asserted
against Cosmar Corporation or PMP. Cos mar Corporation and PMP sell their
products to chain drug stores and mass merchandisers principally located
throughout the United States and Europe.
Principles of Combination -- Cosmar Corporation and PMP are controlled by
common shareholders. The combined financial statements include the accounts of
Cosmar Corporation and PMP, collectively referred to as the "Company". All
significant intercompany transactions have been eliminated.
Revenue Recognition -- Revenue is recognized upon shipment of product to
the customer, with appropriate allowance for estimated returns and other
allowances. The Company also has a consulting and exclusive production agreement
with a customer. The agreement provides for royalties to be received each
calendar quarter in the amount of $65,625. Royalties received in advance are
deferred and recognized as income in the month earned. Consulting income earned
for the period from January 1, 1994 to August 17, 1994 was $175,000 which is
included in other income in the accompanying combined statement of operations.
Research and Development Costs -- Research and development costs related to
the designing, development and testing of new products are charged to expense as
incurred.
Income Taxes -- The Company has elected to be taxed as an S Corporation
under the provisions of the Internal Revenue Code through August 17, 1994. Under
those provisions, the Company does not pay federal or state corporate income
taxes on its taxable income. Instead, the shareholders are liable for federal
and state income taxes on the Company's taxable income. Under California state
law the S Corporation are subject to a 1 1/2 percent franchise tax charged at
the corporate level.
2. COMMITMENTS
Operating Leases -- The Company leases certain warehouse and office
facilities and automobiles under operating lease agreements certain of which are
subject to escalations, expiring at various dates through 1996. Rent expense
associated with operating leases for the period from January 1, 1994 to August
17, 1994 was $219,362.
Future minimum lease payments under noncancellable operating leases as of
August 17, 1994 are:
<TABLE>
<S> <C>
1994................................................... $ 155,408
1995................................................... 434,417
1996................................................... 416,320
----------
$1,006,145
==========
</TABLE>
Under the terms of a license agreement, the Company is obligated to pay to
the licensers, royalties equal to a specified percentage of the sales of the
Company's products subject to the license agreement. The Company is obligated to
pay minimum royalties aggregating approximately $767,000 through 2004. Royalty
expense recognized under this agreement totaled $116,000 for the period from
January 1, 1994 to August 17, 1994.
F-29
<PAGE> 122
COSMAR CORPORATION AND AFFILIATE
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
PERIOD FROM JANUARY 1, 1994 TO AUGUST 17, 1994
3. RELATED PARTY TRANSACTIONS
The Company paid consulting fees to a shareholder in the amount of $40,000
for the period ended August 17, 1994, which are included in general and
administrative expenses in the accompanying statement of operations.
F-30
<PAGE> 123
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF
COSMAR CORPORATION AND AFFILIATE
We have audited the accompanying combined statements of income and cash
flows of Cosmar Corporation and Affiliate for the year ended December 31, 1993.
These combined statements of income and cash flows are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined statements of income and cash flows based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined statements of income and cash
flows are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the statements of
income and cash flows. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall combined statements of income and cash flows
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the combined statements of income and cash flows referred
to above present fairly, in all material respects, the results of operations and
cash flows of Cosmar Corporation and Affiliate for the year ended December 31,
1993 in conformity with generally accepted accounting principles.
Windes & McClaughry
Long Beach, California
April 26, 1994
F-31
<PAGE> 124
COSMAR CORPORATION AND AFFILIATE
COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
SALES........................................................ $25,844,062
COST OF SALES................................................ 10,852,670
-----------
GROSS PROFIT................................................. 14,991,392
-----------
OPERATING EXPENSE
Shipping and warehouse..................................... 1,076,022
Selling.................................................... 5,198,714
Administrative............................................. 3,085,282
Research and development................................... 567,968
-----------
9,927,986
-----------
INCOME FROM OPERATIONS....................................... 5,063,406
-----------
OTHER INCOME (EXPENSE)
Interest (expense)......................................... (131,711)
Other income............................................... 5,797
-----------
(125,914)
-----------
INCOME BEFORE STATE FRANCHISE TAX............................ 4,937,492
STATE FRANCHISE TAX.......................................... 136,000
-----------
NET INCOME................................................... $ 4,801,492
===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-32
<PAGE> 125
COSMAR CORPORATION AND AFFILIATE
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................................... $ 4,801,492
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization.................... 476,766
(Increase) decrease in:
Accounts receivable............................ 255,072
Inventory...................................... (1,162,557)
Prepaid expenses............................... (118,587)
Other assets................................... (5,027)
Increase (decrease) in:
Accounts payable............................... (44,851)
Accrued expenses............................... 219,499
-----------
Net Cash Provided By Operating Activities...... 4,421,807
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment.................. (877,025)
-----------
Net Cash Used In Investing Activities............ (877,025)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in short-term borrowings................. 300,000
Proceeds from notes payable......................... 238,000
Repayment of notes payable.......................... (94,501)
Repayment of due to shareholders.................... (457,175)
Distributions to shareholders....................... (3,689,099)
----------
Net Cash Used In Financing Activities............ (3,702,775)
----------
NET CHANGE IN CASH.................................... (157,993)
CASH AT BEGINNING OF YEAR............................. 298,419
----------
CASH AT END OF YEAR................................... $ 140,426
==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-33
<PAGE> 126
COSMAR CORPORATION AND AFFILIATE
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1993
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Cosmar Corporation and
Affiliate (the Company) is presented to assist in understanding the Company's
combined financial statements.
Organization and Operation
Cosmar Corporation and Precision Molded Plastics are incorporated under the
laws of the State of California and are controlled by common shareholders. The
Company's principal business activity is the manufacture and distribution of
fingernail products. The company has a diversified customer base including
national and international retailers.
Principles of Combination
The combined financial statements include the accounts of Cosmar
Corporation and Precision Molded Plastics. All material intercompany accounts
and transactions have been eliminated.
Inventory
Inventory is stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided by
using the straight-line and accelerated methods over the estimated useful lives
of three to 31 1/2 years.
Expenditures for fixed asset additions and major improvements are
capitalized, and expenditures for maintenance and repairs are expensed as
incurred.
Income Taxes
Both Cosmar Corporation and Precision Molded Plastics shareholders elected
to be taxed as S Corporations for federal and California tax purposes, and as
such, the income is primarily taxed directly to the shareholders. There is a
2 1/2 percent California franchise tax charged at the corporate level and
reflected in the provision for state franchise tax expense. Cash paid for taxes
amounted to approximately $223,000 for 1993.
NOTE 2 -- COMMITMENTS
Operating Leases
The Company leases certain warehouse, office facilities, automobile and
office equipment under operating lease agreements expiring at various dates
through 1996. Rent expense associated with operating leases for the year ended
December 31, 1993 was $276,950.
Noncancellable operating lease obligations as of December 31, 1993 are:
<TABLE>
<CAPTION>
OPERATING
YEAR ENDING DECEMBER 31, LEASES
------------------------ ----------
<S> <C>
1994.................................... $ 303,730
1995.................................... 360,225
1996.................................... 352,178
----------
$1,016,133
==========
</TABLE>
F-34
<PAGE> 127
COSMAR CORPORATION AND AFFILIATE
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993
NOTE 3 -- RELATED PARTY TRANSACTION
The Company paid consulting fees to a shareholder in the amount of $60,000
for the year ended December 31, 1993.
NOTE 4 -- MAJOR CUSTOMERS
During 1993, the Company had three major customers each representing
approximately 10% of sales.
NOTE 5 -- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Noncash financing activities:
The Company refinanced $300,000 of notes payable during the year ended
December 31, 1993.
F-35
<PAGE> 128
GREAT AMERICAN COSMETICS, INC.
BALANCE SHEET
AS AT JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current Assets
Cash............................................................. $1,019,888
Accounts receivable.............................................. 1,607,763
Merchandise inventories -- submitted............................. 2,686,789
Prepaid expenses and other current assets........................ 9,437
----------
Total Current Assets.......................................... 5,323,877
Fixed Assets....................................................... 131,503
Accumulated depreciation......................................... 81,141
----------
50,362
Intangible assets, net of accumulated amortization of $817,679..... 1,157,321
Deposits........................................................... 8,139
----------
Total Assets....................................................... $6,539,699
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current installments of long-term debt........................... $ 220,440
Accounts payable................................................. 737,886
Due to shareholders.............................................. 81,500
Accrued expenses and taxes payable............................... 1,640,621
----------
Total Current Liabilities..................................... 2,680,447
Long-term debt..................................................... 591,590
Commitments and contingencies...................................... --
Shareholders' Equity
Capital stock.................................................... 2,000
Retained earnings................................................ 3,265,662
----------
Total Shareholders' Equity.................................... 3,267,662
----------
Total Liabilities and Shareholders' Equity......................... $6,539,699
==========
</TABLE>
See notes to financial statements.
F-36
<PAGE> 129
GREAT AMERICAN COSMETICS, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
INCOME
From Sales -- net............................................... $7,029,488 $3,702,990
COST OF GOODS SOLD
Inventories -- January 1,....................................... 2,201,359 789,786
Purchases....................................................... 4,266,476 2,725,329
Freight and duty................................................ 258,559 94,821
Other direct costs.............................................. 9,180 24,240
---------- ----------
TOTAL AVAILABLE FOR SALES.................................... 6,735,574 3,634,176
Inventories -- June 30,......................................... 2,686,789 1,537,086
---------- ----------
Cost of Goods Sold........................................... 4,048,785 2,097,090
---------- ----------
GROSS MARGIN ON SALES............................................. 2,980,703 1,605,900
OPERATING EXPENSES
Selling......................................................... 810,896 353,786
General and administrative...................................... 303,714 195,381
Officers' salaries.............................................. 128,546 65,910
Taxes........................................................... 22,833 13,289
Depreciation and amortization................................... 131,069 128,557
---------- ----------
TOTAL OPERATING EXPENSES..................................... 1,397,058 756,923
---------- ----------
NET OPERATING INCOME FOR PERIOD BEFORE OTHER INCOME............... 1,583,645 848,977
Gain on restructuring of debt................................... 409,000 --
Interest income................................................. 3,959 451
---------- ----------
NET INCOME FOR PERIOD BEFORE PROVISION FOR INCOME TAXES........... 1,996,604 849,428
Provision for income taxes...................................... 601,400 322,000
---------- ----------
NET INCOME FOR PERIOD............................................. 1,395,204 527,428
Retained earnings -- January 1,................................... 1,870,458 818,859
---------- ----------
Retained earnings -- June 30,..................................... $3,265,662 $1,346,287
========== ==========
</TABLE>
See notes to financial statements.
F-37
<PAGE> 130
GREAT AMERICAN COSMETICS, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income for period............................................. $1,395,204 $ 527,428
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization.................................. 131,069 128,557
Gain on restructuring of debt.................................. (409,000) --
Changes in assets and liabilities:
Accounts receivable.......................................... (736,565) (631,207)
Inventory.................................................... (485,430) (747,300)
Prepaid expenses............................................. 16,029 (722)
Accounts payable............................................. 176,352 420,284
Accrued expenses and taxes payable........................... 1,008,828 354,563
--------- ---------
Net cash provided by operating activities................. 1,096,487 51,603
--------- ---------
Cash Flows from Investing Activities:
Purchase of fixed assets.......................................... (25,127) (12,406)
Repayment of loans from shareholders.............................. (100,000) (30,000)
--------- ---------
Net cash (used in) investing activities................... (125,127) (42,406)
--------- ---------
Cash Flows from Financing Activities:
Proceeds of notes payable......................................... 1,500,000 200,000
Repayment of installment indebtedness............................. (1,762,375) (134,190)
--------- ---------
Net cash (used in) financing activities................... (262,375) 65,810
--------- ---------
Net Changes in Cash Equivalents..................................... 708,985 75,007
Cash balance -- January 1,.......................................... 310,903 130,081
--------- ---------
Cash balance -- June 30,............................................ $1,019,888 $ 205,088
========= =========
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest....................................................... $ 26,334 $ 2,225
========= =========
Income taxes................................................... $ 22,770 $ 6,840
========= =========
</TABLE>
See notes to financial statements.
F-38
<PAGE> 131
GREAT AMERICAN COSMETICS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1: -- BASIS OF PRESENTATION
In the opinion of management, all adjustments (consisting solely of normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows of Great American Cosmetics, Inc. (the
"Company") are presented on a consistent basis. The results of operations for
the six months ended June 30, 1996 are not necessarily indicative of the results
to be expected for any other interim period or for the entire year. Certain
information and footnote disclosures have been condensed or omitted. The
financial statements should be read in conjunction with the financial statements
for the year ended December 31, 1995.
NOTE 2: -- INVENTORIES
The components of inventories at June 30, 1996 are as follows:
<TABLE>
<S> <C>
Raw materials................................................................... $ 775,898
Finished goods.................................................................. 1,910,891
----------
$2,686,789
==========
</TABLE>
The Company's inventories are stated at the lower of cost (FIFO) or market.
NOTE 3: -- SUBSEQUENT EVENTS
On June 27, 1996, the Company and Messrs. Larry Pallini and Vincent
Carbone, the sole shareholders of the Company entered into a stock purchase
agreement with Cosmar Corporation, a wholly owned subsidiary of Renaissance
Cosmetics, Inc. to sell all the issued and outstanding capital stock of the
Company. The transaction closed on August 21, 1996.
F-39
<PAGE> 132
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Great American Cosmetics, Inc.
Port Washington, New York
We have audited the accompanying Balance Sheet of Great American Cosmetics,
Inc. as of December 31, 1995 and the related Statements of Income, Retained
Earnings, and Cash Flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We have conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
We did not observe the taking of the physical inventory at December 31,
1994, and 1995 since we were not engaged to audit the Company's records until
after that date. We were able to satisfy ourselves by means of other procedures
concerning inventory quantities.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Great American Cosmetics,
Inc. as of December 31, 1995 and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
Deutsch, Marin & Company
July 11, 1996
F-40
<PAGE> 133
GREAT AMERICAN COSMETICS, INC.
BALANCE SHEET
AS AT DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Current Assets
Cash............................................................. $ 310,903
Accounts receivable.............................................. 871,198
Merchandise inventories (Note 1)................................. 2,201,359
Prepaid expenses and other current assets........................ 25,466
----------
Total Current Assets.......................................... 3,408,926
Fixed Assets (Note 1, 3)........................................... 44,637
Intangible assets, net of accumulated amortization of $706,012
(Note 2)......................................................... 1,268,988
Deposits........................................................... 8,139
----------
Total Assets....................................................... $4,730,690
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current installments of long-term debt (Note 4).................. $ 425,000
Accounts payable................................................. 561,533
Due to shareholders (Note 5)..................................... 100,000
Accrued expenses and taxes payable............................... 631,794
----------
Total Current Liabilities..................................... 1,718,327
Long-term debt (Note 4)............................................ 1,058,405
Due to shareholders (Note 5)....................................... 81,500
Commitments and contingencies (Note 7)............................. --
Shareholders' Equity
Common stock -- no par value;
200 shares issued and outstanding............................. 2,000
Retained earnings................................................ 1,870,458
----------
Total Shareholders' Equity.................................. 1,872,458
----------
Total Liabilities and Shareholders' Equity......................... $4,730,690
==========
</TABLE>
The accompanying letter and notes are an integral part of these statements
F-41
<PAGE> 134
GREAT AMERICAN COSMETICS, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Income
From sales............................................................. $7,885,916
Cost of Goods Sold
Inventories -- January 1, 1995......................................... 789,786
Purchases.............................................................. 5,557,433
Freight and duty....................................................... 341,459
Other direct costs..................................................... 50,735
----------
Total available for sales........................................... 6,739,413
Inventories -- December 31, 1995....................................... 2,201,359
----------
Cost of Goods Sold.................................................. 4,538,054
----------
Gross Margin on Sales.................................................... 3,347,862
Operating Expenses
Selling................................................................ 837,947
General and administrative............................................. 429,035
Taxes.................................................................. 28,018
Officers' salaries..................................................... 134,850
Depreciation and amortization.......................................... 257,113
----------
Total Operating Expenses............................................ 1,686,963
==========
Net Income for Year Before Provision for Income Taxes.................... 1,660,899
Provision for income taxes............................................. 609,300
----------
Net Income for Year...................................................... 1,051,599
Retained earnings -- January 1, 1995..................................... 818,859
----------
Retained earnings -- December 31, 1995................................... $1,870,458
==========
</TABLE>
The accompanying letter and notes are an integral part of these statements
F-42
<PAGE> 135
GREAT AMERICAN COSMETICS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
Cash Flows from Operating Activities:
Net income for year.............................................. $1,051,599
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization................................. 257,113
Changes in assets and liabilities:
Accounts receivable......................................... (156,146)
Inventories................................................. (1,411,573)
Prepaid expenses............................................ (20,064)
Deposits.................................................... (389)
Accounts payable............................................ 251,369
Accrued expenses and taxes payable.......................... 448,011
----------
Net cash provided by operating activities................ 419,920
----------
Cash Flows from Investing Activities:
Repayment of shareholder loans................................... (80,000)
Purchase of fixed assets......................................... (31,908)
----------
Net cash (used in) investing activities.................. (111,908)
----------
Cash Flows from Financing Activities:
Proceeds of notes payable........................................ 150,000
Repayment of installment indebtedness............................ (277,190)
----------
Net cash (used in) financing activities.................. (127,190)
----------
Net Changes in Cash Equivalents.................................... 180,822
Cash balance -- January 1, 1995.................................... 130,081
----------
Cash balance -- December 31, 1995.................................. $ 310,903
==========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest...................................................... $ 8,496
==========
Taxes......................................................... $ 93,275
==========
</TABLE>
The accompanying letter and notes are an integral part of these statements
F-43
<PAGE> 136
GREAT AMERICAN COSMETICS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1: -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company's Activities -- The Company is a New York corporation, organized in
May, 1990, and formerly known as Unforgettable Cosmetics, Inc. The Company is a
wholesaler of health, beauty aids and fragrances selling to predominantly chain
drugstores, mass merchandisers and other wholesalers.
Merchandise Inventories -- Inventories consist of finished goods,
unpackaged product components (bulk), and displays, materials and supplies and
are valued at the lower of cost or market, primarily on a first-in, first-out
(FIFO) cost basis. All obsolete or non-saleable merchandise has been valued at
net realizable value.
Fixed Assets and Depreciation -- Fixtures and equipment are stated at cost
and are depreciated for both financial reporting and income tax purposes under
the Modified Accelerated Cost Recovery System (MACRS). In accordance with this
provision, equipment is being depreciated using the double declining balance
method over a five/seven year period. These procedures differ from generally
accepted accounting principles, which require depreciation to be provided over
the estimated average useful lives of the assets. Any difference in the current
year's provision for depreciation on these assets, based upon the usage of
MACRS, rather than the estimated average useful lives, is not significant.
Property sold or retired is eliminated from the asset and reserve accounts
in the year of disposition. Any differences between the proceeds on disposition
and undepreciated cost are reflected in other income.
Expenditures for maintenance, repairs and minor renewals which do not
naturally extend the life of assets are charged against earnings when incurred.
Additions and major renewals are capitalized.
Concentration of Credit Risk -- The Company's credit risks primarily
consist of accounts receivable from various drug store chains. Management
performs ongoing credit evaluations of its customers and provides allowances as
deemed necessary.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
NOTE 2: -- ACQUISITION OF NAT ROBBINS LTD.
On December 1, 1992, the Company acquired the operations and substantially
all assets of Nat Robbins Ltd., a New York corporation in a business similar to
their own.
Assets included were as follows:
<TABLE>
<S> <C>
Trademark................................................ $1,000,000
Customer list............................................. 400,000
Goodwill.................................................. 75,000
Equipment................................................. 25,000
----------
$1,500,000
==========
</TABLE>
In addition, a four year non-competition agreement was entered into between
the seller and the Company, at a cost of $500,000. With the exception of the
noncompete covenant and equipment, each asset acquired is amortized over a
fifteen year period in accordance with the Revenue Reconciliation Act of 1993.
F-44
<PAGE> 137
GREAT AMERICAN COSMETICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3: -- FIXED ASSETS
Fixed assets and depreciation are comprised as follows:
<TABLE>
<CAPTION>
ACCUMULATED BOOK
COST DEPRECIATION VALUE DEPRECIATION
-------- ------------ ------- ------------
<S> <C> <C> <C> <C>
Machinery and equipment....................... $ 81,254 $ 38,915 $42,339 $ 13,304
Furniture and fixtures........................ 10,975 10,975 -- 9,753
Shelves and racks............................. 14,147 11,849 2,298 10,722
-------- -------- ------- --------
Total......................................... $106,376 $ 61,739 $44,637 $ 33,779
======== ======== ======= ========
</TABLE>
NOTE 4: -- LONG-TERM DEBT
Long-term debt is comprised as follows:
<TABLE>
<S> <C>
Various installment notes for equipment and intangibles................ $1,333,405
Notes payable -- Quality Supply Corp., with interest at 13%,
due November 5, 1996................................................. 100,000
Notes payable -- Christine Tsaktsirlis, with interest at 13%,
due November 5, 1996................................................. 50,000
----------
1,483,405
Amounts due within one year............................................ 425,000
----------
$1,058,405
==========
</TABLE>
The various installment notes result from an agreement dated December 1,
1992 for the purchase of the name and sundry assets of Nat Robbins, Ltd. (Note
2). The total purchase price was $2,000,000, which included the assumption by
the Company of certain liabilities of the seller in the amount of $328,000. The
payments due under the note are calculated at 8% of the net sales of Nat Robbins
products and are payable on a monthly basis. The seller has received a security
interest in the acquired assets, which the seller assigned to Extebank. At the
direction of the seller, the Company had been remitting any amounts due under
the agreement equally to pay both the assumed liabilities and Extebank. At
December 31, 1994, the assumed liabilities were paid in full.
Management has been negotiating with a third party lender a refinancing of
the Extebank indebtedness so as to achieve more favorable principal repayment
terms. (See Note 8.)
Management, based upon its 1995 sales of "Nat Robbins" products, has
classified $275,000 of the obligation as a current maturity of long-term debt.
NOTE 5: -- RELATED PARTY TRANSACTIONS
The shareholders of the Company have made various advances of working
capital, when needed, to the Company. These advances are payable on demand,
without collateral, and interest is charged at prevailing market rates.
The shareholders have agreed not to withdraw portions of their respective
loans to the company for the next twelve (12) month period. As such, these
amounts have been classified as long-term.
F-45
<PAGE> 138
GREAT AMERICAN COSMETICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6: -- INCOME TAXES
The provision for income taxes consist of the following:
<TABLE>
<S> <C>
Federal income tax, at applicable rates................................. $453,400
New York Sate franchise tax............................................. 155,900
--------
Total................................................................. $609,300
========
</TABLE>
The Company is currently being audited by the Internal Revenue Service for
years 1993 and 1994. Management does not feel that any adjustment will be
material. The issues under review, if adjusted by the IRS, will merely result in
a timing difference as to the deduction of certain costs.
NOTE 7: -- COMMITMENTS AND CONTINGENCIES
In November of 1994, the Company moved to a new location where the minimum
annual rental commitment in effect at December 31, 1995 is as follows:
<TABLE>
<S> <C>
1996..................................................................... $48,205
1997..................................................................... 50,065
1998..................................................................... 51,925
1999..................................................................... 53,785
2000..................................................................... 4,495
</TABLE>
The lease requires payment of real estate taxes, electric and other
expenses. The Company also leases additional office space in Florida under a
lease expiring February, 1997, which provides for the lessee to be responsible
for all insurance, utilities and real estate taxes. Rent expense relating to
these arrangements aggregated $58,511 for 1995.
NOTE 8: -- SUBSEQUENT EVENT
Refinancing -- In April, 1996, the Company obtained a $600,000 loan from
Chase Manhattan Bank, which funds were used for the purpose of repayment of the
existing notes with Extebank. In accordance with an agreement with Extebank, the
Company received a $350,000 discount on the early retirement of the debt. In
addition, the Company entered into a revolving credit agreement with Chase that
provides for advances up to a maximum of $900,000.
Pending Sale -- The shareholders of the Company have entered into a stock
purchase agreement dated June 27, 1996 with Cosmar Corporation (the Buyer).
Pursuant to the agreement, the Buyer is acquiring from the shareholders all of
the outstanding capital stock of Great American Cosmetics, Inc. The transaction
contemplated under the agreement is scheduled to close by August 31, 1996.
* * * * *
F-46
<PAGE> 139
MEM COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
6/30/96 12/31/95
----------- -----------
<S> <C> <C>
ASSETS:
Current assets:
Cash.......................................................... $ 160,670 $ 957,562
Accounts receivable, less allowance for doubtful accounts of
$648,355 at 6/30/96 and $680,319 at 12/31/95................ 5,045,762 13,381,468
Inventories, at lower of cost (first-in, first out) or market:
Finished goods.............................................. 7,448,374 6,021,947
Raw materials and work in process........................... 11,972,955 8,582,573
Prepaid expenses.............................................. 1,450,637 825,377
------------ ------------
Total current assets.......................................... 26,078,398 29,768,927
Property, plant and equipment, at cost........................ 19,269,804 19,106,128
Less accumulated depreciation................................. (14,485,038) (13,924,996)
------------ ------------
Net property, plant and equipment............................. 4,784,766 5,181,132
Other assets:
Advance royalty payments -- net............................... 496,170 567,450
Other assets.................................................. 250,516 208,132
Intangibles -- net............................................ 9,859,941 10,098,702
------------ ------------
Total assets.................................................. $41,469,791 $45,824,343
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loans payable to financial institutions and banks............. $10,032,496 $10,791,385
Accounts payable.............................................. 5,764,558 3,523,504
Accrued expenses.............................................. 1,629,645 1,928,989
Notes payable -- current portion.............................. 1,553,990 1,553,990
------------ ------------
Total current liabilities..................................... 18,980,689 17,797,868
Long-term notes............................................... 2,274,005 3,369,813
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, $.05 par value; 6,000,000 shares authorized,
3,000,000 shares issued..................................... 150,000 150,000
Additional paid-in capital.................................... 3,090,110 3,090,110
Retained earnings............................................. 22,034,385 26,460,779
Less: Common stock in treasury, at cost....................... (4,597,430) (4,597,430)
Cumulative translation adjustment....................... (461,968) (446,797)
------------ ------------
Total stockholders' equity.................................... 20,215,097 24,656,662
------------ ------------
Total liabilities and stockholders' equity.................... $41,469,791 $45,824,343
============ ============
</TABLE>
F-47
<PAGE> 140
MEM COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1996 1995 1995
QUARTER YEAR TO DATE QUARTER YEAR TO DATE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Net sales................................... $4,258,979 $ 9,180,831 $4,703,688 $10,985,222
Costs and expenses:
Cost of sales............................... 2,919,048 5,663,400 2,733,824 6,202,368
Selling and shipping expense................ 2,245,664 4,209,123 2,527,112 4,807,886
General and administrative expense.......... 1,317,987 2,679,238 1,226,176 2,441,254
---------- ----------- ---------- -----------
Total costs and expenses.................. 6,482,699 12,551,761 6,487,112 13,451,508
---------- ----------- ---------- -----------
(2,223,720) (3,370,930) (1,783,424) (2,466,286)
Other income (expense):
Royalties, interest and other income........ 43,035 132,080 72,405 177,170
Amortization of intangibles................. (119,381) (238,761) (119,358) (238,689)
Merger expenses............................. (288,276) (288,276) -- --
Interest expense............................ (303,961) (585,046) (323,900) (587,894)
Financing expense........................... (42,293) (75,461) (47,898) (80,295)
---------- ----------- ---------- -----------
Net (loss).................................. $(2,934,596) $(4,426,394) $(2,202,175) $(3,195,994)
---------- ----------- ----------- -----------
Net (loss) per share........................ $ (1.14) $ (1.71) $ (.85) $ (1.24)
---------- ----------- ----------- -----------
Average shares outstanding.................. 2,583,184 2,583,184 2,580,184 2,580,184
</TABLE>
Net income (loss) per share was determined by dividing net income (loss) by
the average number of shares outstanding during the respective period.
F-48
<PAGE> 141
MEM COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)............................................... $(4,426,394) $(3,195,994)
Depreciation and amortization................................... 869,947 844,071
Provision for losses on accounts receivable..................... 157,194 108,942
(Increase) decrease in accounts receivable...................... 8,172,581 7,226,063
(Increase) decrease in inventory................................ (4,814,564) (6,047,332)
(Increase) decrease in other current assets..................... (624,633) (204,000)
(Increase) decrease in other assets............................. (42,384) (13,838)
Increase (decrease) in accounts payable......................... 2,241,316 729,137
Increase (decrease) in accrued expenses......................... (298,931) (988,162)
----------- -----------
Net cash provided by (used in) operating activities............. 1,234,132 (1,541,113)
Cash Flows from Investing Activities:
Additions to plant and equipment................................ (163,592) (496,887)
----------- -----------
Net cash (used in) investing activities......................... (163,592) (496,887)
Cash Flows from Financing Activities:
Short-term borrowings........................................... 5,656,747 8,611,394
(Repayments of) short-term borrowings........................... (6,416,264) (6,316,076)
(Payments of) long-term notes................................... (1,095,809) (1,089,159)
----------- -----------
Net cash (used in) provided by financing activities............. (1,855,326) 1,206,159
Effect of exchange rate changes on cash......................... (12,106) 1,304
----------- -----------
Net (decrease) in cash.......................................... (796,892) (830,537)
Cash at the beginning of the year............................... 957,562 1,128,897
----------- -----------
Cash at the end of the period................................... $ 160,670 $ 298,360
=========== ===========
</TABLE>
The information on pages F-47 to F-49 reflects all adjustments of a normal
recurring nature which the Company considers necessary for a fair presentation
of the results for those periods.
ITEM 1. LEGAL PROCEEDINGS.
On July 31, 1996, Tom Randall ("Randall"), on behalf of himself and all
other shareholders of the Company (other than the defendants), filed a purported
class action suit in Supreme Court, State of New York, against the Company and
four of its current and former directors, Gay A. Mayer, Elizabeth C. Mayer,
Bruce J. Klatsky and Paul Hallingby, Jr., seeking equitable relief and
unspecified compensatory damages. The suit alleges, among other things, that the
consideration proposed to be paid to public shareholders of the Company under
the terms of the transactions contemplated by the agreement in principle with
Renaissance Cosmetics, Inc. ("RCI") announced June 24, 1996 is inadequate and
grossly unfair to the public shareholders of the Company and further that the
individual defendants, in violation of their fiduciary obligations to maximize
shareholder value, have not considered potential purchasers of the Company or
its stock in a manner designed to obtain the highest possible price for the
Company's public shareholders. Randall seeks, among other things, an order of
the Court requiring defendant to seek other buyers of the Company and, in the
event that the proposed transactions with RCI are consummated, Randall seeks to
recover damages caused by the alleged breach of fiduciary duties owed by the
individual defendants to the shareholders of the Company, together with fees and
expenses.
* * * * *
F-49
<PAGE> 142
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
MEM Company, Inc.
We have audited the accompanying consolidated balance sheets of MEM
Company, Inc. and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
MEM Company, Inc. and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Hackensack, New Jersey
February 21, 1996
F-50
<PAGE> 143
MEM COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net sales............................ $44,825,314 $53,094,217 $38,453,774
Costs and expenses:
Cost of sales........................ 25,618,098 28,541,205 22,622,236
Selling and shipping expense......... 15,108,538 19,612,873 13,281,251
General and administrative expense... 5,215,135 5,202,902 4,892,234
----------- ----------- -----------
Total costs and expenses........... 45,941,771 53,356,980 40,795,721
----------- ----------- -----------
(1,116,457) (262,763) (2,341,947)
Other income (expense):
Royalty income....................... 361,085 264,535 409,119
Interest income...................... 18,726 226,226 247,245
Amortization of intangibles.......... (477,460) (306,326) (57,936)
Other income (expense)............... 5,124 11,816 (48,617)
Interest expense..................... (1,602,038) (1,112,403) (489,363)
Financing expense.................... (170,957) (149,362) (288,407)
----------- ----------- -----------
Net (loss)........................... $(2,981,977) $(1,328,277) $(2,569,906)
=========== =========== ===========
Per share, based on weighted
average shares outstanding......... $ (1.16) $ (.52) $ (1.00)
=========== =========== ===========
</TABLE>
See accompanying notes.
F-51
<PAGE> 144
MEM COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash.............................................................. $ 957,562 $ 1,128,897
Accounts receivable, less allowance for doubtful accounts of
$680,319 in 1995 and $661,654 in 1994........................... 13,381,468 12,843,943
Inventories, at lower of cost (first-in, first-out) or market:
Finished goods.................................................. 6,021,947 6,095,908
Raw materials & work in process................................. 8,582,573 9,228,083
Prepaid expenses.................................................. 825,377 1,163,589
----------- -----------
Total current assets.............................................. 29,768,927 30,460,420
Property, plant & equipment, at cost:
Land.............................................................. 341,752 340,829
Buildings & improvements.......................................... 4,466,224 4,250,376
Machinery & equipment............................................. 11,812,562 11,174,123
Furniture & fixtures.............................................. 2,485,590 2,347,180
----------- -----------
19,106,128 18,112,508
Less accumulated depreciation..................................... (13,924,996) (12,788,644)
----------- -----------
Net property, plant & equipment................................... 5,181,132 5,323,864
Other assets:
Advance royalty payments & license agreements -- net of
accumulated amortization of $747,050 in 1995 and $604,490 in
1994............................................................ 567,450 710,010
Net cash value of life insurance and other assets................. 208,132 193,729
Intangible assets -- net of accumulated amortization of $1,240,107
in 1995 and $761,765 in 1994.................................... 10,098,702 10,572,940
----------- -----------
Total assets...................................................... $45,824,343 $47,260,963
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loans payable..................................................... $10,791,385 $ 6,528,016
Accounts payable.................................................. 3,523,504 4,488,160
Accrued expenses.................................................. 853,001 1,004,720
Accrued advertising and promotion................................. 1,075,988 1,303,667
Notes payable-current portion..................................... 1,553,990 1,534,066
----------- -----------
Total current liabilities......................................... 17,797,868 14,858,629
Long-term notes:
8% -- payable to 1997......................................... 644,000 1,288,000
8.19% -- payable to 1998......................................... 620,521 642,039
10.5% -- payable to 1999......................................... 2,105,292 2,976,585
----------- -----------
Total long-term notes............................................. 3,369,813 4,906,624
Commitments and contingencies
Stockholders' equity:
Common stock, $.05 par value; shares authorized: 6,000,000;
issued: 3,000,000............................................... 150,000 150,000
Additional paid-in capital........................................ 3,090,110 3,090,110
Retained earnings................................................. 26,460,779 29,442,756
----------- -----------
29,700,889 32,682,866
Less common stock in treasury, at cost (1995 -- 416,816 shares;
1994 -- 419,816)................................................ (4,597,430) (4,607,180)
Cumulative translation adjustment................................. (446,797) (579,976)
----------- -----------
Total stockholders' equity........................................ 24,656,662 27,495,710
----------- -----------
Total liabilities and stockholders' equity........................ $45,824,343 $47,260,963
=========== ===========
</TABLE>
See accompanying notes.
F-52
<PAGE> 145
MEM COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY TRANSLATION
STOCK CAPITAL EARNINGS STOCK ADJUSTMENT TOTAL
-------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1992... $150,000 $3,090,110 $33,340,939 $(4,644,010) $(348,135) $31,588,904
Issuance of treasury
shares.................... -- -- -- 6,500 -- 6,500
Translation adjustment...... -- -- -- -- (106,859) (106,859)
Net income (loss)........... -- -- (2,569,906) -- -- (2,569,906)
-------- ---------- ----------- ----------- --------- -----------
Balance December 31, 1993... 150,000 3,090,110 30,771,033 (4,637,510) (454,994) 28,918,639
Issuance of treasury
shares.................... -- -- -- 30,330 -- 30,330
Translation adjustment...... -- -- -- -- (124,982) (124,982)
Net income (loss)........... -- -- (1,328,277) -- -- (1,328,277)
-------- ---------- ----------- ----------- --------- -----------
Balance December 31, 1994... 150,000 3,090,110 29,442,756 (4,607,180) (579,976) 27,495,710
Issuance of treasury
shares.................... -- -- -- 9,750 -- 9,750
Translation adjustment...... -- -- -- -- 133,179 133,179
Net income (loss)........... -- -- (2,981,977) -- -- (2,981,977)
-------- ---------- ----------- ----------- --------- -----------
Balance December 31, 1995... $150,000 $3,090,110 $26,460,779 $(4,597,430) $(446,797) $24,656,662
======== ========== =========== =========== ========= ===========
</TABLE>
See accompanying notes.
F-53
<PAGE> 146
MEM COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income (loss).................................. $(2,981,977) $(1,328,277) $(2,569,906)
Depreciation and amortization...................... 1,719,514 1,640,308 1,451,331
Provision for losses on accounts receivable........ 368,330 445,065 119,098
(Increase) decrease in accounts receivable......... (901,284) (4,762,020) 1,705,326
(Increase) decrease in inventory................... 748,628 (3,512,810) 2,079,755
(Increase) decrease in other current assets........ 337,909 20,741 270,840
Increase (decrease) in accounts payable............ (964,631) 2,205,017 (377,412)
Increase (decrease) in other accrued expenses...... (383,047) 980,500 (315,929)
(Increase) decrease in other assets................ (14,403) (15,253) (27,941)
----------- ----------- -----------
Net cash (used in) provided by operating
activities....................................... (2,070,961) (4,326,729) 2,335,162
Cash Flows from Investing Activities
Additions to plant and equipment................... (946,333) (1,023,003) (719,030)
Payment in lieu of future royalties................ -- -- (500,000)
Acquisition of intangibles......................... -- (6,409,215) --
Collection of note receivable...................... -- 2,635,989 240,473
----------- ----------- -----------
Net cash (used in) investing activities............ (946,333) (4,796,229) (978,557)
Cash Flows from Financing Activities
Short-term borrowings.............................. 16,894,091 14,709,272 7,326,415
(Repayments of) short-term borrowings.............. (12,622,580) (9,209,825) (9,121,954)
Proceeds from long-term notes...................... -- 7,050,000 --
(Payments of) long-term notes...................... (1,535,260) (3,220,833) (12,691)
Issuance of treasury stock......................... 9,750 8,250 6,500
----------- ----------- -----------
Net cash provided by (used in) financing
activities....................................... 2,746,001 9,336,864 (1,801,730)
Effect of exchange rate changes on cash............ 99,958 (77,028) (11,643)
----------- ----------- -----------
Net increase (decrease) in cash.................... (171,335) 136,878 (456,768)
Cash at the beginning of the year.................. 1,128,897 992,019 1,448,787
----------- ----------- -----------
Cash at the end of the year........................ $ 957,562 $ 1,128,897 $ 992,019
=========== =========== ===========
Supplemental cash flow data: Interest paid......... $ 1,581,743 $ 995,727 $ 530,488
=========== =========== ===========
</TABLE>
See accompanying notes.
F-54
<PAGE> 147
MEM COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 1. ACCOUNTING POLICIES
Nature of business: The Company's business consists of manufacturing,
selling and distributing a diversified line of toiletries and accessories to
retailers of all sizes. The Company operates in one industry segment. One
national customer represented 13% of net sales in 1995 and 14% in 1994. The
Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Financial information about
geographic data is disclosed in Item 1(b) of the Company's 1995 Form 10-K.
Consolidation: The consolidated financial statements include the accounts
of the Company's subsidiaries. All material intercompany items have been
eliminated. The assets and liabilities of foreign subsidiaries have been
translated at the exchange rate at the balance sheet date. Revenues, expenses,
gains and losses are translated at the average rate for the year, determined by
averaging the rates at the end of each calendar quarter.
Deferred financing costs: Deferred financing costs are included in prepaid
expenses and are being amortized over the life of the loans.
Intangible assets: Intangible assets arising from the excess of purchase
price of subsidiaries acquired prior to 1971 over the fair value of the net
assets acquired have not been amortized. Other intangible assets are being
amortized on a straight-line basis over twenty to forty years. Impairments are
recognized whenever events or changes in circumstances indicate that the
carrying amount of intangible assets may not be recoverable and the future
undiscounted cash flows attributable to the asset are less than its carrying
value. In 1995, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 121 and utilized its provisions in the evaluation of intangible and
other long-lived assets. The adoption of SFAS No. 121 had no effect on the
financial statements.
Depreciation: For financial accounting purposes, depreciation is provided
on the straight-line basis as follows: buildings and improvements -- 3 to 25
years; machinery and equipment -- 5 to 12 years; furniture and fixtures -- 4 to
10 years. For income tax purposes, the Company generally uses accelerated
depreciation.
Advance royalty payments and license agreements: License agreements and
nonrefundable royalty payments in connection with a licensing agreement are
being amortized as selling expense on a straight-line basis which averages
seventeen years.
Royalty income: Royalty income represents amounts earned by licensing the
English Leather and Tinkerbell trademarks for use by various third parties.
Revenue recognition: Revenues are recorded at the time of shipment of
merchandise.
Use of estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts in the financial
statements and accompanying notes. These estimates principally include
provisions for sales returns and allowances. Actual results could differ from
those estimates.
NOTE 2. BRITISH STERLING ASSET PURCHASE
On May 20, 1994, the Company acquired certain assets relating to the
British Sterling fragrance line of products from the Speidel Division of
Textron, Inc. for $9,182,000, of which $8,145,000 was for intangibles,
$1,029,000 for inventories and $8,000 for other assets. Other direct costs of
the acquisition were $196,215. The purchase was financed by a term loan of
$7,050,000 and a note for $1,932,000 payable to Textron. The balance of $396,215
was paid from the Company's working capital.
F-55
<PAGE> 148
MEM COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
NOTE 3. CREDIT ARRANGEMENTS AND NOTES PAYABLE
In March, 1993, the Company obtained a three year secured financing
agreement with a financial institution which provided for a revolving line of
credit of up to $15,000,000 based on eligible collateral, for working capital
purposes. The agreement contains certain covenants generally associated with
this type of financing including the pledging of substantially all assets as
collateral, a prohibition on the payment of dividends and considers a material
adverse change as a potential event of default. Interest on borrowings is at the
Bank of America prime rate (8 1/2% at December 31, 1995) plus 2% and an unused
line fee of 1/4% is payable at various levels of borrowing. Previous to June,
1995, the interest rate had been prime plus 2.5%.
In connection with the acquisition described in Note 2 above, the agreement
was amended in May, 1994 to provide for a five year term loan of $7,050,000,
extend the maturity of the agreement by two years to April, 1998 and increase
the total permitted borrowings at any time to $17,500,000 (including the
outstanding term loan). During peak seasonal periods, this limit may be
increased to $20,000,000. The term loan was reduced by $2,465,076 in October,
1994 from the collection of a note receivable held by the Company. Principal of
the term loan is payable in equal monthly installments over five years, and
interest is determined on the same basis as the revolving line of credit. The
agreement was amended in June, 1995 to lower the interest rate and extend the
maturity by one year to April, 1999.
Under the terms of the acquisition, the seller received an unsecured note
payable for $1,932,000 at 8% interest. This note is payable in three equal
annual installments which began June 1, 1995.
The Company's Canadian subsidiary has pledged its land and building as
security for a 8.19% note payable which is payable in monthly principal
installments of $3,233 until October, 1998 when the balance is due.
The aggregate payments due on all long-term notes payable during each of
the three years subsequent to December 31, 1996 are: 1997 -- $1,553,990;
1998 -- $1,452,931; 1999 -- $362,892.
The Company's United Kingdom subsidiary has a line of credit of $932,000
for short term financing at various interest rates, of which $494,935 was
outstanding at December 31, 1995. This line is secured by the subsidiary's
accounts receivable and inventory.
The weighted average interest rate on short-term borrowings outstanding at
December 31, 1995 and 1994 was 10.4% and 11%, respectively.
NOTE 4. INCOME TAXES
At December 31, 1995, the Company had loss carryforwards for U. S. tax
purposes of approximately $9,609,000 of which $679,000 expires in 2006,
$3,834,000 in 2007, $1,703,000 in 2008, $625,000 in 2009 and $2,768,000 in 2010.
The Company also had approximately $1,541,000 of foreign tax loss carryforwards
as of December 31, 1995. Approximately $751,000 of these loss carryforwards will
expire between 1998 and 2002 while the remaining $790,000 can be carried forward
indefinitely. Under the provisions of SFAS No. 109, a valuation allowance is
established if, based on the weight of available evidence, it is more likely
than not that a portion of the deferred asset will not be realized.
Consequently, at December 31, 1995, the Company has established a valuation
allowance against a portion of the above loss carryforwards.
F-56
<PAGE> 149
MEM COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
Income (loss) before income taxes is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Domestic.......................................... $(2,892,596) $(1,151,029) $(1,974,147)
Foreign........................................... (89,381) (177,248) (595,759)
----------- ----------- -----------
$(2,981,977) $(1,328,277) $(2,569,906)
=========== =========== ===========
</TABLE>
The components of the net deferred tax asset and liability as of December
31, 1995 and 1994, were as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment................................. $ 419,000 $ 443,000
----------- -----------
Total deferred tax liability.................................. $ 419,000 $ 443,000
=========== ===========
Deferred tax assets:
Net operating loss carryforwards.............................. $4,460,000 $3,360,000
Valuation allowance for deferred tax assets................... (4,041,000) (2,917,000)
----------- -----------
Net deferred tax asset.......................................... 419,000 443,000
----------- -----------
Net deferred tax liability...................................... $ 0 $ 0
=========== ===========
</TABLE>
The reconciliation of the (benefit) for federal income tax in the financial
statements and the (benefit) computed at the statutory rates are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C>
(Benefit) at statutory rate.......................... $(1,013,872) $(451,614) $(873,768)
Limitation on utilization of domestic losses......... 937,583 347,150 632,110
Limitation on utilization of foreign losses.......... 30,389 60,264 202,558
Other -- Net......................................... 45,900 44,200 39,100
----------- --------- ---------
$ 0 $ 0 $ 0
=========== ========= =========
</TABLE>
NOTE 5. LEASES
The Company rents warehouse and office space under a lease which expires in
2003. The Company is also responsible for the payment of insurance, taxes and
maintenance of the property. The future minimum rental commitment for this lease
is as follows: 1996 -- $62,000; 1997 -- $62,000; 1998 -- $62,000;
1999 -- $62,000; 2000 -- $62,000; thereafter -- $186,000. Rental expense
amounted to $305,000 in 1995, $351,000 in 1994 and $342,000 in 1993.
NOTE 6. STOCK OPTIONS
Under the 1987 Non-Qualified Stock Option Plan, 240,000 shares were
authorized for issuance. No options have been granted under the Plan.
Under the 1991 Stock Incentive Plan, 200,000 shares of common stock were
authorized for issuance to key employees at an option price which is the fair
market value on the date of the grant. Awards made under the Plan may be options
or contingent options. Contingent options will become exercisable in whole or in
part based upon an evaluation of the employee's performance during the year in
which the option is granted.
F-57
<PAGE> 150
MEM COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
Under the 1993 Non-Employee Stock Incentive Plan, 50,000 shares of common
stock were authorized for issuance to non-employee members of the Board of
Directors and certain individuals who provide consulting services to the Company
at an option price which is the fair market value on the date of grant.
Options issued under the Plans to date are exercisable in various
installments, and are exercisable in full after two years from grant.
Information with respect to options is as follows:
<TABLE>
<CAPTION>
OPTION PRICE
NUMBER OF SHARES PER SHARE
---------------- -------------
<S> <C> <C>
Outstanding -- December 31, 1992........................... 43,375 $5.00
Granted.................................................... 35,750 $4.13 -- $5.00
Exercised.................................................. (500) $5.00
Cancelled.................................................. (7,000) $5.00
-------
Outstanding -- December 31, 1993........................... 71,625 $4.13 -- $5.00
Granted.................................................... 20,700 $4.13
Cancelled.................................................. (10,000) $4.13 -- $5.00
-------
Outstanding -- December 31, 1994........................... 82,325 $4.13 -- $5.00
Granted.................................................... 31,000 $3.50 -- $3.88
Cancelled.................................................. (4,000) $3.50 -- $5.00
-------
Outstanding -- December 31, 1995........................... 109,325 $3.50 -- $5.00
=======
</TABLE>
Options on 74,275 shares were exercisable at December 31, 1995.
NOTE 7. POSTRETIREMENT BENEFITS
The Company does not provide any postretirement health care, life insurance
or other welfare benefit programs to current or former employees except that the
Company maintains a defined benefit pension plan for employees who meet certain
eligibility requirements. Benefits under the plan are based on salary and years
of service. For the past three years, no contributions have been required.
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Service cost-benefits earned during the period........ $ 190,300 $ 182,915 $ 226,383
Interest cost on projected benefit obligation......... 291,383 291,992 308,755
Investment return on plan assets...................... (929,056) 204,838 (471,152)
Other................................................. 452,161 (710,709) (31,352)
--------- --------- ---------
Net pension cost (benefit)............................ $ 4,788 $ (30,964) $ 32,634
========= ========= =========
Assumptions:
Discount rate....................................... 8% 8% 8%
Compensation increases.............................. 5% 5% 5%
Rate of return on assets............................ 8% 8% 8%
</TABLE>
F-58
<PAGE> 151
MEM COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
A reconciliation between the plan's funded status and the pension asset as
recorded in the Company's balance sheet is presented below:
<TABLE>
<S> <C> <C> <C>
Plan's assets at fair value, primarily stocks and
bonds........................................... $ 5,115,894 $ 4,295,427 $ 5,121,274
Plan's projected benefit obligation............... (3,676,167) (3,699,488) (3,898,265)
------------ ----------- -----------
Funded status..................................... 1,439,727 595,939 1,223,009
Unrecognized net asset to be amortized over 13
years........................................... (565,624) (676,531) (787,438)
Unrecognized prior service cost................... 85,093 95,864 106,635
Unrecognized asset (gain) over expected return.... (947,985) 727 (557,171)
----------- ----------- -----------
Prepaid (accrued) pension cost.................... $ 11,211 $ 15,999 $ (14,965)
=========== =========== ===========
Actuarial present value of accumulated benefit
obligation:
Vested.......................................... $ 2,557,886 $ 2,636,587 $ 2,532,562
Not yet vested.................................. 160,700 148,055 175,622
----------- ----------- -----------
Accumulated benefit obligation.................... $ 2,718,586 $ 2,784,642 $ 2,708,184
=========== =========== ===========
</TABLE>
NOTE 8. QUARTERLY FINANCIAL DATA (UNAUDITED)
Following is a schedule of key financial data by quarter for the years 1995
and 1994.
<TABLE>
<CAPTION>
AVERAGE SHARES
NET SALES GROSS PROFIT NET INCOME NET INCOME OUTSTANDING
QUARTERS ENDED (000) (000) (000) PER SHARE (000)
- -------------- --------- ------------ ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
03/31/94...... $ 5,241 $ 2,159 $(1,087) $(.42) 2,573
06/30/94...... $ 5,647 $ 1,870 $(2,129) $(.83) 2,573
09/30/94...... $19,057 $ 9,797 $ 1,162 $ .45 2,575
12/31/94...... $23,149 $10,727 $ 726 $ .28 2,576
03/31/95...... $ 6,282 $ 2,813 $ (994) $(.39) 2,580
06/30/95...... $ 4,704 $ 1,970 $(2,202) $(.85) 2,580
09/30/95...... $16,699 $ 7,804 $ 554 $ .22 2,580
12/31/95...... $17,140 $ 6,620 $ (340) $(.14) 2,581
</TABLE>
Since the Company's business is seasonal in nature, comparisons among
quarters of the year are not necessarily indicative of a trend in the results of
operations, but principally reflect this seasonality.
F-59
<PAGE> 152
INDEX TO SCHEDULES
<TABLE>
<S> <C>
Renaissance Cosmetics Inc.:
Schedule II -- Valuation and Qualifying Accounts..................... S-1
Cosmar Corporation and Affiliate:
Schedule II -- Valuation and Qualifying Accounts..................... S-2
</TABLE>
<PAGE> 153
RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
ADDITIONS
------------------------
CHARGED CHARGED
BALANCE AT TO PROFIT TO OTHER BALANCE
BEGINNING AND LOSS ACCOUNTS DEDUCTIONS AT END
OF PERIOD OR INCOME (DESCRIBE)(1) (DESCRIBE)(2) OF PERIOD
--------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1996
Accounts receivable
Allowances (A)......... $1,775,057 $21,207,837 $ -- $18,829,103 $4,153,791
========== =========== ========== =========== ==========
Inventory reserves....... $3,449,000 $ 5,000 $ -- $ 1,914,000 $1,540,000
========== =========== ========== =========== ==========
Period from April 15,
1994 (inception) to
March 31, 1995
Accounts Receivable
Allowances (A)......... $ -- $6,478,386 $ 49,086 $4,752,415 $1,775,057
========== ========== ========== ========== ==========
Inventory reserves....... $ -- $ 23,000 $3,426,000(3) $ -- $3,449,000
========== ========== ========== ========== ==========
</TABLE>
- ---------------
(A) Represents allowance for sales returns, doubtful accounts and discounts
(1) Represents translation adjustments
(2) Represents writeoffs applied against reserve balances.
(3) Represents reserves created at dates of acquisition of companies.
S-1
<PAGE> 154
COSMAR CORPORATION AND AFFILIATE (PREDECESSOR)
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE PERIOD FROM JANUARY 1, 1994 TO AUGUST 17, 1994
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------- ---------- --------- ------------- ---------- ---------
ADDITIONS
--------------------------
CHARGED CHARGED
BALANCE AT TO PROFIT TO OTHER BALANCE
BEGINNING AND LOSS ACCOUNTS DEDUCTIONS AT END
DESCRIPTION OF PERIOD OR INCOME (DESCRIBE)(1) (DESCRIBE) OF PERIOD
- ----------- ---------- --------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Accounts receivable Allowances (A).... $ 223,000 $ 672,913 $ -- $567,194 $ 328,719
======== ======== ======== ======== ========
</TABLE>
- ---------------
(A) Represents allowance for sales returns, doubtful accounts and discounts.
(1) Represents writeoffs applied against reserve balances.
S-2
<PAGE> 155
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 4
Prospectus Summary.................... 5
Risk Factors.......................... 10
Recent Developments................... 16
Use of Proceeds....................... 19
Capitalization........................ 20
Selected Financial Information........ 21
Unaudited Pro Forma Financial Data.... 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 31
Business.............................. 37
Management............................ 57
Security Ownership of Certain
Beneficial Owners and Management.... 63
Certain Relationships and Related
Transactions........................ 64
Exchange Offer........................ 65
Plan of Distribution.................. 72
Description of Series C Preferred
Stock............................... 73
Description of Outstanding
Indebtedness........................ 78
Description of Outstanding Capital
Stock............................... 82
Certain Federal Income Tax
Considerations...................... 86
Legal Opinion......................... 89
Experts............................... 89
Index to Financial Statements......... F-1
</TABLE>
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RENAISSANCE
COSMETICS, INC.
------------------------
PROSPECTUS
------------------------
, 1996
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") grants a
Delaware corporation the power to indemnify any director, officer, employee or
agent against reasonable expenses (including attorneys' fees) incurred by him in
connection with any proceeding brought by or on behalf of the corporation and
against judgments, fines, settlements and reasonable expenses (including
attorneys' fees) incurred by him in connection with any other proceeding, if (a)
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and (b) in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. Except as ordered by a court, however, no indemnification is to be
made in connection with any proceeding brought by or in the right of the
corporation where the person involved is adjudged to be liable to the
corporation.
Article VII of the registrant's restated certificate of incorporation
provides that the registrant shall, to the fullest extent permitted by section
145 of the DGCL, indemnify any and all persons whom it shall have the power to
indemnify under that section 145 from and against any and all of the expenses,
liabilities or other matters referred to in or covered by that section.
Section 102 of the DGCL permits the limitation of directors' personal
liability to the corporation or its stockholders for monetary damages for breach
of fiduciary duties as a director except for (i) any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of the law, (iii) breaches under section 174 of the DGCL, which relate to
unlawful payments of dividends or unlawful stock repurchase or redemptions, and
(iv) any transaction from which the director derived an improper personal
benefit.
Article VIII of the registrant's restated certificate of incorporation
limits the personal liability of directors of the registrant to the fullest
extent permitted by paragraph (7) of subsection (b) of section 102 of the DGCL.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the registrant
pursuant to the foregoing provisions, the registrant has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
Pursuant to section 11.8 of the Indenture, the holders of the Senior Notes
have agreed to waive and release all liability of the directors, officers and
controlling persons of the registrant which may arise in connection with any
obligations of the registrant or any guarantors in connection with the Senior
Notes or the Indenture.
Pursuant to section 9 of the registration rights agreement relating to the
Senior Notes, section 7 of the registration rights agreement relating to the
Series B Preferred Stock, section 5 of the common stock registration rights
agreement relating to the Series B Warrant Shares, section 5 of the common stock
registration rights agreement relating to the shares of Common Stock purchased
by CIBC, and section 5 of the common stock registration rights agreement
relating to the shares of Common Stock purchased by Bastion under the New Common
Stock Sale, the holders of such securities have agreed to indemnify the
directors, officers and controlling persons of the registrant against certain
liabilities, costs and expenses that may be incurred in connection with the
registration of such securities, to the extent that such liabilities, costs and
expenses that may be incurred in connection with the registration of such
securities, to the extent that such liabilities, costs and expenses arise from
an omission or untrue statement contained in information provided to the
registrant by the holders of such securities.
The Company's Directors' and Officers' Liability and Reimbursement
Insurance Policies are designed to reimburse the Company for any payments made
by it pursuant to the foregoing indemnification. Such policies have aggregate
coverage of $5.0 million. The Securities Purchase Agreements, dated as of May
29, 1996 and
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August 8, 1996 respectively, between the Company and CIBC and the Initial
Purchaser (collectively, the "Buyers"), contain provisions by which the Buyers
agree to indemnify the Company and its affiliates (including its officers,
directors, employees, agents and controlling persons) against certain
liabilities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS:
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2.1 (6) Stock Purchase Agreement among Cosmar Corporation, a Delaware corporation
("Cosmar Corporation"), Larry Pallini, Vincent Carbone and Great American
Cosmetics, Inc., a New York corporation ("GAC"), entered into on June 27, 1996,
providing for the acquisition by Cosmar Corporation of all of the capital stock
of GAC.
2.2 (6) Agreement and Plan of Merger, among Renaissance Cosmetics, Inc., a Delaware
corporation (the "Company"), Renaissance Acquisition, Inc., a New York
corporation ("RAI") and MEM Company, Inc. a New York corporation ("MEM"), dated
as of August 6, 1996.
3.1 (1) Restated certificate of incorporation of the Company filed with the Secretary of
State of the State of Delaware on August 17, 1994.
3.1.2 (8) Certificate of Designation of Preferences and Rights of Senior Exchangeable
Redeemable Preferred Stock, Series A, of the Company, filed with the Secretary
of State of the State of Delaware on May 29, 1996.
3.1.3 (7) Certificate of Designation of Preferences and Rights of Senior Redeemable
Preferred Stock, Series B, of the Company, filed with the Secretary of State of
the State of Delaware on August 15, 1996.
3.1.4 (10) Certificate of Increase of Certificate of Designation of Preferences and Rights
of Senior Redeemable Preferred Stock, Series B filed with the Secretary of State
of the State of Delaware on September 27, 1996.
3.2 (1) By-laws of the Company.
4.1 (7) Certificate of Designation of Preferences and Rights of Senior Redeemable
Preferred Stock, Series C, par value $.01 per share, of the Company filed with
the Secretary of State of the State of Delaware on August 15, 1996.
4.2 (10) Certificate of Increase of Certificate of Designation of Preferences and Rights
of Senior Redeemable Preferred Stock, Series C filed with the Secretary of State
of the State of Delaware on September 27, 1996.
4.3 (10) Specimen certificate of share of Series C Preferred Stock.
5.1 (10) Opinion of Paul, Weiss, Rifkind, Wharton & Garrison, regarding the legality of
the securities being registered.
10.2 (1) License agreement (the "Houbigant U.S. License Agreement"), dated May , 1994,
between Houbigant Inc., a Delaware corporation ("Houbigant") and Parfums Parquet
Incorporated (f.k.a. New Fragrance License Corp.) ("Parfums Parquet").
10.4 (2) Amendment to the Houbigant U.S. License Agreement, dated May 12, 1994.
10.5 (2) Amendment to the Houbigant U.S. License Agreement, dated June 1, 1994.
10.6 (1) Amendment to the Houbigant U.S. License Agreement, dated June 24, 1994.
10.7 (1) Three letter agreements relating to the Houbigant U.S. License Agreement, each
dated July 1, 1994.
10.8 (1) Letter of Agreement dated July 1, 1994, between Houbigant and Parfums Parquet
relating to the Houbigant U.S. License Agreement.
10.9 Right of Last Refusal Agreement dated July 1, 1994 among Houbigant, Luigi
Massironi, Michael Sherman and Parfums Parquet relating to the Houbigant U.S.
License Agreement.
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10.10 (1) Guaranty, dated July 1, 1994, by Cosmar in favor of Houbigant of all obligations
of Parfums Parquet under the Houbigant U.S. License Agreement.
10.11 Security Agreement -- Trademarks, dated July 1, 1994, among Houbigant, Parfums
Parquet, Chemical Bank New Jersey N.A. and National Westminster Bank, U.S.A.
10.12 Assignment for Security, dated July 1, 1994, between Houbigant and Parfums
Parquet.
10.13 (1) Letter agreement, dated August 18, 1994, between Parfums Parquet and Houbigant,
with respect to Assumption and Assignment Agreement.
10.14 (2) Restated and Amended License Agreement (the "Harby's License Agreement"), dated
August 16, 1994, between Harby's Corporation NV ("Harby's") and Houbigant.
10.15 (1) Assumption and assignment agreement (the "Assumption and Assignment Agreement"),
dated August 18, 1994, among Houbigant, Harby's and Parfums Parquet.
10.16 (1) Amendment, dated September 19, 1994, to the Assumption and Assignment Agreement.
10.17 (1) Letter Agreement, dated August 18, 1994, among Harby's, Houbigant and Parfums
Parquet, regarding certain rights under the Harby's License Agreement.
10.18 (2) License Agreement (the "Worldwide License Agreement"), dated August 10, 1994, by
and between Houbigant, Houbigant GMBH and Parfums Parquet.
10.19 (2) Amendment dated August 16, 1994 to the License Agreement dated August 10, 1994
between Houbigant, Houbigant GMBH and Parfums Parquet.
10.20 (2) Amendment dated September 16, 1994 to the License Agreement dated August 10,
1994, between Houbigant, Houbigant GMBH and Parfums Parquet Incorporated.
10.21 Letter Agreement, dated February 14, 1995, relating to the License Agreement
dated August 10, 1994 between Houbigant and Parfums Parquet.
10.22 Right of Last Refusal Agreement, dated February 14, 1995, among Houbigant, Luigi
Massironi, Michael Sherman and Parfums Parquet relating to the Worldwide License
Agreement.
10.23 Guaranty, dated February 28, 1995, by Cosmar in favor of Houbigant of all
obligations of Parfums Parquet under the License Agreement dated August 10, 1994
between Houbigant, Houbigant GMBH and Parfums Parquet.
10.24 Security Agreement -- Trademarks, dated February 28, 1995, among Houbigant,
Parfums Parquet, Chemical Bank New Jersey N.A. and National Westminster Bank,
USA.
10.24.1 Assignment for Security Agreement, dated February 14, 1995, between Houbigant
and Parfums Parquet.
10.25 (2) Letter Agreement dated September 21, 1994 amending the Worldwide License
Agreement, the Houbigant U.S. License Agreement and the Harby's License
Agreement by and between Parfums Parquet Incorporated, Harby's, Houbigant, and
Houbigant GMBH.
10.26 (2) Purchase Agreement dated December 12, 1994 by and among Houbigant (1995) Limitee
(formerly 3088766 Canada Limited), ACB Fragrances and Cosmetics, Inc., ACB
Mercantile, Inc., Houbigant Limitee, Augustine Celaya, Giacomo Giuliano, and
Gilles Pellerin.
10.26.1 (3) Escrow Agreement, dated December 12, 1994, between ACB Fragrances and Cosmetics,
Inc., ACB Mercantile, Inc., Houbigant Limitee, Augustine Celaya, Giacomo
Giuliano, Gilles Pellerin, Houbigant (1995) Limited and Lavery de Billis.
10.27 (2) Employment Agreement dated December 12, 1994, between Houbigant (1995) Limitee
and Giacomo Giuliano.
10.28 (2) Employment Agreement dated December 12, 1994, between Houbigant (1995) Limitee
and Gilles Pellerin.
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10.29 (2) Non-Competition Agreement dated December 12, 1994, between Houbigant (1995)
Limitee and Augustine Celaya.
10.30 (10) Amendment, Modification and Settlement Agreement, dated , 1996,
among Houbigant, Dana Perfumes Corp. (fka. Parfums Parquet) ("Dana") and
Houbigant (1995) Limitee amending the Worldwide License Agreement and the
Houbigant U.S. License Agreement and providing for the execution of a new
license agreement for Canada.
10.31 (10) License Agreement (the "Canadian License"), dated , 1996, between
Houbigant and Houbigant (1995) Limitee.
10.32 (10) Letter Agreement, dated , 1996, among Houbigant, Dana and
Houbigant (1995) Limitee, amending the provisions for royalty payments under the
Worldwide License Agreement, the Houbigant U.S. License Agreement and the
Canadian License Agreement.
10.33 (10) Amendment No. 1 to License Agreements, dated , 1996, among
Houbigant, Dana and Houbigant (1995) Limitee, amending the Worldwide License
Agreement, the Houbigant U.S. License Agreement and the Canadian License
Agreement.
10.34 (10) Amendment No. 1 to Security Agreement -- Trademarks, dated , 1996,
among Houbigant, Parfums Parquet, Chemical Bank New Jersey N.A. and NatWest Bank
NA.
10.35 License Agreement, dated August 18, 1994, between Cosmar Corporation and
Renaissance Cosmetics, Inc.
10.36 (1) Letter agreement, dated August 18, 1994, between the Company and Dr. Thomas V.
Bonoma, granting Dr. Bonoma stock options.
10.37 (6) Employment agreement, dated August 6, 1996, between the Company and Dr. Thomas
V. Bonoma.
10.38 (1) Stockholders agreement, dated August 18, 1994, among the Company and the
stockholders listed in schedule 1 thereto.
10.40 (10) Employee Stock Option Plans.
10.41 Management Services Agreement, dated August 16, 1994, between Kidd, Kamm &
Company and Renaissance Cosmetics, Inc.
10.42 (1) Industrial Warehouse lease between Princeland Development Company and Cosmar
California, dated May 17, 1993, and an assignment of that lease, dated August
18, 1994, by Cosmar California in favor of Cosmar Corporation.
10.43 (1) Industrial building lease between Princeland Development Company and Cosmar
California, dated July 15, 1991, and an assignment of that lease, dated August
18, 1994, by Cosmar California in favor of Cosmar Corporation.
10.44 (1) Industrial building lease between Sparks Industrial Joint Venture and Precision
Molded Plastics, Inc., dated November 20, 1991, and a consent to assignment of
that lease, dated June 7, 1994, executed by Precision Molded Plastics, Inc. and
Sparks Industrial Joint Venture.
10.45 (1) Office lease between Fortune Financial and Cosmar California, dated January 1,
1992, and a consent to assignment of that lease, dated June 21, 1994, executed
by Cosmar California and Fortune Financial.
10.46 (1) Various subleases for office space at 635 Madison Avenue, New York, New York,
between Saatchi & Saatchi Holdings (USA) as sublessor, and Dana Perfumes Corp.,
as sublessee.
10.47 (8) Standard Industrial Lease (the "Lease") relating to property known as 11700
Monarch Street, Garden Grove, California, between Bixby Western Properties as
Lessor and A.H. Robins Company, Incorporated as Lessee (the "Lessee"), dated
June 25, 1979.
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10.48 (8) First Amendment to the Lease, between Trust Company of the West as Trustee for
TCW Realty Fund IV as successor Lessor (the "Lessor") and the Lessee, dated
November 10, 1989.
10.49 (8) Second Amendment to the Lease, between the Lessor and the Lessee, dated as of
January 1, 1993.
10.50 (8) Sublease of the Lessee's rights under the Lease to Cosmar Corporation, dated as
of March 1, 1996 (the "Sublease").
10.51 (8) Consent of the Lessor to the Sublease, dated as of March 1, 1996.
10.52 Agreement of Lease between Groupe Gestion Luger as Lessor and Houbigant Ltee as
Lessee (the "Lessee"), relating to the immovable property situated at 1593 to
1645 Cunard Street, City of Chomedey (Laval), Province of Quebec, dated June 25,
1979 and assignment of that lease, dated December 12, 1994, by the Lessee in
favor of 3088766 Canada Limited.
10.53 (10) Lease, between Bonanno Real Estate Group II, L.P. and Parfums Parquet, dated
February , 1995 relating to the property situated at 734 Grand Avenue, in the
Borough of Ridgefield, New Jersey.
10.53.1 Standard Form Commercial Lease, between Sally A. Starr and Lisa A. Brown as
Trustees of Massachusetts 955 Realty trust for the Benefit of 955 Massachusetts
Avenue Associates (as lessor) and Renaissance Cosmetics, Inc. relating to the
property located in Cambridge, Massachusetts.
10.53.2 Lease Agreement Between Ghent Limited Partnership (as lessor) and Renaissance
Cosmetics, Inc. (as tenant) relating to the property situated in Greenwich,
Connecticut.
10.54 (1) Option Agreement between New Dana Acquisition Corp. and Trust Naniases, a
Liechtenstein trust, dated November 3, 1994, for the purchase of all the issued
and outstanding shares of capital stock of Perfumes Dana do Brasil, S.A.
10.54.1(2) Management Services Agreement, dated December 22, 1994, between New Dana
Acquisition Corp. and Perfumes Dana do Brazil, S.A.
10.55 (9) Notice dated November 29, 1995 of exercise of option to purchase Parfums Dano do
Brazil, S.A.
10.56 (1) Agreement for the purchase of all the capital stock of Dana S.A., dated November
3, 1994, between New Dana Acquisition Corp. and Fimasa S.A., a Panamanian
corporation.
10.57 (1) Agreement for the purchase of all the capital stock of Les Parfums de Dana,
Inc., dated November 3, 1994, between New Dana Acquisition Corp. and Fidelia
S.A., a Swiss corporation.
10.58 (1) Agreement for the purchase of all of the capital stock of Marcafin S.A. et al.,
dated November 3, 1994, between New Dana Acquisition Corp. and Trust Naniases, a
Liechtenstein trust.
10.59 (2) Letter agreement, dated December 21, 1994, amending the Dana purchase agreements
referred to in Exhibits 10.54 to 10.58.
10.60 (2) Tie-in letter, dated November 3, 1994, from New Dana to each of the Dana
subsidiaries.
10.62 (2) Agreement for the purchase and sale of the assets of Cosmar Corporation and
Precision Molded Plastics, Inc., dated as of May 19, 1994, by and among Cosmar
California, Precision Molded Plastics, Inc., their respective shareholders, C.P.
Cosmetics, Inc. and C.P. Holding Corp.
10.63 (1) Employment Agreement, dated as of August 18, 1994, among Renaissance Cosmetics,
Inc., Cosmar Corporation and Robert H. Schnell.
10.64 Letter Agreement, dated June 1, 1995, between Renaissance Cosmetics, Inc. and
Aldran H. Lajoie.
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10.65 (1) Employment Agreement, dated as of August 18, 1994, among Renaissance Cosmetics,
Inc., Cosmar Corporation and Marc Schnell.
10.66 (10) Non-Competition Agreement, dated as of August 18, 1994, among Renaissance
Cosmetics, Inc., Cosmar Corporation and Jerry D. Kayne.
10.67 (10) Non-Competition Agreement, dated as of August 18, 1994, among Renaissance
Cosmetics, Inc., Cosmar Corporation and Fred Kayne.
10.68 (2) Note Purchase Agreement ("Note Purchase Agreement") regarding Variable Rate
Senior Secured Revolving Notes Due 1996 and Variable Rate Senior Secured Term
Notes due 1996, dated as of December 21, 1994 by and among Cosmar Corporation,
Renaissance Cosmetics, Inc., and Nomura Holding America Inc.
10.69 (5) Amendment No. 1 and Waiver to Note Purchase Agreement, dated as of April 7,
1995, among Nomura Holding America Inc., Cosmar Corporation and the Company.
10.70 Amendment No. 2 to Note Purchase Agreement, dated as of September 8, 1995, among
Nomura Holding America Inc., Cosmar Corporation and the Company.
10.71 Amendment No. 3 and Consent to Note Purchase Agreement, dated as of January 8,
1996, among Nomura Holding America Inc., Cosmar Corporation and the Company.
10.72 Amendment No. 4 and Waiver to Note Purchase Agreement and Amendment No. 2 to
Security Documents, dated as of May 29, 1996, among Nomura Holding America Inc.,
Cosmar Corporation and the Company.
10.73 Amendment No. 5 to Note Purchase Agreement, dated as of June 14, 1995, among
Nomura Holding America Inc., Cosmar Corporation and the Company.
10.74 Waiver to Note Purchase Agreement, dated as of August 8, 1996, among Nomura
Holding America Inc., Cosmar Corporation and the Company.
10.75 (2) Variable Rate Senior Secured Revolving Note Due 1996 to Nomura Holding America
Inc., by Cosmar Corporation.
10.76 (2) Variable Rate Senior Secured Term Notes Due 1996 to Nomura Holding America Inc.,
by Cosmar Corporation.
10.77 (2) Guarantee, dated December 22, 1994, by Renaissance Cosmetics, Inc., for and in
consideration of the purchase by Nomura Holding America Inc. of the Notes issued
and to be issued by Cosmar Corporation pursuant to the Note Purchase Agreement
dated as of December 21, 1994.
10.78 (2) Guarantee, dated December 22, 1994, by Dana Perfumes Corp., for and in
consideration of the purchase by Nomura Holding America Inc. of the Notes issued
and to be issued by Cosmar Corporation pursuant to the Note Purchase Agreement
dated as of December 21, 1994.
10.79 (2) Guarantee, dated December 22, 1994, by New Dana Acquisition Corp., for and in
consideration of the purchase by Nomura Holding America Inc. of the Notes issued
and to be issued by Cosmar Corporation pursuant to the Note Purchase Agreement
dated as of December 21, 1994.
10.80 (2) Guarantee, dated December 22, 1994, by Les Parfums de Dana, Inc., for and in
consideration of the purchase by Nomura Holding America Inc. of the Notes issued
and to be issued by Cosmar Corporation pursuant to the Note Purchase Agreement
dated as of December 21, 1994.
10.81 (2) Guarantee, dated December 22, 1994, by Roslyn Importers Inc., for and in
consideration of the purchase by Nomura Holding America Inc. of the Notes issued
and to be issued by Cosmar Corporation pursuant to the Note Purchase Agreement
dated as of December 21, 1994.
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10.82 (2) Guarantee, dated December 22, 1994, by Perfumes and Cosmetics Importers, Inc.,
for and in consideration of the purchase by Nomura Holding America Inc. of the
Notes issued and to be issued by Cosmar Corporation pursuant to the Note
Purchase Agreement dated as of December 21, 1994.
10.83 (2) Guarantee, dated December 22, 1994, by Parfums Dana Export Corp., for and in
consideration of the purchase by Nomura Holding America Inc. of the Notes issued
and to be issued by Cosmar Corporation pursuant to the Note Purchase Agreement
dated as of December 21, 1994.
10.86 (2) Pledge and Security Agreement, dated as of December 22, 1994, by and between
Cosmar Corporation, and Nomura Holding America Inc.
10.87 (2) Pledge and Security Agreement, dated as of December 22, 1994, by and between
Renaissance Cosmetics, Inc. and Nomura Holding America Inc.
10.88 (2) Intellectual Property Security Agreement, dated December 22, 1994, by and among
Cosmar Corporation, Renaissance Cosmetics, Inc., Parfums Parquet Incorporated,
New Dana Acquisition Corp., Parfums Dana Export Corp., Perfumes and Cosmetics
Importers, Inc. Les Parfums de Dana, Inc., Dana Perfumes Corp., Roslyn Importers
Inc. and Nomura Holding America Inc.
10.89 (2) Pledge and Security Agreement, dated as of December 22, 1994, by and between Les
Parfums de Dana, Inc., and Nomura Holding America Inc.
10.90 (2) Pledge and Security Agreement, dated as of December 22, 1994, by and between
Dana Perfumes Corp., and Nomura Holding America Inc.
10.91 (2) Pledge and Security Agreement, dated December 22, 1994, by and between Parfums
Parquet Incorporated, and Nomura Holding America Inc.
10.92 (2) Pledge and Security Agreement, dated as of December 22, 1994, by and between New
Dana Acquisition Corp., and Nomura Holding America Inc.
10.93 (2) Pledge and Security Agreement, dated as of December 22, 1994, by and between
Roslyn Importers Inc., and Nomura Holding America Inc.
10.94 (2) Pledge and Security Agreement, dated as of December 22, 1994, by and between
Parfums Dana Export Corp., and Nomura Holding America Inc.
10.95 Parent Cash Equivalent Pledge Agreement, dated as of August 15, 1996, among
Nomura Holding America Inc., Renaissance Cosmetics, Inc. and The Chase Manhattan
Bank.
10.96 (5) Renaissance Cosmetics, Inc. 1994 Stock Option Plan.
10.97 (4) Aircraft lease agreement dated February 13, 1995 between the Company and General
Electric Capital Corporation.
10.98 (9) Filing dated October 11, 1995 to reflect on the public stock records of Paris,
France the purchase by the Company of the shares of RSH 149 S.A.R.L.
10.99 (8) Securities Purchase Agreement between the Company and CIBC WG Argosy Merchant
Fund 2, L.L.C. (the "Fund"), dated as of May 29, 1996. Amendment No. 1, dated as
of June 21, 1996, to Securities Purchase Agreement, dated as of May 29, 1996,
between Renaissance Cosmetics, Inc. and CIBC WG Argosy Merchant Fund 2, L.L.C.
10.100 (8) Registration Rights Agreement between the Company and the Fund, dated as of May
29, 1996.
10.101 (8) Common Stock Registration Rights Agreement between the Company and the Fund,
dated as of May 29, 1996.
10.102 (7) Securities Purchase Agreement, dated as of August 8, 1996, between the Company
and CIBC Wood Gundy Securities Corp.
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10.103 (7) Registration Rights Agreement, dated as of August 15, 1996, between the Company
and CIBC Wood Gundy Securities Corp.
10.104 (7) Common Stock Registration Rights Agreement, dated as of August 15, 1996, between
the Company and CIBC Wood Gundy Securities Corp.
10.105 Subscription Agreement, dated August 15, 1996, between the Company and CIBC WG
Argosy Merchant Fund 2, L.L.C.
10.106 Warrant Agreement, dated as of August 18, 1994, between Renaissance Cosmetics,
Inc. and American Bank National Association.
10.107 (7) Warrant Agreement, dated as of August 15 1996, between the Company and Firstar
Trust Company.
10.108 (1) Indenture, dated as of August 18, 1994, among the Company, as Issuer, the
guarantors identified therein (the "Guarantors"), and American Bank National
Association, as Trustee.
10.109 (3) Form of the Exchange Notes.
10.110 (3) Form of the 2002 Notes.
10.111 (2) First supplemental indenture, dated as of November 15, 1994, among the Company,
as issuer, New Dana Acquisition Corp., as guarantor, and American Bank National
Association, as Trustee.
10.112 (2) Second supplemental indenture, dated as of December 15, 1994, among the Company,
as issuer, Houbigant (1995) Limitee, as guarantor, and American Bank National
Association as trustee.
10.113 (2) Third supplemental indenture, dated as of December 23, 1994, among the Company,
as issuer, certain subsidiaries of the Company, as guarantors, and American
National Bank Association, as trustee.
10.114 (8) Fourth supplemental indenture, dated as of February 27, 1996, among the Company,
as issuer, SH 149 S.A.R.L., as guarantor, and American Bank National
Association, as trustee.
10.115 Fifth supplemental indenture, dated as of August 21, 1996, among the Company, as
the issuer, GAC, as guarantor, and American Bank National Association, as
trustee.
10.116 Waiver, dated as of August 12, 1996.
10.117 Closing Escrow Agreement, dated as of June 21, 1996, by and among Cosmar
Corporation, Larry Pallini, Vincent Carbone and the law firm of Todtman, Young,
Tunick, Nachamie, Hendler & Spizz, P.C.
10.118 Pre-Closing Escrow Agreement, dated as of June 27, 1996, by and among Cosmar
Corporation, Larry Pallini, Vincent Carbone and the law firm of Todtman, Young,
Tunick, Nachamie, Hendler & Spizz, P.C.
10.119 Consulting Agreement, dated August 21, 1996, by and among Hilltop Sales, Inc.,
Cosmar Corporation and Renaissance Cosmetics, Inc.
10.120 Consulting Agreement, dated August 21, 1996, by and among Pageant Group, Ltd.,
Cosmar Corporation and Renaissance Cosmetics, Inc.
10.121 (6) Employment Agreement, dated August 6, 1996, by and between Gay A. Mayer and
Renaissance Cosmetics, Inc.
10.122 (6) Stockholder Agreement, dated August 7, 1996, by and among Renaissance Cosmetics,
Inc., RAI and the parties signatory thereto.
10.123 Letter Agreement, dated September 6, 1996, amending the Securities Purchase
Agreement, dated as of August 8, 1996, between CIBC Wood Gundy Securities Corp.
and Renaissance Cosmetics, Inc.
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<TABLE>
<CAPTION>
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- ----------- -----------------------
<S> <C>
10.124 First Amendment to the Warrant Agreement, dated as of September 27, 1996,
between Renaissance Cosmetics, Inc. and Firstar Trust Company as warrant agent.
10.125 First Amendment to the Registration Rights Agreement, dated as of September 27,
1996, between Renaissance Cosmetics, Inc. and CIBC Wood Gundy Securities Corp.
10.126 First Amendment to the Common Stock Registration Rights Agreement, dated as of
September 27, 1996, between Renaissance Cosmetics, Inc. and CIBC Wood Gundy
Securities Corp.
10.127 (10) Securities Purchase Agreement, dated as of September 27, 1996, between
Renaissance Cosmetics, Inc. and Bastion Capital Fund, L.P
10.128 (10) Common Stock Registration Rights Agreement, dated as of September 27, 1996,
between Renaissance Cosmetics, Inc. and Bastion Capital Fund, L.P.
10.129 (10) Voting Agreement, dated as of September 27, 1996, between Kidd, Kamm Equity
Partners, L.P. and Bastion Capital Fund, L.P.
12.1 Historical and Pro forma statement of ratio of earnings to fixed charges.
21.1 List of subsidiaries.
23.1 (10) Consent of Paul, Weiss, Rifkind, Wharton & Garrison (to be included as part of
the Paul, Weiss, Rifkind, Wharton & Garrison legality opinion).
23.2 Report and consent of Deloitte & Touche, LLP.
23.3 Consent of Ernst & Young LLP.
23.4 Consent of Windes & McClaughry.
23.5 Consent of Deutsch, Marin & Company.
24.1 Power of Attorney (included on signature page).
99.1 (10) Letter of Transmittal for the Exchange Offer.
</TABLE>
- ---------------
(1) Filed with the Company's Registration Statement on Form S-4 filed with the
Securities and Exchange Commission ("SEC") on December 12, 1994, and
incorporated herein by reference thereto.
(2) Filed with Amendment No. 1 to the Company's Registration Statement on Form
S-4 filed with the SEC on January 27, 1995, and incorporated herein by
reference thereto.
(3) Filed with Amendment No. 2 to the Company's Registration Statement on Form
S-4 filed with the SEC on February 9, 1995, and incorporated herein by
reference thereto.
(4) Filed with the Company's Quarterly Report on Form 10-Q filed with the SEC on
March 27, 1995, and incorporated herein by reference thereto.
(5) Filed with the Company's Annual Report on Form 10-K filed with the SEC on
June 29, 1995, and incorporated herein by reference thereto.
(6) Filed with the Company's Quarterly Report on Form 10-Q filed with the SEC on
August 14, 1996, and incorporated herein by reference thereto.
(7) Filed with the Company's Form 8-K filed with the SEC on August 8, 1996, and
incorporated herein by reference thereto.
(8) Filed with the Company's Annual Report on Form 10-K filed with the SEC for
the fiscal year ended March 31, 1996, and incorporated herein by reference
thereto.
(9) Filed with the Company's Quarterly Report on Form 10-Q filed with the SEC on
February 14, 1996, and incorporated herein by reference thereto.
(10) To be filed by Amendment.
II-9
<PAGE> 165
(B) FINANCIAL STATEMENT SCHEDULES:
Schedule II -- Valuation and Qualifying Accounts (Renaissance Cosmetics
Inc. & Subsidiaries)
Schedule II -- Valuation and Qualifying Accounts -- (Cosmar Corporation and
Affiliates)
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated amount offering range may be reflected
in the form of prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent not more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-10
<PAGE> 166
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on September 30, 1996.
RENAISSANCE COSMETICS, INC.
By /s/ THOMAS T.S. KAUNG
--------------------------------------
Name: Thomas T.S. Kaung
Title: Group Vice President and
Chief Financial Officer
POWER OF ATTORNEY
Each of the undersigned officers and directors of Renaissance Cosmetics,
Inc. constitutes and appoints Thomas V. Bonoma and Thomas T. S. Kaung and each
or any of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this registration statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to enable the registrant to comply
with the Securities Act and all requirements of the Securities and Exchange
Commission, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitutes or substitute, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ THOMAS V. BONOMA Chairman, Chief Executive Officer and September 30, 1996
- ------------------------------------- President (principal executive
(Thomas V. Bonoma) officer) and Director
/s/ THOMAS T.S. KAUNG Group Vice President and Chief September 30, 1996
- ------------------------------------- Financial Officer (principal financial
(Thomas T.S. Kaung) officer and principal accounting
officer)
/s/ ERIC R. HAMBURG Director September 30, 1996
- -------------------------------------
(Eric R. Hamburg)
Director September , 1996
- -------------------------------------
(Kurt L. Kamm)
Director September , 1996
- -------------------------------------
(William J. Kidd)
/s/ JOHN H. LYNCH Director September 30, 1996
- -------------------------------------
(John H. Lynch)
</TABLE>
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<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ E. MARK NOONAN Director September 30, 1996
- -------------------------------------
(E. Mark Noonan)
/s/ TERRY M. THEODORE Director September 30, 1996
- -------------------------------------
(Terry M. Theodore)
/s/ DANIEL D. VILLANUEVA Director September 30, 1996
- -------------------------------------
(Daniel D. Villanueva)
</TABLE>
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EXHIBIT INDEX
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2.1 (6) Stock Purchase Agreement among Cosmar Corporation, a Delaware
corporation ("Cosmar Corporation"), Larry Pallini, Vincent Carbone and
Great American Cosmetics, Inc., a New York corporation ("GAC"),
entered into on June 27, 1996, providing for the acquisition by Cosmar
Corporation of all of the capital stock of GAC. ......................
2.2 (6) Agreement and Plan of Merger, among Renaissance Cosmetics, Inc., a
Delaware corporation (the "Company"), Renaissance Acquisition, Inc., a
New York corporation ("RAI") and MEM Company, Inc. a New York
corporation ("MEM"), dated as of August 6, 1996. .....................
3.1 (1) Restated certificate of incorporation of the Company filed with the
Secretary of State of the State of Delaware on August 17, 1994. ......
3.1.2 (8) Certificate of Designation of Preferences and Rights of Senior
Exchangeable Redeemable Preferred Stock, Series A, of the Company,
filed with the Secretary of State of the State of Delaware on May 29,
1996. ................................................................
3.1.3 (7) Certificate of Designation of Preferences and Rights of Senior
Redeemable Preferred Stock, Series B, of the Company, filed with the
Secretary of State of the State of Delaware on August 15, 1996. ......
3.1.4 (10) Certificate of Increase of Certificate of Designation of Preferences
and Rights of Senior Redeemable Preferred Stock, Series B filed with
the Secretary of State of the State of Delaware on September 27, 1996.
3.2 (1) By-laws of the Company. ..............................................
4.1 (7) Certificate of Designation of Preferences and Rights of Senior
Redeemable Preferred Stock, Series C, par value $.01 per share, of the
Company filed with the Secretary of State of the State of Delaware on
August 15, 1996. .....................................................
4.2 (10) Certificate of Increase of Certificate of Designation of Preferences
and Rights of Senior Redeemable Preferred Stock, Series C filed with
the Secretary of State of the State of Delaware on September 27, 1996.
4.3 (10) Specimen certificate of share of Series C Preferred Stock. ...........
5.1 (10) Opinion of Paul, Weiss, Rifkind, Wharton & Garrison, regarding the
legality of the securities being registered. .........................
10.2 (1) License agreement (the "Houbigant U.S. License Agreement"), dated May
, 1994, between Houbigant Inc., a Delaware corporation ("Houbigant")
and Parfums Parquet Incorporated (f.k.a. New Fragrance License Corp.)
("Parfums Parquet"). .................................................
10.4 (2) Amendment to the Houbigant U.S. License Agreement, dated May 12,
1994. ................................................................
10.5 (2) Amendment to the Houbigant U.S. License Agreement, dated June 1,
1994. ................................................................
10.6 (1) Amendment to the Houbigant U.S. License Agreement, dated June 24,
1994. ................................................................
10.7 (1) Three letter agreements relating to the Houbigant U.S. License
Agreement, each dated July 1, 1994. ..................................
10.8 (1) Letter of Agreement dated July 1, 1994, between Houbigant and Parfums
Parquet relating to the Houbigant U.S. License Agreement. ............
</TABLE>
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10.9 Right of Last Refusal Agreement dated July 1, 1994 among Houbigant,
Luigi Massironi, Michael Sherman and Parfums Parquet relating to the
Houbigant U.S. License Agreement. ....................................
10.10 (1) Guaranty, dated July 1, 1994, by Cosmar in favor of Houbigant of all
obligations of Parfums Parquet under the Houbigant U.S. License
Agreement. ...........................................................
10.11 Security Agreement -- Trademarks, dated July 1, 1994, among Houbigant,
Parfums Parquet, Chemical Bank New Jersey N.A. and National
Westminster Bank, U.S.A. .............................................
10.12 Assignment for Security, dated July 1, 1994, between Houbigant and
Parfums Parquet. .....................................................
10.13 (1) Letter agreement, dated August 18, 1994, between Parfums Parquet and
Houbigant, with respect to Assumption and Assignment Agreement. ......
10.14 (2) Restated and Amended License Agreement (the "Harby's License
Agreement"), dated August 16, 1994, between Harby's Corporation NV
("Harby's") and Houbigant. ...........................................
10.15 (1) Assumption and assignment agreement (the "Assumption and Assignment
Agreement"), dated August 18, 1994, among Houbigant, Harby's and
Parfums Parquet. .....................................................
10.16 (1) Amendment, dated September 19, 1994, to the Assumption and Assignment
Agreement. ...........................................................
10.17 (1) Letter Agreement, dated August 18, 1994, among Harby's, Houbigant and
Parfums Parquet, regarding certain rights under the Harby's License
Agreement. ...........................................................
10.18 (2) License Agreement (the "Worldwide License Agreement"), dated August
10, 1994, by and between Houbigant, Houbigant GMBH and Parfums
Parquet. .............................................................
10.19 (2) Amendment dated August 16, 1994 to the License Agreement dated August
10, 1994 between Houbigant, Houbigant GMBH and Parfums Parquet. ......
10.20 (2) Amendment dated September 16, 1994 to the License Agreement dated
August 10, 1994, between Houbigant, Houbigant GMBH and Parfums Parquet
Incorporated. ........................................................
10.21 Letter Agreement, dated February 14, 1995, relating to the License
Agreement dated August 10, 1994 between Houbigant and Parfums
Parquet. .............................................................
10.22 Right of Last Refusal Agreement, dated February 14, 1995, among
Houbigant, Luigi Massironi, Michael Sherman and Parfums Parquet
relating to the Worldwide License Agreement. .........................
10.23 Guaranty, dated February 28, 1995, by Cosmar in favor of Houbigant of
all obligations of Parfums Parquet under the License Agreement dated
August 10, 1994 between Houbigant, Houbigant GMBH and Parfums
Parquet. .............................................................
10.24 Security Agreement -- Trademarks, dated February 28, 1995, among
Houbigant, Parfums Parquet, Chemical Bank New Jersey N.A. and National
Westminster Bank, USA. ...............................................
10.24.1 Assignment for Security Agreement, dated February 14, 1995, between
Houbigant and Parfums Parquet. .......................................
</TABLE>
<PAGE> 170
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10.25 (2) Letter Agreement dated September 21, 1994 amending the Worldwide
License Agreement, the Houbigant U.S. License Agreement and the
Harby's License Agreement by and between Parfums Parquet Incorporated,
Harby's, Houbigant, and Houbigant GMBH. ..............................
10.26 (2) Purchase Agreement dated December 12, 1994 by and among Houbigant
(1995) Limitee (formerly 3088766 Canada Limited), ACB Fragrances and
Cosmetics, Inc., ACB Mercantile, Inc., Houbigant Limitee, Augustine
Celaya, Giacomo Giuliano, and Gilles Pellerin. .......................
10.26.1 (3) Escrow Agreement, dated December 12, 1994, between ACB Fragrances and
Cosmetics, Inc., ACB Mercantile, Inc., Houbigant Limitee, Augustine
Celaya, Giacomo Giuliano, Gilles Pellerin, Houbigant (1995) Limited
and Lavery de Billis. ................................................
10.27 (2) Employment Agreement dated December 12, 1994, between Houbigant (1995)
Limitee and Giacomo Giuliano. ........................................
10.28 (2) Employment Agreement dated December 12, 1994, between Houbigant (1995)
Limitee and Gilles Pellerin. .........................................
10.29 (2) Non-Competition Agreement dated December 12, 1994, between Houbigant
(1995) Limitee and Augustine Celaya. .................................
10.30 (10) Amendment, Modification and Settlement Agreement, dated
, 1996, among Houbigant, Dana Perfumes Corp. (fka. Parfums Parquet)
("Dana") and Houbigant (1995) Limitee amending the Worldwide License
Agreement and the Houbigant U.S. License Agreement and providing for
the execution of a new license agreement for Canada. .................
10.31 (10) License Agreement (the "Canadian License"), dated ,
1996, between Houbigant and Houbigant (1995) Limitee. ................
10.32 (10) Letter Agreement, dated , 1996, among Houbigant, Dana
and Houbigant (1995) Limitee, amending the provisions for royalty
payments under the Worldwide License Agreement, the Houbigant U.S.
License Agreement and the Canadian License Agreement. ................
10.33 (10) Amendment No. 1 to License Agreements, dated , 1996,
among Houbigant, Dana and Houbigant (1995) Limitee, amending the
Worldwide License Agreement, the Houbigant U.S. License Agreement and
the Canadian License Agreement. ......................................
10.34 (10) Amendment No. 1 to Security Agreement -- Trademarks, dated
, 1996, among Houbigant, Parfums Parquet, Chemical Bank
New Jersey N.A. and NatWest Bank NA. .................................
10.35 License Agreement, dated August 18, 1994, between Cosmar Corporation
and Renaissance Cosmetics, Inc. ......................................
10.36 (1) Letter agreement, dated August 18, 1994, between the Company and Dr.
Thomas V. Bonoma, granting Dr. Bonoma stock options. .................
10.37 (6) Employment agreement, dated August 6, 1996, between the Company and
Dr. Thomas V. Bonoma. ................................................
10.38 (1) Stockholders agreement, dated August 18, 1994, among the Company and
the stockholders listed in schedule 1 thereto. .......................
10.40 (10) Employee Stock Option Plans...........................................
</TABLE>
<PAGE> 171
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10.41 Management Services Agreement, dated August 16, 1994, between Kidd,
Kamm & Company and Renaissance Cosmetics, Inc. .......................
10.42 (1) Industrial Warehouse lease between Princeland Development Company and
Cosmar California, dated May 17, 1993, and an assignment of that
lease, dated August 18, 1994, by Cosmar California in favor of Cosmar
Corporation. .........................................................
10.43 (1) Industrial building lease between Princeland Development Company and
Cosmar California, dated July 15, 1991, and an assignment of that
lease, dated August 18, 1994, by Cosmar California in favor of Cosmar
Corporation. .........................................................
10.44 (1) Industrial building lease between Sparks Industrial Joint Venture and
Precision Molded Plastics, Inc., dated November 20, 1991, and a
consent to assignment of that lease, dated June 7, 1994, executed by
Precision Molded Plastics, Inc. and Sparks Industrial Joint
Venture. .............................................................
10.45 (1) Office lease between Fortune Financial and Cosmar California, dated
January 1, 1992, and a consent to assignment of that lease, dated June
21, 1994, executed by Cosmar California and Fortune Financial. .......
10.46 (1) Various subleases for office space at 635 Madison Avenue, New York,
New York, between Saatchi & Saatchi Holdings (USA) as sublessor, and
Dana Perfumes Corp., as sublessee. ...................................
10.47 (8) Standard Industrial Lease (the "Lease") relating to property known as
11700 Monarch Street, Garden Grove, California, between Bixby Western
Properties as Lessor and A.H. Robins Company, Incorporated as Lessee
(the "Lessee"), dated June 25, 1979. .................................
10.48 (8) First Amendment to the Lease, between Trust Company of the West as
Trustee for TCW Realty Fund IV as successor Lessor (the "Lessor") and
the Lessee, dated November 10, 1989. .................................
10.49 (8) Second Amendment to the Lease, between the Lessor and the Lessee,
dated as of January 1, 1993. .........................................
10.50 (8) Sublease of the Lessee's rights under the Lease to Cosmar Corporation,
dated as of March 1, 1996 (the "Sublease"). ..........................
10.51 (8) Consent of the Lessor to the Sublease, dated as of March 1, 1996. ....
10.52 Agreement of Lease between Groupe Gestion Luger as Lessor and
Houbigant Ltee as Lessee (the "Lessee"), relating to the immovable
property situated at 1593 to 1645 Cunard Street, City of Chomedey
(Laval), Province of Quebec, dated June 25, 1979 and assignment of
that lease, dated December 12, 1994, by the Lessee in favor of 3088766
Canada Limited. ......................................................
10.53 (10) Lease, between Bonanno Real Estate Group II, L.P. and Parfums Parquet,
dated February , 1995 relating to the property situated at 734 Grand
Avenue, in the Borough of Ridgefield, New Jersey. ....................
10.53.1 Standard Form Commercial Lease, between Sally A. Starr and Lisa A.
Brown as Trustees of Massachusetts 955 Realty trust for the Benefit of
955 Massachusetts Avenue Associates (as lessor) and Renaissance
Cosmetics, Inc. relating to the property located in Cambridge,
Massachusetts. .......................................................
10.53.2 Lease Agreement Between Ghent Limited Partnership (as lessor) and
Renaissance Cosmetics, Inc. (as tenant) relating to the property
situated in Greenwich, Connecticut. ..................................
</TABLE>
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10.54 (1) Option Agreement between New Dana Acquisition Corp. and Trust
Naniases, a Liechtenstein trust, dated November 3, 1994, for the
purchase of all the issued and outstanding shares of capital stock of
Perfumes Dana do Brasil, S.A. ........................................
10.54.1(2) Management Services Agreement, dated December 22, 1994, between New
Dana Acquisition Corp. and Perfumes Dana do Brazil, S.A. .............
10.55 (9) Notice dated November 29, 1995 of exercise of option to purchase
Parfums Dano do Brazil, S.A. .........................................
10.56 (1) Agreement for the purchase of all the capital stock of Dana S.A.,
dated November 3, 1994, between New Dana Acquisition Corp. and Fimasa
S.A., a Panamanian corporation. ......................................
10.57 (1) Agreement for the purchase of all the capital stock of Les Parfums de
Dana, Inc., dated November 3, 1994, between New Dana Acquisition Corp.
and Fidelia S.A., a Swiss corporation. ...............................
10.58 (1) Agreement for the purchase of all of the capital stock of Marcafin
S.A. et al., dated November 3, 1994, between New Dana Acquisition
Corp. and Trust Naniases, a Liechtenstein trust. .....................
10.59 (2) Letter agreement, dated December 21, 1994, amending the Dana purchase
agreements referred to in Exhibits 10.54 to 10.58. ...................
10.60 (2) Tie-in letter, dated November 3, 1994, from New Dana to each of the
Dana subsidiaries. ...................................................
10.62 (2) Agreement for the purchase and sale of the assets of Cosmar
Corporation and Precision Molded Plastics, Inc., dated as of May 19,
1994, by and among Cosmar California, Precision Molded Plastics, Inc.,
their respective shareholders, C.P. Cosmetics, Inc. and C.P. Holding
Corp. ................................................................
10.63 (1) Employment Agreement, dated as of August 18, 1994, among Renaissance
Cosmetics, Inc., Cosmar Corporation and Robert H. Schnell. ...........
10.64 Letter Agreement, dated June 1, 1995, between Renaissance Cosmetics,
Inc. and Aldran H. Lajoie. ...........................................
10.65 (1) Employment Agreement, dated as of August 18, 1994, among Renaissance
Cosmetics, Inc., Cosmar Corporation and Marc Schnell. ................
10.66 (10) Non-Competition Agreement, dated as of August 18, 1994, among
Renaissance Cosmetics, Inc., Cosmar Corporation and Jerry D.
Kayne. ...............................................................
10.67 (10) Non-Competition Agreement, dated as of August 18, 1994, among
Renaissance Cosmetics, Inc., Cosmar Corporation and Fred Kayne. ......
10.68 (2) Note Purchase Agreement ("Note Purchase Agreement") regarding Variable
Rate Senior Secured Revolving Notes Due 1996 and Variable Rate Senior
Secured Term Notes due 1996, dated as of December 21, 1994 by and
among Cosmar Corporation, Renaissance Cosmetics, Inc., and Nomura
Holding America Inc. .................................................
10.69 (5) Amendment No. 1 and Waiver to Note Purchase Agreement, dated as of
April 7, 1995, among Nomura Holding America Inc., Cosmar Corporation
and the Company. .....................................................
10.70 Amendment No. 2 to Note Purchase Agreement, dated as of September 8,
1995, among Nomura Holding America Inc., Cosmar Corporation and the
Company. .............................................................
</TABLE>
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10.71 Amendment No. 3 and Consent to Note Purchase Agreement, dated as of
January 8, 1996, among Nomura Holding America Inc., Cosmar Corporation
and the Company. .....................................................
10.72 Amendment No. 4 and Waiver to Note Purchase Agreement and Amendment
No. 2 to Security Documents, dated as of May 29, 1996, among Nomura
Holding America Inc., Cosmar Corporation and the Company. ............
10.73 Amendment No. 5 to Note Purchase Agreement, dated as of June 14, 1995,
among Nomura Holding America Inc., Cosmar Corporation and the
Company. .............................................................
10.74 Waiver to Note Purchase Agreement, dated as of August 8, 1996, among
Nomura Holding America Inc., Cosmar Corporation and the Company. .....
10.75 (2) Variable Rate Senior Secured Revolving Note Due 1996 to Nomura Holding
America Inc., by Cosmar Corporation. .................................
10.76 (2) Variable Rate Senior Secured Term Notes Due 1996 to Nomura Holding
America Inc., by Cosmar Corporation. .................................
10.77 (2) Guarantee, dated December 22, 1994, by Renaissance Cosmetics, Inc.,
for and in consideration of the purchase by Nomura Holding America
Inc. of the Notes issued and to be issued by Cosmar Corporation
pursuant to the Note Purchase Agreement dated as of December 21,
1994. ................................................................
10.78 (2) Guarantee, dated December 22, 1994, by Dana Perfumes Corp., for and in
consideration of the purchase by Nomura Holding America Inc. of the
Notes issued and to be issued by Cosmar Corporation pursuant to the
Note Purchase Agreement dated as of December 21, 1994. ...............
10.79 (2) Guarantee, dated December 22, 1994, by New Dana Acquisition Corp., for
and in consideration of the purchase by Nomura Holding America Inc. of
the Notes issued and to be issued by Cosmar Corporation pursuant to
the Note Purchase Agreement dated as of December 21, 1994. ...........
10.80 (2) Guarantee, dated December 22, 1994, by Les Parfums de Dana, Inc., for
and in consideration of the purchase by Nomura Holding America Inc. of
the Notes issued and to be issued by Cosmar Corporation pursuant to
the Note Purchase Agreement dated as of December 21, 1994. ...........
10.81 (2) Guarantee, dated December 22, 1994, by Roslyn Importers Inc., for and
in consideration of the purchase by Nomura Holding America Inc. of the
Notes issued and to be issued by Cosmar Corporation pursuant to the
Note Purchase Agreement dated as of December 21, 1994. ...............
10.82 (2) Guarantee, dated December 22, 1994, by Perfumes and Cosmetics
Importers, Inc., for and in consideration of the purchase by Nomura
Holding America Inc. of the Notes issued and to be issued by Cosmar
Corporation pursuant to the Note Purchase Agreement dated as of
December 21, 1994. ...................................................
10.83 (2) Guarantee, dated December 22, 1994, by Parfums Dana Export Corp., for
and in consideration of the purchase by Nomura Holding America Inc. of
the Notes issued and to be issued by Cosmar Corporation pursuant to
the Note Purchase Agreement dated as of December 21, 1994. ...........
10.86 (2) Pledge and Security Agreement, dated as of December 22, 1994, by and
between Cosmar Corporation, and Nomura Holding America Inc. ..........
</TABLE>
<PAGE> 174
<TABLE>
<CAPTION>
LOCATION OF
EXHIBIT IN
SEQUENTIAL
NUMBERING
EXHIBIT NO. DESCRIPTION OF DOCUMENT SYSTEM
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<S> <C> <C>
10.87 (2) Pledge and Security Agreement, dated as of December 22, 1994, by and
between Renaissance Cosmetics, Inc. and Nomura Holding America
Inc. .................................................................
10.88 (2) Intellectual Property Security Agreement, dated December 22, 1994, by
and among Cosmar Corporation, Renaissance Cosmetics, Inc., Parfums
Parquet Incorporated, New Dana Acquisition Corp., Parfums Dana Export
Corp., Perfumes and Cosmetics Importers, Inc. Les Parfums de Dana,
Inc., Dana Perfumes Corp., Roslyn Importers Inc. and Nomura Holding
America Inc. .........................................................
10.89 (2) Pledge and Security Agreement, dated as of December 22, 1994, by and
between Les Parfums de Dana, Inc., and Nomura Holding America Inc. ...
10.90 (2) Pledge and Security Agreement, dated as of December 22, 1994, by and
between Dana Perfumes Corp., and Nomura Holding America Inc. .........
10.91 (2) Pledge and Security Agreement, dated December 22, 1994, by and between
Parfums Parquet Incorporated, and Nomura Holding America Inc. ........
10.92 (2) Pledge and Security Agreement, dated as of December 22, 1994, by and
between New Dana Acquisition Corp., and Nomura Holding America
Inc. .................................................................
10.93 (2) Pledge and Security Agreement, dated as of December 22, 1994, by and
between Roslyn Importers Inc., and Nomura Holding America Inc. .......
10.94 (2) Pledge and Security Agreement, dated as of December 22, 1994, by and
between Parfums Dana Export Corp., and Nomura Holding America Inc. ...
10.95 Parent Cash Equivalent Pledge Agreement, dated as of August 15, 1996,
among Nomura Holding America Inc., Renaissance Cosmetics, Inc. and The
Chase Manhattan Bank. ................................................
10.96 (5) Renaissance Cosmetics, Inc. 1994 Stock Option Plan. ..................
10.97 (4) Aircraft lease agreement dated February 13, 1995 between the Company
and General Electric Capital Corporation. ............................
10.98 (9) Filing dated October 11, 1995 to reflect on the public stock records
of Paris, France the purchase by the Company of the shares of RSH 149
S.A.R.L. .............................................................
10.99 (8) Securities Purchase Agreement between the Company and CIBC WG Argosy
Merchant Fund 2, L.L.C. (the "Fund"), dated as of May 29, 1996.
Amendment No. 1, dated as of June 21, 1996, to Securities Purchase
Agreement, dated as of May 29, 1996, between Renaissance Cosmetics,
Inc. and CIBC WG Argosy Merchant Fund 2, L.L.C. ......................
10.100 (8) Registration Rights Agreement between the Company and the Fund, dated
as of May 29, 1996. ..................................................
10.101 (8) Common Stock Registration Rights Agreement between the Company and the
Fund, dated as of May 29, 1996. ......................................
10.102 (7) Securities Purchase Agreement, dated as of August 8, 1996, between the
Company and CIBC Wood Gundy Securities Corp. .........................
10.103 (7) Registration Rights Agreement, dated as of August 15, 1996, between
the Company and CIBC Wood Gundy Securities Corp. .....................
10.104 (7) Common Stock Registration Rights Agreement, dated as of August 15,
1996, between the Company and CIBC Wood Gundy Securities Corp. .......
10.105 Subscription Agreement, dated August 15, 1996, between the Company and
CIBC WG Argosy Merchant Fund 2, L.L.C. ...............................
</TABLE>
<PAGE> 175
<TABLE>
<CAPTION>
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NUMBERING
EXHIBIT NO. DESCRIPTION OF DOCUMENT SYSTEM
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<S> <C> <C>
10.106 Warrant Agreement, dated as of August 18, 1994, between Renaissance
Cosmetics, Inc. and American Bank National Association. ..............
10.107 (7) Warrant Agreement, dated as of August 15 1996, between the Company and
Firstar Trust Company. ...............................................
10.108 (1) Indenture, dated as of August 18, 1994, among the Company, as Issuer,
the guarantors identified therein (the "Guarantors"), and American
Bank National Association, as Trustee. ...............................
10.109 (3) Form of the Exchange Notes. ..........................................
10.110 (3) Form of the 2002 Notes. ..............................................
10.111 (2) First supplemental indenture, dated as of November 15, 1994, among the
Company, as issuer, New Dana Acquisition Corp., as guarantor, and
American Bank National Association, as Trustee. ......................
10.112 (2) Second supplemental indenture, dated as of December 15, 1994, among
the Company, as issuer, Houbigant (1995) Limitee, as guarantor, and
American Bank National Association as trustee. .......................
10.113 (2) Third supplemental indenture, dated as of December 23, 1994, among the
Company, as issuer, certain subsidiaries of the Company, as
guarantors, and American National Bank Association, as trustee. ......
10.114 (8) Fourth supplemental indenture, dated as of February 27, 1996, among
the Company, as issuer, SH 149 S.A.R.L., as guarantor, and American
Bank National Association, as trustee. ...............................
10.115 Fifth supplemental indenture, dated as of August 21, 1996, among the
Company, as the issuer, GAC, as guarantor, and American Bank National
Association, as trustee. .............................................
10.116 Waiver, dated as of August 12, 1996. .................................
10.117 Closing Escrow Agreement, dated as of June 21, 1996, by and among
Cosmar Corporation, Larry Pallini, Vincent Carbone and the law firm of
Todtman, Young, Tunick, Nachamie, Hendler & Spizz, P.C. ..............
10.118 Pre-Closing Escrow Agreement, dated as of June 27, 1996, by and among
Cosmar Corporation, Larry Pallini, Vincent Carbone and the law firm of
Todtman, Young, Tunick, Nachamie, Hendler & Spizz, P.C. ..............
10.119 Consulting Agreement, dated August 21, 1996, by and among Hilltop
Sales, Inc., Cosmar Corporation and Renaissance Cosmetics, Inc. ......
10.120 Consulting Agreement, dated August 21, 1996, by and among Pageant
Group, Ltd., Cosmar Corporation and Renaissance Cosmetics, Inc. ......
10.121 (6) Employment Agreement, dated August 6, 1996, by and between Gay A.
Mayer and Renaissance Cosmetics, Inc. ................................
10.122 (6) Stockholder Agreement, dated August 7, 1996, by and among Renaissance
Cosmetics, Inc., RAI and the parties signatory thereto. ..............
10.123 Letter Agreement, dated September 6, 1996, amending the Securities
Purchase Agreement, dated as of August 8, 1996, between CIBC Wood
Gundy Securities Corp. and Renaissance Cosmetics, Inc. ...............
</TABLE>
<PAGE> 176
<TABLE>
<CAPTION>
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EXHIBIT IN
SEQUENTIAL
NUMBERING
EXHIBIT NO. DESCRIPTION OF DOCUMENT SYSTEM
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10.124 First Amendment to the Warrant Agreement, dated as of September 27,
1996, between Renaissance Cosmetics, Inc. and Firstar Trust Company as
warrant agent. .......................................................
10.125 First Amendment to the Registration Rights Agreement, dated as of
September 27, 1996, between Renaissance Cosmetics, Inc. and CIBC Wood
Gundy Securities Corp. ...............................................
10.126 First Amendment to the Common Stock Registration Rights Agreement,
dated as of September 27, 1996, between Renaissance Cosmetics, Inc.
and CIBC Wood Gundy Securities Corp. .................................
10.127 (10) Securities Purchase Agreement, dated as of September 27, 1996, between
Renaissance Cosmetics, Inc. and Bastion Capital Fund, L.P ............
10.128 (10) Common Stock Registration Rights Agreement, dated as of September 27,
1996, between Renaissance Cosmetics, Inc. and Bastion Capital Fund,
L.P. .................................................................
10.129 (10) Voting Agreement, dated as of September 27, 1996, between Kidd, Kamm
Equity Partners, L.P. and Bastion Capital Fund, L.P. .................
12.1 Historical and Pro forma statement of ratio of earnings to fixed
charges. .............................................................
21.1 List of subsidiaries. ................................................
23.1 (10) Consent of Paul, Weiss, Rifkind, Wharton & Garrison (to be included as
part of the Paul, Weiss, Rifkind, Wharton & Garrison legality
opinion). ............................................................
23.2 Report and consent of Deloitte & Touche, LLP. ........................
23.3 Consent of Ernst & Young LLP. ........................................
23.4 Consent of Windes & McClaughry. ......................................
23.5 Consent of Deutsch, Marin & Company. .................................
24.1 Power of Attorney (included on signature page). ......................
99.1 (10) Letter of Transmittal for the Exchange Offer. ........................
</TABLE>
- ---------------
(1) Filed with the Company's Registration Statement on Form S-4 filed with the
Securities and Exchange Commission ("SEC") on December 12, 1994, and
incorporated herein by reference thereto.
(2) Filed with Amendment No. 1 to the Company's Registration Statement on Form
S-4 filed with the SEC on January 27, 1995, and incorporated herein by
reference thereto.
(3) Filed with Amendment No. 2 to the Company's Registration Statement on Form
S-4 filed with the SEC on February 9, 1995, and incorporated herein by
reference thereto.
(4) Filed with the Company's Quarterly Report on Form 10-Q filed with the SEC
on March 27, 1995, and incorporated herein by reference thereto.
(5) Filed with the Company's Annual Report on Form 10-K filed with the SEC on
June 29, 1995, and incorporated herein by reference thereto.
(6) Filed with the Company's Quarterly Report on Form 10-Q filed with the SEC
on August 14, 1996, and incorporated herein by reference thereto.
(7) Filed with the Company's Form 8-K filed with the SEC on August 8, 1996, and
incorporated herein by reference thereto.
(8) Filed with the Company's Annual Report on Form 10-K filed with the SEC for
the [fiscal] year ended March 31, 1996, and incorporated herein by
reference thereto.
(9) Filed with the Company's Quarterly Report on Form 10-Q filed with the SEC
on February 14, 1996, and incorporated herein by reference thereto.
(10) To be filed by Amendment.
<PAGE> 1
Exhibit 10.9
RIGHT OF LAST REFUSAL
This Agreement, entered into this 1st day of July, 1994, among
HOUBIGANT, INC., a Delaware corporation, having a principal place of business at
1135 Pleasant View Terrace West, Ridgefield, New Jersey 07657 (the "Grantor"),
LUIGI MASSIRONI, with an address at 350 East 79th Street, New York, New York
10021, MICHAEL SHERMAN, with an address at 333 East 68th Street, New York, New
York 10021, but excluding the Grantor's institutional creditors that may hold or
retain stock in the Grantor under Grantor's anticipated plan of reorganization
and any stock held by Grantor as treasury stock (Messrs. Massironi and Sherman
and other stockholders, subject to the exclusion noted above, are hereinafter
individually referred to as the "Stockholder" and collectively referred to as
the "Stockholders"), and NEW FRAGRANCE LICENSE CORP., a Delaware corporation,
with an address located c/o Kidd Kamm & Company, Three Pickwick Plaza,
Greenwich, Connecticut 06830 (the "Licensee"). Capitalized terms used herein and
not otherwise defined herein shall have the respective meanings ascribed to them
in the License Agreement (as defined below).
WITNESSETH
WHEREAS, it is presently anticipated that the Stockholders, together
with the Grantor's institutional creditors, will own all or substantially all of
the issued and outstanding shares of the Grantor (the "Stock") following
confirmation of Grantor's anticipated plan of reorganization;
WHEREAS, the Grantor and Licensee have heretofore entered into a
License Agreement dated May __, 1994 (executed on or about May 2, 1994), as
modified on May 12, 1994, June 1, 1994 and July 1, 1994 (the "License
Agreement"); and
WHEREAS, as a condition to the License Agreement, and in accordance
with paragraphs 38 and 40 of the License Agreement, the Grantor and the Licensee
require that the Stockholders and Grantor deliver this Agreement to the
Licensee;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Stockholders hereby agree as
follows:
1. Provided that (i) each of the Stockholders owns Stock of the Grantor
and (ii) the Grantor owns all of the assets (i.e., trademarks, tradenames,
know-how and related assets) which are the subject of the License Agreement
(collectively the "Assets"), as is presently anticipated following confirmation
of the Grantor's anticipated plan of reorganization, each of the Stockholders
and the Grantor hereby agrees he or it will not sell, assign, dispose of,
pledge, hypothecate or otherwise transfer (collectively, a "Sale"), other than
(a) as part of a plan of reorganization confirmed and approved by the bankruptcy
court having jurisdiction over the Grantor's chapter 11 estate, or (b) as part
of an initial public offering of equity
<PAGE> 2
securities of the Grantor or a sale or transfer among related/affiliated
entities, any Stock of the Grantor or the Assets, except in accordance with the
following procedures:
(a) Prior to the Sale by a (i) Stockholder of all or a portion of his
Stock or (ii) Grantor of all or a portion of the Assets, to a third party, such
Stockholder or Grantor, as the case may be, will provide the Licensee advanced
written notice thereof (the "Sale Notice"), which shall constitute an
irrevocable offer for a period of twenty (20) days after delivery thereof,
setting forth (i) the number of shares of Stock that the Stockholder proposes to
sell or the Assets Grantor proposes to sell (the "Offer"), (ii) the proposed
transferee and (iii) the price at which the Stockholder or Grantor proposes to
make the Sale to such transferee (the "Offer Price"), and will offer to sell the
Stock or the Assets, as the case may be, to the Licensee at the Offer Price and
on the other terms and conditions contained in the Sale Notice. Within twenty
(20) days after delivery of the Sale Notice, the Licensee must either
(i) Accept the Offer; or
(ii) Inform the Stockholder or Grantor in writing that the
Licensee declines the Offer.
(b) Sale of Stock or of the Assets, as the case may be, under the
above-referenced terms shall be made at the offices of the Grantor in the U.S.
on a mutually satisfactory business day at least twenty (20) but not more than
forty-five (45) days after delivery of the Sale Notice. Delivery of certificates
or other instruments evidencing such Stock, duly endorsed for transfer to the
Licensee and free and clear of all claims, liens and encumbrances, shall be made
on such date against payment by the Licensee of the Offer Price therefor. The
Grantor shall affix or cause to be affixed, legends upon the certificates or
other instruments evidencing the Stock referring to this Agreement and the terms
and conditions hereof.
(c) If the Licensee does not accept the Offer, the Stockholder or
Grantor may sell the Stock or the Assets so offered for sale at a price not less
than the Offer Price, and on terms not more favorable to the purchaser thereof
than the terms stated in the original Sale Notice, at any time within 120 days
after the expiration of the offer required by paragraph 1(a) above. In the event
that all of the Stock or Assets are not sold by the Stockholder or Grantor
during such 120-day period, the right of the Stockholders or Grantor to sell
such unsold Stock or Assets shall expire and the obligations of this Section 1
shall be reinstated.
(d) Notwithstanding any of the foregoing, the Stockholders shall be
permitted to make transfers of their Stock, in their sole discretion, between
and among members of their immediate family, or a trust established for the
benefit of a member of a Stockholder's immediate family. Any subsequent transfer
of said Stock outside of the Stockholder's immediate family, or a trust
established for the benefit of a
2
<PAGE> 3
member of a Stockholder's immediate family, shall be subject to Licensee's
rights under this Agreement.
2. In the event Grantor shall undertake to sell to a third party
(subject to the terms and provisions of this Agreement) those assets which
comprise the terms of the Agreement, Grantor shall provide Licensee with
advanced written notice thereof and the last opportunity to acquire such assets
on such terms and conditions in conformity with the proposed third-party
transaction.
3. Each of the Stockholders and the Grantor shall take all appropriate
action as may be necessary or appropriate to effectuate the provisions and
intent of this Agreement.
4. The Grantor covenants and agrees that it will not transfer or
reflect on its books and records, or otherwise directly or indirectly, recognize
any transactions which are in conflict with, or in violation of, the terms and
conditions of this Agreement.
The Stockholders and the Grantor acknowledge that the undertakings of
the Stockholders and Grantor pursuant to this Agreement constitute material
inducements to the Licensee to enter into the Licensee Agreement and consummate
the transactions contemplated thereunder.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed and delivered as of the date first set forth above.
/s/ Luigi Massironi
--------------------------------
Luigi Massironi, in his capacity
as an anticipated Stockholder
/s/ Michael J. Sherman
--------------------------------
Michael Sherman, in his capacity
as an anticipated Stockholder
HOUBIGANT, INC.
By: /s/ Luigi Massironi
-----------------------------
Luigi Massironi, President
3
<PAGE> 1
Exhibit 10.11
SECURITY AGREEMENT - TRADEMARKS
AGREEMENT made as of this 1st day of July, 1994 between HOUBIGANT,
INC., a Delaware corporation, located at 1135 Pleasant View Terrace West,
Ridgefield, New Jersey 07657 ("Grantor"), NEW FRAGRANCE LICENSE CORP., a
Delaware corporation, located at c/o Kidd Kamm & Company, Three Pickwick Plaza,
Greenwich, Connecticut 06830 ("Licensee"), and CHEMICAL BANK NEW JERSEY, N.A.,
individually and as agent (the "Bank Agent") for CHEMICAL BANK NEW JERSEY, N.A.
and NATIONAL WESTMINSTER BANK, USA (collectively, the "Banks") located at P.O.
Box 1090, Two Tower Center, East Brunswick, New Jersey 08816. Capitalized terms
used herein and not otherwise defined shall have the meanings ascribed to them
in the License Agreement (as defined below).
WHEREAS, on November 18, 1993 (the "Filing Date"), Licensor, together
with certain affiliates, filed a voluntary petition for relief under chapter 11
of Title 11, United States Code (the "Bankruptcy Code"), in the United States
Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court").
Grantor's chapter 11 case is being jointly administered by the Bankruptcy Court
under procedurally consolidated case no. 93 B 45767 (JLG) (the "Bankruptcy
Case");
WHEREAS, Grantor has adopted, used and is using, and is the owner of
the entire right, title and interest in and to, certain trademarks and designs;
WHEREAS, Grantor and Licensee have entered Into a license agreement
dated May , 1994 (and executed on or about May 2, 1994), as modified on May 12,
1994 and as further modified on June 1, 1994 (the "License Agreement"), pursuant
to which Grantor has granted Licensee certain rights to use the Trademarks for
the Products in the Territories (as defined in the License Agreement) as listed
on Schedule A thereto;
WHEREAS, pursuant to an Order of the Bankruptcy Court dated June 2,
1994, the Bankruptcy Court, inter alia, (a) authorized and approved Grantor's
implementation and effectuation of the License Agreement, and (b) authorized and
empowered Grantor to execute and deliver such additional documents and
instruments as may be necessary or appropriate to consummate the transactions
contemplated by the License Agreement, including, without limitation, this
Security Agreement (the "Approval Order");
WHEREAS, both prior to and subsequent to the Filing Date, Licensor and
certain of its affiliates incurred certain indebtedness to the Banks (in the
aggregate, the "Bank Debt") under certain pre-petition and post-Filing Date loan
documents (collectively, the "Bank Loan Documents");
WHEREAS, the Banks hold valid, first priority, duly perfected liens
against and security interests in and to all or substantially all assets of
Grantor, including, without limitation, the Trademarks, to secure repayment of
the Bank Debt; and
<PAGE> 2
WHEREAS, the Banks have consented to permit Grantor to grant Licensee a
second priority lien against and security interest in and to the Trademarks for
the Products in the Territories, which lien and security interest shall be in
all respects subordinate in right and priority to the lien and security interest
of the Banks in and to the Trademarks, and subject further to the terms and
provisions of the License Agreement and this Security Agreement;
NOW, THEREFORE, IT IS AGREED that, for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, Grantor does hereby
grant to Licensee a security interest in all of its right, title and interest in
and to each of the Trademarks for the Products in the Territories, as set forth
below.
1. Grant of Security Interest. Subject to the terms and provisions of
this Agreement, this security interest shall secure the prompt payments,
performance and observances of all Obligations (as hereinafter defined) by
Grantor. The grant of this security interest by Grantor to Licensee shall be in
all respects subordinate in right and priority to the lien and security interest
of the Banks in and to the Trademarks.
2. Definitions.
(a) "Obligations" shall mean any and all obligations of
any kind incurred by Grantor to Licensee arising
under the License Agreement including, without
limitation, the liabilities and obligations evidenced
by or issued, created or arising in connection with
this Agreement, that arise, result from, or are
connected to Grantor's rejection or disaffirmance of
the License Agreement pursuant to Section 365 of the
Bankruptcy Code in any subsequent case under chapter
11 of the Bankruptcy Code commenced by the Grantor (a
"Rejection Event").
(b) "Enforcement" means, collectively or individually,
for (i) Licensee to declare a "Rejection Event" under
the License Agreement; and/or (ii) the Banks and/or
the Bank Agent to demand payment in full of or
accelerate the indebtedness of Grantor to the Banks
and to commence the judicial or nonjudicial
enforcement of any of the rights and remedies under
the Bank Loan Documents or any anticipated plan of
reorganization of Grantor, as the case may be.
(c) "Enforcement Notice" means a written notice delivered
in accordance with Section 11 hereof, which notice
shall (i) if delivered by Licensee, state that an
"Rejection Event" under the License Agreement has
occurred, specify the nature of such Rejection Event,
and announce that an Enforcement Period (as
hereinafter defined) has commenced and (ii) if
2
<PAGE> 3
delivered by the Banks or the Bank Agent, state that
an "Event of Default" under the Bank Loan Documents
with respect to Grantor's failure to make a payment
or Grantor's breach of a financial covenant or any
anticipated plan of reorganization of Grantor, as the
case may be, has occurred and that the applicable
cure period, if any, has expired and the Event of
Default has not been cured by Grantor, and shall
specify the nature of such event of default, and
announce that an Enforcement Period has commenced.
(d) "Enforcement Period" means the period of time
following the receipt by either the Bank Agent or
Licensee of an Enforcement Notice delivered by the
other until the earlier of the following: (i) Grantor
shall have paid its obligations in full to the Banks
under the Bank Loan Documents; (ii) Grantor has cured
the Rejection Event which gave rise to Licensee's
Enforcement Notice; (iii) the party delivering an
Enforcement Notice agrees in writing to (a) rescind
its Enforcement Notice and (b) terminate the
Enforcement Period.
3. Representations and Warranties. Grantor hereby represents, warrants,
covenants and agrees as follows:
(a) Grantor has not abandoned any of the Trademarks for the
Products in the Territories.
(b) Except as provided otherwise in the License Agreement,
Grantor will, at Licensee's expense, perform all acts and execute all documents
requested by Licensee at any time to evidence, perfect, maintain, record and
enforce this security interest in the Trademarks for the Products in the
Territories or otherwise in furtherance of the provisions of this Agreement, and
Grantor hereby authorizes Licensee to execute and file one or more financing
statements (and similar documents) or copies thereof, in substantially the form
annexed as Exhibit "A" hereto and made a part hereof, or of this Security
Agreement, with respect to the Trademarks for the Products in the Territories,
signed only by Licensee;
(c) Except as provided otherwise in the License Agreement,
Grantor will not do any act, or omit to do any act, whereby the Trademarks may
become abandoned, invalidated, unenforceable, avoided or avoidable and, to the
extent required by the terms and provisions of the License Agreement, shall
notify Licensee immediately if it knows of any reason or has reason to know that
any application, registration or recording may become abandoned, canceled,
invalidated, avoided or avoidable;
3
<PAGE> 4
(d) Provided such action is not inconsistent with or
prohibited by the License Agreement, or this Agreement, Licensee may, at its
sole discretion and expense, pay any amount or do any act required of Grantor
hereunder or requested by Licensee to preserve, defend, protect, maintain,
record or enforce Grantor's obligations contained herein, the Obligations, the
Trademarks for the Products in the Territories, or the right, title and interest
granted Licensee herein, and which Grantor fails to do or pay;
(e) Subject to the provisions of the License Agreement, if
Grantor files an application(s) for the registration of a Trademark with the
United States Patent and Trademark Office or any similar office or agency in the
United States, which Trademark, if registered, would constitute Licensee's
collateral under this Agreement, Grantor shall promptly notify Licensee of such
registration and, to the extent required by this Agreement or the License
Agreement, as the case may be, and upon request by Licensee, and subject to
receipt of the prior written consent of the Banks thereto, execute and deliver
any and all agreements, instruments and documents necessary or appropriate to
evidence Licensee's security interest in such Trademark upon its registration;
(f) The Trademarks for the Products in the Territories now
owned by Grantor are valid and subsisting and in full force and effect. Subject
to the valid, duly existing and perfected security interest of the Banks
therein, Grantor has the sole, full and clear title thereto, and, with the
consent of the Banks, the right and power to grant the security interest herein
granted. The Trademarks for the Products in the Territories are not subject to
any liens, claims, mortgages, assignments, licenses, security interests or
encumbrances of any nature whatsoever, except as otherwise specifically set
forth herein and on Schedule B annexed hereto;
(g) Subject to the terms and provisions of the License
Agreement, so long as there are Obligations owing to Licensee, Grantor will not
assign, sell, mortgage, lease, transfer, pledge, hypothecate, grant a security
interest in or lien upon that is prior or senior in right to the lien and
security interest herein granted to Licensee, encumber, or otherwise dispose of
any of the Trademarks for the Products in the Territories, without the prior
written consent of the Banks and Licensee, and nothing in this Agreement shall
be deemed a consent by Licensee to any such action except as expressly permitted
herein;
(h) As of the date hereof, Grantor does not have any
Trademarks for the Products in the Territories registered in, or the subject of
pending applications in, the United States Patent and Trademark Office or any
similar office or agency in the United States that would be subject to the terms
of the License Agreement and/or this Agreement, other than those that may be
described in Schedule D to the License Agreement and made a part hereof;
(i) Subject to the terms and provisions of the License
Agreement, Grantor will render any assistance necessary to Licensee in any
proceeding before the United States Patent and Trademark Office or any similar
office
4
<PAGE> 5
or agency in the United States to maintain each application and registration of
the Trademarks, including, without limitation, filing of renewals, affidavits of
use, affidavits of incontestability and opposition, interference and
cancellation proceedings.
4. Rights and Remedies. Each of the Bank Agent and Licensee agrees to
use its best efforts to give an Enforcement Notice to the other prior to
commencement of Enforcement. In the event of the issuance by Licensee of Notice
of a Rejection Event and during an Enforcement Period, Licensee shall have the
following rights and remedies (to the extent permitted by applicable law) in
addition to all other rights and remedies of Licensee, whether under law, the
Obligations, or otherwise, all such rights and remedies being cumulative, not
exclusive and enforceable alternatively, successively or concurrently, without
(except as provided herein) notice to, or consent by Grantor: (a) neither
Grantor nor any affiliate or subsidiary thereof shall make any use of the
Trademarks or any mark similar thereto for any purpose; (b) Licensee may, at any
time and from time to time, upon ten (10) days prior notice to Grantor, license,
whether general, special or otherwise, and whether on an exclusive or
non-exclusive basis, the Collateral, throughout the United States of America,
its territories and possessions, for such term or terms, on such conditions, and
in such manner, as Licensee shall in its sole discretion determine; (c) Licensee
may, at any time and from time to time, upon ten (10) days' prior notice to
Grantor, assign, sell, or otherwise dispose of, the Collateral or any of it,
either with or without special or other conditions or stipulations, with power
to buy the Collateral or any part of it, and with power also to execute
assurances, and do all other acts and things for completing the assignment, sale
or disposition which Licensee shall, in its sole discretion, deem appropriate or
proper; and (d) in addition to the foregoing, in order to implement the
assignment, sale or other disposal of any of the Collateral pursuant to
subparagraph 4(c) hereof, Licensee may at any time, pursuant to the authority
granted in the Powers of Attorney described in paragraph 5 hereof, execute and
deliver on behalf of Grantor, one or more instruments of assignment of the
Trademarks (or any application, registration or recording thereof), in form
suitable for filing, recording or registration. Grantor agrees to pay when due
all costs incurred in any such transfer of the Collateral, including any taxes,
fees and attorneys' fees, and all such costs not so paid shall be added to and
deemed additional advances under the License Agreement. Licensee may apply the
proceeds actually received from any such license, assignment, sale or other
disposition to the reasonable costs and expenses thereof, including, without
limitation, reasonable attorneys' fees and all legal, travel and other expenses
which may be incurred by Licensee as a result of Grantor's breach of
Obligations, and Grantor shall remain liable and will pay Licensee on demand any
deficiency remaining to compensate Licensee for any such breach. Nothing herein
contained shall be construed as requiring Licensee to take any such action at
any time. In the event of any such license, assignment, sale or other
disposition of the Collateral, or any of it, after the occurrence of a Rejection
Event, Grantor shall supply its know-how and expertise relating to the
manufacture and sale of the products and services bearing the Trademarks to
Licensee or its designee. Notwithstanding the foregoing, the parties hereto
agree that during an Enforcement Period:
5
<PAGE> 6
(a) Licensee shall not take any action to foreclose or realize
upon or to enforce any rights it may have with respect to the Trademarks for the
Products in the Territories without the Banks' or Bank Agent's prior written
consent thereto, unless the Bank Debt shall have been first paid and satisfied
in full; and
(b) Subject to any applicable restrictions in the Bank Loan
Documents, the Banks or the Bank Agent, as the case may be, may, at their/its
option and without the prior written consent of Licensee, take any action to
accelerate payment of the Bank Debt and/or to foreclose or realize upon or
enforce any of its rights with respect to the Trademarks.
5. Power of Attorney. Concurrently with the execution and delivery
hereof, Grantor is executing and delivering to Licensee in the form of Exhibit 1
hereto, ten originals of a Power of Attorney for the implementation of the
assignment, sale or other disposal of the Collateral pursuant to paragraph 4
hereof.
6. Notices of Default. From and after the date of this Agreement,
Licensee agrees to use reasonable efforts to give the Banks, or the Bank Agent,
copies of any notice sent to Grantor with respect to the occurrence or existence
of a Rejection Event, default or other breach under the License Agreement or
this Agreement. From and after the date of this Agreement, the Banks agree to
use reasonable efforts to give Licensee, or its authorized agent or designee,
copies of any notice sent to Grantor with respect to the occurrence or existence
of a default or other breach under the Bank Loan Documents or any anticipated
plan of reorganization of Grantor, in each case simultaneously with the sending
of any such notice to Grantor.
7. Modification. No provision hereof shall be modified, altered or
limited except by a written instrument expressly referring to this Agreement and
executed by the party to be charged. The execution and delivery of this
Agreement has been authorized by the Board of Directors of Grantor and by the
Bankruptcy Court in the Bankruptcy Case.
8. Successors and Assigns. This Agreement shall be binding upon the
successors, assigns or other legal representatives of Grantor, and shall,
together with the rights and remedies of Licensee hereunder, inure to the
benefit of Licensee, its successors, assigns or other legal representatives.
9. Governing Law. This Agreement, the Obligations and the Trademarks
for the Products in the Territories shall be governed in all respects by the
laws of the United States and the laws of the State of New Jersey.
10. Severability. If any term of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity of all other terms hereof shall
in no way be affected thereby.
6
<PAGE> 7
11. Counterparts. This Agreement may be executed in one or more
counterparts which when taken together shall constitute one and the same
Security Agreement.
12. Notices. All notices and other communications provided for
hereunder shall, unless otherwise stated herein, be in writing (including
telecommunications and communication by facsimile copy) and mailed, telexed,
transmitted or delivered, as to each party hereto, at its address set forth
above or at such other address as shall be designated by such party in a written
notice to the other parties hereto. All such notices and communications shall be
effective upon receipt, or, in the case of notice by mail, five (5) days after
being deposited in the mails, postage prepaid, or in the case of notice by
telex, when telexed against receipt of the answer back, or in the case of notice
by facsimile copy, when verbal confirmation of receipt is obtained, in each case
addressed as aforesaid.
13. Third-Party Beneficiaries. The terms and provisions of this
Agreement shall be for the sole benefit of the Grantor, Licensee and the Banks
for their respective successors and assigns and no other Person shall have any
right, benefit, or priority by reason of this Agreement.
14. Section Titles. The article and section headings contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
IN WITNESS WHEREOF, Grantor and Licensee have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the day
and year first above written.
HOUBIGANT, INC.
By: /s/ Luigi Massironi Pres.
-----------------------------
(Title)
NEW FRAGRANCE LICENSE CORP.
By: /s/
-----------------------------
GROUP (Title)
VICE
PRESIDENT
7
<PAGE> 8
CHEMICAL BANK NEW JERSEY, N.A.
as agent for CHEMICAL BANK NEW
JERSEY, N.A. and NATIONAL
WESTMINSTER BANK, USA
By: /s/
-----------------------------
VICE PRESIDENT (Title)
CHEMICAL BANK NEW JERSEY, N.A.
By: /s/
-----------------------------
VICE PRESIDENT (Title)
NATIONAL WESTMINSTER BANK, USA
By: /s/ Nina McLaughlin
-----------------------------
VICE PRESIDENT
8
<PAGE> 1
Exhibit 10.12
ASSIGNMENT FOR SECURITY
WHEREAS, HOUBIGANT INC. (herein referred to as "Grantor") has adopted,
used and is using, and owns the entire right, title and interest in and to, the
trademarks and the applications, registrations and recordings more particularly
described on Schedule A annexed hereto as part hereof (the "Trademarks");
WHEREAS, Grantor is obligated to NEW FRAGRANCE LICENSE CORP. (the
"License") and has entered into a Security Agreement -- Trademarks dated the
date hereof (the "Agreement") in favor of Licensee; and
WHEREAS pursuant to the Agreement, Grantor is granting to Licensee a
security interest in the Trademarks, together with any reissue, extension or
renewal thereof, the goodwill of the business symbolized by the Trademarks, the
applications and registrations thereof, and all proceeds thereof, including,
without limitation, any and all causes of action which may exist by reason of
infringement thereof (the "Collateral"), to secure the payment, performance and
observance of all indebtedness, obligations, liabilities and agreements of any
kind of Grantor or Licensee, now existing or hereafter arising, evidenced by or
issued, created or arising in connection with the Licensee (all of the foregoing
being herein referred to as the "Obligations");
<PAGE> 2
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, Grantor does hereby assign unto Licensee and grant to
Licensee a security interest in the Collateral to secure the prompt payment,
performance and observance of the Obligations.
Grantor does hereby further acknowledge and affirm that the rights and
remedies of Licensee with respect to the assignment of and security interest in
the Collateral made and granted hereby are more fully set forth in the
Agreement, the terms and provisions of which are hereby incorporated herein by
reference as if fully set forth herein.
IN WITNESS WHEREOF, Grantor has caused this Assignment to be duly
executed by its officer thereunder duly authorized as of the first day of July,
1994.
HOUBIGANT INC.
By: /s/ Luigi Massironi
-----------------------------
NEW FRAGRANCE LICENSE CORP.
By: /s/
-----------------------------
GROUP VICE PRESIDENT
-2-
<PAGE> 3
SCHEDULE A
<TABLE>
<CAPTION>
Name of
Trademark Trademark Registration
--------- ----------------------
<S> <C>
PRESENCE RN 309,266
CHANTILLY RN 865,906
HOUBIGANT RAFFINEE RN 1,256,522
DEMI-JOUR RN 1,488,987
MONSIEUR MUSK RN 1,566,699
</TABLE>
- 3 -
<PAGE> 1
Exhibit 10.21
Houbigant Inc.
1135 Pleasant View Terrace West
Ridgefield, New Jersey
February 14, 1995
Parfums Parquet Incorporated
675 Massachusetts Avenue
Cambridge, Massachusetts 02139
Dear Sirs:
Reference is made to that certain License Agreement dated August 10,
1994, as modified on August 16, 1994, September 16, 1994 and September 21, 1994
(the "License Agreement"), between Houbigant Inc. (the "Grantor") and Parfums
Parquet Incorporated ("Licensee"). Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings ascribed to them in
the License Agreement.
In accordance with paragraph 38(k) of the License Agreement, and as a
condition to Closing under the License Agreement, the Grantor hereby agrees that
from and after the Closing Date and after confirmation of its anticipated plan
of reorganization, the Grantor will operate its business in the ordinary course
as, among other things, a designer, marketer and distributor of perfumes,
fragrance products and related products. Grantor agrees that it will not enter
into any transactions unrelated to its business that will have a material
adverse effect on Grantor's post-confirmation financial condition. In addition,
Grantor agrees that in connection with its business it will not execute any
guarantees nor make any commitments on behalf of any other person or firm other
than in the ordinary course of its business or for or on behalf of any wholly
owned subsidiaries of Grantor engaged in businesses related to Grantor's
business, without the prior written consent of the Banks and Licensee thereto.
The Grantor acknowledges that the Licensee shall have the right to
receive financial and business information from time to time concerning the
Grantor upon reasonable request, and including the right upon reasonable notice
to the Grantor to review relevant books and records of the Grantor in addition
to receiving periodic financial and other information with respect to the
Grantor as may be required by the License Agreement.
<PAGE> 2
The Grantor acknowledges that the undertakings of the Grantor pursuant
to this letter agreement constitute material inducements to the Licensee to
enter into the License Agreement and consummate the transactions contemplated
thereunder.
This Agreement shall be binding on the Grantor and all persons or
corporations succeeding to or acquiring the business now carried on by the
Grantor.
Very truly yours,
HOUBIGANT INC.
By: /s/ Michael J. Sherman
----------------------
Michael J. Sherman
Exec. Vice President
<PAGE> 1
Exhibit 10.22
RIGHT OF LAST REFUSAL
This Agreement, entered into this 14th day of February, 1995, among
HOUBIGANT, INC., a Delaware corporation, having a principal place of business at
1135 Pleasant View Terrace West, Ridgefield, New Jersey 07657 (the "Grantor"),
LUIGI MASSIRONI, with an address at 350 East 79th Street, New York, New York
10021, MICHAEL SHERMAN, with an address at 333 East 68th Street, New York, New
York 10021, but excluding the Grantor's institutional creditors that may hold or
retain stock in the Grantor under Grantor's anticipated plan of reorganization
and any stock held by Grantor as treasury stock (Messrs. Massironi and Sherman
and other stockholders, subject to the exclusion noted above, are hereinafter
individually referred to as the "Stockholder" and collectively referred to as
the "Stockholders"), and PARFUMS PARQUET INCORPORATED, a Delaware corporation,
with an address located at 675 Massachusetts Avenue, Cambridge, Massachusetts
02139 (the "Licensee"). Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings ascribed to them in the License
Agreement (as defined below).
WITNESSETH
WHEREAS, it is presently anticipated that the Stockholders, together
with the Grantor's institutional creditors, will own all or substantially all of
the issued and outstanding shares of the Grantor (the "Stock") following
confirmation of Grantor's anticipated plan of reorganization;
WHEREAS, the Grantor and Licensee have heretofore entered into a
License Agreement dated August 10, 1994, as modified on August 16, 1994,
September 16, 1994 and September 21, 1994 (the "License Agreement"); and
WHEREAS, as a condition to the License Agreement, and in accordance
with paragraphs 38 and 40 of the License Agreement, the Grantor and the Licensee
require that the Stockholders and Grantor deliver this Agreement to the
Licensee;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Stockholders hereby agree as
follows:
1. Provided that (i) each of the Stockholders owns Stock of the Grantor
and (ii) the Grantor owns all of the assets (i.e., trademarks, tradenames,
know-how and related assets) which are the subject of the License Agreement
(collectively the
<PAGE> 2
"Assets"), as is presently anticipated following confirmation of the Grantor's
anticipated plan of reorganization, each of the Stockholders and the Grantor
hereby agrees he or it will not sell, assign, dispose of, pledge, hypothecate or
otherwise transfer (collectively, a "Sale"), other than (a) as part of a plan of
reorganization confirmed and approved by the bankruptcy court having
jurisdiction over the Grantor's chapter 11 estate, or (b) as part of an initial
public offering of equity securities of the Grantor or a sale or transfer among
related/affiliated entities, any Stock of the Grantor or the Assets, except in
accordance with the following procedures:
(a) Prior to the Sale by a (i) Stockholder of all or a portion of his
Stock or (ii) Grantor of all or a portion of the Assets, to a third party, such
Stockholder or Grantor, as the case may be, will provide the Licensee advanced
written notice thereof (the "Sale Notice"), which shall constitute an
irrevocable offer for a period of twenty (20) days after delivery thereof,
setting forth (i) the number of shares of Stock that the Stockholder proposes to
sell or the Assets Grantor proposes to sell (the "Offer"), (ii) the proposed
transferee and (iii) the price at which the Stockholder or Grantor proposes to
make the Sale to such transferee (the "Offer Price"), and will offer to sell the
Stock or the Assets, as the case may be, to the Licensee at the Offer Price and
on the other terms and conditions contained in the Sale Notice. Within twenty
(20) days after delivery of the Sale Notice, the Licensee must either
(i) Accept the Offer; or
(ii) Inform the Stockholder or Grantor in
writing that the Licensee declines the
Offer.
(b) Sale of Stock or of the Assets, as the case may be, under the
above-referenced terms shall be made at the offices of the Grantor in the U.S.
on a mutually satisfactory business day at least twenty (20) but not more than
forty-five (45) days after delivery of the Sale Notice. Delivery of certificates
or other instruments evidencing such Stock, duly endorsed for transfer to the
Licensee and free and clear of all claims, liens and encumbrances, shall be made
on such date against payment by the Licensee of the Offer Price therefor. The
Grantor shall affix or cause to be affixed, legends upon the certificates or
other instruments evidencing the Stock referring to this Agreement and the terms
and conditions hereof.
(c) If the Licensee does not accept the Offer, the Stockholder or
Grantor may sell the Stock or the Assets so offered for sale at a price not less
than the Offer Price, and
<PAGE> 3
on terms not more favorable to the purchaser thereof than the terms stated in
the original Sale Notice, at any time within 120 days after the expiration of
the offer required by paragraph 1 (a) above. In the event that all of the Stock
or Assets are not sold by the Stockholder or Grantor during such 120-day period,
the right of the Stockholders or Grantor to sell such unsold Stock or Assets
shall expire and the obligations of this Section 1 shall be reinstated.
(d) Notwithstanding any of the foregoing, the Stockholders shall be
permitted to make transfers of their Stock, in their sole discretion, between
and among members of their immediate family, or a trust established for the
benefit of a member of a Stockholder's immediate family. Any subsequent transfer
of said Stock outside of the Stockholder's immediate family, or a trust
established for the benefit of a member of a stockholder's immediate family,
shall be subject to Licensee's rights under this Agreement.
2. In the event Grantor shall undertake to sell to a third party
(subject to the terms and provisions of this Agreement) those assets which
comprise the terms of the Agreement, Grantor shall provide Licensee, with
advanced written notice thereof and the last opportunity to acquire such assets
on such terms and conditions in conformity with the proposed third-party
transaction.
3. Each of the Stockholders and the Grantor shall take all appropriate
action as may be necessary or appropriate to effectuate the provisions and
intent of this Agreement.
4. The Grantor covenants and agrees that it will not transfer or
reflect on its books and records, or otherwise directly or indirectly, recognize
any transactions which are in conflict with, or in violation of, the terms and
conditions of this Agreement.
The Stockholders and the Grantor acknowledge that the undertakings of
the Stockholders and Grantor pursuant to this Agreement constitute material
inducements to the Licensee to enter into the Licensee Agreement and consummate
the transactions contemplated thereunder,
<PAGE> 4
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed and delivered as of the date first set forth above.
/s/ Luigi Massironi
--------------------------------------
Luigi Massironi, In his capacity
as an anticipated Stockholder
/s/ Michael Sherman
--------------------------------------
Michael Sherman, in his capacity
as an anticipated Stockholder
HOUBIGANT INC.
By: /s/ Michael Sherman
----------------------------------
Michael J. Sherman
Exec. Vice President
<PAGE> 1
Exhibit 10.23
GUARANTY
Cosmar Corporation
Three Pickwick Plaza
Greenwich, Connecticut 06830
February 28, 1995
Houbigant, Inc.
1135 Pleasant View Terrace West
Ridgefield, New Jersey 07657-0299
Chemical Bank New Jersey,
National Association
Two Tower Center
East Brunswick, New Jersey 08816-1090
National Westminster Bank USA
175 Water Street
New York, New York 10038-4924
Gentlemen:
Reference is made to the License Agreement dated the 10th day of
August, 1994 between Houbigant, Inc. ("Houbigant") and Parfums Parquet
Incorporated (f/k/a New Fragrance License Corp.) ("PPI"), (said License
Agreement, as amended on August 16, 1994, September 16, 1994 and September 21,
1994, and as it may hereafter be amended or otherwise modified from time to
time, the "License Agreement"), pursuant to which Houbigant licensed to PPI
certain trade marks, trade names and/or applications therefore and the technical
knowledge with respect thereto owned and controlled by Houbigant. All terms not
otherwise defined herein being used herein are as defined in the License
Agreement.
SECTION 1. Guaranty. Cosmar Corporation, f/k/a C.P. Cosmetics Inc.,
("Guarantor") hereby unconditionally and irrevocably guarantees to Houbigant and
Chemical Bank New Jersey, National Association ("Chemical") as collateral agent
for itself (the "Agent") and National Westminster Bank USA ("NatWest")
(collectively, Chemical and NatWest are hereafter referred to as the "Banks")
the prompt and complete payment and performance of all obligations under the
License Agreement of its subsidiary, PPI (the "Obligations").
<PAGE> 2
SECTION 2. Enforcement of Guaranty. This is a guarantee of payment and
not of collection. In the event of the occurrence of an event of default under
the terms of the License Agreement by PPI, after the expiration of any
applicable cure periods, Houbigant or the Agent may proceed to exercise any
right or remedy which it may have under this Guaranty without pursuing or
exhausting any right or remedy which it may have against PPI or any other person
or entity.
SECTION 3. Guaranty Absolute. The obligations of the Guarantor
hereunder shall be absolute and unconditional irrespective of the validity,
legality or enforceability of the License Agreement or any other circumstance
(other than payment) which might constitute a legal or equitable discharge of a
surety or guarantor, it being agreed that the Obligations of the Guarantor
hereunder shall not be discharged except by payment as herein provided.
SECTION 4. Guaranty Not Affected. Without limiting the generality of
Section 3, the Guarantor hereby consents and agrees that, at any time and from
time to time:
(a) the time, manner, place and/or terms of payment of performance of
all or any of the Obligations may be extended or changed;
(b) any action may be taken under or in respect of the License
Agreement in the exercise of any remedy, power or privilege therein contained or
otherwise with respect thereto, or such remedy, power or privilege may be
waived, omitted or not enforced; and
(c) the License Agreement may be amended or modified in any respect;
without notice to or further assent from the Guarantor, and all without
affecting this Guaranty or the obligations of the Guarantor, which shall
continue in full force and effect until all of the Obligations and all of the
obligations of the Guarantor shall have been fully paid and performed.
SECTION 5. Waiver. The Guarantor hereby waives notice of acceptance of
this Guaranty, presentment, demand, protest, notice of the occurrence of any
event of default and any other notice of any kind whatsoever, with respect to
any or all of the Obligations hereof, and promptness in making any claim or
demand hereunder; and no act or omission of any kind in the premises shall in
any way affect or impair this Guaranty.
-2-
<PAGE> 3
SECTION 6. Reinstatement. This Guaranty shall continue to be effective
or be reinstated, as the case may be, if at any time payment, or any part
thereof, of any of the Obligations is rescinded or must otherwise be restored or
returned by Houbigant or the Agent.
SECTION 7. Subrogation. The Guarantor hereby waives all rights of
subrogation, reimbursement, indemnity, exoneration, contribution or any other
claim which the Guarantor may now or hereafter have against PPI or any other
person directly or contingently liable for the Obligations, guaranteed
hereunder, or against or with respect to PPI's property, arising from the
existence or performance of this Guaranty.
SECTION 8. Representations and Warranties. The Guarantor hereby
represents and warrants that, as of the date hereof:
(a) The execution, delivery and performance by it of this Guaranty are
duly authorized by all necessary corporate actions, do not contravene or violate
(i) any material provision of law, (ii) the Guarantor's charter or bylaws, (iii)
any material contractual restriction binding on or affecting the Guarantor or
(iv) any material law, rule or regulation of any applicable governmental or
quasi-governmental authority, and do not result in or require the creation of
any lien, security interest or other charge or encumbrance upon or with respect
to any of its properties.
(b) This Guaranty constitutes the legal, valid and binding obligation
of the Guarantor, enforceable against the Guarantor in accordance with its
terms.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority, regulatory body or any other party
is required for the due execution, delivery and performance by the Guarantor of
this Guaranty.
(d) The Guarantor's net worth is in excess of $10,000,000.
(e) There are no pending material court or administrative proceedings
or undischarged judgments against the Guarantor and no Federal or state tax
liens have been filed or threatened against the Guarantor nor is the Guarantor
in default or claimed default under any agreement for borrowed money.
-3-
<PAGE> 4
(f) The Guarantor shall furnish its current financial statements,
including the Guarantor's annual financial statements, to Houbigant and the
Agent on the same regular basis as such information must be provided by the
Guarantor to its lenders and, upon the request of Houbigant or the Agent, shall
permit Houbigant or Houbigant's representatives or the Agent or the Agent's
representatives to inspect the Guarantor's financial records at the Guarantor's
offices.
SECTION 9. Continuing Guaranty. The Guarantor hereby represents and
agrees that this is a continuing guaranty and (a) shall remain in full force and
effect until payment in full of the Obligations and any and all expenses which
might be incurred by Houbigant or the Agent in collecting any or all of the
Obligations and/or enforcing any rights hereunder including, without limitation,
the reasonable fees and expenses of Houbigant's counsel or the Agent's counsel
and (b) shall inure to the benefit of and be enforceable by Houbigant or the
Agent and their successors, transferees and assigns.
SECTION 10. Governing Law. This Guaranty shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to principles of conflicts of law. The Guarantor hereby submits to the
jurisdiction of the Courts of the State of New York and to the Federal Courts
located within the City of New York. The Guarantor further consents to the entry
and enforcement of any judgment against the Guarantor in the courts of the
jurisdiction in which and to which the Guarantor or any of its property is
present or is subject.
SECTION 11. Net Worth. The Guarantor shall at all times maintain a
minimum net worth of not less than $10,000,000 until such time as the Banks have
been paid in full the allowed amount of their claims under a confirmed and
effective plan of reorganization for Houbigant.
SECTION 12. Due and Payable. If (a) the Guarantor or PPI should at any
time become insolvent or make a general assignment for the benefit of creditors,
or if a petition in bankruptcy or any insolvency or reorganization proceedings
shall be filed or commenced by, against, or in respect of PPI or the Guarantor;
(b) any representation or warranty made by the Guarantor herein or in any
writing furnished to Houbigant or the Agent in connection with the Guaranty
shall be incorrect, false or misleading in any material respect on the date as
of which made; (c) the Guarantor shall default in the punctual and
-4-
<PAGE> 5
complete performance or observance of the terms of this Guaranty, or any
agreement pertaining hereto or otherwise obligating the Guarantor to Houbigant
and the Agent; (d) the Guarantor shall have concealed, removed, or permitted to
be concealed or removed any part of its property, with intent to hinder, delay
or defraud its creditors, or any of them, or made or suffered a fraudulent
transfer or conveyance under any applicable bankruptcy, fraudulent transfer or
similar law, or shall have permitted or suffered any creditor to obtain a lien
upon any material portion of its property through judicial or legal proceedings
or distraint; or (e) the Guarantor shall have been dissolved, liquidated or its
existence terminated, then any and all of the Obligations shall, forthwith, for
purposes hereof, be deemed due and payable without notice notwithstanding that
any such Obligation is not then due and payable by PPI.
SECTION 13. Severability. If a court of competent jurisdiction shall
invalidate any provision of this Guaranty, such judgment shall not invalidate or
otherwise affect any other provision hereof.
IN WITNESS WHEREOF, the Guarantor has duly executed and delivered this
Guaranty as of the date first above written.
COSMAR CORPORATION
By:___________________________
Name:_________________________
Title:________________________
-5-
<PAGE> 1
Exhibit 10.24
SECURITY AGREEMENT - TRADEMARKS
AGREEMENT made as of this 28th day of February, 1995 between HOUBIGANT
INC., a Delaware corporation, located at 1135 Pleasant View Terrace West,
Ridgefield, New Jersey 07657 ("Grantor"), PARFUMS PARQUET INCORPORATED, a
Delaware corporation, located at 675 Massachusetts Avenue, Cambridge,
Massachusetts 02139 ("Licensee"), and CHEMICAL BANK NEW JERSEY, N.A.,
individually and as agent (the "Bank Agent") for CHEMICAL BANK NEW JERSEY, N.A.
and NATIONAL WESTMINSTER BANK, USA (collectively, the "Banks") located at P.O.
Box 1090, Two Tower Center, East Brunswick, New Jersey 08816. Capitalized terms
used herein and not otherwise defined shall have the meanings ascribed to them
in the License Agreement (as defined below).
WHEREAS, on November 18, 1993 (the "Filing Date"), Licensor, together
with certain affiliates, filed a voluntary petition for relief under chapter 11
of Title 11, United States Code (the "Bankruptcy Code"), in the United States
Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court").
Grantor's chapter 11 case is being jointly administered by the Bankruptcy Court
under procedurally consolidated case no. 93 B 45767 (JLG) (the "Bankruptcy
Case");
WHEREAS, Grantor has adopted, used and is using, and is the owner of
the entire right, title and interest in and to, certain trademarks and designs;
WHEREAS, Grantor and Licensee have entered into a license agreement
dated August 10, 1994, as modified on August 16, 1994 and as further modified on
each of September 16, 1994 and September 21, 1994 (the "License Agreement"),
pursuant to which Grantor has granted Licensee certain rights to use the
Trademarks for the Products in the Territories (as defined in the License
Agreement) as listed on Schedule A thereto;
WHEREAS, pursuant to an Order of the Bankruptcy Court dated September
21, 1994, the Bankruptcy Court, inter alia, (a) authorized and approved Grantors
implementation and effectuation of the License Agreement, and (b) authorized and
empowered Grantor to execute and deliver such additional documents and
instruments as may be necessary or appropriate to consummate the transactions
contemplated by the License Agreement, including, without limitation, this
Security Agreement (the "Approval Order");
WHEREAS, both prior to and subsequent to the Filing Date, Licensor and
certain of its affiliates incurred certain indebtedness to the Banks (in the
aggregate, the "Bank Debt") under certain pre-petition and post-Filing Date loan
documents (collectively, the "Bank Loan Documents");
WHEREAS, the Banks hold valid, first priority, duly perfected liens
against and security interests in and to all or
<PAGE> 2
substantially all assets of Grantor, including, without limitation, the
Trademarks, to secure repayment of the Bank Debt; and
WHEREAS, the Banks have consented to permit Grantor to grant Licensee a
second priority lien against and security interest in and to the Trademarks for
the Products in the Territories, which lien and security interest shall be in
all respects subordinate in right and priority to the lien and security interest
of the Banks in and to the Trademarks, and subject further to the terms and
provisions of the License Agreement and this Security Agreement;
NOW, THEREFORE, IT IS AGREED that, for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, Grantor does hereby
grant to Licensee a security interest in all of its right, title and interest in
and to each of the Trademarks for the Products in the Territories, as set forth
below.
1. Grant of Security Interest. Subject to the terms and provisions of
this Agreement, this security interest shall secure the prompt payments,
performance and observances of all Obligations (as hereinafter defined) by
Grantor. The grant of this security interest by Grantor to Licensee shall be in
all respects subordinate in right and priority to the lien and security interest
of the Banks in and to the Trademarks.
2. Definitions.
(a) "Obligations" shall mean any and all obligations of any kind
incurred by Grantor to Licensee arising under the License
Agreement including, without limitation, the liabilities and
obligations evidenced by or issued, created or arising in
connection with this Agreement, that arise, result from, or
are connected to Grantor's rejection or disaffirmance of the
License Agreement pursuant to Section 365 of the Bankruptcy
Code in any subsequent case under chapter 11 of the Bankruptcy
Code commenced by the Grantor(a "Rejection Event").
(b) "Enforcement" means, collectively or individually, for (i)
Licensee to declare a "Rejection Event" under the License
Agreement; and/or (ii) the Banks and/or the Bank Agent to
demand payment in full of or accelerate the indebtedness of
Grantor to the Banks and to commence the judicial or
nonjudicial enforcement of any of the rights and remedies
under the Bank Loan
-2-
<PAGE> 3
Documents or any anticipated plan of reorganization of
Grantor, as the case may be.
(c) "Enforcement Notice" means a written notice delivered in
accordance with Section 11 hereof, which notice shall (i) if
delivered by Licensee, state that a "Rejection Event" under
the License Agreement has occurred, specify the nature of such
Rejection Event, and announce that an Enforcement Period (as
hereinafter defined) has commenced and (ii) if delivered by
the Banks or the Bank Agent, state that an "Event of Default"
under the Bank Loan Documents with respect to Grantor's
failure to make a payment or Grantees breach of a financial
covenant or any anticipated plan of reorganization of Grantor,
as the case may be, has occurred and that the applicable cure
period, if any, has expired and the Event of Default has not
been cured by Grantor, and shall specify the nature of such
event of default, and announce that an Enforcement Period has
commenced.
(d) "Enforcement Period" means the period of time following the
receipt by either the Bank Agent or Licensee of an Enforcement
Notice delivered by the other until the earlier of the
following: (i) Grantor shall have paid its obligations in full
to the Banks under the Bank Loan Documents; (ii) Grantor has
cured the Rejection Event which gave rise to Licensee's
Enforcement Notice; (iii) the party delivering an Enforcement
Notice agrees in writing to (a) rescind its Enforcement Notice
and (b) terminate the Enforcement Period.
3. Representations and Warranties. Grantor hereby represents, warrants,
covenants and agrees as follows:
(a) Grantor has not abandoned any of the Trademarks for the
Products in the Territories.
(b) Except as provided otherwise in the License Agreement, Grantor
will, at Licensee's expense, perform all acts and execute all
documents requested by Licensee at any time to evidence,
perfect, maintain, record and enforce this security interest
in the Trademarks for the Products in the Territories or
otherwise in furtherance of the provisions of this
-3-
<PAGE> 4
Agreement, and Grantor hereby authorizes Licensee to execute
and file one or more financing statements (and similar
documents) or copies thereof, in substantially the form
annexed as Exhibit "A" hereto and made a part hereof, or of
this Security Agreement, with respect to the Trademarks for
the Products in the Territories, signed only by Licensee;
(c) Except as provided otherwise in the License Agreement, Grantor
will not do any act, or omit to do any act, whereby the
Trademarks may become abandoned, invalidated, unenforceable,
avoided or avoidable and, to the extent required by the terms
and provisions of the License Agreement, shall notify Licensee
immediately if it knows of any reason or has reason to know
that any application, registration or recording may become
abandoned, canceled, invalidated, avoided or avoidable;
(d) Provided such action is not inconsistent with or prohibited by
the License Agreement, or this Agreement, Licensee may, at its
sole discretion and expense, pay any amount or do any act
required of Grantor hereunder or requested by Licensee to
preserve, defend, protect, maintain, record or enforce
Grantor's obligations contained herein, the Obligations, the
Trademarks for the Products in the Territories, or the right,
title and interest granted Licensee herein, and which Grantor
fails to do or pay;
(e) Subject to the provisions of the License Agreement, if Grantor
files an application(s) for the registration of a Trademark
with the United States Patent and Trademark Office or any
similar office or agency in the United States, which
Trademark, if registered, would constitute Licensee's
collateral under this Agreement, Grantor shall promptly notify
Licensee of such registration and, to the extent required by
this Agreement or the License Agreement, as the case may be,
and upon request by Licensee, and subject to receipt of the
prior written consent of the Banks thereto, execute and
deliver any and all agreements, instruments and documents
necessary or appropriate to evidence Licensee's security
interest in such Trademark upon its registration;
-4-
<PAGE> 5
(f) The Trademarks for the Products in the Territories now owned
by Grantor are valid and subsisting and in full force and
effect. Subject to the valid, duly existing and perfected
security interest of the Banks therein, Grantor has the sole,
full and clear title thereto, and, with the consent of the
Banks, the right and power to grant the security interest
herein granted. The Trademarks for the Products in the
Territories are not subject to any liens, claims, mortgages,
assignments, licenses, security interests or encumbrances of
any nature whatsoever, except as otherwise specifically set
forth herein and on Schedule B annexed hereto;
(g) Subject to the terms and provisions of the License Agreement,
so long as there are Obligations owing to Licensee, Grantor
will not assign, sell, mortgage, lease, transfer, pledge,
hypothecate, grant a security interest in or lien upon that is
prior or senior in right to the lien and security interest
herein granted to Licensee, encumber, or otherwise dispose of
any of the Trademarks for the Products in the Territories,
without the prior written consent of the Banks and Licensee,
and nothing in this Agreement shall be deemed a consent by
Licensee to any such action except as expressly permitted
herein;
(h) As of the date hereof, Grantor does not have any Trademarks
for the Products in the Territories registered in, or the
subject of pending applications in, the United States Patent
and Trademark Office or any similar office or agency that
would be subject to the terms of the License Agreement and/or
this Agreement, other than those that may be described in
Schedule D to the License Agreement and made a part hereof;
(i) Subject to the terms and provisions of the License Agreement,
Grantor will render any assistance necessary to Licensee in
any proceeding before the United States Patent and Trademark
Office or any similar office or agency to maintain each
application and registration of the Trademarks, including,
without limitation, filing of renewals, affidavits of use,
affidavits of incontestability and
-5-
<PAGE> 6
opposition, interference and cancellation proceedings.
4. Rights and Remedies. Each of the Bank Agent and Licensee agrees to
use its best efforts to give an Enforcement Notice to the other prior to
commencement of Enforcement. In the event of the issuance by Licensee of Notice
of a Rejection Event and during an Enforcement Period, Licensee shall have the
following rights and remedies (to the extent permitted by applicable law) in
addition to all other rights and remedies of Licensee, whether under law, the
Obligations, or otherwise, all such rights and remedies being cumulative, not
exclusive and enforceable alternatively, successively or concurrently, without
(except as provided herein) notice to, or consent by Grantor: (a) neither
Grantor nor any affiliate or subsidiary thereof shall make any use of the
Trademarks or any mark similar thereto for any purpose; (b) Licensee may, at any
time and from time to time, upon ten (10) days prior notice to Grantor, license,
whether general, special or otherwise, and whether on an exclusive or
non-exclusive basis, the Collateral, throughout the Territory, for such term or
terms, on such conditions, and in such manner, as Licensee shall in its sole
discretion determine; (c) Licensee may, at any time and from time to time, upon
ten (10) days' prior notice to Grantor, assign, sell, or otherwise dispose of,
the Collateral or any of it, either with or without special or other conditions
or stipulations, with power to buy the Collateral or any part of it, and with
power also to execute assurances, and do all other acts and things for
completing the assignment, sale or disposition which Licensee shall, in its sole
discretion, deem appropriate or proper; and (d) in addition to the foregoing, in
order to implement the assignment, sale or other disposal of any of the
Collateral pursuant to subparagraph 4(c) hereof, Licensee may at any time,
pursuant to the authority granted in the Powers of Attorney described in
paragraph 5 hereof, execute and deliver on behalf of Grantor, one or more
instruments of assignment of the Trademarks (or any application, registration or
recording thereof), in form suitable for filing, recording or registration.
Grantor agrees to pay when due all costs incurred in any such transfer of the
Collateral, including any taxes, fees and attorneys' fees, and all such costs
not so paid shall be added to and deemed additional advances under the License
Agreement. Licensee may apply the proceeds actually received from any such
license, assignment, sale or other disposition to the reasonable costs and
expenses thereof, including, without limitation, reasonable attorneys' fees and
all legal, travel and other expenses which may be incurred by Licensee as a
result of Grantor's breach of Obligations, and Grantor shall remain liable and
will pay Licensee on demand any deficiency remaining to compensate Licensee for
any such breach. Nothing herein contained shall be construed as requiring
Licensee to take any such action at any time. In the event of
-6-
<PAGE> 7
any such license, assignment, sale or other disposition of the Collateral, or
any of it, after the occurrence of a Rejection Event, Grantor shall supply its
know-how and expertise relating to the manufacture and sale of the products and
services bearing the Trademarks to Licensee or its designee. Notwithstanding the
foregoing, the parties hereto agree that during an Enforcement Period:
(a) Licensee shall not take any action to foreclose or realize
upon or to enforce any rights it may have with respect to the
Trademarks for the Products in the Territories without the
Banks' or Bank Agent's prior written consent thereto, unless
the Bank Debt shall have been first paid and satisfied in
full; and
(b) Subject to any applicable restrictions in the Bank Loan
Documents, the Banks or the Bank Agent, as the case may be,
may, at their/its option and without the prior written consent
of Licensee, take any action to accelerate payment of the Bank
Debt and/or to foreclose or realize upon or enforce any of its
rights with respect to the Trademarks.
5. Power of Attorney. Concurrently with the execution and delivery
hereof, Grantor is executing and delivering to Licensee in the form of Exhibit 1
hereto, ten originals of a Power of Attorney for the implementation of the
assignment, sale or other disposal of the Collateral pursuant to paragraph 4
hereof.
6. Notices of Default. From and after the date of this Agreement,
Licensee agrees to use reasonable efforts to give the Banks, or the Bank Agent,
copies of any notice sent to Grantor with respect to the occurrence or existence
of a Rejection Event, default or other breach under the License Agreement or
this Agreement. From and after the date of this Agreement, the Banks agree to
use reasonable efforts to give Licensee, or its authorized agent or designee,
copies of any notice sent to Grantor with respect to the occurrence or existence
of a default or other breach under the Bank Loan Documents or any anticipated
plan of reorganization of Grantor, in each case simultaneously with the sending
of any such notice to Grantor.
7. Modification. No provision hereof shall be modified, altered or
limited except by a written. instrument expressly referring to this Agreement
and executed by the party to be charged. The execution and delivery of this
Agreement has been authorized by the Board of Directors of Grantor and by the
Bankruptcy Court in the Bankruptcy Case.
-7-
<PAGE> 8
8. Successors and Assigns. This Agreement shall be binding upon the
successors, assigns or other legal representatives of Grantor, and shall,
together with the rights and remedies of Licensee hereunder, inure to the
benefit of Licensee, its successors, assigns or other legal representatives.
9. Governing Law. This Agreement, the Obligations and the Trademarks
for the Products in the Territories shall be governed in all respects by the
laws of the United States and the laws of the State of New Jersey.
10. Severability. If any term of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity of all other terms hereof shall
in no way be affected thereby.
11. Counterparts. This Agreement may be executed in one or more
counterparts which when taken together shall constitute one and the same
Security Agreement.
12. Notices. All notices and other communications provided for
hereunder shall, unless otherwise stated herein, be in writing (including
telecommunications and communication by facsimile copy) and mailed, telexed,
transmitted or delivered, as to each party hereto, at its address set forth
above or at such other address as shall be designated by such party in a written
notice to the other parties hereto. All such notices and communications shall be
effective upon receipt, or, in the case of notice by mail, five (5) days after
being deposited in the mails, postage prepaid, or in the case of notice by
telex, when telexed against receipt of the answer back, or in the case of notice
by facsimile copy, when verbal confirmation of receipt is obtained, in each case
addressed as aforesaid.
13. Third-Party Beneficiaries. The terms and provisions of this
Agreement shall be for the sole benefit of the Grantor, Licensee and the Banks
for their respective successors and assigns and no other Person shall have any
right, benefit, or priority by reason of this Agreement.
14. Section Titles. The article and section headings contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
-8-
<PAGE> 9
IN WITNESS WHEREOF, Grantor and Licensee have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
HOUBIGANT INC. , and
HOUBIGANT GMBH
By: /s/ Michael J. Sherman
-----------------------------------
(Title)
PARFUMS PARQUET INCORPORATED
By: /s/
-----------------------------------
Group V.P. -- Finance (Title)
Consented and agreed to:
CHEMICAL BANK NEW JERSEY, NA
individually and as Agent
By: /s/
--------------------------------
NATWEST BANK, N.A.
By: /s/ Nina McLaughlin
--------------------------------
-9-
<PAGE> 1
Exhibit 10.24.1
ASSIGNMENT FOR SECURITY
WHEREAS, HOUBIGANT INC. (herein referred to as "Grantor") has adopted,
used and is using, and owns the entire right, title and interest in and to, the
trademarks and the applications, registrations and recordings more particularly
described on Schedule A annexed hereto as part hereof (the "Trademarks");
WHEREAS, Grantor is obligated to PARFUMS PARQUET INCORPORATED (the
"Licensee") and has entered into a Security Agreement -- Trademarks dated the
date hereof (the "Agreement") in favor of Licensee; and
WHEREAS pursuant to the Agreement, Grantor is granting to Licensee a
security interest in the Trademarks, together with any reissue, extension or
renewal thereof, the goodwill of the business symbolized by the Trademarks, the
applications and registrations thereof, and all proceeds thereof, including,
without limitation, any and all causes of action which may exist by reason of
infringement thereof (the "Collateral"), to secure the payment, performance and
observance of all indebtedness, obligations, liabilities and agreements of any
kind of Grantor or Licensee, now existing or hereafter arising, evidenced by or
issued, created or arising in connection with the Licensee (all of the foregoing
being herein referred to as the "Obligations");
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, Grantor does hereby assign unto Licensee and grant to
Licensee a security interest in the Collateral to secure the prompt payment,
performance and observance of the Obligations.
Grantor does hereby further acknowledge and affirm that the rights and
remedies of Licensee with respect to the assignment of and security interest in
the Collateral made and granted hereby are more fully set forth in the
Agreement, the terms and provisions of which are hereby incorporated herein by
reference as if fully set forth herein.
IN WITNESS WHEREOF, Grantor has caused this Assignment to be duly
executed by its officer thereunder duly authorized as of the 14th day of
February, 1995.
HOUBIGANT INC.
By: /s/ Michael J. Sherman
-----------------------------------
PARFUMS PARQUET INCORPORATED
By: /s/ Group V.P. Finance
-----------------------------------
<PAGE> 2
SCHEDULE A
TRADEMARK REGISTRATIONS
<TABLE>
<CAPTION>
Registration
TRADEMARK Country Class Number Renewal Date
- --------- ------- ----- ------------- ------------
<S> <C> <C> <C> <C>
CHANTILLY Argentina 3 1254165 10/29/1997
CHANTILLY Aruba 3 13553 12/31/1995
CHANTILLY Bermuda 48 7420 10/04/2001
CHANTILLY Brazil 3 1232/0601.307 11/25/1994
CHANTILLY Chile 3 296295 06/16/1995
CHANTILLY Colombia 3 118894 08/24/2002
CHANTILLY Costa Rica 3 19932/21951 03/24/1998
CHANTILLY Guatemala 3 20471 02/24/1999
CHANTILLY- Honduras 3 14375 08/08/1997
HOUBIGANT
CHANTILLY 3 17131 07/23/2000
CHANTILLY Mexico 52 150680 04/10/1999
CHANTILLY Peru 3 11927 12/30/2002
CHANTILLY Puerto Rico 6 15478 10/04/1998
CHANTILLY Trinidad & Tabago 48 5502 05/26/1997
CHANTILLY United States 51,3,5 865,906 03/03/2009
CHANTILLY Uruguay 3 232496 06/11/2000
CHANTILLY Venezuela 6 42976F 12/10/2007
CHANTILLY Virgin Islands 3,5 5708 03/04/2009
</TABLE>
Page 1 of 3
<PAGE> 3
SCHEDULE A
TRADEMARK REGISTRATIONS
<TABLE>
<CAPTION>
Registration
TRADEMARK Country Class Number Renewal Date
- --------- ------- ----- ------------- ------------
<S> <C> <C> <C> <C>
DEMI-JOUR Chile 3 365535 03/05/2001
DEMI-JOUR Costa Rica 3 76305 07/19/2001
DEMI-JOUR United States 3 1,488,987 05/24/2008
DEMI-JOUR Venezuela 6 16145/89
Application
LUTECE BY
HOUBIGANT Colombia 3 121154 11/20/2002
LUTECE United States 3 1311856 12/31/2005
Intl.Cl.51,52
LUTECE BY
HOUBIGANT Argentina 3 1171230 09/02/1995
LUTECE BY
HOUBIGANT Brazil 3 811763641
Application
LUTECE BY
HOUBIGANT Chile 3 297405 06/11/1995
LUTECE BY
HOUBIGANT Ecuador 3 1620/85 06/20/1995
LUTECE BY
HOUBIGANT Panama 3 39836 09/18/1996
LUTECE BY
HOUBIGANT Paraguay 3 113130 05/31/1995
LUTECE Puerto Rico 6 27613 10/20/1997
LUTECE BY
HOUBIGANT Venezuela 6 126125F 01/16/2002
MONSIEUR MUSK USA 3 1,566,699 11/21/1999
</TABLE>
Page 2 of 3
<PAGE> 4
SCHEDULE A
TRADEMARK REGISTRATIONS
<TABLE>
<CAPTION>
Registration
TRADEMARK Country Class Number Renewal Date
- --------- ------- ----- ------------- ------------
<S> <C> <C> <C> <C>
PRESENCE United States 3 309266 01/09/2004
RAFFINEE Costa Rica 3 76308 07/19/2001
RAFFINEE Mexico 3 263188 10/01/1995
RAFFINEE Puerto Rico 6 27612 10/20/1997
RAFFINEE United States 3 1,264,630 01/24/2004
RAFFINEE Uruguay In Script 3 220459 07/24/2001
3,25 218948 09/12/2001
HOUBIGANT
RAFFINEE United States 3,51 1,256,522 11/07/2003
HOUBIGANT
RAFFINEE Venezuela 6 113761-F 09/17/2000
</TABLE>
Page 3 of 3
<PAGE> 1
Exhibit 10.35
LICENSE AGREEMENT
Dated August 18, 1994
The parties to this agreement are Cosmar Corporation, a Delaware
corporation (the "Licensee"), and Renaissance Cosmetics, Inc., a Delaware
corporation (the "Licensor").
The Licensee desires to use the items of intellectual property rights
set forth in exhibit A (the "Licensed Property") in connection with the
operation of the Licensee's business, and the Licensor is willing to grant to
the Licensee the exclusive right and license to use the Licensed Property in
connection with the operation of the Licensee's business, upon the terms and
subject to the conditions set forth below.
It is therefore agreed as follows:
1. Grant of License.
1.1. The Licensor hereby grants to the Licensee a perpetual exclusive
worldwide right and license to use the Licensed Property in connection with the
operation of the Licensee's business, including, without limitation, in
connection with the production, manufacture, advertising, merchandising,
promotion, labeling, marketing, distribution and sale of products, of all kinds
and description, whether or not currently produced.
1.2. The design, content and workmanship of the goods or articles
manufactured or distributed in connection with the Licensed Property, and of all
production and advertising materials used in connection therewith, at all times
shall be of a high quality and, with respect to products currently produced, at
least commensurate with the quality of the goods produced or sold by the
Licensee, or its predecessors, prior to the date of this agreement.
1.3. The Licensor shall not directly or indirectly grant any other
license for the use of the Licensed Property without the consent of the
Licensee.
2. Royalties. The Licensee shall pay to the Licensor, in United States
currency, a royalty of $10.00 per annum.
<PAGE> 2
3. Books and Records; Audits. The Licensee shall prepare and maintain,
in accordance with generally accepted accounting principles, true, complete and
correct books of account and records (including without limitation the originals
or copies of documents supporting entries in the books of account) covering all
transactions arising out of or relating to this agreement. The Licensor and its
duly authorized representatives shall have the right, during regular business
hours and upon reasonable notice to the Licensee, to audit, examine and make
copies, at the Licensor's cost and expense, the books of account and records of
the Licensee and all other documents and materials in the possession or under
the control of the Licensee relating to this agreement. All the books of account
and records shall be kept available by the Licensee for at least three years
after the end of the calendar year to which they relate.
4. The Licensed Property.
4.1. The Licensee shall have the right to use any of the Licensed
Property as or in connection with the corporate name or trade name of the
Licensee or any of its subsidiaries and in any advertising, publicity, labeling,
packaging or printed matter.
4.2. The Licensee acknowledges the validity of the Licensed Property
and the exclusive ownership of the Licensed Property by the Licensor, whether or
not registered. The Licensee shall not, at any time during the term of this
agreement or thereafter, directly or indirectly challenge, contest or aid in
challenging or contesting the validity or ownership by the Licensor or the
Licensed Property, or the title or registration thereto, whether now existing or
hereafter obtained by the Licensor or any affiliate or subsidiary of the
Licensor. Any and all goodwill and other rights that attach to, or arise in
connection with the use of, the Licensed Property during the term of this
agreement or thereafter as a result of the business activities of the Licensee
shall inure to the sole benefit of the Licensor and shall remain vested in the
Licensor. The Licensee shall not, at any time, do or permit to be done any act
or thing that could reasonably be expected to have a material adverse effect on
the rights of the Licensor in and to the Licensed Property or reduce the value
of the Licensed Property or detract from their reputation.
4.3. The Licensee shall cooperate with the Licensor in the execution,
filing and prosecution of all such instruments or documents as the Licensor may
deem appropriate to obtain the registration and the renewal and maintenance of
registration of
-2-
<PAGE> 3
the Licensed Property, and to confirm the Licensor's ownership rights of the
Licensed Property and the respective rights of the Licensor and Licensee
pursuant to this agreement. All rights in the Licensed Property, other than
those specifically granted in this agreement, are reserved by the Licensor for
its own use and benefit. The Licensor has made and makes no representation or
warranty as to the validity or effectiveness of the registration (or
registrability) of any of the Licensed Property and the failure to obtain, renew
or maintain registration thereof shall not be deemed a breach of this agreement
by the Licensor.
4.4. The Licensee shall use the Licensed Property in each applicable
jurisdiction strictly in compliance with the legal requirements obtaining
strictly therein and shall use any markings in connection therewith as may be
required by applicable law. The Licensee shall at the request of the Licensor
cause to appear on all articles, products and materials on which or in
connection with which the Licensed Property are used, such legends, markings and
notices as may be reasonably necessary in order to give appropriate notice of
any trademark, trade name, trademark registration, application therefor or other
related right.
4.5. The Licensee promptly shall notify the Licensor of any
infringement or imitation of the Licensed Property or of any use by any person
of a trademark similar to any of the Licensed Property that comes to the
attention of the Licensee. The Licensor shall not be required to take any action
with respect to any third party's infringement, imitation or use of the Licensed
Property if it deems it inadvisable to do so. If the Licensor fails to take any
action, the Licensee shall have the right, at the Licensee's sole cost and
expense, to take such action as it deems advisable for the protection of its
rights in and to the Licensed Property.
5. Indemnity. The Licensee shall indemnify, defend and hold the
Licensor and its directors, officers, employees, representatives and agents
harmless from and against any claim, suit, loss, damage, demand, injury or
expense (including reasonable attorneys' fees) arising out of the production,
manufacture, advertising, merchandising, promotion, labeling, marketing,
distribution and sale of any articles or products by or on behalf of the
Licensee, whether arising out of a permitted or non-permitted use of the
Licensed Property by the Licensee or any agent of the Licensee or by any
consumer of such articles or products, or for any other reason whatsoever.
6. Defaults. If the Licensee fails to make any payment in accordance
with section 2 and if that default
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<PAGE> 4
continues uncured for ten days after written notice thereof is received by the
Licensee, the Licensor shall have the right to terminate this agreement
forthwith by written notice of termination to the Licensee. If either the
Licensor or the Licensee fails to perform any of the other covenants required to
be performed by it under this agreement, the other party, at its sole election,
may terminate this agreement forthwith by written notice of termination to the
defaulting party if (i) the default is curable but continues uncured for a
period of 20 days after written notice of termination has been given to the
defaulting party or (ii) the default is not curable.
7. Rights on Expiration or Termination. Upon termination of this
agreement pursuant to section 6 or upon its expiration, all of the rights of the
Licensee under this agreement shall terminate forthwith and shall revert
immediately to the Licensor, the Licensee shall discontinue forthwith all use of
the Licensed Property, the Licensee no longer shall have the right to use the
Licensed Property or any variation or simulation thereof and the Licensee
promptly shall transfer to the Licensor, free of charge, all registrations,
filings and rights with regard to the Licensed Property that it may then
possess. Upon such termination or expiration, all royalties payable to the
Licensor under this agreement shall become immediately due and payable.
8. Representations and Warranties.
8.1. The Licensor represents and warrants to the Licensee that the
Licensor has the corporate right, power and authority to enter into this
agreement and to perform all of its obligations hereunder, and that it has
granted no other license to use the Licensed Property.
8.2. The Licensee represents and warrants to the Licensor that the
Licensee has full right, power and authority to enter into this agreement and to
perform all of its obligations hereunder.
9. Miscellaneous
9.1. Notice. All notices or other communications in connection with
this agreement shall be in writing and shall be considered given when delivered
personally or on the fifth day after mailing, certified mail return receipt
requested, to the following addresses:
-4-
<PAGE> 5
If to the Licensor:
Renaissance Cosmetics, Inc.
Three Pickwick Plaza
Greenwich, Connecticut 06830
with a copy to:
Parker Chapin Flattau & Klimpl
1211 Avenue of the Americas
New York, New York 10036
Attn: Edward R. Mandell, Esq.
If to the Licensee:
Cosmar Corporation
c/o Kidd, Kamm & Company
9454 Wilshire Boulevard
Beverly Hills, California 90212
with a copy to:
Parker Chapin Flattau & Klimpl
1211 Avenue of the Americas
New York, New York 10036
Attn: Edward R. Mandell, Esq.
9.2. Assignability. Neither this agreement nor any of the rights
granted hereunder may be assigned, sublicensed or transferred by the Licensee
without the express written consent of the Licensor and any attempted direct or
indirect assignment, sublicense or transfer of this agreement or any of the
rights granted hereunder, whether voluntary or by operation of law, shall be
void unless the Licensor shall have given its prior written consent.
9.3. Successors and Assigns. This agreement shall inure to the benefit
of and shall be binding upon the parties and their respective permitted
successors and assigns.
9.4. Governing Law. This agreement shall be governed by and construed
and interpreted in accordance with the laws of the state of Delaware applicable
to agreements made and to be performed wholly within that state.
-5-
<PAGE> 6
9.5. Waivers. No waiver by either party, whether express or implied, of
any provision of this agreement, or of any breach or default thereof, shall
constitute a continuing waiver of that provision or of any other provision of
this agreement. Acceptance of payments by the Licensor shall not be deemed a
waiver by the Licensor of any breach of or default under any of the provisions
of this agreement by the Licensee.
9.6. Severability. If any provision or any portion of any provision of
this agreement shall be held to be void or unenforceable, the remaining
provisions of this agreement and the remaining portion of any provision held
void or unenforceable in part shall continue in full force and effect.
RENAISSANCE COSMETICS, INC.
By: /s/ Thomas V. Bonoma
-----------------------------------
Thomas V. Bonoma, President
and Chief Executive Officer
COSMAR CORPORATION
By: /s/ Terry M. Theodore
-----------------------------------
Terry M. Theodore, Vice President
and Secretary
-6-
<PAGE> 7
EXHIBIT A
---------
Licensed Property
TRADEMARKS OWNED BY RENAISSANCE COSMETICS, INC.
Mark Reg. No. Date
- ---- -------- ----
All rights owned by the
Licensor to use the
trademark "Quik Fit" as
such rights may exist
anywhere in the world,
including such rights
associated with the
following trademark
registrations:
U.S.A. Reg. No. 1,569,080* Dec. 5, 1989
Canada Reg. No. 363,909* Nov. 17, 1989
France App. No. 93488093* Oct. 18, 1993
- ------------------
* The Licensor is the beneficial owner of this trademark registration.
All registrations of this trademark are being transferred to the
Licensor by the former owners, Cosmar Corporation, a California
corporation.
-7-
<PAGE> 1
Exhibit 10.41
Management Services Agreement
KIDD, KAMM & COMPANY
Three Pickwick Plaza
Greenwich, Connecticut 06830
August 16, 1994
Renaissance Cosmetics, Inc.
Three Pickwick Plaza
Greenwich, Connecticut 06830
Gentlemen:
This is to confirm our understanding concerning the management and
consulting services which we are to perform for Renaissance Cosmetics, Inc. (the
"Company").
Our services will include but not be limited to the following:
1. Service on the Board of Directors - Four Partners or other designees
of our firm will upon designation by Kidd, Kamm Equity Partners, L.P. serve as
members of the Board of Directors of the Company (the "Designees"). So long as
he is able, such designees shall include William J. Kidd.
2. Financial Planning - We will review the Company's budget after it is
prepared by the Company, will work closely with management in monitoring the
Company's financial affairs and initiate and maintain relationships with sources
of financing for the Company including banks, other lending institutions and
investment banking firms.
3. Management Assistance - We will confer and work closely with senior
management of the Company and will provide advice and consultation in all areas
of executing the Company's business plan.
4. Annual Business Plan and Budget - We will assist in the preparation
of annual business plans and budgets and work closely with management to monitor
the Company's performance.
<PAGE> 2
5. Acquisitions - Where appropriate, we will analyze and review
proposals and make recommendations concerning acquisitions and other business
opportunities.
6. Remuneration - In consideration of our services, we shall receive an
annual fee of $675,000 for each fiscal year commencing September 1, 1994 payable
in equal monthly installments. This fee may be increased at any time by action
of the Board of Directors of the Company and with the approval of Thomas V.
Bonoma. In addition, the Company will reimburse us for all reasonable
out-of-pocket expenses incurred by us in connection with the performance of our
services hereunder.
Notwithstanding the foregoing, payment of our fee as well as any
increases in our fee shall be subject to the terms and provisions of Section
4.24 of the Indenture among Renaissance Cosmetics, Inc., American Bank National
Association as Trustee, et al. as the same may be amended from time to time and
the terms and provisions of the cumulative Exchangeable Preferred Stock Series A
being issued by the Company, as the same may be amended from time to time.
This Agreement shall be for a term of seven (7) years and shall
continue thereafter on a year-to-year basis (at the fee for the last twelve (12)
month period unless otherwise agreed to), unless terminated by either the
Company or the undersigned by written notice not earlier than 90 days and no
later than 60 days prior to the end of the applicable period.
Please signify your approval of this Agreement by signing the copy of
this letter where indicated.
Very truly yours,
KIDD, KAMM & COMPANY
By: /s/
----------------------------------------
Agreed:
RENAISSANCE COSMETICS, INC.
By: /s/
---- -----------------------
-2-
<PAGE> 1
Exhibit 10.52
ON THIS 23rd DAY OF DECEMBER IN THE YEAR ONE THOUSAND NINE HUNDRED
AND NINETY-THREE
GROUPE GESTION LUGER INC., a body politic and corporate, duly incorporated,
having its Head Office and principal place of business in the City of Montreal,
in the Province of Quebec, hereinacting and represented by Michael Mikelberg,
its President, hereto duly authorized as he does declare;
HEREINAFTER REFERRED TO AS THE "LESSOR"
AND HOUBIGANT LTEE, a body politic and corporate, duly incorporated, having its
Head Office and principal place of business in the City of St. Leonard, Province
of Quebec, hereinacting and represented by Giacomo Giuliano, its
vice-president, hereto duly authorized as he does declare;
HEREINAFTER REFERRED TO AS THE "LESSEE"
WHICH have, this day, declared as follows:
DEFINITIONS
ARTICLE I
The following expressions whenever used herein shall have the following
meanings:
(a) "LESSOR" means: GROUPE GESTION LUGER INC.;
(b) "LESSEE" means HOUBIGANT LTEE, its Successors and Assigns;
(c) "PROPERTY" means the following immoveable property, namely: The
building bearing civic numbers 1593 to 1645 Cunard Street in the City
of Laval erected entirely within the limits of a building lot
composed of a lot known and designated upon the
<PAGE> 2
2
Plan and Book of Reference of the Official Cadastre of the Parish of
Saint-Martin, Registration Division of Laval, as being the following:
- Subdivision number forty-two of the original lot six hundred and
twenty-two (622-42).
(d) "BUILDING" means the industrial building erected on the property and bearing
Civic Numbers 1593 to 1645 Cunard, in the City of Laval, Province of Quebec;
(e) "LEASED PREMISES" means that part of the Building leased to the Lessee by
the Lease bearing Civic Number 1593 to 1645 Cunard in the City of Laval,
Province of Quebec, and containing a total superficial area of approximately
forty-three thousand eighty-seven square feet (43,087 sq. ft.) English Measure
and more or less, the whole as is outlined in Schedule "A" annexed hereto;
(f) "PROPERTY TAXES" means all taxes, rates, dues and assessments whatsoever
(assessments and special assessments shall be those imposed during the term
hereof and the cost thereof shall be amortized over the term of this Lease)
whether municipal, governmental or otherwise now charged or hereafter to be
charged upon or in respect of the Property and Building, or any part thereof
(excepting any income or profit taxes of the Lessor or any taxes, rates, dues
and assessments charged or hereafter to be charged upon the Lessee), and
including, but not so as to limit the foregoing, all Property taxes and
assessments whatsoever, all municipal taxes, special taxes, local improvement
taxes, Montreal Urban Community taxes, school taxes and water taxes, and taxes
on paid-up capital, and any value-added tax on rental income that may be levied
by any government or any applicable taxing authority, whether known as a
value-added tax or by any other name.
With respect to water taxes, only those water taxes associated with normal
non-industrial or non-business water consumption (i.e.
<PAGE> 3
3
bathroom, kitchen and drinking water) shall be permitted on the premises;
Water consumed for any purpose other than the aforementioned purposes shall be
metered (installation at the cost of the Lessee) and paid for by the Lessee
according to the use thereof;
(g) "INSURANCE PREMIUMS" means the aggregate of all Insurance Premiums paid or
payable by the Lessor with respect to Insurance placed or to be placed by the
Lessor on the Property and Building inclusive of Fire, Extended Coverage and
Malicious Damage Insurance for full replacement value of the Building, its
improvements and equipment, Public Liability Insurance, Property Damage
Insurance, Rental Insurance, Boiler Insurance, Plate Glass Insurance and such
other Insurance as the Lessor may place with respect to the Property and
Building, the whole in such amounts as may be reasonably placed by the Lessor;
(h) "COMMON AREA CHARGES" means the aggregate of all expenses, disbursements and
costs annually incurred by the Lessor with respect to the maintenance, upkeep,
repair, administration [four hundred dollars ($400) a month] (inclusive of
Reparations Locatives, and Lessee's Repairs), replacements and improvements
relating to all common areas forming part of the Property and Building,
inclusive of the parking areas, snow removal, roadways, sidewalks and
landscaping, as well as all such expenses, disbursements and costs annually
incurred by the Lessor with respect to Lessor's Repairs, Replacements and
Improvements relating to the Building which are not otherwise the liability and
responsibility of the Lessee pursuant to the Lease but exclusive of all
structural defect repairs;
(i) "CHARGES" means the aggregate of all Property Taxes, Insurance Premiums and
Common Area Charges incurred by the Lessor in the Year in Question;
<PAGE> 4
4
(j) "AREA OF LEASED PREMISES" means the area (expressed in square feet) of the
Leased Premises measured from the exterior face of all exterior walls, doors and
windows and from the centre line of all interior walls separating the Leased
Premises from adjacent premises, which the Lessor and Lessee acknowledge to be
forty-three thousand eighty-seven square feet (43,087 sq. ft.) English Measure
and more or less;
(k) "GROSS RENTABLE AREA" means the sum of the area of the Leased Premises plus
the Lessee's square footage proportion of the common areas which the Lessor and
the Lessee acknowledge to be forty-three thousand eighty-seven square feet
(43,087 sq. ft.) English Measure and more or less;
(l) "RENTABLE AREA OF THE BUILDING" means forty-three thousand eighty-seven
square feet (43,087 sq. ft.) English Measure and more or less;
(m) "PORTION" means one hundred percent (100%), being the Area of the Leased
Premises divided by the Rentable Area of the Building multiplied by one hundred
percent (100%);
(n) "YEAR" means the calendar year;
(o) "LEASE" means the Present Deed of Lease.
ARTICLE II
The Lessor hereby leases the Leased Premises to the Lessee, hereto present and
accepting, for the Term, and subject to the Rental Terms and Conditions
hereinafter set forth.
<PAGE> 5
5
TERM
ARTICLE III
The Lease shall have a term of five (5) years and shall commence on the first
(1st) day of January, Nineteen Hundred and Ninety-Four (1994) and shall
terminate on the thirty-first (31st) day of December, Nineteen Hundred and
Ninety-Eight (1998), unless terminated prior thereto under the provisions
hereof.
NET NET RENTAL
ARTICLE IV
The Lessee binds and obliges itself to pay to the Lessor during each year of the
Term, in lawful money of Canada, without setoff, compensation or deduction
whatsoever, Net Net Rental being the aggregate of the following:
(a) A Base Rent per annum of one hundred and thirty-three thousand five hundred
and sixty-nine dollars and seventy cents ($133,569.70) in and by way of even,
equal and consecutive monthly in advance instalments on the first (1st) day of
each and every month of eleven thousand one hundred and thirty dollars and
eighty-one cents ($11,130.81) from and including the first (1st) day of January,
Nineteen Hundred and Ninety-Four (1994) up to and including the thirty-first
(31st) day of December, Nineteen Hundred and Ninety-Four (1994);
A Base Rent per annum of one hundred and forty-six thousand four
hundred and ninety-five dollars and eighty cents ($146,495.80) in and by way of
even, equal and consecutive monthly in advance instalments on the first (1st)
day of each and every month of twelve thousand two hundred and seven dollars and
ninety-eight cents ($12,207.98) from and including the first (1st) day of
January, Nineteen Hundred and Ninety-Five (1995) up to and
<PAGE> 6
6
including the thirty-first (31st) day of December, Nineteen Hundred
and Ninety-Five (1995);
A Base Rent per annum of one hundred and fifty-two thousand nine
hundred and fifty-eight dollars and eighty-five cents ($152,958.85) in and by
way of even, equal and consecutive monthly in advance instalments on the first
(1st) day of each and every month of twelve thousand seven hundred and forty-six
dollars and fifty-seven cents ($12,746.57) from and including the first (1st)
day of January, Nineteen Hundred and Ninety-Six (1996) up to and including the
thirty-first (31st) day of December, Nineteen Hundred and Ninety-Six (1996);
A Base Rent per annum of one hundred and fifty-nine thousand four
hundred and twenty-one dollars and ninety cents ($159,421.90) in and by way of
even, equal and consecutive monthly in advance instalments on the first (1st)
day of each and every month of thirteen thousand two hundred and eighty-five
dollars and sixteen cents ($13,285.16) from and including the first (1st) day of
January, Nineteen Hundred and Ninety-Seven (1997) up to and including the
thirty-first (31st) day of December, Nineteen Hundred and Ninety-Seven (1997);
A Base Rent per annum of one hundred and sixty-five thousand eight
hundred and eighty-four dollars and ninety-five cents ($165,884.95) in and by
way of even, equal and consecutive monthly in advance instalments on the first
(1st) day of each and every month of thirteen thousand eight hundred and
twenty-three dollars and seventy-five cents ($13,823.75) from and including the
first (1st) day of January, Nineteen Hundred and Ninety-Eight (1998) up to and
including the thirty-first (31st) day of December, Nineteen Hundred and
Ninety-Eight (1998);
(b) An additional rent in an amount equivalent to the portion of the Charges.
The Lessee may, at its option, pay the property taxes to the Lessor
XXXXXXXXXXXXXXXXXXXX prior to the date upon which the taxes are due and payable
by the Lessor to the applicable taxing authority.
<PAGE> 7
7
Prior to the commencement of each Year or as soon thereafter as is reasonably
possible, the Lessor will furnish to the Lessee an estimate of the Charges for
such Year; and the Lessee shall pay to the Lessor on the first days of each
month in advance during the Year, additional rent equal to one-twelfth (1/12th)
of the portion of the estimated Charges. The Lessee may, at its option, pay the
taxes to the Lessor thirty (30) days prior to the date upon which the taxes are
due and payable by the Lessor to the applicable taxing authority. Should the
first year of the Term not commence on the first day of January, or should the
last day of the Term not terminate on the thirty-first day of December, then,
prior to the commencement of the Term or of the last Year of the term, as the
case may be, or as soon thereafter as is reasonably possible, the Lessor shall
furnish to the Lessee an estimate of the Charges for the part of the Year in
question; and the Lessee shall pay to the Lessor on the first day of each month
in advance during the part of the Year in question forming part of the Term,
additional rent equal to the portion of the estimated Charges divided by the
number of months during the part of the Year in question.
After the end of each year, or after the end of the Term in the case of the
final year, the Lessor shall furnish the Lessee with a statement of the actual
Charges for such year (or part of year, as the case may be) and the Lessee shall
pay to the Lessor forthwith an amount equal to the Portion of the excess of the
actual Charges over the estimated Charges. Should the estimated Charges exceed
the actual Charges, the Lessee shall receive forthwith repayment for the Portion
of the excess. The appropriate adjustments shall be made between the parties
hereto within thirty (30) days after the date on which the Lessor has furnished
the Lessee with such statement.
The Lessee shall pay as and when due all water taxes, business taxes and other
similar rates and taxes which may be levied or
<PAGE> 8
8
imposed upon the Premises or upon the business carried on therein, and also all
other rates and taxes which are or may be payable by the Lessee as tenant or
occupant thereof. If the mode of collecting such taxes be so altered as to make
the Lessor, landlord and/or the proprietor liable therefor instead of the Lessee
or if by law, regulation or otherwise such taxes are made payable by lessors,
landlords or proprietors or if one account is rendered for such taxes covering
the entire Building or a portion thereof greater than that occupied by the
Lessee, the Lessor will pay such accounts and the Lessee will repay the Lessor
as Additional Rent on demand the amount of the benefit derived by the Lessee
from such change, or the Lessee's Proportionate Share of the total account
rendered, as the case may be.
The Lessee shall pay its portion of the surtax charged on the building, such
amount to be paid prior to the date for payment by the Lessor to the City of
Laval.
SPECIAL CONDITIONS
1. The Lessee agrees to take the premises on an "AS IS" basis.
2. ACB Mercantile Inc. and/or Houbigant Ltee agree to pay Groupe Gestion Luger
Inc. seventy thousand dollars ($70,000.00) plus GST and QST, such sum to
represent the unamortized remaining portion of the one hundred and sixty
thousand dollar ($160,000.00) leasehold improvement made in the premises for ACB
Mercantile Inc., such amount to be paid upon signing of this lease but in no
event later than December 31, 1993.
CONDITIONS
ARTICLE V
The present Lease is made under the following Charges, Clauses and
<PAGE> 9
9
Conditions, all of which shall be deemed to be the essence of the Lease and
without which the same would not have been made, to wit:
1. The Lessee undertakes to use and occupy the premises for the purposes only
of: manufacturing, distribution, marketing of toiletries, cosmetics and
perfumes.
2. The Lessee shall pay on their respective due dates all water taxes,
applicable or chargeable with respect to the Leased Premises and the Business
Tax and Machinery Tax, which may be levied or imposed in virtue of the Lessee's
business or operations therein, and also all other rates, taxes, dues and
assessments whatsoever which are or may be payable by the Lessee as Tenant and
Occupant of the Leased Premises under the provisions of the Charter and By-Law
of the City of Laval and amendments thereof, and of any other governmental laws
or otherwise, and notwithstanding any law, by-law or regulation which may be
passed or adopted whereby water taxes, business taxes, machinery taxes or any
other of the aforementioned taxes, rates, dues and assessments are made payable
by landlords and proprietors. If the mode of collecting such taxes is so altered
as to make the Lessor liable therefor instead of the Lessee, the Lessee
undertakes to pay to the Lessor forthwith the amount so paid by the Lessor.
3. The Lessee shall further pay on their respective due dates all charges for
all public utilities charged upon or in relation to the Leased Premises,
including all charges for electricity, gas, water, steam or hot water to be used
upon or charged in respect of the Leased Premises beginning November 1st, 1993.
The Lessor shall provide facilities and equipment and fixtures
including metering devices applicable solely to the Leased Premises for natural
gas and electricity and the Lessee shall sign a contract with the public utility
companies for these services.
<PAGE> 10
10
4. The Lessee shall furnish the Leased Premises and shall maintain therein at
all times a sufficient quantity of merchandise, goods and moveable effects to
secure payment of at least one year's rent.
5. The Lessee shall not transfer or assign any of its rights in the Lease or any
part thereof, nor sublet the Leased Premises or any part thereof, nor use, nor
suffer the same to be used for any purpose than that above-mentioned, without in
each case the prior written consent of the Lessor, which consent shall not be
unreasonably withheld.
In the event of any transfer, assignment or sublease in virtue of this
condition, the Lessee shall, in such event, remain jointly and severally
responsible with such transferee, assignee or sub-lessee for the payment of the
Net Net Rental, and the fulfilment of all the other terms and conditions herein
stipulated.
6. The Lessee, at its own expense, shall heat the Leased Premises to a
reasonable degree of temperature.
7. The Lessee, at its own expense, shall maintain and keep the Leased Premises
well painted, clean and tidy and in such a condition as a reasonably careful
owner would do; and shall promptly make all repairs of any nature whatsoever
(exclusive of structural defect repairs) to the Leased Premises and its
equipment and appurtenances, inclusive of all Tenant's repairs (reparations
locatives), and all replacements.
The Lessee, at its own expense, is responsible for the maintenance,
repair and replacement of the heating and air-conditioning system of the Leased
Premises.
The Lessor, its agents and representatives, shall have the right, at
all reasonable times during the Term, to enter the Leased Premises to examine
the condition thereof and to ascertain whether
<PAGE> 11
11
the Lessee is performing its obligations hereunder.
Should the Lessee fail to make and complete such repairs, maintenance
and replacements within a reasonable delay, the Lessor shall have the right to
make or complete the same on behalf of the Lessee. In such event the Lessee
binds and obliges itself to reimburse the Lessor with the total amount so
expended by the Lessor within seven (7) days from the date on which the Lessor
has so notified the Lessee to that effect.
Upon expiration of the Term, or upon the prior termination of the
Lease, the Lessee shall remove all its merchandise, goods and moveable effects
from the Leased Premises, and shall deliver the same to the Lessor in as good a
state, order and condition as the Leased Premises were at the commencement of
the Term, reasonable wear and tear, and accidents from fire excepted.
8. The Lessee, upon knowledge of any structural defects relating to the Leased
Premises, shall promptly notify the Lessor of the same; and the latter shall
cause said structural defects to be repaired with due diligence and at their
expense, unless said defects were caused by fault or negligence of the Lessee or
those for whom it is in law responsible, in which event the Lessee shall
reimburse the Lessor with the cost of said defects within ten (10) days'
notification to that effect.
9. The Lessee, at its own expense, shall promptly comply with and conform to all
governmental (inclusive of federal, provincial and municipal) rules and
regulations, and shall effect, at its own expense, all alterations and
improvements requested by them insofar as same pertain to the Leased Premises;
and shall further promptly comply with and conform to all the rules and
regulations of the police, fire and health departments. The Lessee shall further
comply with and conform to any and all regulations, orders or recommendations of
the Canadian Fire Underwriters Association, or
<PAGE> 12
12
any other body having similar functions, or of any insurance company by which
the Lessor and/or the Building may be insured.
10. The Lessee shall allow any person who may be desirous of purchasing, leasing
or hypothecating the Leased Premises to visit and examine the same between the
hours of nine o'clock (9:00) in the morning and five o'clock (5:00) in the
evening during every working week day of the Lessee, and to allow notices for
that purpose to be placarded and to be left on the Leased Premises.
11. The Lessee shall have no right to cancel or terminate the Lease due to any
failure on its part to obtain any permits which may be necessary to enable it to
operate in the Leased Premises.
12. The Lessee will provide the Lessor with a Certificate of Liability Insurance
covering the Lessee and Lessor in respect of the Leased Premises and its
operations therein to the extent of not less than Five Hundred Thousand Dollars
($500,000.00) insuring injuries to or death of persons and damage of property of
others arising from any one occurrence.
13. The Lessor shall not be liable for any damage, loss or injury to any
property or person in, upon or about the Leased Premises resulting from any
cause whatsoever, unless through the fault of the Lessor, and whether the same
is caused to the Lessee, its employees, customers or any other person or to any
property in or about the Leased Premises; and the Lessee binds and obliges
itself to hold the Lessor free and harmless from any and all such claims.
14. The Lessee shall not make any alterations or improvements to the Leased
Premises, unless the same are approved in writing by the Lessor, which approval
shall not be unreasonably withheld. It is understood and agreed between the
parties hereto that all such alterations and improvements shall be made in
compliance with all
<PAGE> 13
13
governmental by-laws or regulations relating thereto, and will be carried out in
a proper and workmanlike manner in such a way as not to weaken the structure of
the Leased Premises. The Lessee shall carry such Workmen's Compensation and
General Liability Insurance for the protection of the Lessor as the Lessor may
reasonably require, and shall do any and all things necessary to prevent the
filing of any privilege or lien against the Leased Premises or the Building. In
the event any such privilege or lien shall be filed or registered, the Lessee
shall cause the same to be discharged at its own expense within ten (10) days
thereof or shall deposit with the Lessor prior to the expiration of said delay
sufficient sums to discharge the said privilege or lien including any interest
thereon or costs thereof, and which said sum the Lessor can remit to the
privileged or lien creditor at any time at their sole discretion.
All alterations and improvements of a permanent character incorporated
in the Leased Premises by the Lessee shall, upon the termination of the Lease,
remain on the Leased Premises as the property of the Lessor without compensation
to the Lessee therefor; unless the Lessor, at its option, requests the Lessee to
remove all or part of the said alterations and improvements, in which event the
same shall be removed by the Lessee at its own expense. All other alterations
and improvements shall remain the Lessee's property; and the Lessee shall be at
liberty to remove the same, and obliged to remove the same if so requested by
the Lessor, at the termination of the Lease.
Should the said alterations and improvements, or any part thereof, be
removed by the Lessee pursuant to the foregoing provisions, the Lessee shall
repair all damage done to the plaster, woodwork or floors caused by such
removal, and shall leave the Leased Premises in the same state and condition in
which it was at the commencement of the Term, reasonable wear and tear excepted.
<PAGE> 14
14
The Lessee shall reimburse the Lessor annually throughout the Term or
any extension thereof in an amount equivalent to any increase in Property Taxes
resulting from or attributed to any alterations or improvements effected by the
Lessee to the Leased Premises.
15. INTENTIONALLY OMITTED.
16. Should the Leased Premises, or any part thereof, at any time during the
Term, be damaged or destroyed by fire or otherwise so as to render the same
unfit for the purposes of the Lessee, then, and so often as the same shall
happen, the Net Net Rental or a proportionate part thereof, according to the
nature and extent of the damages sustained, shall abate, and all or any remedies
for recovery of the Net Net Rental or such proportionate part thereof shall be
suspended until the Leased Premises shall have been rebuilt or made fit for the
purpose of the Lessee.
There shall be no abatement of rent if the damage to the Leased
Premises arises out of an occurrence on the Leased Premises, unless such damage
shall not have been caused by the fault or negligence of the Lessee, its agents
or employees.
If the Building or the Leased Premises are destroyed or damaged by fire
or otherwise at any time during the Term, then in every such event the following
provisions shall have effect:
(a) The Lessee shall give prompt written notice of such damage or destruction to
the Lessor.
(b) If the damage or destruction is such that the Leased Premises are rendered
wholly unfit for occupancy or it is impossible or unsafe to use and occupy them,
and if in either event the damage, in the reasonable opinion of the Lessor, such
opinion to be given to the Lessee within twenty (20) days from the receipt by
the
<PAGE> 15
15
Lessor of the Lessee's aforementioned notice, cannot be repaired with reasonable
diligence within sixty (60) days from the happening of such damage or
destruction, then either the Lessor or the Lessee may, within the fifteen (15)
days succeeding the giving of the Lessor's opinion, terminate the Lease by
giving to the other written notice of such termination, in which event, the
Lease and the Term shall cease and be at an end as of the date of such damage or
destruction and the rent and all other payments for which the Lessee is liable
under the Terms of the Lease shall be apportioned and paid in full to the date
of such damage or destruction. In the event that neither the Lessor nor the
Lessee so terminates the Lease, or in the event that the opinion of the Lessor
given to the Lessee as described above confirms that the damage or destruction
can be repaired with reasonable diligence within one hundred and twenty (120)
days from the date of such damage or destruction, then the Lessor shall repair
the Building with all reasonable speed and the rent hereby payable shall abate
from the date of the damage or destruction until the same is made good to the
extent of enabling the Lessee to use and occupy the Leased Premises.
(c) If in the opinion of Lessor the damage or destruction can be repaired within
one hundred and twenty (120) days from the date of its happening, and the damage
or destruction is such that the Leased Premises can be partially used for the
purposes for which they are hereby leased, then until such damage or destruction
has been repaired, the rent shall abate in the proportion that the part of the
Leased Premises which is rendered unfit for occupancy bears to the Area of the
Leased Premises, and the Lessor shall forthwith repair the damage or destruction
with all reasonable speed.
17. The Lessee shall not bring or cause to be brought into the Leased Premises
any machinery, equipment or other effect that by reason of its weight or size
might damage the Leased Premises or overload the floors; and the Lessee hereby
assumes responsibility for all damages resulting therefrom.
<PAGE> 16
16
18. The Lessee shall have the right to erect or display any sign, advertisement
or notice on any part of the property or Leased Premises provided that the
Lessee has obtained prior written consent and approval of the design, colour,
size, style and location of such sign, advertisement or notice from the Lessor,
which consent and approval shall not be unreasonably withheld. Any such sign,
advertisement or notice shall be dignified in appearance and shall comply with
all governmental regulations, and the Lessee shall remove such sign,
advertisement or notice at the termination of the Lease and shall repair any
damage done to the Leased Premises resulting from the erection and removal of
such sign, advertisement or notice.
19. The Lessee shall pay all extra Insurance Premiums which the company with
which the Building may be insured shall exact in consequence of the business
carried on in the Leased Premises by the Lessee, or anything brought into or
stored in the Leased Premises by the Lessee. The Lessee shall further indemnify
and protect the Lessor from any and all demands made by other tenants in the
Building should their rate of insurance be increased in consequence of the
business carried on by the Lessee or anything brought into or stored in the
Leased Premises by the Lessee. The Lessor shall similarly indemnify and protect
the Lessee hereunder should its rates of insurance be increased in consequence
of the business carried on by or in consequence of anything brought into or
stored in the Leased Premises by other tenants in the Property.
20. The Lessee shall observe all reasonable rules and regulations of which it
has written notice imposed by the Lessor on its tenants in the Building
pertaining to the safety, care and cleanliness of the Building and the safety,
comfort and convenience of its tenants; and without derogating from the
generality of the foregoing, the Lessee covenants with the Lessor that it will
not do, or omit to do, or permit to be done or omitted anything upon
<PAGE> 17
17
or in respect of the Leased Premises, the doing or omission of which, as the
case may be, shall be or result in nuisance.
21. The Lessee shall not create any obnoxious odors and/or undue noise. The
Lessee shall be responsible for the removal and disposal of all its garbage and
waste.
22. The Lessee shall make all rental payments and shall pay all other sums which
be owing to the Lessor pursuant to the Lease, without notice or formality, at
the office of the Lessor at 1455 Sherbrooke Street West, Suite 200, Mezzanine,
Montreal, Quebec H3G 1L2, or as directed by the Lessor. All notices to be given
to either of the parties pursuant to the Lease shall be validly given if either
delivered or sent by prepaid registered mail addressed, in the case of the
Lessor to: 1455 Sherbrooke Street West, Suite 200, Mezzanine, Montreal, Quebec
H3G 1L2, and to the Lessee at the Leased Premises, or to such other address as
either party hereto may furnish to the other in writing. Any such notice, if so
mailed, shall be deemed to have been given on the date following the date of
the mailing thereof.
23. Should the Lessee fail to fulfill any covenant or obligation incurred or
assumed by it in the Lease, the Lessor shall have the right to cure the default
on behalf of the Lessee, and shall be entitled to charge all sums so paid to the
Lessee, who shall pay them forthwith to the Lessor as additional rent. The
Lessor, in addition to any other right, shall have the same remedies and may
take the same steps for the recovery of all such sums as it may have for the
recovery of rental arrears under the terms of the Lease.
24. The Lessee binds and obliges itself to pay to the Lessor interest on late
payments of Net Net Rental and other sums which may be payable by it to the
Lessor pursuant to the Lease calculated at the rate of twelve percent (12%) per
annum and calculated from
<PAGE> 18
18
the respective due dates thereof.
25. If at any time during the Term of the Lease, the Lessee should become
insolvent or bankrupt, or make an assignment of property under the bankruptcy
laws, the Winding Up Act, or any other insolvency law in force at the time, or
should the Lessee fail to make any payment of rent or any other sums owing to
the Lessor within thirty (30) days of its due date as is herein provided, or
should the property, goods or effects of the Lessee, or any part thereof, or the
Lease itself be seized or taken in execution or by attachment by virtue of a
judgment of the court, or should the Lessee desert, vacate or abandon the Leased
Premises, or should the Lessee fail, within twenty (20) days of the date of
mailing of the written notice from the Lessor, to remedy any other default or
fulfill any other obligation to which it is obliged hereunder, then upon the
occurrence of any of the aforementioned eventualities or contingencies, the
Lease shall, at the option of the Lessor, and without any notice or
mise-en-demeure whatsoever to the Lessee, to the assignee or to any other
person, become null and void at the end of the year then current, or at any time
even prior or subsequent thereto. In such event the Lessor, at its option, may
relet the Leased Premises upon such terms and conditions as the Lessor may deem
proper. The Lessor hereby expressly reserves all rights or recourses to claim
all accrued rent, difference in rent, losses, damages, costs and disbursements
suffered by the Lessor,
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX and with reserve
of all other rights or recourses of the Lessor.
26. The Lessee shall give to the Lessor six (6) months' written notice prior to
the termination of the Term of its intention to vacate the Leased Premises
failing which the Lessor may, at its option, give written notice to the Lessee
within a period of not less that thirty (30) days prior to the termination of
the Term that the Lease is renewed for a further period of twelve (12) months
from the date of the termination of the Term, subject to the
<PAGE> 19
19
same Net Net Rental as was payable by the Lessee during the last year of the
Term, and under the same terms and conditions as are herein set forth. If
neither of the notices above-described is given, the Lease shall terminate ipso
facto without notice or demand on the date herein stated and any continued
occupation of the Leased Premises by the Lessee shall not have the effect of
extending the period or of renewing the Lease for any period of time, the whole
notwithstanding the provisions of the Quebec Civil Code; and the Lessee shall be
presumed to occupy the Leased Premises under a tenancy from month to month in
consideration of a monthly in advance rental payments equivalent to the Net Net
Rental payable by the Lessee to the Lessor during the last year of the Term
pursuant to the Lease.
27. It is the mutual intention of the parties hereto that the rental payments
defined in the Lease shall be an absolutely net net return to the Lessor during
the Term of the Lease, free of any and all costs and expenses of any nature
whatsoever relating to the Leased Premises, other than any income or profit
taxes which may be levied against the Lessor, or any interest or amortization
charges of the Lessor in respect of mortgages or hypothecs.
28. The Lessee has deposited with the Lessor the sum of sixteen thousand two
hundred and fifty-eight dollars and sixty-four cents ($16,258.64) to be applied
on account of the base rent due for the month of December 1998 at the signing of
the lease agreement or occupancy of the Premises, whichever is the earlier.
29. No interest shall accrue on such security deposit. In the event of any
default hereunder by the Lessee, the Lessor may utilize such deposit to offset
either in whole or in part any obligations of the Lessee hereunder. In the event
that the Lessee does not default hereunder, the security deposit shall be
returned to the Lessee at the expiration of the Lease Term, without any interest
thereon; however, the Lessee expressly acknowledges that
<PAGE> 20
20
the Lessee will not hold any lender of the Lessor liable for the return of all
or any part of the security deposit unless the security deposit is escrowed with
such lender.
30. The Lessee hereby grants to the Lessor, to be affective only on the coming
into force of the new Civil Code a hypothec in the amount of three hundred and
four thousand four hundred and sixty-four dollars and eighty cents ($304,464.80)
(being the annual rent and estimated real estate taxes and operating expenses
for a period of one year and sale taxes thereon) on the universality of
moveables belonging to the Lessee to secure the payment of all rent to be paid
by the Lessee pursuant to this offer to lease and the performance of all other
obligations contained in this offer to lease on the part of the Lessee to be
performed and any damages that may be suffered by Lessor as a result of the
failure by the Lessee to conform to its obligations contained herein. The Lessee
hereby irrevocably authorizes the Lessor to do all that is necessary to publish
this hypothec once the registers for same have been created including, without
limitation, the right to sign any necessary documents or statements that must be
published in the appropriate registers. The Lessor agrees to cede priority of
this hypothec to a bank or other similar financial institution that advances
monies to the Lessee for the purposes of its operations.
XXXXXXXXXXXXXXXXXX For greater certainty, the failure of the Lessee to sign a
form of lease presented to it by the Lessor which contains all the terms hereof
shall be considered a default permitting the Lessor to exercise a hypothecary
right.
31. The Lessee shall pay to the Lessor as additional rent its proportionate
share of all expenses incurred by the Lessor as a result of having obtained or
attempted to obtain a reduction in real estate taxes. All real estate taxes
being the subject of contestation by the Lessor will nevertheless be included in
the calculation of Lessee's share provided however that, if the Lessee
<PAGE> 21
21
has paid the amount of rent increase according to this article and that the
Lessor has subsequently received a reimbursement of any portion of the real
estate taxes having served as a basis for this payment, the Lessor shall pay to
the Lessee the appropriate portion of such reimbursement after having deducted
from same the amount of the above-mentioned expenses.
The Lessor shall not be obligated to oppose, litigate or contest the
levying of real estate taxes and shall have the right at its discretion to
settle the real estate taxes by compromise or otherwise or shall have the right
to consent, renounce or dispose of same otherwise, without it being necessary to
advise or obtain Lessee's consent or approval.
LANGUAGE DECLARATION
Les Parties ont exige que le present acte de bail soit redige en anglais. The
Parties have requested that this Deed of Lease be drawn in English.
WHEREOF ACTE:
DONE AND PASSED at the City of Montreal on the date aforesaid and after due
reading hereof, the Parties hereto have signed.
THE LESSOR:
GROUPE GESTION LUGER INC.
/s/ Illegible Per: /s/ Illegible
- ------------------- ---------------------------------------
/s/ Illegible THE LESSEE:
- -------------------
Witness HOUBIGANT LTEE
Per: /s/ Illegible
---------------------------------------
<PAGE> 22
ASSIGNMENT OF LEASE MADE AND ENTERED INTO AT THE PLACE AND
ON THE DATE HEREINAFTER INDICATED.
- -------------------------------------------------------------------------------
BY AND BETWEEN:- HOUBIGANT LTEE, a body politic and corporate duly incorporated
according to law and having its head office in the City and
District of Montreal, and represented by Augustine Celaya,
duly authorized for the purpose of the present agreement;
(hereinafter referred to as the "Assignor")
PARTY OF THE FIRST PART
AND:- 3088766 CANADA LIMITED, a body politic and corporate duly
incorporated according to law and having its head office in the
City and District of Toronto, and represented by Albert E.
DeChellis, duly authorized for the purpose of the present
agreement;
(hereinafter referred to as the "Assignee")
PARTY OF THE SECOND PART
AND:- GROUPE GESTION LUGER INC., a body politic and corporate duly
incorporated according to law and having its head office in the
City and District of Montreal, hereinacting through and
represented by Michael Mikelberg, duly authorized for the
purpose of the present agreement;
(hereinafter referred to as the "Landlord")
PARTY OF THE THIRD PART
<PAGE> 23
WHEREAS the Landlord executed an Agreement of Lease (the "Lease") with the
Assignor on December 23, 1993 for the immoveable property situated at 1593 to
1645 Cunard Street, in the City of Chomodey (Laval), Province of Quebec, which
premises are more fully described in the Lease (the "Premises");
WHEREAS concurrently herewith, the Assignor along with ACB Mercantile Inc. and
ACB Fragrances and Cosmetics Inc. has sold to the Assignee its assets pursuant
to the terms of an Offer to Purchase made by the Assignee to the Assignor on
December 12, 1994, and accepted by the Assignor on December 12, 1994, (the
"Offer");
WHEREAS pursuant to the Offer, the Assignor undertook to assign and transfer to
the Assignee all of its right, title and interest in and to the Lease and to
obtain the consent of the Landlord of such assignment;
WITNESSETH:
I - PREAMBLE
1.01 The preamble to this agreement shall form part hereof as if written out
at length herein.
II - ASSIGNMENT
2.01 In consideration of the sum of one dollar ($1.00) and other good and
valuable consideration paid by the Assignee to the Assignor, the receipt
whereof is hereby acknowledged, the Assignor does hereby assign, transfer and
make over unto the Assignee, hereto present and accepting as and from the
Effective Date (as hereinafter defined), all of the Assignor's rights, title
and interest in and to the Lease and all benefits to be derived therefrom.
<PAGE> 24
-3-
III - ASSUMPTION OF OBLIGATIONS
3.01 The Assignee hereby covenants and agrees with the Assignor and the
Landlord, that the Assignee, throughout the remainder of the term of the Lease
and any renewal thereof, shall pay the rent and other charges stipulated
therein at the times and in the manner provided in the Lease and shall assume,
observe and perform each and every one of the covenants, provisos and
conditions on the part of the tenant therein set forth, including, without
limitation, the use and occupancy of the Premises or any part thereof for any
purpose other than the one stipulated in the Lease as if the Assignee were the
Tenant thereunder and the Assignee shall indemnify and save harmless the
Assignor from all actions, suits, costs, losses, damages and expenses in
respect of such covenants, conditions and agreements. The assumption of the
Assignor's obligations by the Assignee shall include, without limitation, the
hypothecation of the movables, being purchased by the Assignee pursuant to the
Offer, and the movables hypothecated pursuant to paragraph 30 of Article V of
the Lease to secure the payment of rent to be paid by Assignor under the Lease
and the fulfillment and discharge of any obligations of the Assignor
originating prior to the Effective Date.
3.02 The Assignee acknowledges that it has received a copy of the Lease,
that it unconditionally accepts all of the terms and conditions thereof.
3.03 Notwithstanding the present assignment, the Assignor hereby binds and
obliges itself, jointly and severally with the Assignee in favour of the
Landlord, for the payment of the rent and other charges stipulated in the Lease
at the times and in the manner provided therein and the performance of each and
everyone of the covenants, provisos and conditions on the part of the Tenant
therein set forth throughout the remainder of the term of the Lease and any
renewal thereof and hereby waives the benefits of division, discussion and
subrogation.
3.04 In the event that the Assignee, during the Term, shall make an
assignment for the benefit of its creditors or shall become bankrupt or
insolvent or if the Assignee shall take advantage of any act or statute which
may be enforced for bankrupt or insolvent debtors, or if the Assignee shall be
wound up, the Assignor will, at Landlord's option, ipso facto, be deemed by
these presents and without novation to have entered into a lease with the
Landlord for the Premises for a term equal in duration to the residue remaining
unexpired of the Term at the time of notice from the Landlord that the Assignor
has become the Tenant hereunder. Such lease shall be deemed to contain the like
landlords and tenants' obligations respectively and the like covenants,
provisos,
<PAGE> 25
-4-
agreements and conditions in all respects (including the proviso for re-entry)
as are contained in the Lease.
3.05 The Assignor expressly covenants, agrees and undertakes that all of
its obligations set out herein and in the Lease shall remain in full force and
effect during the Term of the Lease.
3.06 For purposes of this agreement, the Term shall include the original
term, any renewals or extensions thereof, whether referred to as overholding or
otherwise. The Assignor hereby waives notice of the taking effect of and coming
into force of any such renewals or extensions.
IV - EFFECTIVE DATE
4.01 This assignment shall be deemed to have taken effect as and from
December 12, 1994.
V - NO OTHER ASSIGNMENT OR SUBLET
5.01 The consent of the Landlord herein shall not avail for any other
assignment of the Lease or sublet of the Premises and any such further
assignment or Sublease shall require the prior written consent of the Landlord.
VI - LANDLORD'S CONSENT
6.01 The Landlord hereby declares that it consents to the foregoing
assignment in consideration of the agreements of the parties herein but, in
doing so, the Landlord does not hereby acknowledge or approve of any terms of
the agreement between the Assignor and the Assignee except for the assignment
itself.
VII - CONCLUDING PROVISIONS
7.01 This agreement shall not constitute any novation of the obligations of
the Assignor under the Lease, nor any derogation of the terms and conditions
therein set forth.
<PAGE> 26
-5-
This agreement shall enure to the benefit of and be binding upon the
parties hereto, their assigns, successors and legal representatives.
This agreement shall be construed in accordance with and shall be
subject to the laws of the Province of Quebec.
The Assignee undertakes to reimburse the Landlord for costs and fees
incurred by it in the preparation of this agreement.
The Assignor and the Assignee shall be jointly and severally responsible
for the payment of the Landlord's administrative and legal fees and costs in
connection with the processing of the Assignor's request for consent to the
proposed agreement and with respect to the preparation of this agreement. In
this connection, the Landlord hereby acknowledges receipt of the amount of five
hundred dollars ($500.00) including GST and QST) representing the aforesaid
amounts.
The parties have requested that this agreement be prepared in the
English language. Les parties aux presentes ont exige que cette convention soit
redigee anglais.
WITNESS WHEREOF THE PARTIES HERETO HAVE SIGNED THESE ASSENTS AT THE
PLACES AND ON THE DATES HEREINAFTER INDICATED.
SIGNED AT MONTREAL THIS 12TH DAY OF DECEMBER 1994.
Houbigant Ltee (Assignor)
Per: Augustine Celaya
/s/ AUGUSTINE CELAYA
------------------------------
<PAGE> 27
-6-
SIGNED AT MONTREAL THIS 12TH DAY OF DECEMBER 1994.
3088766 Canada Limited (Assignee)
Per: Albert E. DeChellis
/s/ ALBERT E. DECHELLIS
------------------------------------
SIGNED AT MONTREAL THIS 12TH DAY OF DECEMBER 1994.
Groupe Gestion Luger (Landlord)
Per: Michael Mikelberg
/s/ MICHAEL MIKELBERG
-------------------------------------
<PAGE> 1
Exhibit 10.53.1
STANDARD FORM COMMERCIAL LEASE
1 & 2. PARTIES AND PREMISES. Sally A. Starr and Lisa A. Brown as
Trustees of Massachusetts 955 Realty Trust for the benefit of 955 Massachusetts
Avenue Associates, a Massachusetts limited partnership with a principal place of
business at 39 Brighton Avenue, Boston, Massachusetts 02134, hereinafter called
the Lessor, which expression shall include its heirs, successors, and assigns
where the context so admits, does hereby lease to Renaissance Cosmetics, Inc., a
Delaware corporation with a principal place of business at 675 Massachusetts
Avenue, Cambridge, Massachusetts 02139, hereinafter called the Lessee, which
expression shall include its successors, executors, administrators, and assigns
where the context so admits, and the Lessee hereby leases the premises (the
"Premises") consisting of approximately 2,055 square feet of rentable space
having an address of 955 Massachusetts Avenue, Cambridge, Massachusetts 02139,
located on the third (3) floor of the building (the "Building") situated at and
numbered 955 Massachusetts Avenue, Cambridge, Massachusetts 02139 together with
the right to use in common, with others entitled thereto, any existing hallways,
stairways, and elevators, necessary for access to said Premises, and any
existing lavatories nearest thereto.
3. TERM. The term of this lease shall be a period of five (5)
years from the Commencement Date, plus the Partial Month (as hereinafter
defined), if any; and the term shall terminate on the "Expiration Date", which
shall be the date which is sixty (60) months (plus the Partial Month, if any)
after the Commencement Date, unless sooner terminated as may be provided
herein. The first lease year shall consist of any partial calendar month
following the Commencement Date (the "Partial Month") and the next twelve (12)
calendar months. Each succeeding lease year shall commence upon the expiration
of the prior lease year and shall consist of twelve (12) calendar months.
The term "Commencement Date" as used herein shall mean the date that
LESSOR delivers possession of the Premises to Lessee. Lessor shall deliver the
Premises to Lessee "as is". The Commencement Date is estimated to be July 1,
1995, provided however, if Lessor fails to deliver possession of the Premises
at the estimated date, the Lessor shall not be liable for any damages caused
thereby, nor shall this lease be void or voidable, but the Commencement Date
shall be delayed by the period of delay in the delivery of possession of the
Premises. If this lease is extended or renewed, all references to "term" herein
shall refer to the extension or renewal terms unless specifically designated
otherwise.
4. RENT. (A) Rent is payable in twelve (12) equal monthly
installments in advance on the first day of each month during each lease year
of the term at the office of The Hamilton Company, 39 Brighton Avenue, Boston,
Massachusetts 02134 (and also at the early termination of this lease, a
proportionate part of rent for any part of a month then unexpired). All rent
checks shall be made payable to 955 MASS. AVE. If Lessor elects to accept rent
after the seventh (7th) day of the month, interest will accrue on such sum at
the rate of 1 1/2% per month until such time as it is paid.
<PAGE> 2
(B) The base rent for each year of the term (the "Base Rent") shall be
as follows:
<TABLE>
<CAPTION>
LEASE YEAR PER YEAR PER MONTH
<S> <C> <C>
Year One* $41,100.00 $3,425.00
Year Two $41,100.00 $3,425.00
Year Three $41,100.00 $3,425.00
Year Four $41,100.00 $3,425.00
Year Five $41,100.00 $3,425.00
</TABLE>
* Base Rent is also due for any Partial Month in Lease Year One, pro-rata based
on the length of said Partial Month.
5. SECURITY DEPOSIT. Upon the execution of this Lease by Lessee, the
Lessee shall deposit with the Lessor the amount of Six Thousand Eight Hundred
Fifty ($6,850.00) Dollars. This deposit shall be held by Lessor as security for
payment of all rent and other sums of money payable for the term and for the
faithful performance by Lessee of all other covenants and agreements; provided,
however, that the Lessee shall have no right to require Lessor to indemnify
itself from this deposit for any particular violation or default of Lessee, the
use of this deposit to indemnify Lessor being within Lessor's sole discretion.
If all or any part of the deposit is applied to an obligation of Lessee
hereunder, Lessee shall immediately upon request by Lessor restore said deposit
to its original amount. No interest shall be payable to Lessee on account of
this deposit and Lessor may commingle the funds from this deposit with other of
its funds. Upon any conveyance by Lessor of its interest under this lease, the
deposit may be delivered by Lessor to Lessor's grantee or transferee (or
accounted for by means of an adjustment between seller and buyer). Upon any such
delivery or accounting, Lessee hereby releases Lessor of any and all liability
with respect to the deposit, its application and return, and Lessee agrees to
look solely to such grantee or transferee.
This deposit, or any part thereof, not previously applied by Lessor,
shall be returned to Lessee only after the Expiration Date or the date on
which any renewal term expires, and only after Lessee has fully vacated the
Premises, notwithstanding that this lease has been terminated by Lessor; it
being the intention of the parties that this deposit shall secure Lessor not
only as to default by Lessee before such termination, but also to secure Lessor
from any deficiency of rent or other charges payable to Lessor by Lessee.
Provided that as of the beginning of the thirteenth (13th) month of the term,
Lessee is not or has not been in default of this Lease beyond any applicable
cure period and has paid installments of rent in a timely manner (on or before
the date on which it is due), Lessor shall apply $3,425.00 of said security
deposit towards Base Rent owed by Lessee for the thirteenth (13th) month of the
original term of this Lease.
6. RENT ADJUSTMENT.
A TAX ESCALATION. For purposes of this Article "fiscal year" means the
twelve (12) months ending on June 30; "fiscal base year" means the fiscal year
ending June 30, 1995; "taxes" means all taxes and assessments levied by
governmental authority against the Building and its associated land and
personalty or taxes in lieu thereof; "Lessee's Share" means two and four
thousand five hundred and seventeen ten-thousands (2.4517%) percent. If the
taxes for any fiscal year (or portion of any fiscal year) occurring within the
term after the fiscal base year exceed taxes for the fiscal base year (or
exceed a pro rata portion of fiscal
2
<PAGE> 3
base year taxes in the event of a portion of a fiscal year being included
within the term), then Lessee shall pay to Lessor the Lessee's Share of the
excess as Additional Rent. Lessor will notify Lessee within thirty (30) days of
receipt of tax bills of the amount of taxes and the Lessee's Share of excess
taxes for the current fiscal year; Lessee shall pay Lessee's Share of the
excess within 7 days of such notification. If Lessor later receives a reduction
or refund on taxes resulting from abatement of such taxes by final
determination of legal proceedings, settlement or otherwise, Lessee is entitled
to Lessee's Share of the reduction or refund up to the amount of Additional
Rent paid for such fiscal year less Lessee's share of expenses incurred by
Lessor. If Lessor receives a refund or reduction in taxes for the fiscal base
year, then taxes for the fiscal base year shall be measured by the abated
amount.
On the date this lease expires or is otherwise terminated, the entire
additional rent on account of taxes and a proportionate share of the additional
rent on account of taxes for the fiscal year during which such expiration or
termination occurs shall immediately become due and payable by Lessee to
Lessor. Such proportionate share shall be based upon the length of time this
lease has been in existence during such latter fiscal year, and shall be
estimated by Lessor based upon the most recent applicable data, adjusted when
the actual date is available. Adjustments shall be made if the terms of this
lease begins and/or ends on other than the first or last day of a fiscal year.
In the event of Lessee's default, Lessee's obligation to pay any and all
additional rent under this lease shall continue and shall cover all periods up
to the Expiration Date.
B. ADJUSTED RENT. Intentionally Deleted.
7. UTILITIES. The Lessee shall pay, as they become due, all bills for
electricity and other utilities (whether they are used for hot water or for
other purposes) that are furnished to the Premises and separately metered, and
all bills for fuel furnished to a separate tank servicing the Premises
exclusively. The Lessor agrees to provide and to furnish cold water and
reasonable heat and air conditioning (except to the extent that the same are
furnished through separately metered utilities or separate fuel tanks as set
forth above) to the Premises during normal business hours on regular business
days of the heating and air conditioning seasons of each year, to furnish
elevator service and to light passageways and stairways during business hours,
and to furnish such cleaning service as is customary in similar buildings in
said city or town, all subject to interruption due to any accident, to the
making of repairs, alterations, or improvements, to labor difficulties, to
trouble in obtaining fuel, electricity, service, or supplies from the sources
from which they are usually obtained for said building, or to any cause beyond
the Lessor's control.
Lessor shall have no obligation to provide utilities or equipment other
than the utilities and equipment within the Premises as of the Commencement
Date of this lease. In the event Lessee requires additional utilities or
equipment, the installation and maintenance thereof shall be Lessee's sole
obligation, provided that such installation shall be subject to the written
consent of the Lessor.
8. USE OF LEASED PREMISES. The Lessee shall use the Premises only for
the purpose of a general office used for a business mass marketing and
distributing fragrances, cosmetics, and artificial fingernails, but for no
other purpose. Provided however, Lessee shall not conduct at the Premises any
hazardous or dangerous activities or any activities posing uncommon, unusual or
out of the ordinary level of risk to property or to persons. Moreover, Lessee
shall not utilize at or bring on to the Premises any hazardous, dangerous or
volatile substances.
3
<PAGE> 4
LESSOR MAKES NO WARRANTIES OR REPRESENTATIONS THAT THE PREMISES ARE FIT
FOR A PARTICULAR USE OR PURPOSE, INCLUDING WITHOUT LIMITATION THE USE AS
SPECIFIED HEREIN, EXCEPT AS OTHERWISE REQUIRED BY LAW.
9. COMPLIANCE WITH LAWS. The Lessee acknowledges that no trade or
occupation shall be conducted in the Premises or use made thereof which will be
unlawful, improper, noisy or offensive, or contrary to any law or any municipal
by-law or ordinance in force in the city or town in which the Premises are
situated, or which tend to degrade the economic status of the building.
10. FIRE INSURANCE. The Lessee shall not permit any use of the Premises
which will make voidable any insurance on the property of which the Premises
are a part, or on the contents of said property or which shall be contrary to
any law or regulation from time to time established by the New England Fire
Insurance Rating Association, or any similar body succeeding to its powers. The
Lessee shall on demand reimburse the Lessor, and all other tenants, all extra
insurance premiums caused by the Lessee's use of the Premises.
11. MAINTENANCE.
A. LESSEE'S OBLIGATIONS. The Lessee agrees to maintain the Premises in
good condition, damage by fire and other casualty only excepted, and whenever
necessary, to replace plate glass and other glass therein, acknowledging that
the Premises are now in good order and the glass whole. The Lessee shall not
permit the Premises to be overloaded, damaged, stripped, or defaced, nor suffer
any waste. Lessee shall obtain written consent of Lessor before erecting any
sign on the Premises. Lessee shall be responsible for the maintenance, repair
and replacement of all electrical, plumbing, heating, air conditioning,
ventilation and other mechanical installations located entirely on or serving
only the Premises.
B. LESSOR'S OBLIGATIONS. The Lessor agrees to maintain the structure
foundation, exterior and roof of the building of which the Premises are a part
in the same condition as it is on the Commencement Date or as it may be put in
during the term of this lease, reasonable wear and tear, damage (subject to
Section 19 of this lease) by fire and other casualty only excepted, unless such
maintenance is required because of the conduct of Lessee or those for whose
conduct the Lessee is legally responsible. Lessor shall be responsible only for
maintaining the building's mechanical and electrical systems which serve more
than one unit.
C. SNOW REMOVAL. The removal of snow and ice from sidewalks bordering
upon the Premises shall be Lessor's responsibility. The preceding
notwithstanding, Lessee shall be responsible for the prompt clean-up and
removal from any common area of the Building or the grounds of any trash,
debris or litter (including accumulation of cigarette butts) deposited by its
employees, agents or contractors.
12. ALTERATIONS - ADDITIONS. The Lessee shall not make structural
alterations or additions to the Premises, but may make non-structural
alterations provided the Lessor consents thereto in writing, which consent
shall not be unreasonably withheld or delayed. All such allowable alterations
shall be at Lessee's expense and shall be in quality at least equal to the
present construction. Lessee shall not permit any mechanic's liens, or similar
liens, to remain upon the leased Premises for labor and material furnished to
Lessee or claimed to have been furnished to Lessee in connection with work of
any character performed or claimed to have been performed at the direction of
Lessee and shall cause any such lien to be released of record forthwith without
cost to Lessor. Any alterations or improvements made by the Lessee shall become
the property of the Lessor at the termination
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of occupancy as provided herein.
13. ASSIGNMENT - SUBLEASING. Lessee shall not assign, sublet, underlet,
mortgage, pledge or encumber (collectively referred to as "Transfer") this
lease without Lessor's prior written consent, which consent shall not be
unreasonably withheld. Lessor's refusal to consent to a Transfer for any use or
purpose other than specifically stated in Paragraph 8 herein shall not be
deemed to be an unreasonable withholding of consent.
In the event the Lessee desires to Transfer this lease to a proposed
Transferee to whom Lessor is required to give its reasonable consent pursuant to
the foregoing paragraph, Lessor shall have the option of either (1) allowing
Lessee to transfer this lease, in which case Lessee shall remain primarily
liable upon all the terms, conditions and covenants hereof, will deliver to
Lessor an instrument executed by the Transferee binding the same to the terms
and provisions of this lease and will pay to Lessor the amount by which the sum
of rent, additional rent due to taxes and all other money or consideration it
received from a Transferee exceeds the sum of all monetary obligations which
Lessee owes to Lessor for the period of such Transfer, or (2) terminating this
lease and relieving Lessee of all its future obligations hereunder provided that
upon receipt of written notice from Lessor of Lessee's intention to terminate
the lease, Lessee may withdraw its request for consent in writing within one
week of receipt of such termination notice, in which event this lease shall
continue in full force and effect without any transfer of the same. In the event
of such termination, Lessee shall be relieved of all future obligations
hereunder as of the date of termination. In the event the lease is terminated,
as hereinafter provided, Lessor shall be free to enter into a new lease with the
proposed new tenant or anyone else on whatever terms and conditions it chooses.
Consent by Lessor, whether express or implied, to any Transfer shall not
constitute a waiver of Lessor's right to prohibit any subsequent Transfer, nor
shall such consent be deemed a waiver of Lessor's right to terminate this lease
upon any subsequent Transfer. Moreover, Lessor's acceptance of any name for
listing on any Building directory will not be deemed, nor will it substitute for
Lessor's consent, as required herein, to any sublease, assignment or other
occupancy of the Premises.
As used herein, the term "assign" or "assignment" shall be deemed to
include, without limitation: (a) any transfer of the Lessee's interest in the
lease by operation of law, the merger or consolidation of the Lessee with or
into any other firm or corporation, or (b) the transfer or sale of a
controlling interest in the Lessee whether by sale of its capital stock or
otherwise.
14. SUBORDINATION. This lease shall be subject and subordinate to any
and all mortgages, deeds of trust and other instruments in the nature of a
mortgage, now or at any time hereafter, a lien or liens on the property of
which the Premises are a part and the Lessee shall, when requested, promptly
execute and deliver such written instruments as shall be necessary to show the
subordination of this lease to said mortgages, deeds of trust or other such
instruments in the nature of a mortgage.
15. LESSOR'S ACCESS. The Lessor or agents of the Lessor may, at
reasonable times, enter to view the Premises and remove placards and signs not
approved and affixed as herein provided, and make repairs and alterations as
Lessor should elect to do and may show the Premises to others, and at any time
within three (3) months before expiration of the term, may affix to any
suitable part of the Premises a notice for letting or selling the Premises or
property of which the Premises are a part and keep the same so affixed without
hindrance or molestation.
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16. INDEMNIFICATION. The Lessee will save Lessor harmless, defend and
will exonerate and indemnify Lessor, from and against any and all claims,
liabilities or penalties:
(i) on account of or based upon any injury to person, or loss of or damage to
property sustained on or occurring or emanating from the Premises on account of
or based upon the act, omission, fault, negligence or misconduct of any person
except Lessor, its employees, agents and independent contractors.
(ii) on account of or based upon any injury to person, or loss of or damage to
property, sustained on or occurring elsewhere in or about the Building arising
out of the use or occupancy of the Building or Premises by the Lessee or by any
person claiming by, through or under Lessee, except where caused by the act,
omission, fault, negligence or misconduct of Lessor, its employees, agents and
independent contractors.
and in addition to and not in limitation of either of the foregoing
subdivisions (i) and (ii);
(iii) on account of or based upon any work or thing whatsoever done on the
Premises; except where caused by the negligence, fault or misconduct of Lessor,
its employees, agents or independent contractors.
and, in respect of any of the foregoing, from and against all costs, expenses
(including reasonable attorneys' fees), and liabilities incurred in or in
connection with any such claim, or any action or proceedings; and in case any
action or proceeding is brought against Lessor by reason of any such claim,
Lessee upon notice from Lessor shall at Lessee's expense resist or defend such
action or proceeding and employ counsel reasonably satisfactory to Lessor.
17. LESSEE'S INSURANCE
1. Personal Property. All risk (including that of casualty, theft, and
any other harm, damage or loss) to Lessee's personal property and to the
personal property of others held by Lessee, and the loss of use of the same,
shall be borne solely by Lessee. As used herein, personal property includes,
but is not limited to, all tangible and intangible goods and accounts,
inventory, merchandise, fixtures, equipment and systems. Lessee shall purchase
and maintain insurance in an amount adequate to repair or replace or otherwise
cover its personal property (and the personal property of others held or leased
by it or otherwise on the Premises) and the tenant improvements and interior
finish and build-out to the Premises.
Lessee is responsible for the replacement of any broken plate glass
that is part of the Building covered by this lease.
2. Comprehensive Commercial Liability Insurance. Lessee agrees to
maintain throughout the term of the lease, Comprehensive Commercial Liability
Insurance written on an occurrence basis. Such insurance shall include coverage
for product/completed operations, personal injury, broad form property damage,
host liquor, extended bodily injury and broad form contractual liability. The
minimum limit of liability carried on such insurance shall be $1,000,000
combined single limit for each occurrence with any aggregate limit applying
only to each of the following: products/completed operations, personal injury
and contractual liability. However, if the policy contains a general policy
aggregate or an aggregate which applies to coverages other than the
aforementioned coverages, the Lessee shall purchase minimum limits of
$1,000,000 per occurrence/$2,000,000
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aggregate per location.
3. Automobile Liability. Lessee agrees to maintain automobile liability
insurance for owned, non-owned, and hired vehicles. The minimum limit of
liability carried on such insurance shall be ($1,000,000.00) each accident,
combined single limit for bodily injury and property damage.
4. Workers Compensation. Lessee agrees to maintain workers'
compensation insurance providing statutory limits including employer's
liability insurance with current limits of $100,000.00 for each additional
injury and, with respect to bodily injury by disease, $100,000.00 each employee
and $500,000.00 per policy year.
5. Umbrella Liability. Lessee agrees to maintain umbrella liability
coverage with limits of $2,000,000.00 per occurrence. Umbrella coverage is to
apply excess of the comprehensive commercial liability/automobile liability and
employers liability coverages mentioned in section 2, 3, and 4 above.
All insurance policies required in paragraphs 2, 3 and 5 above shall
designate the Lessor and The Hamilton Company, as additional insureds. Lessee
agrees that the insurance coverages required under sections number 1 through 5
above shall be written by a company or companies authorized to do business in
the Commonwealth of Massachusetts with an A.M. Best's rating of "A-", VII or
better. The liability coverage of the policies specified above in Paragraphs 2
and 5 shall cover all business activities conducted by Lessee at the Premises.
Lessee agrees to furnish the Lessor with Certificates of Insurance
prior to the beginning of the term of the lease. Renewal Certificates of
Insurance shall be delivered to the Lessor at least fifteen (15) days in
advance of each renewal date. Such certificates shall state that in the event
of cancellation of material change written notification shall be given to the
Lessor at least thirty (30) days in advance of such cancellation or material
change. However, if Lessee, having used all reasonable efforts is unable to
have such certificate so state, then at least such certificate shall state that
in the event of such cancellation or material change in coverage, the insurer
shall endeavor to mail written notice thereof to the Lessor at least ten (10)
days prior to such cancellation or material change, and in such event Lessee
shall promptly notify Lessor of any such cancellation or change upon receipt by
Lessee of written notice from the insurer thereof.
18. EMINENT DOMAIN AND DEMOLITION. If the Premises or any part thereof
or the whole or any substantial part of the Building are taken for any street
or other public use, by action of the City or other authorities, or if Lessor
voluntarily elects to demolish the Building or any substantial part of the
Building, except as a consequence of fire or other casualty damage, then this
lease and the term shall terminate at the election of the Lessor. Lessor may
elect so to terminate this lease even if the entire interest of the Lessee is
divested by such a taking. If, as a result of a taking, the Premisses or any
substantial portion thereof, or substantial access thereto, is taken such that
the Premises is rendered unfit for its use, then Lessee may elect to terminate
this lease (effective upon dispossession of the Premises or such substantial
portion or access), and if not terminated or if less than a substantial portion
of the Premises is taken, the rent shall be abated proportionately according to
the nature and extent of the injury sustained by the Premises until the
Premises and access thereto or, in the case of a taking, what may remain
thereof, shall have been restored to a proper and tenantable condition, which
restoration Lessor shall promptly conduct.
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Except for the Lessor's election voluntarily to demolish the Premises
or Building, any election to terminate shall be made by Lessor or Lessee not
later than thirty (30) days after Lessor receives notice of such taking or
action or the occurrence of such damage. The Lessor reserves and excepts from
this lease all rights to damages resulting from the taking for public use of
the Premises or any portion thereof, or right appurtenant thereto, or privilege
or easement in, through, or over the same, and by way of confirmation of the
foregoing the Lessee hereby grants all rights to such damages previously
accrued or accruing during the term to the Lessor, to have and to hold for the
Lessor forever. Solely, in the case of Lessor's election voluntarily to
demolish the Premises or Building as stated above in this Article, Lessor must
give Lessee at least one (1) year prior to termination notice, after which this
lease shall terminate and be of no further recourse to either party except as
to rights and obligations incurred prior to the termination date.
19. FIRE AND OTHER DAMAGE; SUBROGATION
A. Fire and Other Damage - If the Building or any part thereof is
partially damaged by fire or other casualty such that the Premises and the
Building are not rendered substantially untenantable and Lessee is able to
remain open for business, the damage thereto (except for damage to the
Premise's interior finish and build-out and to Lessee's fixtures, property and
equipment, for which Lessee shall be responsible) shall be restored by and at
the expense of Lessor, and until such restoration shall be made, if the
Premises are rendered substantially unfit for its use and purpose, the rent and
other charges shall be subject to an abatement to the extent fair and
equitable, except if such casualty was a result of the willful fault or
negligence of Lessee, in which event there shall be no abatement of rent. Such
restoration shall be made promptly by Lessor subject to delay which may arise
by reason of adjustment of insurance, and for reasonable delay on account
of "labor troubles" or any other cause beyond Lessor's control (excluding
financial inability). Lessor shall not be liable for any inconvenience or
annoyance to Lessee or for injury to the business of Lessee resulting from such
excused delays.
If the Building or the Premises is substantially damaged so as to be
substantially untenantable by fire or other casualty, the rent and other
charges shall be subject to an abatement to the extent fair and equitable as of
the date of the fire or casualty, and continuing until Lessor completes its
restoration obligations hereunder or until the term expires hereunder, except
if such casualty was a result of the willful fault or negligence of Lessee, in
which event there shall be no abatement of rent, and the Lessor shall promptly
restore the same (excluding Lessee's interior finish and build-out and Lessee's
fixtures, property, and equipment), unless Lessor decides not to restore, in
which event the Lessor may, within sixty (60) days, after such fire or other
cause, give Lessee a notice in writing of such decision and thereupon the term
shall expire upon the thirtieth (30th) day after such notice is given, and the
Lessee shall vacate the Premises and surrender the same to the Lessor. If the
Building (excluding Lessee Improvements and Lessee's fixtures, property and
equipment) is not in fact restored by Lessor within six (6) months after the
fire or other casualty, the Lessee may terminate this Lease by written notice
to Lessor within thirty (30) days after the end of the said six (6) month
period.
The provisions of this Article 19 shall govern in the case of damage or
destruction of the Building or any part thereof and restoration thereof due to
a fire or casualty notwithstanding any inconsistent provisions of this Lease.
Notwithstanding anything to the contrary contained in this Article 19,
the provisions hereof shall be subject and subordinate to the rights of
institutions holding mortgages on the Building including the rights contained
in any of Lessor's mortgage financing documents affecting the Building.
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B. Waiver of Subrogation - Lessor and Lessee hereby release each other
from any and all liability or responsibility to the other or anyone claiming
through or under them by way of subrogation or otherwise for any loss or damage
to property caused by fire or any of the extended coverage or supplementary
contract casualties, even if such fire or other casualty shall have been caused
by the fault or negligence of the other party, or anyone for whom such party
may be responsible, and irrespective of whether the releasor carries property
insurance, provided, however, that this release shall be applicable and in
force and effect only to the extent permitted by law and only with respect to
loss or damage occurring during such time as such release does not adversely
affect releasor's property insurance policies (if any) or prejudice the right
of the releasor to recover thereunder. Lessor and Lessee each agree that it
will request its insurance carriers to include in its policies, whether or not
such policies are required hereunder, a clause or endorsement to the effect
that any such release shall not adversely affect said policies or prejudice the
right of releasor to recover thereunder. If extra cost shall be charged, each
party will bear the amount of its extra cost. In any of Lessee's property
insurance policies with respect to the premises which do not contain or which
do not allow a waiver of subrogation rights, Lessee shall have Lessor
designated thereon as an additional insured, and Lessee hereby agrees to
defend, indemnify and hold Lessor harmless from any liability, loss, damage, or
causes of action to which Lessor is subject due to or resulting from Lessee's
failure to either maintain property insurance with waiver of subrogation rights
or alternatively designate Lessor as an additional insured.
20. DEFAULT AND BANKRUPTCY. The following shall constitute a
default by Lessee under this Lease;
(a) The Lessee shall fail to make payment or any installment of rent or
other sum herein specified and such failure shall continue for seven (7) days
after written notice thereof, or
(b) The Lessee shall fail to observe or perform any other of the Lessee's
covenants, agreements or obligations hereunder and such default shall not be
corrected within thirty (30) days after written notice thereof or, if such
default shall reasonably require longer than thirty (30) days to cure, shall
not within said period commence and diligently proceed to cure such default; or
(c) The Lessee shall be declared bankrupt or insolvent according to law if
a receiver shall be appointed to manage Lessee's affairs, or if any assignment
shall be made of Lessee's property for the benefit of creditors,
In the event of a default, the Lessor shall have the right thereafter,
while such default continues to declare this lease ended without prejudice to
any other remedy it may have. Any notice required to be given by Lessor for any
failure of Lessee to pay rent or other sums (prior to said failure being deemed
a default) shall be deemed satisfied by the serving by Lessor on Lessee at the
Premises of a "notice to quit" so long as the same provides Lessee with the
right to cure within at least five (5) days of service.
21. LESSOR'S DEFAULT. Lessor shall not be deemed to be in default
unless such default remains uncured for more than thirty (30) days following
written notice from Lessee specifying the nature of such default, or such longer
period as may be reasonably required to correct such default. Lessor's
liability for maintenance and repair shall always be limited to the cost of
making such repair or accomplishing such maintenance or repair. In no event
shall Lessor be liable for consequential or any indirect damages. The
provisions of this Section are subject to the provisions of Sections 18 and 19
dealing with eminent domain and fire and other casualty.
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22. LESSOR'S REMEDIES. If this lease is terminated as provided in Section
20, Lessee shall forthwith pay to Lessor all sums which were due prior to the
date of such termination and Lessee shall pay on the days originally fixed
herein for the payment thereof amounts equal to the several installments of
rent, adjusted rent, additional rent and any and all other charges as they
would have become due if this lease had not been terminated.
As a second alternative, at the election of Lessor, Lessee will, at the
time of such termination, pay to Lessor, as liquidated damages, the amount of
the excess, if any, of the present value at the time of termination of the
total rent and other benefits which would have accrued to Lessor under this
lease over and above the fair market rental value (in advance) of the Premises
for the balance of the term. For the purpose of this paragraph, the total rent
shall be computed by assuming that Lessee's Share of real estate taxes,
operating costs and other charges would be the amount thereof (if any) for the
immediately preceding year of the term.
As a third alternative, upon any such termination, at Lessor's
election, Lessor shall have the right to declare all installments of rent,
additional rent and other charges payable hereunder for the next one (1) full
year to be immediately due and payable as liquidated damages and not as a
penalty.
In addition to the foregoing (and whether or not the Lease is
terminated upon a default), Lessee agrees (i) to indemnify and save Lessor
harmless from and against all expenses together with interest at the rate of
1.5% per month which Lessor may incur in collecting such amount or in
obtaining possession of, or in re-letting the Premises, or in defending any
action arising as a result of or in connection with a default, including,
without limitation, legal expenses, attorneys' fees, brokerage fees, and the
cost of putting the Premises in good order or preparing the same for rental;
(ii) that Lessor may re-let the Premises or any part or parts thereof, either
in the name of Lessor or otherwise or a term or terms which may, at Lessor's
option, be less than or exceed the period which would otherwise have
constituted the balance of the term and may grant concessions or free rent for
a reasonable time. The failure of Lessor to re-let the premises or any part
thereof shall not release or affect Lessee's liability for damage. Any suit
brought to collect the amount of deficiency for any month shall not prejudice
the right of Lessor to collect the deficiency for any subsequent month by a
similar proceeding. Lessor may make such alterations, repairs, replacements and
decorations on the Premises which in Lessor's sole judgement are advisable or
necessary for the purpose of re-letting the Premises, and the making of such
alterations or decorations shall not release Lessee from any liability. In the
event the Premises are re-let by Lessor, Lessee shall be entitled to a credit
in the net amount of rent received by Lessor, after deduction of all expenses
incurred in connection with Lessee's default, re-letting the Premises and in
collecting the rent, except in the event Lessor has chosen the second or third
alternative as a remedy in which event Lessee shall not be entitled to any
credit.
Lessee further agrees that, if on the Expiration Date or other
termination date, Lessee does not surrender the Premises or fails to remove any
of its property from the Premises and Lessor obtains an order of eviction then
Lessor may enter the Premises for the purpose of removing Lessee's goods and
effects, without prejudice to any other remedies, and Lessor may remove and
store such goods and effects at Lessee's expense, Lessee hereby granting Lessor
an irrevocable power of attorney to accomplish same.
23. NOTICE. Any notice from the Lessor to the Lessee relating to
the Premises or to the occupancy thereof, shall be deemed duly served if left
at the Premises by constable addressed to the Lessee, or if mailed to the
Premises, registered or certified mail, return receipt requested, postage
prepaid or if delivered by a national
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commercial express delivery service, addressed to the Lessee. Any notice from
the Lessee to the Lessor relating to the Premises or to the occupancy thereof,
shall be deemed duly served, if mailed to the Lessor by registered or certified
mail, return receipt requested, postage prepaid, or if delivered by a national
commercial express delivery service addressed to the Lessor at such address as
the Lessor may from time to time advise in writing. All rent shall be paid and
notices shall be sent to the Lessor at 39 Brighton Avenue, Boston,
Massachusetts 02134.
24. SURRENDER. The Lessee shall at the expiration or other
termination of this lease remove all Lessee's goods and effects from the
Premises, (including, without hereby limiting the generality of the foregoing,
all signs and lettering affixed or painted by the Lessee, either inside or
outside the Premises). Lessee shall deliver to the Lessor the Premises and all
keys, locks thereto, and other fixtures connected therewith and all alterations
and additions made to or upon the Premises, in good condition, damage by fire
or other casualty only excepted. If the lease term terminates by acceleration
or expiration of time and Lessee does not surrender the Premises and remove his
effects from the Premises, and Lessor obtains an order of eviction from a
court, then Lessor may enter the Premises for the purpose of removing Lessee's
goods and effects, without prejudice to any other remedies, and Lessor may
remove and store such goods and effects at Lessee's expense, Lessee hereby
granting Lessor an irrevocable power of attorney to accomplish the same.
25. BROKERAGE. Lessor and Lessee each warrant and represent that
it has not negotiated with any broker (other than Patrick Harrington of R.M.
Bradley and Philip Vallely of The Hamilton Company) in connection with this
lease and each party agrees to indemnify and hold the other party harmless if
such warranty or representation shall be deemed untrue.
26. HOLDOVER. If the Lessee remains on the Premises beyond the
expiration or earlier termination of this lease, such holding over shall not be
deemed to create any tenancy at will, but the Lessee shall be a tenant at
sufferance only, at a daily rate equal to three (3) times the daily rent and
other charges for the last year under this lease. However, all other conditions
of this lease to be performed by Lessee shall continue in force.
27. LIABILITY. Lessee hereby agrees that any judgment, decree or
award obtaining against the Lessor which is related to this lease, the Premises
or the Lessee's use or occupancy of the Premises or the building, whether at law
or in equity, shall be satisfied out of the Lessor's equity in the land and
building, and further agrees to look only to such assets and to no other assets
of the Lessor for satisfaction. Lessor's liability for maintenance and repair
shall always be limited to the cost of making such repair or accomplishing such
maintenance or repair. In no event shall Lessor be liable for consequential or
any indirect damages.
28. NON-WAIVER PROVISION. No acceptance by Lessor of a lesser sum
than the rent, additional rent or any other charge then due shall be deemed to
be other than on account of the earliest installment of such rent or charge
due, nor shall any endorsement or statement on any check or any charge be
deemed an accord and satisfaction, and Lessor may accept such check or payment
without prejudice to Lessor's right to recover the balance of such installment
or pursue any other remedy provided in this lease.
29. LESSOR'S RULES AND REGULATIONS. Lessee shall abide by any
reasonable rules and regulations as the Lessor may make from time to time,
applicable to all Lessees of the Building and uniformly enforced. The Lessor,
however, may change said rules or waive any or all of said rules in the case of
any one or more Lessees. Nor shall the Lessor be responsible to the Lessee, or
to the Lessee's agents, employees, servants, licensees, invitees, or visitors,
for failure to enforce any of the rules and regulations or for the
non-observance or
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violation of any of said rules and regulations by any other Lessee or by any
other person, or for the nonobservance or violation of or failure to enforce or
to perform the provisions of any other lease of any part of the Building.
Notwithstanding the foregoing, however, Lessor shall use its best efforts to
apply the rules and regulations to all Lessees with reasonable uniformity in
conformity with their tenancies.
30. NO OFFER TO LEASE. The submission of this document for
examination and negotiation does not constitute an offer to lease, or a
reservation of, or option for, the Premises. This document shall become
effective and binding only upon the execution and delivery hereof by Lessor and
by Lessee, and until such execution and delivery, Lessor shall not in any way
be bound to enter into a lease with Lessee for the Premises.
31. PARTIAL INVALIDITY. The invalidity of one or more phrases,
sentences, clauses or articles shall not affect the remaining portions of this
lease, and if any part of this lease should be declared invalid by the final
order, decree or judgment of a court of competent jurisdiction, this lease
shall be construed as if such invalid phrases, sentences, clauses or articles
had not been inserted.
32. ENTIRE AGREEMENT. This lease sets forth the entire agreement
between the parties and cannot be modified or amended except in writing duly
executed by the respective parties.
33. NO RECORDING. This lease shall not be recorded.
34. ADDENDA. The Addenda attached hereto numbered 1 through 4 are
attached and incorporated herein by reference.
35. TRUSTEE AS LESSOR. If the Lessor is a trust or a trustee or
trustees, it is agreed that no trustee nor any beneficiary under any agreement
or declaration of trust under which said trust exists or by virtue of which
such trustees act, shall be personally liable under any of the covenants or
agreements of the parties expressed herein or implied hereunder, or otherwise
because of anything arising from or connected with the use and occupation of
the demised Premises by the Lessee, and the parties agree that any and all
claims arising or accruing to them hereunder shall be enforced and satisfied
only against the assets and property of said trust and not in any case against
said trustees or any of them or their successors in trust individually.
36. AUTHORITY. If Lessee is a corporation, each person executing this
Lease on behalf of the Lessee hereby covenants, represents and warrants that
Lessee is a duly incorporated or duly qualified (if foreign) corporation and is
authorized to do business in the Commonwealth of Massachusetts (a copy of
evidence thereof to be supplied to Lessor upon request); and that each person
executing this Lease on behalf of Lessee is an officer of Lessee and that he or
she is duly authorized to execute, acknowledge and deliver this Lease to Lessor
(a copy of a resolution to that effect to be supplied to Lessor upon request).
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IN WITNESS WHEREOF, the said parties hereunto set their hands and seals
this _________________________ day of _______________________, 19 __.
LESSOR: SALLY A. STARR AND LISA A. BROWN AS TRUSTEES
OF MASSACHUSETTS 955 REALTY TRUST FOR THE BENEFIT
OF 955 MASS. AVE. ASSOCIATES
BY: ______________________________________________
Sally A. Starr as Trustee and Not Individually
BY: ______________________________________________
Lisa A. Brown as Trustee and Not Individually
ADDRESS: 39 Brighton Avenue, Boston, MA 02134
LESSEE: RENAISSANCE COSMETICS, INC.
BY: /s/ Thomas V. Bonoma
----------------------------------------------
Thomas V. Bonoma, President
ADDRESS: 675 Massachusetts Avenue, Cambridge, MA 02139
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ADDENDUM #1: RULES AND REGULATIONS
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Lessee or used for any purpose other than for ingress to and egress from
the Premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery
by Lessor. There shall not be used in any space, or in the public hall of the
building, either by a Lessee or by jobbers or others in the delivery or receipt
of merchandise, any hand trucks, except those equipped with rubber tires and
sideguards. If the Premises are situated on the ground floor of the Building,
Lessee thereof shall further, at Lessee's expense, keep the sidewalks and curb
in front of said Premise clean and free from ice, snow, dirt and rubbish.
2. The water and wash closets and plumbing fixtures shall not be used
for any purpose other than those for which they were designed or constructed
and no sweepings, rubbish, rags, acids or other substances shall be deposited
therein, and the expense of any breakage, stoppage, or damage resulting from
the violation of this rule shall be borne by the Lessee who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No Lessee shall sweep or throw or permit to be swept or thrown from
the Premises any dirt or other substances into any of the corridors or halls,
elevators, or out of the doors or windows or stairways of the Building and
Lessee shall not use, keep or permit to be used or kept any foul or noxious gas
or substance in the Premises or permit or suffer the Premises to be occupied or
used in a manner offensive or objectionable to Lessor or other occupants of the
Building by reason of noise, odors and/or vibrations, or interfere in any way
with other Lessees or those having business therein, nor shall any animals or
birds be kept in or about the Building. Smoking or carrying lighted cigars or
cigarettes in the elevators of the Building is prohibited.
4. No awnings or other projections shall be attached to the outside
walls of the Building without the prior written consent of Lessor.
5. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any Lessee on any part of the
outside of the Premises or the Building or on the inside of the Premises if the
same is visible from the outside of the Premises without the prior written
consent of Lessor, except that the name of Lessee may appear on the entrance
door of the Premises. In the event of the violation of the foregoing by any
Lessee, Lessor may remove same without any liability, and may charge the
expense incurred by such removal to Lessee or Lessees violating this rule.
Interior signs on doors and directory tablet shall be inscribed, painted or
affixed for each Lessee by Lessor at the expense of such Lessee, and shall be
of a size, color and style acceptable to Lessor.
6. Except with prior written consent of Lessor and as Lessor may
direct, no Lessee shall mark, paint, drill into, or in any way deface any part
of the Premises or the Building of which they form a part or cut or string
wires, lay linoleum, or other similar floor covering, so that the same shall
come in direct contact with the floor of the Premises, and, if linoleum or
other similar floor covering is desired to be used, an interlining of builder's
deadening felt shall be first affixed to the floor, by a paste or other
material, soluble in water, the use of cement or other similar adhesive
material being expressly prohibited.
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<PAGE> 15
7. Except with the prior written consent of Lessor, no additional locks
or bolts of any kind shall be placed upon any of the doors or windows by any
Lessee, nor shall any changes be made in existing locks or mechanism thereof.
If requested, Lessee shall provide Lessor with a copy of a key for all new
locks or bolts. Each Lessee shall, upon the termination of his tenancy, restore
to Lessor all keys either furnished to or otherwise procured by, such Lessee. In
the event of the loss of any keys furnished to Lessee, Lessee shall pay to
Lessor the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter
of any description shall be delivered to and removed from the Premises only on
the freight elevators and through the service entrances and corridors or in an
alternative way approved by Lessor and only during hours and in a manner
approved by Lessor.
9. Canvassing, soliciting and peddling in the Building is prohibited
and each Lessee shall cooperate to prevent the same.
10. Lessor shall have the right to prohibit any advertising by any
Lessee which, in Lessor's opinion, tends to impair the reputation of the
Building or its desirability as a building for offices, and upon written notice
from Lessor, Lessee shall refrain from or discontinue such advertising.
11. Except for those items necessary for the cleaning and maintenance
of Lessee's business, including office supplies, which shall be property stored
to minimize the risk of fire and explosion, Lessee shall not bring or permit to
be brought or kept in or on the Premises, any inflammable, combustible or
explosive fluid, material, chemical or substance, or cause or permit any odors
of cooking or other process, or any unusual or other objectionable odors to
permeate in or emanate from the Premises.
15
<PAGE> 16
ADDENDUM #2: LESSOR'S IMPROVEMENTS
Prior to the Commencement Date, Lessor shall make renovations and improvements
to the Premises according to the plans and specifications to be attached hereto
as an exhibit and initialed by both Lessor and Lessee. These renovations shall
be made in compliance with all applicable laws and governmental regulations and
at Lessor's expense unless otherwise agreed.
These renovations and improvements shall consist of the following:
(a) See Plans Attached.
Lessor shall provide Lessee with plans for these improvements at its earliest
possible convenience solely for the purpose of Lessee's information.
In the case of any delay in connection with the improvements and renovations,
the Commencement Date shall be extended as provided in Article 3 herein for the
period of such delays as provided in Article 3 herein unless Lessor and Lessee
agree that Lessee can occupy the Premises prior to substantial completion at a
rent to be agreed upon. Provided, however, in such event, Lessee shall not use
the Premises in such manner as will increase the cost of completion and agrees
that it shall pay Lessor an amount equal of 1/365th of the Minimum Rent for any
delay caused by Lessee or anyone employed by it, for each day of such delay.
Under no circumstances whatsoever shall Lessor be liable to Lessee for any
indirect or consequential damage caused by such delay.
Aside from those improvements specifically enumerated above, Lessee accepts
Premises "as is".
16
<PAGE> 17
ADDENDUM #3: OPTION TO EXTEND AT MARKET
Lessee, having at all times faithfully performed all of the terms and
conditions of this lease such that Lessor has not sent to Lessee more that one
(1) written notice pursuant to Section 20 of this Lease during any Lease Year
during the original term, and not being in default, shall have the option to
extend this lease under the same terms and conditions of this lease except for
rent, adjustments to rent, and tax clause, and except for this one (1) option,
for five (5) years, provided Lessee complies with the provisions stated below:
The time periods herein set forth are of the essence, and the requirements for
the exercise of this option shall be strictly construed.
a. Upon Lessor's receipt of written notice, sent by certified mail return
receipt requested, from Lessee that Lessee wishes to extend on or before six
(6) months prior to the Expiration Date (which time period is deemed of the
essence), Lessor shall, within (30) days of such notice by the Lessee, notify
the Lessee of the proposed minimum rent, adjusted rent and additional rent due
to taxes for the extension term.
b. Within thirty (30) days after receipt of Lessor's proposed terms, Lessee
will notify Lessor in writing either of its acceptance of the proposed terms,
or of its rejection of the proposed terms. Lessor's failure to receive Lessee's
written notice within the prescribed period shall be deemed a rejection.
c. After Lessee's rejection of Lessor's proposal for an extension term, if
Lessor receives a bona fide offer from a new Lessee for a new lease for the
Premises (which may include additional space in the Building) on rent terms
less favorable to Lessor which Lessor intends to accept, Lessee shall have a
"right of refusal" to enter into an extension with Lessor upon the same rent
terms set forth in the proposed lease with such bona fide new tenant, provided
Lessee executes an extension agreement within five (5) days of Lessee's receipt
of such a proposed extension agreement from Lessor. In the event that Lessor
receives a bona fide offer on rent terms the same or more favorable to Lessor,
Lessor shall not be obligated to offer Lessee a "right of first refusal".
d. If, for whatever reason, Lessee has not in fact extended this lease within
the period ending thirty (30) days before the Expiration Date, this option
shall expire and Lessee shall have no further right to extend its tenancy
beyond the Expiration Date. In this event Lessor shall be free to rent the
Premises to whomever it chooses, on any terms it chooses, free and clear of
this option.
17
<PAGE> 18
ADDENDUM #4: OPERATING EXPENSES
Lessee shall pay to Lessor as additional rent Lessee's proportionate share of
any increase in annual Operating Expenses for the Building over the base of the
actual Operating Expenses for calendar year 1995 within ten (10) days of
notification after the end of each calendar year or any portion thereof. Lessor
shall furnish to Lessee a statement showing the total Operating Expenses for the
Premises for the year just ended and Lessee's share thereof. Lessee shall pay to
Lessor the amount of Lessee's share of such expenses within ten (10) days after
receipt of the statement. Lessee's share of Lessor's Operating Expenses for the
Premises is hereby defined to be that proportion of such expenses which rentable
floor space within Lessee's Premises bears to the total rentable floor space of
the Building which is hereby calculated to be two and four thousand five hundred
and seventeen ten-thousandths (2.4517%) percent of the total Operating Expenses.
Lessor's standard "Operating Expenses" at the Building shall include any and all
costs of any kind, paid or incurred by Lessor in connection with the operation
of the property, including without limitation, all expenses incurred in
operating, managing, cleaning, equipping, protecting, lighting, decorating,
repairing, replacing and maintaining the Premises and Building. The costs shall
include, without limitation, insurance, management fees, elevator repairs and
services, janitorial services, rubbish removal, snow plowing of drives and
parking lots, maintenance of roadways, walks and parking and loading areas,
fertilization, mowing and watering of lawns, care of shrubbery and general
grounds upkeep and the cost of utilities for provision of Common Area services
(such as but not limited to parking lot lighting, common area lighting, heating
and air conditioning, security systems and property identification sign).
18
<PAGE> 1
EXHIBIT 10.53.2
LEASE
GHENT LIMITED PARTNERSHIP,
Landlord
and
RENAISSANCE COSMETICS INC.,
Tenant
Dated: March 1, 1996
<PAGE> 2
Table of Contents
Page
DATA SHEET..............................................i
ARTICLE 1...............................................1
Definitions
ARTICLE 2...............................................2
Demise; Premises; Term
ARTICLE 3...............................................2
Completion and Occupancy of the Premises
ARTICLE 4...............................................3
Rent
ARTICLE 5...............................................4
Use
ARTICLE 6...............................................5
Escalations
ARTICLE 7...............................................8
Assignment, Mortgaging and Subletting
ARTICLE 8...............................................12
Compliance with Laws; Hazardous Substances
ARTICLE 9...............................................13
Alterations; Improvements
ARTICLE 10..............................................14
Repairs
ARTICLE 11..............................................15
Utilities and Services
ARTICLE 12..............................................16
Damage to or Destruction of the Premises
ARTICLE 13..............................................17
Eminent Domain
ARTICLE 14..............................................18
Conditions of Limitation
ARTICLE 15..............................................20
Re-entry by Landlord; Remedies
ARTICLE 16..............................................22
Curing Tenant's Defaults; Fees and Expenses
ARTICLE 17..............................................22
Non-Liability and Indemnification
ARTICLE 18..............................................24
Surrender
<PAGE> 3
ARTICLE 19.....................................................24
Insurance
ARTICLE 20.....................................................26
Subordination and Attornment
ARTICLE 21.....................................................27
Access; Change in Facilities
ARTICLE 22.....................................................28
Inability to Perform and Waivers
ARTICLE 23.....................................................29
Quiet Enjoyment
ARTICLE 24.....................................................29
Rules and Regulations
ARTICLE 25.....................................................30
Brokerage
ARTICLE 26.....................................................30
Notices and Estoppel Certificate
ARTICLE 27.....................................................31
Security Deposit
ARTICLE 28.....................................................32
Parties Bound
ARTICLE 29.....................................................32
Entire Agreement; No Other Representations;
Governing Law; Separability
ARTICLE 30.....................................................33
Miscellaneous Provisions
Exhibit A: Land Description
Exhibit B: Landlord's Construction
Exhibit C: Floor Plan
Exhibit D: Cleaning Schedule
Exhibit E: Rules and Regulations
Exhibit F: Form of Estoppel Certificate
<PAGE> 4
DATA SHEET
LEASE AGREEMENT
BETWEEN
GHENT LIMITED PARTNERSHIP, LANDLORD
and
RENAISSANCE COSMETICS INC., TENANT
Section 1.01(a) 1. BUILDING:
Building #9
Greenwich Office Park
Section 1.01(f) 2. LANDLORD'S CONSTRUCTION:
Landlord will deliver the Premises, and Tenant hereby
accepts the Premises, "as is", subject to Landlord
combining Space A and Space B (at no cost to Tenant) as
shown on EXHIBIT B attached hereto and hereby made a
part hereof.
Section 1.01(i) 3.TENANT'S PROPORTIONATE SHARE:
10.91%, based upon an aggregate of 21,538 rentable square
feet in the Building.
Section 2.02 4. PREMISES:
Approximately 2,350 rentable square feet on the second
floor of the Building.
5. TERM:
Three (3) years.
Section 2.03(c) (a) COMMENCEMENT DATE:
Sixty (60) days from the date of execution of
this Lease; provided, however, Landlord shall
have the right to accelerate such date upon ten
(10) days prior written notice to Tenant.
Notwithstanding anything to the contrary
contained herein, if the Commencement Date does
not occur on or before June 1, 1996 due to
Landlord's existing tenants' failure to vacate
the Premises, Tenant shall have the option
exercisable on or before June 1, 1996 to cancel
this Lease upon ten (10) days prior written
notice to Landlord. Upon such cancellation, this
Lease shall terminate and be of no further force
or effect and neither party shall have right or
claim hereunder against the other.
Section 2.04 (b) EXPIRATION DATE:
The last day of the thirty-sixth (36th) full
calendar month of the Term.
Section 2.06 6. PARKING SPACES:
Eight (8) parking spaces shall be available to Tenant in
the parking areas of the Greenwich Office Park allocated
to the Building of which spaces four (4) shall be
located in the Building's garage.
Section 3.01 7. PROJECTED COMPLETION DATE FOR LANDLORD'S CONSTRUCTION:
Sixty (60) days from the date of execution of this
Lease.
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<PAGE> 5
Section 4.01(a) 8. FIXED RENT SCHEDULE:
Fixed Rent shall be determined by multiplying 2,350
rentable square feet by an annual rate per rentable square
foot of Twenty-two Dollars ($22.00).
Section 6.01(c) 9. BASE TAX YEAR:
July 1, 1995 - June 30, 1996.
Section 6.01(h) 10. BASE EXPENSE YEAR:
Calendar year 1996.
Section 25.01 11. BROKER(S):
Kim Mowers of Grubb & Ellis Company
Section 27.01 12. SECURITY DEPOSIT:
Tenant has furnished Landlord with its balance sheet as of
December 31, 1995, and its income statement for the period
ended December 31, 1995. In reliance on these financial
statements (which Tenant hereby represents to be true and
correct in all material respects), Landlord has agreed to
the foregoing security arrangement:
Upon the signing of this Lease, Tenant shall deposit with
Landlord Twelve Thousand Nine Hundred Twenty-five Dollars
($12,925.00), being the equivalent of three (3) months of
Fixed Rent over the Term, to be retained by Landlord as a
Security Deposit in accordance with Article 27 of this
Lease.
No later than ninety (90) days after the end of each
fiscal year, Tenant shall furnish to Landlord updated
financial statements which it will certify to be true and
correct.
Section 30.01 13. (a) RIGHT TO CANCEL:
Subject to the terms and conditions of this Item 13
(a), and provided Tenant shall not be in default
under the terms and provisions of this Lease,
Tenant shall have the right to cancel this Lease on
the first of any month from and after the first day
of the nineteenth (19th) full calendar month of the
Term. In order to exercise this right pursuant to
this Item 13 (a), Tenant must (i) give Landlord
written notice of its intent to cancel and (ii) pay
to Landlord a cancellation fee of (A) $10,000, if
the effective cancellation date is the first day of
the nineteenth (19th) full calendar month of the
Term; (B) $9,500, if the effective cancellation
date is the first day of the twentieth (20th) full
calendar month of the Term; (C) $8,875, if the
effective cancellation date is the first day of the
twenty-first (21st) full calendar month of the
Term; (D) $8,300, if the effective cancellation
date is the first day of the twenty-second (22nd)
full calendar month of the Term; (E) $7,725, if the
effective cancellation date is the first day of the
twenty-third (23rd) full calendar month of the
Term; (F) $7,150, if the effective cancellation
date is the first day of the twenty-fourth (24th)
full calendar month of the Term; (G) $6,500, if the
effective cancellation date is the first day of the
twenty-fifth (25th) full calendar month of the
Term; (H) $6,000, if the effective cancellation
date is the first day of the twenty-sixth (26th)
full calendar month of the Term; (I) $5,375, if the
effective cancellation date is the first day of the
twenty-seventh (27th) full calendar month of the
Term; (J) $4,800, if the effective cancellation
date is the first day of the twenty-eighth (28th)
full calendar month of the Term; (K) $4,175, if the
effective cancellation dates is the first day of
the twenty-ninth (29th) full calendar month of the
Term; (L) $3,500, if the effective cancellation
date is the first day of the thirtieth (30th) full
calendar month of the Term; (M) $2,900, if the
effective cancellation date is the first day of the
thirty-first (31st) full calendar month of the
Term; (N) $2,300, if the effective
ii
<PAGE> 6
cancellation date is the first day of the
thirty-second (32nd) full calendar month of the
Term; (O) $1,700, if the effective cancellation
date is the first day of the thirty-third (33rd)
full calendar month of the Term; (P) $1,050, if the
effective cancellation date is the first day of the
thirty-fourth (34th) full calendar month of the
Term; and (Q) $500, if the effective cancellation
date is the first day of the thirty-fifth (35th) or
thirty-sixth (36th) full calendar month of the
Term, in each case not later than 11:59 PM, six (6)
months prior to the effective cancellation date.
Failure to give timely notice or to make timely
payment shall render the exercise of Tenant's right
to cancel null and void.
(b) MISCELLANEOUS:
With respect to any consent required to be given
under this Lease, such consent shall not be
unreasonably withheld or delayed. All costs and
fees to be charged against Landlord or Tenant on
behalf of the other party, including but in no way
limited to items included in operating and
maintenance costs and fees, shall be required to be
reasonable in amount and in nature.
This Data Sheet will become an integral portion of the Lease. Any
discrepancy between the terms of the Data Sheet and the remaining portions of
the Lease (including all Exhibits thereto) shall be resolved in favor of the
Data Sheet.
Landlord
GHENT LIMITED PARTNERSHIP
Date: March 1, 1996 By:_____________________________________
Steven J. Schacter
Its Authorized Representative
Tenant
RENAISSANCE COSMETICS INC.
Date: March 1, 1996 By:_____________________________________0
Name:
Title:
iii
<PAGE> 7
AGREEMENT OF LEASE dated the 1st day of March, 1996 between GHENT
LIMITED PARTNERSHIP, a Connecticut limited partnership, with its principal
office at 100 Putnam Green, Greenwich, Connecticut 06830 ("LANDLORD") and
RENAISSANCE COSMETICS INC., a Delaware corporation, with its principal office at
635 Madison Avenue, New York, New York 10022 ("TENANT")
W I T N E S S E T H:
Landlord and Tenant hereby covenant and agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. For the purposes of this Lease, unless the context
otherwise requires:
(a) "BUILDING" shall mean the Building specified in ITEM 1 of the Data
Sheet.
(b) "BUSINESS DAYS" means Monday through Friday other than days that
are federal or state holidays.
(b) "COMMON AREAS" shall mean all portions of the Building not intended
as leasable area, the Land and other improvements thereon.
(c) "GOVERNMENTAL AUTHORITY" shall mean any Federal, state, county,
municipal or local government and all departments, commissions, boards, bureaus
and offices thereof having or claiming jurisdiction over the "PREMISES" (as
defined below).
(d) "INTEREST RATE" shall mean the lesser of (i) the prevailing prime
or base lending rate published from time to time in the Eastern Edition of the
Wall Street Journal plus 400 basis points, or (ii) the maximum rate of interest
permitted by law from time to time. In the event said prevailing prime lending
rate is published as a range, the prime or base lending rate for purposes hereof
shall be deemed to be an average of the high and low.
(e) "LAND" shall mean the parcel of land within Greenwich Office Park
situated in the Town of Greenwich, the County of Fairfield and State of
Connecticut, more particularly described on EXHIBIT A attached hereto, on which
is situated the Building.
(f) "LANDLORD'S CONSTRUCTION" shall mean the work specified on EXHIBIT
B hereto. The amount Landlord shall contribute to the cost of such Landlord's
Construction is set forth as ITEM 2 of the Data Sheet.
(g) "LEASE YEAR" shall mean every period of twelve (12) consecutive
months during the term of this Lease, commencing on the "COMMENCEMENT DATE" (as
hereinafter defined) or each anniversary thereof, or if the Commencement Date is
not the first day of a calendar month, then on the first day of the first
calendar month after the Commencement Date or each anniversary thereof.
(h) "TENANT'S PROPERTY" shall mean all trade fixtures installed at the
sole expense of Tenant, and which are not replacements of any property of
Landlord, whether any such replacement is made at Tenant's expense or otherwise.
Subject to Sections 9.01. and 18.01., Tenant's Property shall also include all
items of property installed as part of Landlord's Construction and all other
property which does not become affixed to the Premises.
(i) "TENANT'S PROPORTIONATE SHARE" is that percentage which is set
forth as ITEM 3 of the Data Sheet. For the purposes of this Lease, the rentable
square footage area of the Building shall be deemed to be the square footage
specified in ITEM 3 of the data sheet.
1
<PAGE> 8
(j) "UNAVOIDABLE DELAYS" shall mean any and all delays beyond
Landlord's reasonable control, including without limitation, delays caused by
Tenant; governmental restrictions, regulations, controls or preemption; order of
civil, military or naval authority; strikes, labor disputes, lock-outs; shortage
of labor or materials, inability to obtain materials or reasonable substitutes
therefor, default of any building or construction contractor or subcontractor;
enemy action, civil commotion, riot or insurrection; Acts of God, earthquake,
floods, explosions, actions of the elements, extreme weather conditions, fire or
other unavoidable casualty; or, any other cause beyond Landlord's reasonable
control.
ARTICLE 2
DEMISE; PREMISES; TERM
SECTION 2.01. Landlord hereby leases to Tenant, and Tenant hereby hires
from Landlord, the premises hereinafter described ("PREMISES"), in the Building,
for the term hereinafter stated, under the terms and conditions hereinafter
provided.
SECTION 2.02. The Premises consist of that property described in ITEM 4
of the Data Sheet and shown on EXHIBIT C hereto, together with all fixtures,
equipment, improvements, and appurtenances which, at the commencement of this
Lease or at any time during the Term, are attached thereto or installed therein,
other than Tenant's Property. For the purposes of this Lease, the rentable
square footage area of the Premises shall be deemed to be the square footage as
set forth in ITEM 4 of the data sheet.
SECTION 2.03. The Premises are leased for a term ("TERM") which shall
commence on a date ("COMMENCEMENT DATE") which shall be the earliest of:
(a) the date on which the Premises are available for occupancy, as
determined pursuant to Sections 3.02 and 3.03; and
(b) the date Tenant shall occupy the Premises or any part thereof for
the purpose of conducting its business; and
(c) any fixed Commencement Date specified in ITEM 5 of the Data Sheet.
SECTION 2.04. The Term shall end on the date set forth in ITEM 5 of the
Data Sheet ("EXPIRATION DATE"), unless the Term shall sooner terminate pursuant
to Item 13 (a) of the Data Sheet or any of the terms, covenants or conditions of
this Lease or pursuant to law.
SECTION 2.05. Tenant shall have the right to use that number of parking
spaces in the parking areas of Greenwich Office Park allocated to the Building
as specified in ITEM 6 of the Data Sheet. Landlord shall not be responsible for
policing the use of the spaces; however, Landlord shall have the right (but not
the obligation) to control access to the parking areas, by the use of a card
system or otherwise. If Landlord adopts such a system, Tenant shall comply and
shall use diligent efforts to cause its employees, agents and invitees to comply
therewith. Tenant shall have the nonexclusive right to use the parking areas, in
common with other tenants of the Building, up to its maximum permissible number
of spaces.
ARTICLE 3
COMPLETION AND OCCUPANCY OF THE PREMISES
SECTION 3.01. Landlord shall perform Landlord's Construction, and shall
make diligent efforts to complete same on or before the date specified as ITEM 7
in the Data Sheet. Landlord's Construction shall be performed in a first-class
manner as to workmanship, installation and materials, and in accordance with
Tenant's approved plans. Tenant shall have the right to make change orders to
said approved plans, upon Landlord's prior written consent. Landlord shall
provide Tenant with any and all
2
<PAGE> 9
resulting cost increases and/or time delays associated with said change orders
upon approving same. All such cost increases and/or time delays shall be at
Tenant's expense. Landlord shall perform Landlord's Construction in compliance
with all applicable federal, state and local laws, codes, statutes, ordinances,
guidelines, rules and regulations. During the course of construction, Landlord
shall keep Tenant duly apprised of the progress of Landlord's Construction and
any claimed delays.
SECTION 3.02. Subject to Unavoidable Delays, the Premises shall be
conclusively deemed available for Tenant's occupancy on the date that the
following conditions have been met:
(a) a certificate or certificates of occupancy (conditional or
otherwise) or other certificate permitting occupancy of the Premises has or have
been issued by the applicable Governmental Authority;
(b) Landlord's Construction with respect to the Premises has been
substantially completed (excluding (i) any minor details of construction,
decoration or mechanical adjustment which do not materially interfere with
Tenant's use of the Premises, and (ii) TENANT'S WORK, which includes any other
work to be done at the commencement of the Lease Term that is not to be
performed by Landlord, provided, however, that Landlord and Tenant shall
sequence and coordinate the performance of Landlord's Construction and Tenant's
Work in accordance with good construction practice); and
(c) ten (10) days' notice of the occurrence or expected occurrence of
the events described in subsections 3.02(a) and (b) has been given to Tenant.
Landlord shall endeavor, but shall not be obligated, to give longer notice of
such events.
SECTION 3.03. Notwithstanding the provisions of Section 3.02., if there
is a delay in the availability of the Premises for occupancy due to the
availability and/or responsiveness of Tenant's architect or other construction
representative, the sequencing of Landlord's Construction and Tenant's Work, or
due to any default, delay, change order or omission by Tenant, including, but
not limited to, Tenant's failure to deliver to Landlord on or before the Plans
Due Date specified in Item 7 of the Data Sheet working drawings (i) reasonably
acceptable to Landlord, (ii) adequate for submission to, and issuance of a
building permit by, the Town of Greenwich, and (iii) sufficiently detailed and
specific for bidding purposes, then the Premises shall be deemed available for
occupancy on the date when the Premises would have been available but for such
default, delay, change order or omission.
SECTION 3.04. Tenant has inspected the Premises and accepts same in an
"as is" condition, subject to the performance of Landlord's Construction and
Tenant's Work, if any. Landlord and Landlord's agents have made no
representations to Tenant concerning the Premises except those specified herein.
By entering into occupancy of any part of the Premises, Tenant shall be deemed
to have agreed that Landlord, up to the time of such occupancy, had performed
all of its obligations hereunder with respect to such part and that such part,
except for minor details of construction, decoration and mechanical adjustment
referred to above, was in satisfactory condition as of the date of such
occupancy, unless within thirty (30) days after such date Tenant shall have
given notice to Landlord specifying the respects in which the same was not in
such condition.
ARTICLE 4
RENT
SECTION 4.01. Tenant shall pay to Landlord, without notice or demand,
in lawful money of the United States of America, at the office of Landlord or at
such other place as Landlord may designate, the following:
(a) Annual fixed rent ("FIXED RENT") in the amounts specified as ITEM 8
in the Data Sheet for each Lease Year during the Term, payable in equal monthly
installments in advance on the first day of
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each and every calendar month during the Term, for the period commencing on the
Commencement Date and until the Expiration Date.
(b) Additional rent ("ADDITIONAL RENT") consisting of all other sums of
money as shall become due and payable by Tenant hereunder (for default in the
payment of which Landlord shall have the same remedies as for a default in the
payment of Fixed Rent).
(c) If Tenant shall fail to pay within ten (10) days of when due any
installment of Fixed Rent or any Additional Rent, Tenant shall pay interest
thereon at the Interest Rate from the date when such installment or payment
shall have become due to the date of payment thereof, together with a late
charge equal to five percent (5%) of the unpaid installment, which interest and
late charge shall be deemed Additional Rent.
(d) There shall be no abatement of, deduction from, counterclaim or
setoff against Fixed Rent or Additional Rent except as otherwise specifically
provided in this Lease.
SECTION 4.02. On execution hereof, Tenant has paid Landlord the first
two (2) monthly installments of Fixed Rent payable under this Lease. If the
Commencement Date shall be any day other than the first day of a calendar month,
Fixed Rent for such calendar month shall be pro-rated on the basis provided in
the Data Sheet, and Landlord shall credit any excess amount paid pursuant to
this Section 4.02 toward the payment of the Fixed Rent for the next succeeding
calendar month, and Tenant shall pay Landlord any deficiency in the amount paid.
ARTICLE 5
USE
SECTION 5.01. Tenant shall use and occupy the Premises only for
executive and administrative offices for the Tenant's business and for no other
purpose. Tenant shall not use or occupy or suffer or permit the use or occupancy
of the Premises or any part thereof in any manner which in Landlord's judgment
shall adversely affect or interfere with (i) any services required to be
furnished by Landlord to Tenant or to any other tenant or occupant of any part
of the Building; (ii) the proper and economical delivery of any such service;
or, (iii) the use or enjoyment of any part of the Building by any other tenant
or occupant. Without limiting the foregoing, Tenant shall not use the Premises
for the storage, preparation or consumption of food or beverages beyond that
necessary to provide a kitchen/lunchroom facility for its employees.
SECTION 5.02. Tenant shall not use or occupy, suffer or permit the
Premises or any part thereof to be used in any manner, or anything to be done
therein or suffer or permit anything to be brought into or kept therein, which
would: (a) cause substantial or objectionable noise, (b) violate any laws or
requirements of a Governmental Authority, (c) make void or voidable any
insurance policy then in force with respect to the Building and Common Areas,
(d) make unobtainable from reputable insurance companies authorized to do
business in the State of Connecticut at standard rates any fire insurance with
extended coverage, or liability, elevator, boiler or other insurance required to
be furnished by Landlord under the terms of a Superior Mortgage, (e) cause, or
be likely to cause, physical damage to the Building, Common Areas or any part
thereof, (f) constitute a public or private nuisance, (g) impair the appearance,
character or reputation of the Building, (h) discharge objectionable fumes,
vapors or odors into the Building's air conditioning system or into the
Building's flues or vents or otherwise in such manner as may unreasonably offend
other occupants, or (i) impair or interfere with any of the Building's services,
including the furnishing of electrical energy, or the proper and economic
cleaning, air conditioning or other servicing of the Building or the Premises,
or impair or interfere with the use of any of the other
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areas of the Building, or occasion discomfort, annoyance or inconvenience to
Landlord or any of the other tenants or occupants of the Building. The
provisions of this Section, and the application thereof, shall not be deemed to
be limited in any way to or by the provisions of any other Section of this
Article or any of the Rules and Regulations referred to in Article 24.
SECTION 5.03. If any governmental license or permit, other than a
certificate of occupancy, shall be required for the proper and lawful conduct of
Tenant's business in the Premises or any part thereof, then Tenant, at its
expense, shall duly and timely procure and thereafter maintain such license or
permit and submit the same to inspection by Landlord. Tenant shall at all times
comply with the terms and conditions of each such license or permit, but in no
event shall failure to procure and maintain same by Tenant affect Tenant's
obligations hereunder.
SECTION 5.04. Tenant will not at any time use or occupy, or suffer or
permit the Premises to be used in violation of any certificate of occupancy
issued for the Building or the applicable zoning ordinances.
SECTION 5.05. Tenant shall not place a load upon any floor of the
Premises that exceeds the floor load per square foot that such floor was
designed to carry and which is allowed by certificate, rule, regulation, permit
or law. Subject to the terms of the next preceding sentence, if Tenant wishes to
place any safes in the Premises, it may do so at its own expense, but Landlord
reserves the right to limit their weight and position. Business machines and
mechanical equipment in the Premises shall be placed and maintained by Tenant,
at Tenant's expense, in such manner as shall be sufficient to absorb vibration
and noise and prevent annoyance or inconvenience to Landlord or any of the other
tenants or occupants of the Building.
SECTION 5.06. In the event Tenant prohibits its employees from smoking
on the Premises or designates any areas within the Premises as "non-smoking"
areas, the Tenant shall provide a suitably sized and designated smoking area for
its employees wholly within the Premises.
ARTICLE 6
ESCALATIONS
SECTION 6.01. As used herein:
(a) The term "TAXES" shall mean the aggregate of all real estate taxes,
assessments, special or otherwise, sewer rents, rates and charges, water rents,
rates and charges, or any other charge of a Governmental Authority of a similar
or dissimilar nature, of any kind, which may be levied or assessed upon or with
respect to the Building and the Common Areas, and all taxes or charges levied on
the Fixed Rent and/or Additional Rent or the gross receipts from the Building,
or charges levied on Landlord's receipts from the Building which are in lieu of
or a substitute for, any other tax or assessment or charge upon or with respect
to the Building, the Land, or Greenwich Office Park. Taxes shall not be deemed
to include:
(i) franchise or similar taxes of Landlord, or
(ii) income, excess profits or other taxes, if any, of Landlord,
except to the extent such taxes are in lieu of or a substitute
for any other tax, assessment or charge upon the Land and
Building, which, if such other tax, assessment or charge were
in effect, would be payable by Tenant as provided above, in
which event such taxes shall be computed as if the Land and
Building were the only property of Landlord, and the rent
hereunder the only income of Landlord.
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If due to a future change in the method of taxation any franchise, income (other
than an income tax which is applicable to other parties in addition to owners of
real property), profit or other tax shall be levied against Landlord in
substitution in whole or in part for or in lieu of any tax which would otherwise
constitute Taxes, or a tax or excise shall be imposed upon or measured by rents,
such franchise, income, profit or other tax, or excise imposed upon or measured
by rents, shall be deemed to be Taxes for the purpose hereof.
(b) The term "TAX YEAR" shall mean the period of twelve (12) months
commencing on July 1st of each year or such other twelve (12) month period as
may hereafter be duly adopted as the fiscal year for real estate tax purposes
for the Town of Greenwich or other applicable Governmental Authority.
(c) The term "BASE TAX YEAR" shall be the period specified as ITEM 9 in
the Data Sheet.
(d) The term "LANDLORD'S STATEMENT" shall mean an instrument containing
a computation of any Additional Rent due pursuant to the provisions of this
Article.
(e) The term "BASE TAXES" shall mean the amount of Taxes payable by
Landlord during the Base Tax Year.
(f) The term "COST OF OPERATION AND MAINTENANCE" shall mean the
aggregate of all costs incurred by Landlord, excluding costs of work done for
tenants at their own expense, with respect to the operation, maintenance and
repair of the Building and the Common Areas, including, without limitation, the
cost incurred for air conditioning; mechanical ventilation; heating; cleaning;
rubbish removal; window washing; elevators; porter and matron service; metered
or unmetered (if or to the extent not separately metered) cost of electric
current used throughout the Common Areas, if and to the extent it is not billed
directly to Tenant or a tenant; steam; protection and security services, if any;
shuttle service, if any; repairs; maintenance; all insurance; supplies, wages,
salaries, disability benefits, pensions, hospitalization, retirement plans and
group insurance and other benefits or similar expenses with respect to service
and maintenance employees; uniforms and working clothes for such employees and
the cleaning thereof; expenses imposed pursuant to any collective bargaining
agreement with respect to such employees; the current amortized portion of
capital expenses incurred with respect to the Building and Common Areas,
together with interest at Landlord's cost on the unamortized balance; payroll,
social security, unemployment and other similar taxes with respect to such
employees; sales, use and other similar taxes; water rates and sewer rents;
management fees whether actually paid to independent contractors or imputed in
accordance with the provisions of Section 6.07; cost of landscaping; legal and
accounting fees; permit and license fees; the cost of changes to comply with
governmental requirements; repairs to Common Areas; and utility and other
consultants' fees; and the costs (including but not limited to, the fees of
lawyers, appraisers and other professionals) of any application or proceeding
brought by or on behalf of the Landlord to lower the assessment on which the
taxes are based, whether or not such application or proceeding is successful in
reducing such assessment. Notwithstanding anything to the contrary contained
herein, the cost of legal services will be excluded from the definition of Cost
of Operation and Maintenance to the extent such services relate to (i) a
financing or refinancing of the Building, (ii) the preparation or negotiation of
leases, and (iii) disputes with specific tenants concerning the landlord/tenant
relationship.
(g) "OPERATIONAL YEAR" shall mean each calendar year falling wholly or
partially during the Term.
(h) "BASE EXPENSE YEAR" shall be the period specified as ITEM 10 in the
Data Sheet.
(i) The term "BASE EXPENSES" shall mean the Cost of Operation and
Maintenance for the Base Expense Year.
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(j) "TENANT'S PROJECTED SHARE" shall mean Tenant's Proportionate Share
multiplied by Landlord's written estimate of increase of Cost of Operation and
Maintenance for the ensuing Operational Year over the Base Expenses, said
written estimate to be delivered by Landlord to Tenant during December of each
year. Tenant's Projected Share shall be divided by twelve (12) and each such
one-twelfth (1/12) shall be payable on the first of each month, starting January
1 of the ensuing year, by Tenant to Landlord as Additional Rent.
SECTION 6.02. (a) If Taxes payable in any Tax Year falling wholly or
partially within the Term shall be greater than the Base Taxes, Tenant shall pay
as Additional Rent for such Tax Year a sum equal to Tenant's Proportionate Share
of the amount by which the Taxes for such Tax Year exceed the Base Taxes.
Tenant's obligation to make such payment shall commence on the first day of July
following the Base Tax Year. Subsequent to the issuance by Greenwich or any
other applicable Governmental Authority of the bill for Taxes, Landlord shall
submit to Tenant a copy of such bill together with Landlord's Statement and
Tenant shall pay the Additional Rent set forth on such statement within thirty
(30) days after the mailing of such statement by Landlord.
(b) If, as a result of any application or proceeding brought by or on
behalf of Landlord, the Base Taxes shall be decreased, Landlord's Statement next
following such decrease shall include a pro rata adjustment for prior tax years
reflecting such decrease in the Base Taxes (less all costs and expenses,
including but not limited to counsel fees, incurred by Landlord in connection
with such application or proceeding). If, as a result of any application or
proceeding brought by or on behalf of Landlord for review of the assessed
valuation of the Building or Common Areas for any fiscal year subsequent to the
Base Tax Year, there shall be a decrease in the Taxes for any Tax Year with
respect to which Landlord shall have previously rendered a Landlord's Statement
and Tenant shall have paid Additional Rent hereunder, Landlord's Statement next
following such decrease shall include an adjustment for such Tax Year reflecting
such decrease in Taxes.
(c) Any payments of Additional Rent or refunds due to Tenant hereunder
for any period of less than a full Lease Year, or any adjustment required due to
the change in the area of the Premises, shall be equitably prorated to reflect
any such event. Any expenses, including but not limited to the cost of operation
and maintenance and tax escalations, not attributable solely to the Building or
solely to the Premises, shall be equitably allocated among other buildings or
other tenants, as applicable.
SECTION 6.03. (a) After the expiration of the Base Expense Year and
each Operational Year, Landlord shall furnish Tenant a written detailed
statement prepared by Landlord of the Cost of Operation and Maintenance incurred
for such Year. During the period of thirty (30) days after receipt of Landlord's
Statement, Tenant may inspect the records of the material reflected in said
Landlord's Statement at a reasonable time mutually agreeable to Landlord and
Tenant. Within thirty (30) days after receipt of such Landlord's Statement for
any Operational Year setting forth Tenant's Proportionate Share of any increase
of Cost of Operation and Maintenance during such Operational Year over the Cost
of Operation and Maintenance in the Base Expense Year (said increase being
referred to herein as the "COST INCREASE"), Tenant shall pay same (less the
amount of Tenant's Projected Share paid by Tenant on account thereof) to
Landlord as Additional Rent.
(b) Commencing with the first Operational Year, Tenant shall pay to
Landlord, as Additional Rent, Tenant's Projected Share. If Landlord's Statement
at the end of the then Operational Year shall indicate that Tenant's Projected
Share exceeded Tenant's Proportionate Share of Cost Increase, Landlord shall
credit the amount of such excess against the subsequent payment of Additional
Rent due hereunder. If Landlord's Statement shall indicate that Tenant's
Proportionate Share of Cost Increase exceeded
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Tenant's Projected Share for the then Operational Year, Tenant shall, within
thirty (30) days of receipt of Landlord's Statement pay the amount of such
excess to Landlord.
SECTION 6.04. If the Term shall expire on a date other than December
31st, any Additional Rent for the Lease Year in which the date of expiration of
the Term shall occur shall be apportioned in that percentage which the number of
days in the period from January 1st of such Lease Year to such date of
expiration, both inclusive, shall bear to the total number of days in the
calendar year in which such expiration occurs.
SECTION 6.05. (a) Landlord's failure to render Landlord's Statement
with respect to any Operational Year or Tax Year, or Landlord's delay in
rendering said Statement beyond a date specified herein, shall not prejudice
Landlord's right to render a Landlord's Statement with respect to that or any
subsequent Operational Year or Tax Year. The obligations of Landlord and Tenant
under the provisions of this Article with respect to any Additional Rent shall
survive the expiration or any sooner termination of the Term.
(b) Each Landlord's Statement shall be conclusive and binding upon
Tenant, unless within thirty (30) days after receipt of such Landlord's
Statement, Tenant shall notify Landlord that it disputes the correctness of
Landlord's Statement, specifying the respects in which Landlord's Statement is
claimed to be incorrect. Pending the determination of such dispute, Tenant shall
pay Additional Rent in accordance with the applicable Landlord's Statement, and
such payment shall be without prejudice to Tenant's position in any legal
proceeding commenced by Tenant.
SECTION 6.06. Any Additional Rent payable pursuant to Article 6 shall
be collectible by Landlord in the same manner as Fixed Rent, and Landlord shall
have the same remedies for nonpayment thereof as Landlord has hereunder for
non-payment of Fixed Rent.
SECTION 6.07. During the period that Landlord or an affiliate of
Landlord shall manage the Building with its own employees rather than
independent contractors, the aggregate management costs and fees shall not
exceed a rate which is competitive for such services in a first class office
building in the Greenwich area.
ARTICLE 7
ASSIGNMENT, MORTGAGING AND SUBLETTING
SECTION 7.01. (a) Except as otherwise expressly provided in this
Article, neither this Lease, nor the term and estate hereby granted, nor any
part hereof or thereof, nor the interest of Tenant in any sublease or the
rentals thereunder, shall be assigned, mortgaged, pledged, encumbered or
otherwise transferred by Tenant, Tenant's legal representatives, subtenants, or
successors in interest by operation of law or otherwise, and neither the
Premises, nor any part thereof, shall be encumbered in any manner by reason of
any act or omission on the part of Tenant or anyone claiming under or through
Tenant, or shall be sublet or be used or occupied or permitted to be used or
occupied, or utilized for desk space or for mailing privileges by anyone other
than Tenant or for any purpose other than as permitted by this Lease, without
the prior written consent of Landlord in each case. The transfer (or transfers
in the aggregate) of a controlling interest in Tenant, by transfers of stock or
general partnership interests, shall be deemed an assignment of this Lease. In
the event that Tenant shall desire to assign this Lease or to sublease any
portion of the Premises, then Tenant shall submit in writing to Landlord the
name of the proposed assignee or subtenant, the nature and character of its
business, the terms and conditions of the proposed assignment or subletting,
information as to the financial responsibility of the proposed assignee or
subtenant, and such other information as Landlord may require. In the event that
Tenant desires to
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assign this Lease, then any proposed assignment must require Tenant's assignee
to assume Tenant's obligations from and after the effective date of an
assignment.
(b) Anything in subsection 7.01.(a) to the contrary notwithstanding,
the prior written consent of Landlord shall not be required with respect to an
assignment of this Lease or a sublease of part or all of the Premises to an
entity controlled by, controlling or under common control with Tenant. For this
purpose "CONTROL" shall mean (i) in the case of a corporation, ownership of more
than fifty percent (50%) of the outstanding capital stock of that corporation,
(ii) in the case of a general partnership, shall mean more than fifty percent
(50%) of the general partnership interest of the partnership, and (iii) in the
case of a limited partnership, shall mean more than fifty percent (50%) of the
general partnership interests of such limited partnership. In connection with
any such assignment or sublease, Tenant shall give notice to Landlord at least
ten (10) days prior to the transaction and shall deliver a copy of the
documentation to Landlord within ten (10) days after the execution of the
assignment or sublease.
(c) Any assignment of this Lease, or of the interest of Tenant
hereunder, or sublease as aforesaid, without full compliance with any and all
requirements set forth in this Lease shall be a breach of this Lease and a
default hereunder and shall be of no effect.
SECTION 7.02. (a) In the event that at any time or from time to time
prior to or during the Term of this Lease Tenant desires to sublet all or any
part of the Premises or assign this Lease in whole or in part, Tenant (i) shall
be deemed to have granted Landlord the option to sublet from Tenant such space
so proposed to be sublet or assigned upon the covenants, agreements, terms,
provisions and conditions hereinafter set forth, and (ii) shall not offer such
space for subletting or assignment to anyone other than Landlord until thirty
(30) days have elapsed after the receipt of such notice by Landlord. Such option
on the part of Landlord to sublet from Tenant such space so proposed to be
sublet or assigned shall be exercisable by Landlord in writing during said
period of thirty (30) days. If Landlord fails to exercise such option within
said thirty (30)-day period and Tenant fails to complete a sublease with a third
party (as hereinafter provided) within ninety (90) days thereafter, Tenant shall
again comply with all the conditions of this Section, as if the notice and
option hereinabove referred to had not been given and received.
(b) In the event Landlord exercises Landlord's option to sublet such
space, such sublease by Tenant to Landlord shall be at an annual fixed rent
equal to the Fixed Rent and Additional Rent as provided in this Lease for the
entire Premises or equal to an equitable apportionment of such Fixed and
Additional Rent if such sublease shall be in respect of less than the whole of
the Premises, and shall be for the same term as that of the proposed subletting,
and it is hereby expressly agreed that:
(i) the sublease shall be expressly subject to all of the
covenants, agreements, terms, provisions and conditions of
this Lease, except such as are not relevant or applicable, and
except as otherwise expressly set forth to the contrary in
this Section;
(ii) such sublease to Landlord shall give Landlord the unqualified
and unrestricted right, without Tenant's permission, to assign
such sublease or any interest therein and/or sublet the space
covered by such sublease or any part or parts of such space
and to make any and all changes, alterations, and improvements
in the space covered by such sublease;
(iii) such sublease to Landlord shall provide that any assignee or
subtenant of Landlord may, at the election of Landlord, be
permitted to make alterations, decorations and installments in
such space or any part thereof and shall also provide in
substance that any such alterations, decorations and
installations therein made by any assignee or subtenant of the
Landlord may be removed, in whole or in part, by such assignee
or subtenant, at its
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option, prior to or upon the expiration or other termination
of such sublease provided that such assignee or subtenant, at
its expense, shall repair any damage and injury to such space
so sublet caused by such removal; and
(iv) such sublease to Landlord shall also provide that the parties
to such sublease expressly negate any intention that any
estate created under such sublease be merged with any other
estate held by either of said parties. Tenant covenants and
agrees (a) that any such assignment or subletting by the
subtenant may be for any purpose or purposes that Landlord, in
Landlord's uncontrolled discretion, shall deem suitable or
appropriate, (b) that Tenant, at Tenant's expense, shall and
will at all times provide and permit reasonably appropriate
means of ingress to and egress from such space so sublet by
Tenant to Landlord, and (c) that at the expiration of the term
of such sublease, Tenant will accept the space covered by such
sublease in its then existing condition, subject to the
obligations of Landlord to make such repairs thereto as may be
necessary to preserve the premises demised by such sublease in
good order and condition.
(c) In addition to the rights of Landlord specified above, if Tenant
proposes to sublet all or substantially all of the Premises or to assign this
Lease, Landlord shall have the right to cancel and terminate this Lease, by
notice to Tenant within thirty (30) days after receipt of Tenant's proposal.
SECTION 7.03. In the event Landlord does not exercise its option to so
sublet or cancel, Landlord covenants not unreasonably to withhold its consent,
which must be in writing, to a subletting or assignment, provided, however, that
Landlord shall not, in any event, be obligated to consent to any such proposed
subletting or assignment unless:
(a) At the time of the request for Landlord's consent and at the date
of the sublease or assignment, this Lease shall be in full force and effect,
without any breach or default thereunder on the part of Tenant.
(b) The proposed subtenant or assignee shall possess a business
reputation and financial credit such as are then in keeping with the standards
of Landlord for the Building.
(c) The Premises, except with Landlord's prior written consent, shall
not have been publicly advertised for subletting at a rental rate lower than the
higher of (i) the Fixed Rent and all Additional Rent then payable, or (ii) the
then prevailing rental rate for other space in the Building or comparable space
if Building is full.
(d) The subtenant or assignee assumes, by an instrument in form and
content satisfactory to Landlord, the due performance of all Tenant's
obligations under this Lease with respect to the subleased or assigned space.
(e) A copy of the sublease or the original assumption agreement, fully
executed and acknowledged, is submitted to Landlord within ten (10) days of
execution of the sublease or assignment agreement.
(f) Any such sublease or assignment provides that, in the event of any
further subleasing or assignment of any portion of the Premises by the subtenant
or assignee or anyone claiming under or through it, the prior written consent of
Landlord must be obtained as provided in Section 7.01 and any profit on such
further subletting shall be paid over entirely to Tenant, to be shared with
Landlord as provided in Section 7.05.
(g) By way of illustration and not limitation, Landlord shall not be
obligated to consent to any proposed assignment or sublease to any of the
following entities:
(i) a bank, trust company, safe deposit business, savings and loan
association or loan company;
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(ii) a tenant or subtenant whose projected or reasonably likely use
of the Premises involves the use, storage, generation, or
disposal of Hazardous Substances as defined in Section 8.02 of
this Lease;
(iii) a school, college, university or educational institution,
whether or not non-profit; (iv) a government, governmental or
quasi-governmental organization, or any agency or subdivision
thereof;
(v) a tenant or subtenant of a tenant of Landlord or its
affiliates, an occupant of the Building or any other building
in Greenwich owned by the Landlord or its affiliates, or any
party or entity with whom Landlord, or its affiliates or their
agents or representatives have engaged in active negotiations
for a lease during the ninety (90)-day period immediately
preceding the date of Tenant's request for consent; or
(vi) a tenant or subtenant whose projected or reasonably likely use
of the Premises would classify the Premises as a "place of
public accommodation" under the American with Disabilities Act
of 1990, as may be amended from time to time, or furthermore
whose projected or reasonably likely use of the Premises would
create obligations in excess of Landlord's obligations under
this Lease but for the sublease or assignment.
SECTION 7.04. If this Lease is assigned, whether or not in violation of
the provisions of this Lease, Landlord may collect rent from the assignee. If
the Premises or any part thereof are sublet or used or occupied by anybody other
than Tenant, whether or not in violation of this Lease, Landlord may, after
default by Tenant and expiration of Tenant's time to cure such default, collect
rent from the subtenant or occupant. In either event, Landlord may apply the net
amount collected to the rents herein reserved, but no such assignment,
subletting, occupancy or collection shall be deemed a waiver of any of the
provisions of this Article, or the acceptance of the assignee, subtenant or
occupant as tenant, or a release of Tenant from the further performance by
Tenant of Tenant's obligations under this Lease. The consent by Landlord to an
assignment, mortgaging or subletting pursuant to any provision of this Lease
shall not in any way be considered to relieve Tenant or any party claiming under
or through Tenant from obtaining the express consent of Landlord to any other or
further assignment, mortgaging or subletting which consent shall be required for
all further sublettings or assignments whether or not required pursuant to the
terms and provisions of this Article 7.
SECTION 7.05. With respect to any sublease or assignment by Tenant of
all or any portion of the Premises, the following provisions shall apply. Any
profit on such sublease or assignment shall be shared twenty-five percent (25%)
by Tenant and seventy-five percent (75%) by Landlord. For purposes of this
Section, "PROFIT" shall refer to the difference between: (1) all payments made
by a subtenant or assignee to Tenant as rent or otherwise under or in connection
with said sublease or assignment; and (2) the annual Fixed Rent and Additional
Rent payable hereunder with respect to the space affected by such sublease or
assignment. Payments of Landlord's share of the profit in connection therewith
shall be made monthly as Additional Rent hereunder, on the first day of each
month.
SECTION 7.06. (a) In case of subletting to a party other than Landlord,
a duly executed and acknowledged original of the sublease shall be delivered to
Landlord, the same to provide that (i) such sublease is and shall be subject and
subordinate to this Lease and any then present or future modifications thereof;
and (ii) in the event of termination, reentry or dispossession by Landlord under
this Lease, Landlord may, at its option, take over all of the right, title and
interest of Tenant, as sublessor, under such sublease, and such subtenant shall,
at Landlord's option, attorn to Landlord pursuant to the then executory
provisions of such sublease, except that Landlord shall not (A) be liable for
any previous acts or
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omissions of Tenant, as sublessor under such sublease; (B) be subject to any
offsets, not expressly provided for in such sublease, against Landlord or (C) be
bound by any previous modification of such sublease to which Landlord shall not
have consented in writing, or by any previous prepayments of more than one (1)
month's rent.
(b) In the case of such assignment or subletting, Tenant, as assignor
or sublessor, as the case may be, shall remain liable for the performance or
observance of all of the terms and provisions on Tenant's part to be performed
or observed under this Lease.
(c) Any consent of Landlord to any such assignment or subletting shall
not be construed as a waiver of any requirement for obtaining: (i) the consent
of Landlord to any subsequent assignment of this Lease or subletting of the
entire Premises or (ii) the consent of Landlord to any assignment of any
sublease, the undersubletting of the whole or any portion of the Premises or the
subletting of any portion of the Premises. Tenant shall pay Landlord's costs
incurred in connection with consideration of such consent, including but not
limited to counsel fees and payments to any mortgagee. If the holder of a
Superior Mortgage must approve a requested sublease or assignment and declines
to do so, it shall be reasonable for Landlord to withhold its consent.
SECTION 7.07. Notwithstanding any other provisions of this Article 7,
if the Premises consist of less than five thousand (5,000) square feet of
rentable space, not less than all of the Premises may be sublet or assigned.
Denial of consent to the subletting or assignment of less than five thousand
(5,000) square feet of rentable space shall not be construed as unreasonableness
on the part of Landlord.
ARTICLE 8
COMPLIANCE WITH LAWS; HAZARDOUS SUBSTANCES
SECTION 8.01. Tenant, at its cost and expense, shall comply with all
laws, statutes, rules, ordinances, orders, regulations and notices of
Governmental Authorities (present, future, ordinary, extraordinary, foreseen or
unforeseen), and of all insurance policies, at any time duly issued or in force,
applicable to the Premises or to the use or occupation thereof, provided
however, that Tenant shall not be responsible for making any structural
alteration of the Premises unless same shall be required as a result of the
fault or negligence of Tenant, its contractors or agents in the particular
operation of Tenant's business.
SECTION 8.02. Tenant shall not cause or permit any Hazardous Substance
to be used, stored, generated, or disposed of on or in the Premises by Tenant,
Tenant's agents, employees, contractors or invitees, without first obtaining
Landlord's written consent, which may be withheld at the Landlord's sole and
absolute discretion. Additionally, Tenant shall not use, store, generate or
dispose of any substance in any manner or undertake any act which would cause
the Premises or the Greenwich Office Park to be classified as an "establishment"
under the laws of the State of Connecticut. If Hazardous Substances are used,
stored, generated, or disposed of on or in the Premises, or if the Premises
become contaminated in any manner for which Tenant is legally liable or if
Tenant's use of the Premises causes the Premises and/or the Greenwich Office
Park to be classified as an "establishment" under applicable Connecticut law,
Tenant shall indemnify, defend, and hold harmless the Landlord from any and all
claims, damages, fines, judgments, penalties, costs, liabilities, or losses
(including, without limitation, a decrease in the value of the Premises or the
Building of which they are part, damages because of adverse impact on marketing
of the space, and any and all sums paid for settlement of claims, attorneys',
consultant, and expert fees) arising during or after the Lease Term and arising
as a result of such contamination or use by Tenant. This indemnification
includes, by way of illustration and not limitation, any and all costs
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incurred because of any investigation of the site or any cleanup, removal, or
restoration mandated by a federal, state, or local agency or political
subdivision. In addition, if Tenant causes or permits the presence of any
Hazardous Substance on the Premises and this results in contamination, Tenant
shall promptly, at its sole expense, take any and all necessary actions to
return the Premises to the condition existing before the presence of any such
Hazardous Substance on the Premises, provided, however, that Tenant shall first
obtain Landlord's written approval for any such remedial action. Tenant's
obligations pursuant to this Section 8.02 shall survive the expiration or early
termination of this Lease.
As used herein, "HAZARDOUS SUBSTANCE" means any substance which is
toxic, ignitable, reactive, or corrosive and which is regulated by the Town of
Greenwich, the State of Connecticut, or the United States government. Hazardous
Substance includes any and all material or substances which are defined as
"hazardous waste," "extremely hazardous waste," or a Hazardous Substance
pursuant to state, federal, or local governmental law. Hazardous Substance
includes but is not restricted to asbestos, polychlorinated biphenyls ("PCBs")
and petroleum.
SECTION 8.03. Tenant shall, at Tenant's sole cost and expense, comply
with any and all requirements of any statute, rule, ordinance, order, regulation
or notice of any Governmental Authority relating to the recycling of waste
generated by tenants of the Building (collectively, the "RECYCLING LAWS"),
including, without limitation, Connecticut Public Act 87-544 and the regulations
promulgated pursuant thereto. Without limiting the generality of the foregoing,
Tenant shall, at Tenant's sole cost and expense, separate all solid waste in
accordance with, and otherwise comply with, the requirements of such Recycling
Laws and any recycling plan in effect from time to time in the Building; and, in
the event Landlord is required to separate any solid waste generated by Tenant
or Landlord otherwise incurs any costs or expenses in connection with the
recycling of Tenant's solid waste, Tenant shall reimburse Landlord for all such
costs and expenses within ten (10) days after Tenant's receipt of a bill
therefor from Landlord.
ARTICLE 9
ALTERATIONS; IMPROVEMENTS
SECTION 9.01. Tenant shall make no changes or alterations in or to the
Premises of any nature without Landlord's prior written consent. Landlord shall
not be deemed to be unreasonably withholding its consent if Tenant's proposed
changes or alterations are not within the guidelines of Connecticut Light and
Power Company's energy conscious construction program, a program in which
Landlord participates or may participate to increase electrical efficiency. If
Landlord consents to any proposed changes or alterations, such consent shall not
(i) constitute certification of compliance with the American with Disabilities
Act of 1990, as may be amended from time to time ("ADA") or (ii) give rise to
any ADA compliance or responsibility on the part of the Landlord. All fixtures
and partitions, railings and like installations (excluding movable partitions
and Tenant's trade furniture, fixtures and equipment), installed in the Premises
at any time, either by Tenant or by Landlord on Tenant's behalf, shall at the
Expiration Date or prior termination of this Lease, become the property of
Landlord and shall remain upon and be surrendered with the Premises, unless
Landlord, by notice to Tenant no later than twenty (20) days prior to the
Expiration Date or prior termination date of this Lease, elects to have them
removed by Tenant, in which event the same shall be removed from the Premises by
Tenant forthwith, at Tenant's expense. Nothing in this Section shall be
construed to prevent Tenant's removal of Tenant's Property including Landlord's
Construction, unless in connection with Landlord's Construction, Landlord, by
notice to Tenant no later than twenty (20) days prior to the Expiration Date or
prior termination date of this Lease,
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elects to have Tenant leave any part or all of Landlord's Construction in the
Premises. However, upon removal of any Tenant's Property from the Premises or
upon removal of other installations as may be required or permitted by Landlord,
Tenant shall immediately, and at its expense, repair and restore the Premises to
the condition existing prior to installation and repair any damage to the
Premises or the Building due to such removal. If Tenant uses any paint color or
other wall covering in the Premises that is not Building standard, at the end of
the Term Tenant, at Tenant's expense, must (i) repaint the Premises or remove
the non-standard wall covering and (ii) paint the Premises in a Building
standard color. All property permitted or required by Landlord to be removed
from the Premises at the end of the Term remaining in the Premises after
Tenant's removal shall be deemed abandoned and may, at the election of Landlord,
either be retained as Landlord's property or may be removed from the Premises by
Landlord at Tenant's expense. Tenant's obligations pursuant to this Section 9.01
shall survive the expiration or early termination of this Lease.
SECTION 9.02. Tenant shall, before making any alterations, additions,
installations or improvements, at its expense, obtain all permits, approvals and
certificates required by any governmental or quasi-governmental bodies and (upon
completion) certificates of final approval thereof and shall deliver promptly
duplicates of all such permits, approvals and certificates to Landlord. Tenant
agrees to carry and will cause Tenant's contractors and subcontractors to carry
such workmen's compensation, general liability, personal and property damage
insurance as Landlord may require. As permitted by law, Tenant agrees to obtain
and deliver to Landlord, written and unconditional waivers of mechanic's liens
upon the Land and Building for all work, labor and service to be performed and
all materials to be furnished in connection with such work, signed by all
contractors, sub-contractors, materialmen and laborers to become involved in
such work. Notwithstanding the foregoing, if any mechanic's lien is filed
against the Premises, Land or Building, for work claimed to have been done for,
or materials furnished to, Tenant, whether or not done pursuant to this Article,
the same shall be discharged by Tenant within thirty (30) days thereafter, at
Tenant's expense.
SECTION 9.03. Landlord shall have the right to perform any proposed
alterations to the Premises at cost, plus fifteen percent (15%) to cover general
conditions (exclusive of on-site management), management, overhead and profit.
Before commencing any alterations, Landlord, in good faith, shall, if requested
by Tenant, competitively bid same, on a "fixed price" and "sealed bid" basis, to
at least three (3) outside subcontractors for each major trade involved. The
subcontractor selected need not be the one submitting the lowest bid, if
Landlord reasonably believes that the relative reliability and skill of the
various subcontractors warrant a selection based on considerations not limited
solely to price.
ARTICLE 10
REPAIRS
SECTION 10.01. Tenant shall take good care of the Premises and, at
Tenant's sole cost and expense, shall make all repairs and replacements, as and
when needed to preserve the Premises in good working order and condition, except
that Tenant shall not be required to make any structural repairs or structural
replacements to the Building and the Building systems serving the Premises
unless necessitated or occasioned by the acts, omissions or negligence of
Tenant, or any of its servants, employees, contractors, agents, visitors,
invitees or licensees, or by the use or occupancy or manner of use or occupancy
of the Premises by Tenant or any such person; in such cases, Landlord may make
or cause such structural repairs or structural replacements to be made, but
shall not be obligated to do so, and Tenant agrees to pay to Landlord promptly
upon Landlord's demand as Additional Rent, the cost of such repairs or
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replacements. In the event Landlord elects not to make such repairs or
replacements caused by Tenant's negligence, Landlord may require Tenant to make
such repairs or replacements at Tenant's sole cost and expense.
SECTION 10.02. Landlord, at its expense, shall keep and maintain the
Common Areas and the fixtures, appurtenances, systems and facilities serving the
Premises, in good working order, condition and repair and shall make all
necessary repairs not required to be made by the Tenant.
ARTICLE 11
UTILITIES AND SERVICES
SECTION 11.01. Landlord shall provide the cleaning services described
in EXHIBIT D attached hereto. Tenant shall pay to Landlord, on demand,
Landlord's charges for any special or unusual cleaning work in the Premises,
including without limitation, the cleaning of private baths, interior glass,
pantries, kitchens, lounge areas, panelled and fabric walls, and wood floors;
provided, however, that Tenant understands that nothing herein shall require
Landlord to provide any special or unusual cleaning work. Tenant acknowledges
that the cleaning services required to be furnished by Landlord pursuant to
Section 11.01 may be furnished by a contractor or contractors employed by
Landlord and agrees that Landlord shall not be deemed in default of any of its
obligations under this Section unless such default shall continue for an
unreasonable period of time after written notice from Tenant to Landlord setting
forth the special nature of such default.
SECTION 11.02. Landlord shall provide year round air conditioning to
the Premises capable of providing and maintaining criteria as follows:
Design Condition Inside Condition Outside Condition
Cooling Cycle 78 degrees D.B. F 95 degrees D.B. F
------------- ----------------- -----------------
50% R.H. 75 degrees W.B. F
-------- -----------------
Heating Cycle 68 degrees F 0 degrees F
------------- ------------ -----------
on Business Days from 8:00 a.m. to 6:00 p.m. and Saturdays from 8:00 a.m. to
1:00 p.m. (These design standards are based on an occupancy of not more than
eight persons per 1000 sq. ft. and a total connected load not to exceed 5 watts
per square foot for lighting and standard electrical office power, subject to
the recommendations of any Governmental Authority for the purpose of conserving
energy.) If Tenant requests air-conditioning/cooling or ventilation for more
extended hours, or on Sundays or on holidays, Landlord will furnish the same at
an extra cost to Tenant.
SECTION 11.03. (a) Landlord, at Tenant's expense, shall furnish
electrical energy to or for the use of Tenant in the Premises for the operation
of the lighting fixtures and the electrical receptacles. Subject to adjustment
as provided in subsection (c) below, Tenant shall pay to Landlord, as Additional
Rent, within ten (10) days of being billed therefor, a sum equal to Tenant's
Proportionate Share times one hundred percent (100%) of the actual electricity
charges for the Building (including, without limitation, charges of Landlord's
cost per kilowatt-hour of demand and cost per kilowatt-hour of consumption, as
the same are computed under such rate applicable to Landlord) and all applicable
utility company surcharges, fuel adjustments, rate adjustments, and taxes. If
either the quantity or character of electrical service is changed by the public
utility corporation supplying electrical service to the Building or if
electrical service is no longer available or suitable for Tenant's requirements,
no such change,
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unavailability or unsuitability shall constitute an actual or constructive
eviction, in whole or in part, or entitle Tenant to any abatement or diminution
of rent, or relieve Tenant from any of its obligations under this Lease, or
impose any liability upon Landlord or Landlord's agents.
(b) Tenant covenants that at no time shall the use of electrical energy
in the Premises exceed the capacity of the existing feeders or wiring
installations then serving the Premises. Tenant shall not, without prior consent
of Landlord in each instance, make or perform, or permit the making or
performing of, any alteration to wiring installations or other electrical
facilities in or serving the Premises, nor make any material additions to the
business machines, office equipment, or other appliances in the Premises which
utilize electrical energy.
(c) If Tenant, at any time, shall reasonably question the cost for its
consumption of electricity charged by Landlord as Additional Rent, the validity
of such costs shall be determined by an independent electrical engineer selected
by Landlord, who shall certify such determination in writing to Landlord and
Tenant. Landlord's selection of an independent electrical engineer shall be
subject to Tenant's approval, which shall not be unreasonably withheld or
delayed. If Tenant does not disapprove or consent to Landlord's selection of an
engineer within ten (10) days, such selection shall be deemed approved. The cost
of such consultant shall be paid by Tenant. Tenant may, at its own full cost and
expense, have an electrical meter installed to measure separately the amount of
electricity used in the Premises.
(d) Tenant, at Tenant's expense, shall purchase and install all
replacement lamps (including incandescent and fluorescent), starters and
ballasts used in the Premises. All such purchases shall be from Landlord, unless
Landlord elects otherwise. Prices for such items charged to Tenant shall be at
rates competitive with those charged by other first class office buildings in
the Greenwich area.
SECTION 11.04. Landlord shall supply reasonably adequate quantities of
hot and cold water to a point or points on the floor or floors in which the
Premises are located for ordinary lavatory and drinking purposes. If Tenant
requires, uses or consumes water for any purpose in addition to the ordinary
lavatory use, Landlord may install a water meter and thereby measure Tenant's
consumption of water for all purposes. Tenant shall pay to Landlord the cost of
any such meter and its installation, and Tenant, at Tenant's sole cost and
expense, shall keep any such meter and any such installation equipment in good
working order and repair. Tenant shall pay for water consumed as shown on said
meter and sewer charges thereon, as and when bills are rendered.
SECTION 11.05. Landlord reserves the right to stop the service of the
air conditioning, elevator, plumbing, electrical, sanitary, mechanical or other
service or utility systems of the Building when necessary by reason of accident
or emergency, mechanical breakdown, requirement of law, Unavoidable Delay or for
repairs, alterations, replacements or improvements, which in the reasonable
judgment of Landlord, are desirable or necessary, until the reason for such
stoppage shall have been eliminated.
ARTICLE 12
DAMAGE TO OR DESTRUCTION OF THE PREMISES
SECTION 12.01. If the Premises or any part thereof shall be partially
damaged by fire or other casualty and Tenant gives prompt notice thereof to
Landlord, subject to its rights under Section 12.02 , Landlord shall proceed
with reasonable diligence to repair or cause such damage to be repaired to
restore the Premises to the condition the Premises were in before the tenant
installation was installed. The Fixed Rent and Additional Rent shall be abated
to the extent that the Premises shall have been rendered untenantable, such
abatement to be from the date of such damage or destruction to the date the
Premises shall be substantially repaired, restored or rebuilt. If Tenant shall
reoccupy portions of the Premises as
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the restoration continues, the abatement shall cease as to such portions.
Notwithstanding the foregoing, Landlord shall have no obligation to restore the
Premises and Fixed Rent and Additional Rent shall not be abated if the damage
was caused by an act or omission of Tenant, Tenant's servants, employees,
contractors, agents, visitors, invitees or licensees.
SECTION 12.02. If the Premises shall be totally damaged or rendered
wholly untenantable by fire or other casualty, or if the Building shall be so
damaged by fire or other casualty that substantial alteration or reconstruction
of the Building shall, in Landlord's reasonable opinion, be required (whether or
not the Premises shall have been damaged by such fire or other casualty), then
in any of such events Landlord may, at its option, terminate this Lease by
giving Tenant thirty (30) days notice of such termination, which notice shall be
given within sixty (60) days after the date of such damage. In the event that
such notice of termination shall be given, this Lease shall terminate as of the
date provided in such notice of termination (whether or not the Term shall have
commenced) with the same effect as if that were the Expiration Date, and the
Fixed Rent and Additional Rent shall be apportioned as of such date of damage or
destruction, and any prepaid portion of Fixed and Additional Rent shall be
apportioned as of such date of damage or destruction and shall be refunded by
Landlord to Tenant. If, at any time prior to Landlord giving Tenant the
aforesaid notice of termination, the holder of a Superior Mortgage takes
possession of the Building through foreclosure or otherwise, such holder or
person shall have a further period of sixty (60) days from the date of so taking
possession to terminate this Lease by written notice of termination.
Notwithstanding the foregoing, this Lease will not be terminated and Landlord
shall not be obligated to restore the Premises if the damage was caused by an
act or omission of Tenant, Tenant's servants, employees, contractors, agents,
visitors, invitees or licensees.
SECTION 12.03. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or injury to the business of Tenant resulting in any way
from such damage by fire or other casualty or the repair thereof. Landlord will
not carry insurance of any kind on Tenant's Property, and Landlord shall not be
obligated to repair any damage thereto or replace the same.
SECTION 12.04. This Lease shall be considered an express agreement
governing any case of damage to or destruction of the Building or any part
thereof by fire or other casualty, and any law providing for such a contingency
in the absence of such express agreement, now or hereafter enacted, shall have
no application in such case.
ARTICLE 13
EMINENT DOMAIN
SECTION 13.01. If the whole of the Premises, or such part thereof as
will render the remainder untenantable, shall be acquired or condemned for any
public or quasi-public use or purpose, this Lease shall end as of the date of
the vesting of title in the condemning authority (either through court order or
by voluntary conveyance by Landlord in lieu of condemnation) with the same
effect as if said date were the Expiration Date. If only a part of the Premises
shall be so acquired or condemned, then, except as otherwise provided in this
Article, this Lease and the Term shall continue in force and effect, but, from
and after the date of the vesting of title, the Fixed Rent shall be an amount
which bears the same ratio to the Fixed Rent payable immediately prior to such
condemnation pursuant to this Lease, as the value of the untaken portion of the
Premises (appraised after the taking and repair of any damage to the Building
pursuant to this Section) bears to the value of the entire Premises immediately
before the taking; and any Additional Rent payable or credits receivable
pursuant to Article 6 shall be adjusted to reflect the diminution of the
Premises. The value of the Premises before and after the taking shall be
determined
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for the purposes of this Section by an independent appraiser selected by
Landlord. If only a part of the Building but a material part of the Land shall
be so acquired or condemned, then (a) whether or not the Premises shall be
affected thereby, Landlord, at Landlord's sole option, may give to Tenant,
within sixty (60) days next following the date upon which Landlord shall have
received notice of vesting of title, thirty (30) days notice of termination of
this Lease, and (b) if the part of the Building so acquired or condemned shall
contain more than twenty-five percent (25%) of the total area of the Premises
immediately prior to such acquisition or condemnation, or if, by reason of such
acquisition or condemnation, Tenant no longer has reasonable means of access to
the Premises, Tenant, at Tenant's sole option, may give to Landlord, within
sixty (60) days following the date upon which Tenant shall have received notice
of vesting of title, thirty (30) days notice of termination of this Lease. If a
part of the Premises shall be so acquired or condemned, and the Lease shall not
be terminated pursuant to the provisions of this Section, Landlord, at
Landlord's expense, shall restore that part of the Premises not so acquired or
condemned to a self-contained rental unit. In the event of any termination of
this Lease pursuant to the provisions of this Section, the Fixed Rent and
Additional Rent shall be apportioned as of the date of such termination and any
prepaid portion of Fixed Rent and Additional Rent for any period after such date
shall be refunded by Landlord to Tenant.
SECTION 13.02. In the event of any such acquisition or condemnation of
all or any part of the Building and/or Common Areas, Landlord shall be entitled
to receive the entire award for any such acquisition or condemnation. Tenant
shall have no claim against Landlord or the condemning authority for the value
of any unexpired portion of the Term, and Tenant hereby expressly assigns to
Landlord all of its right, title and interest in and to any such award, and also
agrees to execute any and all further documents that may be required in order to
facilitate the collection thereof by Landlord. Nothing contained in this Section
shall be deemed to prevent Tenant from making a separate claim in any
condemnation proceedings for any moving expenses and for the value of any
Tenant's Property which would be removable at the end of the Term, pursuant to
the provisions of Article 9.
SECTION 13.03. If the grade of any street upon which the Land is
situated or abuts shall be changed by any competent authority, this Lease shall
nevertheless continue in full force and effect, and Landlord shall be entitled
to collect from such authority the entire award that may be made in such
proceedings. Tenant hereby expressly assigns to Landlord all of its right, title
and interest in or to every such award and also agrees to execute any and all
further documents that may be required in order to facilitate the collection
thereof by Landlord.
ARTICLE 14
CONDITIONS OF LIMITATION
SECTION 14.01. This Lease and the Term and estate hereby granted are
subject to the limitations that, if,
(a) Tenant shall file a voluntary petition in bankruptcy or insolvency,
or shall be adjudicated a bankrupt or insolvent or shall file any petition or
answer seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under the present or any future
federal bankruptcy act or any other present or future applicable federal, state
or other statute or law, or shall make an assignment for the benefit of
creditors or shall seek or consent to or acquiesce in the appointment of any
trustee, receiver or liquidator of Tenant or of all or any part of Tenant's
Property; or
(b) within sixty (60) days after the commencement of any such
proceeding against Tenant, such proceeding shall not have been dismissed, or
within sixty (60) days after the appointment of any trustee,
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receiver or liquidator of Tenant or of all or any part of Tenant's Property,
without the consent or acquiescence of Tenant, such appointment shall not have
been vacated or otherwise discharged, or any execution or attachment shall be
issued against Tenant or any of Tenant's Property pursuant to which the Premises
shall be taken or occupied or attempted to be taken or occupied; or
(c) Tenant shall default in the payment when due of any installment of
Fixed Rent or Additional Rent and such default shall continue for a period of
ten (10) days; or
(d) Tenant shall default in the observance or performance of any
material term, covenant or condition of this Lease on Tenant's part to be
observed or performed (other than the covenants for the payment of Fixed Rent or
Additional Rent), and Tenant shall fail to remedy such default within twenty
(20) days after written notice by Landlord to Tenant of such default, or if such
default is of such a nature that it cannot be completely remedied within said
period of twenty (20) days, if Tenant (i) shall not promptly, upon the giving of
such notice, advise Landlord in writing of Tenant's intention duly to institute
all steps necessary to remedy such situation, (ii) shall not promptly institute
and thereafter diligently prosecute to completion all steps necessary to remedy
the same, and (iii) shall not remedy the same within sixty (60) days after the
date of the giving of said notice by Landlord; or
(e) any event shall occur or any contingency shall arise whereby this
Lease or the estate hereby granted or the unexpired balance of the Term would,
by operation of law or otherwise, devolve upon or pass to any person, firm or
corporation other than Tenant, except as is expressly permitted under Article 7;
or
(f) the Premises shall become deserted or abandoned for a period of
thirty (30) consecutive days or if Tenant does not take possession of the
Premises within ninety (90) days of the Commencement Date, only if Tenant has
not timely paid Fixed Rent and Additional Rent due hereunder; or
(g) Tenant shall default in the observance or performance of any term,
covenant or condition on Tenant's part to be observed or performed under any
other lease with Landlord or any affiliate of Landlord of space in the Building,
the Greenwich Office Park or any other property owned by Landlord or any
affiliate of Landlord, and such default shall continue beyond any grace period
set forth in such other lease for the remedying of such default; then, in any of
said events, Landlord may give to Tenant written notice of intention to end the
Term at the expiration of ten (10) days from the date of the giving of such
notice, and, in the event such notice is given, this Lease (whether or not the
Term shall have commenced) shall terminate upon the expiration of said ten (10)
days with the same effect as if that day were the Expiration Date, but Tenant
shall remain liable to Landlord, as provided in Article 15.
SECTION 14.02. In the event Tenant becomes the subject debtor in a case
pending under the Bankruptcy Code (11 U.S.C. Section 101 et. seq.), Landlord's
right to terminate this Lease shall be subject to the rights of the Trustee in
bankruptcy to assume or assign this Lease. To the extent permitted or allowed by
law, the Trustee shall not have the right to assume or assign this Lease, until
the Trustee (i) promptly cures all defaults under the Lease, (ii) promptly
compensates Landlord for monetary damages incurred as a result of such default,
and (iii) provides "ADEQUATE ASSURANCE OF FUTURE PERFORMANCE", which shall mean,
in addition to any other requirements of 11 U.S.C. Section 365(b)(3), that all
of the following have been satisfied: (a) in addition to rent payable under the
Lease, the Trustee has established with Landlord a security deposit equal to
three (3) months Fixed Rent; (b) Trustee has agreed that the security deposit
will be reestablished in said amount, whenever it is drawn upon by Landlord; (c)
Trustee has agreed that Tenant's business will continue to be conducted in a
first class manner; and (d) Trustee has agreed that the use of the Premises will
not change. If all the foregoing are
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not satisfied, Tenant shall be deemed not to have provided Landlord with
adequate assurance of future performance of this Lease.
SECTION 14.03. Any monies received by Landlord from or on behalf of
Tenant during the pendency of any proceeding or appointment of the types
referred to in subsections 14.01 (a) and (b) shall be deemed paid as
compensation for the use and occupation of the Premises, and the acceptance of
any such compensation by Landlord shall not be deemed an acceptance of rent or a
waiver on the part of Landlord of any rights under Section 14.01.
ARTICLE 15
RE-ENTRY BY LANDLORD; REMEDIES
SECTION 15.01. If this Lease and the Term shall terminate for any
reason as provided in Article 14:
(a) Landlord and Landlord's agents may immediately, or at any time
after such default or after the date upon which this Lease shall terminate,
re-enter the Premises or any part thereof, without notice, either by summary
proceeding or by any other applicable action or proceeding, and may repossess
the Premises and remove any and all of its or their property and effects from
the Premises, and in no event shall re-entry be deemed an acceptance of
surrender of this Lease; and
(b) Landlord, at Landlord's option, may relet the whole or any part or
parts of the Premises from time to time, either in the name of Landlord or
otherwise, to such tenant or tenants, for such term or terms ending before, on
or after the Expiration Date, at such rental or rentals and upon such other
conditions, which may include concessions and free rent periods, as Landlord, in
its sole discretion, may determine. Landlord shall have no obligation to relet
the Premises or any part thereof and shall in no event be liable for failure to
relet the Premises or any part thereof, or, in the event of any such reletting,
for failure to collect any rent due upon any such reletting, and no failure
shall operate to relieve Tenant of any liability under this Lease or otherwise
to affect any such liability. Landlord, at Landlord's option, may make such
repairs, replacements, alterations, additions, improvements, decorations and
other physical changes in and to the Premises as Landlord, in its sole
discretion, considers advisable or necessary in connection with any such
reletting or proposed reletting, without relieving Tenant of any liability under
this Lease or otherwise affecting any such liability. Tenant shall be liable for
the amount of all expenses incurred by Landlord in connection with such repairs,
replacements, alterations, additions, improvements, decorations and other
physical changes made by Landlord and the costs of such reletting, including
without limitation, brokerage and reasonable legal expenses.
SECTION 15.02. In the event of any breach or threatened breach by
Tenant or any persons claiming through or under Tenant of any of the agreements,
terms, covenants or conditions contained in this Lease, Landlord shall be
entitled to enjoin such breach or threatened breach and shall have the right to
invoke any right and remedy allowed at law or in equity or by statute or
otherwise as if re-entry, summary proceedings or other specific remedies were
not provided for in this Lease.
SECTION 15.03. If this Lease and the Term shall terminate as provided
in Article 14. or by or under any summary proceeding or any other action or
proceeding, or if Landlord shall re-enter the Premises as provided in this
Article or by or under any summary proceeding or any other action or proceeding,
then, in any of said events:
(a) Tenant shall pay to Landlord all Fixed Rent and Additional Rent to
the date upon which this Lease and the Term shall have terminated or to the date
of re-entry upon the Premises by Landlord, as the case may be;
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(b) Landlord shall be entitled to retain all monies, if any, paid by
Tenant to Landlord, whether as advance rent, security or otherwise, but such
monies shall be credited by Landlord against any Fixed Rent or Additional Rent
due at the time of such termination or re-entry, or at Landlord's option,
against any damages payable by Tenant;
(c) Tenant shall be liable for and shall pay to Landlord, as damages,
any deficiency between (i) the Fixed Rent and Additional Rent payable hereunder
for the period which otherwise would have constituted the unexpired portion of
the Term (conclusively presuming the Operating Expenses and Taxes to be the same
as was payable for the year immediately preceding such termination or re-entry)
and (ii) the net amount, if any, of rents ("NET RENT") collected under any
reletting effected pursuant to the provisions of subsection 15.01(b), for any
part of such period (first deducting from the rents collected under any such
reletting all of Landlord's expenses in connection with the termination of this
Lease or Landlord's re-entry upon the Premises and in connection with such
reletting including but not limited to all repossession costs, brokerage
commissions, legal expenses, attorneys' fees, alteration costs and other
expenses of preparing the Premises for such reletting);
(d) Any such deficiency shall be paid in monthly installments by Tenant
on the days specified in this Lease for the payment of installments of Fixed
Rent. Landlord shall be entitled to recover from Tenant each monthly deficiency
as the same shall arise, and no suit to collect the amount of the deficiency for
any month shall prejudice Landlord's right to collect the deficiency for any
subsequent month by a similar proceeding. Alternatively, suit or suits for the
recovery of such deficiencies may be brought by Landlord from time to time, at
its election;
(e) Whether or not Landlord shall have collected any monthly
deficiencies as aforesaid, Landlord shall, at its sole option, be entitled to
recover from Tenant, and Tenant shall pay Landlord, on demand, as and for
liquidated and agreed final damages, a sum equal to the amount by which the
Fixed Rent and Additional Rent, payable hereunder for the period which otherwise
would have constituted the unexpired portion of the Term (conclusively presuming
the Operating Expenses and Taxes to increase five percent (5%) per annum from
the year immediately preceding such termination or re-entry), exceeds the then
fair and reasonable rental value of the Premises for the same period, both
discounted to present worth at the rate of eight percent (8%) per annum. If,
before presentation of proof of such liquidated damages to any court, commission
or tribunal, the Premises, or any part thereof, shall have been relet by
Landlord for the period which otherwise would have constituted the unexpired
portion of the Term, or any part thereof, the amount of rent upon such reletting
shall be deemed, prima facie, to be the fair and reasonable rental value for the
part or the whole of the Premises so relet during the term of the reletting;
(f) In no event (i) shall Tenant be entitled to receive any excess of
such Net Rent over the sums payable by Tenant to Landlord hereunder, or (ii)
shall Tenant be entitled in any suit by Landlord for the collection of damages
pursuant to this Section to a credit in respect of any Net Rent from a
reletting, except to the extent that such Net Rent is actually received by
Landlord prior to the commencement of such suit. If the Premises or any part
thereof are relet in combination with other space, then proper apportionment on
a square foot area basis shall be made of the rent received from such reletting
and of the expenses of reletting.
SECTION 15.04. Any damages owed by Tenant to Landlord under this
Article, if not paid when due, shall be paid with interest at the Interest Rate
from the due date to the date of payment.
SECTION 15.05. Nothing herein contained shall be construed as limiting
or precluding the recovery by Landlord against Tenant of any sums or damages to
which, in addition to the damages particularly
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provided above, Landlord may lawfully be entitled by reason of any default
hereunder on the part of Tenant.
SECTION 15.06. Each right and remedy of Landlord provided for in this
Lease shall be cumulative and shall be in addition to every other right and
remedy provided for in this Lease, or now or hereafter existing at law or in
equity or by statute or otherwise, and the exercise or beginning of the exercise
by Landlord of any one or more of the rights or remedies provided for in this
Lease, or now or hereafter existing at law or in equity or by statute or
otherwise, shall not preclude the simultaneous or later exercise by Landlord of
any or all other rights or remedies provided for in this Lease or now or
hereafter existing at law or in equity by statute or otherwise.
ARTICLE 16
CURING TENANT'S DEFAULTS; FEES AND EXPENSES
SECTION 16.01. If Tenant shall default in the observance or performance
of any term, covenant, or condition of this Lease on Tenant's part to be
observed or performed, Landlord, without thereby waiving such default, may
perform the same for the account and at the expense of Tenant, without notice in
a case of emergency and in any other case if such default continues after twenty
(20) days from the date of the giving by Landlord to Tenant of written notice of
intention so to do or such lesser period of notice in the event that a condition
might constitute a default under a Superior Mortgage, Landlord may enter the
Premises at any time to cure any such default. Bills for any expense incurred by
Landlord in connection with any such performance by it for the account of
Tenant, and bills for all costs, expenses and disbursements of every kind and
nature whatsoever, including reasonable counsel fees, involved in collecting or
endeavoring to collect Fixed Rent or Additional Rent or other charge or any part
thereof or enforcing or endeavoring to enforce any rights against Tenant, under
or in connection with this Lease, or pursuant to law, including any such cost,
expense and disbursement involved in instituting and prosecuting summary
proceedings, as well as bills for any property, material, labor or services
provided, furnished or rendered by Landlord to Tenant and any charges for
services provided under this Lease, may be sent by Landlord to Tenant monthly or
immediately, and shall be due and payable in accordance with the terms of said
bills, and, if not paid when due, the amounts thereof shall immediately become
due and payable as Additional Rent. Any such bill shall be payable with interest
at the Interest Rate from the date Landlord incurs the charge or expense to the
date of payment by Tenant to Landlord. Tenant's obligations under this Section
shall survive the Expiration Date or sooner termination of the Term.
ARTICLE 17
NON-LIABILITY AND INDEMNIFICATION
SECTION 17.01. (a) Except as provided in Section 17.02., neither
Landlord nor Landlord's agents shall be liable to Tenant, its employees, agents,
contractors, invitees and licensees, and Tenant shall save Landlord and
Landlord's agents harmless of and from all loss, cost, liability, claim, damage
and expense, including, but not limited to reasonable counsel fees, penalties
and fines incurred in connection with or arising from any injury to Tenant its
servants, employees, contractors, agents, visitors, invitees or licensees, or
for any damage to, or loss (by theft or otherwise) of, any of Tenant's Property,
irrespective of the cause of such injury, damage or loss (excluding Landlord's
gross negligence or willful misconduct). Any Building employees to whom any
property shall be entrusted by or on behalf of Tenant shall be deemed to be
acting as Tenant's agents with respect to such property, and neither
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Landlord nor Landlord's agents shall be liable for any loss of or damage to any
such property by theft or otherwise.
(b) In any action brought to enforce the obligations of Landlord under
this Lease, any judgment or decree shall be enforceable against Landlord only to
the extent of Landlord's interest in the Building and Common Areas, and no such
judgment shall be the basis of execution on, or be a lien on, assets of Landlord
or any partner of Landlord other than Landlord's interest in the Building and
Common Areas.
SECTION 17.02. Neither (a) the performance by Landlord, Tenant or
others of any construction, repairs, alterations, additions, installation of
decorations or improvements in, to or on the Building, Common Areas, or the
Premises, nor (b) the failure of Landlord or others to make any such repairs,
alterations, additions, installation of decorations or improvements, nor (c) any
damage to the Premises or to Tenant's Property, nor any injury to any persons,
caused by other tenants or persons in the Building, or by operations in the
construction of any private, public or quasi-public work, or by any other cause,
nor (d) any latent defect in the Building, Common Areas, or in the Premises, nor
(e) any temporary covering of any windows of the Premises for any reason
whatsoever, including Landlord's own acts, nor any permanent covering of any
such windows if required by law, order or regulation of Federal, county, state
or municipal authorities or by any direction pursuant to law or any public
officer, nor (f) any inconvenience or annoyance to Tenant or injury to or
interruption of Tenant's business by reason of any of the events or occurrences
referred to in the foregoing subdivisions (a) through (e) shall constitute an
actual or constructive eviction, in whole or in part, or entitle Tenant to any
abatement or diminution of rent, or relieve Tenant of any of its obligations
under this Lease.
SECTION 17.03. Tenant agrees to indemnify and save Landlord and
Landlord's agents harmless of and from all losses, costs, liabilities, claims,
damages and expenses including, but not limited to reasonable counsel fees,
penalties and fines, incurred in connection with or arising from (a) any default
by Tenant in the observance or performance of any of the terms, covenants or
conditions of this Lease on Tenant's part to be observed or performed, or (b)
the use or occupancy or manner of use or occupancy of the Premises by Tenant or
any person claiming through or under Tenant, or (c) any acts, omissions or
negligence of Tenant or any such person, or the contractors, agents, servants,
employees, visitors or licensees of Tenant, or any such person, in or about the
Premises or the Building, or the Common Areas, either prior to, during, or after
the expiration of the Term, including any acts, omissions or negligence in the
making or performing of any improvements, or (d) failure to comply with the
American with Disabilities Act of 1990 in connection with the Premises, as may
be amended from time to time, in accordance with the terms and provisions of
this Lease. If any action or proceeding shall be brought against Landlord or
Landlord's agents, based upon any such claim, and if Tenant, upon notice from
Landlord, shall cause such action or proceeding to be defended at Tenant's
expense by counsel reasonably satisfactory to Landlord, without any disclaimer
of liability by Tenant in connection with such claim, Tenant shall not be
required to indemnify Landlord and Landlord's agents for counsel fees in
connection with such action or proceeding.
SECTION 17.04. Tenant shall pay to Landlord, within ten (10) days next
following delivery by Landlord to Tenant of bills or statements therefor, sums
equal to all losses, costs, liabilities, claims, damages and expenses referred
to in Section 17.03. Tenant's obligations under this Article shall survive the
Expiration Date or sooner termination of the Term.
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ARTICLE 18
SURRENDER
SECTION 18.01. On the last day of the Term or upon any earlier
termination of this Lease, or upon any re-entry by Landlord upon the Premises,
Tenant shall, at its own expense, quit and surrender the Premises to Landlord
broom clean, in good order, condition and repair except for ordinary wear, tear
and damage by fire or other insured casualty, together with all improvements
which have been made upon the Premises (except as otherwise provided for in this
Lease, including, but not limited to Article 9 above). Tenant shall remove from
the Premises and the Building all of Tenant's Property and all personal property
and personal effects of all persons claiming through or under Tenant, and shall
pay the cost of repairing all damage to the Premises and the Building occasioned
by such removal. Notwithstanding anything to the contrary contained herein, in
connection with Landlord's Construction, Landlord, by notice to Tenant no later
than twenty (20) days prior to the Expiration Date or prior termination of this
Lease, may require Tenant to leave any part or all of such Landlord's
Construction in the Premises.
SECTION 18.02. To the extent allowed by law, Tenant expressly waives,
for itself and for any person claiming through or under Tenant, any rights which
Tenant or any such person may have under any applicable law in connection with
any holdover summary proceedings which Landlord may institute to enforce the
provisions of this Article.
SECTION 18.03. If the Premises are not surrendered at the expiration of
the Term, such holding over without the written consent of the Landlord shall be
construed to be a tenancy from month to month at one-twelfth (1/12th) of an
amount equal to twice the Fixed Rent required to be paid by Tenant for the last
full lease year of the Lease Term, together with an amount estimated by Landlord
as equal to one-twelfth (1/12th) of the Additional Rent payable pursuant to this
Lease, and shall otherwise be on the same terms and conditions as herein
specified so far as applicable. Tenant shall indemnify Landlord against loss or
liability resulting from delay by Tenant in so surrendering the Premises,
including, but not limited to, attorneys fees and any claims made by any
succeeding tenant founded on such delay.
Nothing contained in this Section 18.03 shall (a) imply or be deemed to
grant Tenant any right to remain in the Premises after the termination of this
Lease without the execution of a new lease, (b) imply any obligation on the part
of Landlord to grant a new lease or (c) be construed to limit in any way any
remedy that Landlord may have against Tenant as a holdover tenant, including but
not limited to, resort to the summary process laws or enforcement of the
foregoing indemnity obligation of Tenant.
SECTION 18.04. Tenant's obligations under this Article shall survive
the Expiration Date or sooner termination of this Lease.
ARTICLE 19
INSURANCE
SECTION 19.01. Tenant shall not do anything, or suffer or permit
anything to be done in or about the Building or Common Areas which shall (a)
subject Landlord to any liability or responsibility for injury to any person or
property by reason of any activity being conducted in the Premises, (b) cause
any increase in the fire insurance rates applicable to the Building or equipment
or other property located therein, or (c) be prohibited by any license or other
permit required or obtained pursuant to Section 5.03. Tenant, at Tenant's
expense, shall comply with all requirements of the Connecticut Fire Safety Code.
SECTION 19.02. If by reason of any act or omission on the part of
Tenant, the rate of fire insurance with extended coverage on the Building,
Common Areas, equipment or other property of Landlord or any other tenant or
occupant of the Building shall be higher than it otherwise would be, Tenant
shall
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reimburse Landlord and all such other tenants or occupants, on demand, for that
part of the premiums for fire insurance and extended coverage paid by Landlord
and such other tenants or occupants because of such act or omission on the part
of Tenant.
SECTION 19.03. (a) Tenant shall obtain and keep in full force and
effect during the Term for the benefit of Landlord, and any mortgagees and
Tenant, at Tenant's own cost and expense and in the following amounts or such
greater amounts as Landlord or the holder of the Superior Mortgages may
reasonably request, (i) Public Liability Insurance, such insurance to afford
protection in an amount not less than $2,000,000 for personal injury or death,
and $1,000,000 for damage to property, protecting Landlord and Tenant as
insureds against any and all claims for personal injury, death or property
damage occurring in, upon, adjacent to or connected with the Premises or any
part thereof; and (ii) insurance against loss or damage by fire, and such other
risks and hazards as are insurable under present and future standard forms of
fire and "all-risk" form insurance policies, for Tenant's Property and all
improvements performed on behalf of Tenant by Landlord for the full insurable
value thereof, protecting Landlord, the holder of the Superior Mortgages, and
Tenant as insureds as their respective interests may appear; (iii) contractual
liability insurance in the amounts specified above insuring Tenant's liability
pursuant to Article 17 hereof; (iv) plate glass insurance, at full replacement
value; (v) worker's compensation coverage as required by law; and (vi) with
respect to alterations or improvements permitted to be made by Tenant under this
Lease, contingent liability and builder's insurance, in an amount reasonably
satisfactory to Landlord.
(b) Tenant shall obtain such other insurance in such amounts as may
from time to time be reasonably required by Landlord against other insurable
hazards which at the time are commonly insured against resulting from a change
in local practice in the case of construction or alteration of buildings and/or
in the case of premises similarly situated, due regard being given to the type
of building, its location, construction, use and occupancy.
(c) Said insurance is to be written in form and substance satisfactory
to Landlord, by an insurance company with a rating of A or better from a
recognized rating company such as Bests and which company shall be licensed to
write such insurance in the State of Connecticut. Tenant shall procure, maintain
and place such insurance and pay all premiums and charges therefor and, upon
failure to do so, Landlord may, but shall not be obligated to, procure, maintain
and place such insurance or make such payments, and in such event Tenant agrees
to pay the amount thereof, plus interest at the Interest Rate, to Landlord on
demand, and said sums shall be in each instance collectible as Additional Rent
on the first day of the month following the date of payment by Landlord. Tenant
shall cause to be included in all such insurance policies a provision to the
effect that (i) the same will not be cancelled or renewed except upon twenty
(20) days' prior written notice to Landlord, and (ii) Landlord will receive at
least twenty (20) days' prior written notice of any material changes in the
terms or conditions of all such insurance policies. On the Commencement Date,
the original insurance policies or appropriate certificates thereof shall be
deposited with Landlord. Any renewals, replacements or endorsements thereto
shall also be deposited with Landlord to make certain that said insurance shall
be in full force and during the Term.
SECTION 19.04. Each party shall include in each of its fire and
extended coverage insurance policies (insuring the Building, Common Areas and
Landlord's property therein, in the case of Landlord, and insuring Tenant's
Property and business interest in the Premises, in the case of Tenant, against
loss, damage or destruction by fire or other casualty) a waiver of the insurer's
right of subrogation against the other party, to the extent available and in the
case of Tenant, an additional waiver of insurer's right of subrogation against
Mill Management Inc. and Greenwich Associates, Inc. The policy of insurance or
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certificate thereof delivered to Landlord shall include reference to the waiver
of subrogation referred to above.
SECTION 19.05. Each party hereby waives any right of recovery against
the other for any loss occasioned by fire or other casualty which is an insured
risk under such policies, and each shall look solely to the proceeds of such
policies for any loss occasioned by fire or other casualty which is an insured
risk under such policies.
ARTICLE 20
SUBORDINATION AND ATTORNMENT
SECTION 20.01. This Lease, and all rights of Tenant hereunder are and
shall be subject and subordinate, in all respects, to (a) all future ground
leases, overriding leases and underlying leases and/or grants of term of the
Land and/or the Building or the portion thereof in which the Premises are
located in whole or in part; (b) all mortgages and building loan agreements,
including leasehold mortgages and building loan agreements, which may now or
hereafter affect the Land and/or the Building (collectively, the "SUPERIOR
MORTGAGES"), whether or not the Superior Mortgages shall also cover other lands
and/or buildings; and (c) each and every advance made or hereafter to be made
under the Superior Mortgages and to all renewals, modification, replacements,
substitutions and extensions of the Superior Mortgage, and spreaders and
consolidations of the Superior Mortgages. The provisions of this Section shall
be self-operative, and no further instrument of subordination shall be required.
In confirmation of such subordination, Tenant shall promptly execute and
deliver, at its own cost and expense, any instrument, in recordable form if
required, that Landlord or the holder of a Superior Mortgage or any of their
respective successors in interest may reasonably request to evidence such
subordination, and Tenant hereby constitutes and appoints Landlord
attorney-in-fact for Tenant to execute any such instrument for and on behalf of
Tenant.
SECTION 20.02. If, at any time prior to the expiration of the Term, the
holder of a Superior Mortgage shall become the owner of the Building as a result
of foreclosure of its mortgage or conveyance of the Building, or become a
mortgagee in possession of the Land or the Building, Tenant agrees, at the
election and upon demand of any owner of the Land or the Building, or of the
holder of any Superior Mortgage (including a leasehold mortgagee) in possession
of the Land or the Building, to attorn, from time to time, to any such owner,
holder or lessee, upon the then executory terms and conditions of this Lease,
provided that such owner, holder or lessee, as the case may be, shall then be
entitled to possession of the Premises. Such successor in interest to Landlord
shall not be bound by (a) any payment of Fixed Rent or Additional Rent for more
than one month in advance, except prepayment in the nature of security for the
performance by Tenant of its obligations under the Lease, (b) any amendment,
modification or termination of this Lease made without the consent of the holder
of the Superior Mortgage or such successor in interest whose name is disclosed
to Tenant, (c) any offsets which may be asserted by the lessee hereunder against
payments of rent as a result of any default by or claims against Landlord
hereunder arising prior to the date such successor takes possession of the
Premises, or (d) any obligation by Landlord as lessor hereunder to perform any
work or grant any concession without the mortgagee's express assumption of such
obligation to perform work or grant such concession. The foregoing provisions of
this Section shall inure to the benefit of any such owner, holder or lessee and
shall be self-operative upon any such demand, and no further instrument shall be
required to give effect to said provisions, although Tenant shall execute such
an instrument upon request of the holder of a Superior Mortgage.
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SECTION 20.03. Tenant shall execute and deliver to Landlord within a
reasonable period of time any reasonable modifications of this Lease required or
requested by the holder or potential holder of a Superior Mortgage, provided
that no such modification shall adversely affect Tenant's rights or obligations
hereunder.
ARTICLE 21
ACCESS; CHANGE IN FACILITIES
SECTION 21.01. Landlord reserves the right, at any time, without
incurring any liability to Tenant therefor, to make such changes in or to the
Building and the fixtures and equipment of the Building, as well as in the
entrances, passageways, halls, doors, doorways, corridors, elevators,
escalators, stairs, toilets and other Common Areas, as it may deem necessary or
desirable, provided any such change does not deprive Tenant of access to the
Premises, unreasonably interfere with the use of the Premises, or reduce the
rentable square footage of the Premises in excess of one percent (1%) (without
an appropriate adjustment in Fixed Rent due to such reduction in square footage
of the Premises).
SECTION 21.02. Tenant shall permit Landlord to install, use and
maintain pipes, ducts and conduits within or through the Premises, or through
the walls, columns and ceilings therein, provided that the installation work is
performed at such times and by such methods as will not reduce the useable
office space in the Premises or unreasonably interfere with Tenant's use and
occupancy of the Premises or damage the appearance thereof.
SECTION 21.03. Landlord or Landlord's agents shall have the right to
enter the Premises at all times for any of the purposes specified in this
Article: (a) to examine the Premises, to perform any obligation of Landlord or
to exercise any right or remedy reserved to Landlord in this Lease; (b) to
exhibit the Premises to a prospective purchaser, mortgagee or ground lessor of
the Building, or others and, during the last nine (9) months of the Lease Term,
to exhibit the Premises to prospective tenants, provided, that if possible
Landlord give Tenant twenty-four (24) hours prior verbal notice; (c) to make
such repairs, alterations, improvements or additions or to perform such
maintenance, including the maintenance of all air conditioning, elevator,
plumbing, electrical, sanitary, mechanical and other service or utility systems,
as Landlord may deem necessary or desirable; (d) to take all materials into and
upon the Premises that may be required in connection with any such repair,
alterations, improvements, additions or maintenance; and (e) to alter, renovate
and decorate the Premises if Tenant shall have removed all or substantially all
of Tenant's Property from the Premises. Notwithstanding the foregoing, except in
emergencies or Tenant's default hereunder, all entries by Landlord under this
Section shall be at reasonable times and shall be conducted so as not to
interfere unduly with Tenant's use and occupancy of the Premises.
SECTION 21.04. The exercise of any right reserved to Landlord in this
Article shall not constitute an actual or constructive eviction, in whole or in
part, or entitle Tenant to any abatement or diminution of rent (except as
specifically provided herein), or relieve Tenant from any of its obligations
under this Lease, or impose any liability upon Landlord or Landlord's agents, or
upon the holder of a Superior Mortgage.
SECTION 21.05. If the Premises comprise less than five thousand (5,000)
rentable square feet (or if Tenant's Proportionate Share is less than twenty
percent), Landlord reserves the right to relocate Tenant to comparable space in
another part of the Building or to another building in Greenwich Office Park
upon sixty (60) days written notice to Tenant. The expense of relocating Tenant
in accordance with the
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provisions of this Section 21.05. shall be borne by Landlord. Upon relocation,
all the terms, covenants and conditions of this Lease shall apply to the space
into which Tenant shall be relocated.
ARTICLE 22
INABILITY TO PERFORM AND WAIVERS
SECTION 22.01. This Lease and the obligations of Tenant to pay rent and
perform all of the terms, covenants and conditions on the part of Tenant to be
performed shall in no way be affected, impaired or excused because Landlord, due
to Unavoidable Delay, is (a) unable to fulfill any of its obligations under this
Lease, or (b) unable to supply or delayed in supplying any service expressly or
impliedly to be supplied, or (c) unable to make or delayed in making any
repairs, replacements, additions, alterations or decorations, or (d) unable to
supply or delayed in supplying any equipment or fixtures. Landlord shall in each
instance exercise reasonable diligence to effect performance when and as soon as
possible. However, Landlord shall be under no obligation to pay overtime labor
rates.
SECTION 22.02. In the event Landlord commences any summary proceeding
or other action for non-payment of rent, to the extent permitted by applicable
law, Tenant covenants and agrees that it will not interpose any counterclaim in
any such proceeding.
SECTION 22.03. To the extent permitted by applicable law, Landlord and
Tenant hereby waive trial by jury in any action, proceeding or permitted
counterclaim brought by either against the other on any matter arising out of or
in any way connected with this Lease, the relationship of Landlord and Tenant,
Tenant's use or occupancy of the Premises, any claim of injury or damage, or any
emergency or other statutory remedy with respect thereto.
SECTION 22.04. The failure of Landlord to insist in any one or more
instances upon the strict performance of any one or more of the agreements,
terms, covenants, conditions or obligations of this Lease, or to exercise any
right, remedy or election herein contained, shall not be construed as a waiver
or relinquishment for the future of the performance of such one or more
obligations of this Lease or of the right to exercise such election, but the
same shall continue and remain in full force and effect with respect to any
subsequent breach, act or omission, whether of a similar nature or otherwise.
The manner of enforcement or the failure of Landlord to enforce any of the Rules
and Regulations against Tenant and/or any other tenant in the Building shall not
be deemed a waiver of any such Rules and Regulations.
SECTION 22.05. The following specific provisions of this Section shall
not be deemed to limit the generality of the foregoing provisions of this
Article:
(a) No agreement to accept a surrender of all or any part of the
Premises shall be valid unless in writing and signed by Landlord. No delivery of
keys shall operate as a termination of this Lease or a surrender of the
Premises.
(b) The receipt or acceptance by Landlord of rents with knowledge of
breach by Tenant of any term, covenant or condition of this Lease shall not be
deemed a waiver of such breach.
(c) No payment by Tenant or receipt by Landlord of a lesser amount than
the correct Fixed Rent or Additional Rent shall be deemed to be other than a
payment on account, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment be deemed to effect or evidence an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance or to pursue any other
remedy in this Lease or provided by law.
SECTION 22.06. The provisions of this Article shall survive the
Expiration Date or sooner termination of this Lease.
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ARTICLE 23
QUIET ENJOYMENT
SECTION 23.01. If, and so long as, Tenant pays the Fixed Rent and
Additional Rent and keeps and performs each and every term, covenant and
condition herein contained on the part and on behalf of Tenant to be kept and
performed, Tenant shall quietly enjoy the Premises without hindrance or
molestation by Landlord, subject to the terms, covenants and conditions of this
Lease.
ARTICLE 24
RULES AND REGULATIONS
SECTION 24.01. Tenant, its servants, employees, agents, visitors,
invitees and licensees shall faithfully observe and strictly comply with, and
shall not permit violation of, the Rules and Regulations annexed as EXHIBIT E,
and such reasonable changes therein (whether by modification, elimination or
addition) as Landlord hereafter may make and communicate in writing to Tenant
("RULES AND REGULATIONS").
SECTION 24.02. The Building may be designated and known by any name
Landlord may choose, and such name or designation may be changed from time to
time in Landlord's sole discretion.
SECTION 24.03. If an excavation or other substructure shall be
undertaken or authorized upon land adjacent to the Building or beneath the
Building, Tenant, without liability on the part of the Landlord therefor, shall
afford to the person causing or authorized to cause such excavation or other
substructure work license to enter upon the Premises for the purpose of doing
such work as such person shall deem necessary to protect or preserve any of the
walls or structures of the Building or surrounding land from injury or damage
and to support the same by proper foundations, pinning and/or underpinning, and,
except in case of emergency, Landlord shall endeavor to have such entry
accomplished during reasonable hours in the presence of a representative of
Tenant, who shall be designated by Tenant promptly upon Landlord's request. The
said license to enter shall not constitute an actual or constructive eviction,
in whole or in part, or entitle Tenant to any abatement or diminution of rent,
or relieve Tenant from any of its obligations under this Lease, or impose any
liability upon Landlord or Landlord's agents.
SECTION 24.04. Tenant shall give notice to Landlord, promptly after
Tenant learns thereof, of (a) any accident in or about the Premises, (b) all
fires in the Premises, (c) all damages to or defects in the Premises including
the fixtures, equipment and appurtenances thereof, for the repair of which the
Landlord might be responsible or which constitutes Landlord's property; and (d)
all damages to or defects in any parts or appurtenances to the Building's air
conditioning, elevator, plumbing, electrical, sanitary, mechanical or other
service or utility system located in or passing through the Premises.
SECTION 24.05. Tenant will not require, permit, suffer or allow the
cleaning of any window in the Premises from the outside without Landlord's prior
written consent and unless the equipment and safety devices required by law,
ordinance, rules and regulations are provided and used. Tenant hereby agrees to
indemnify Landlord and Landlord's agents for all losses, damages or fines
suffered by them as a result of the Tenant's requiring, permitting, suffering or
allowing any window in the Premises to be cleaned from the outside in violation
of the requirements of the aforesaid laws, ordinances, regulations and rules.
SECTION 24.06. It is expressly agreed that only Landlord or any one or
more persons, firms or corporations authorized in writing by Landlord will be
permitted to sell, deliver or furnish any food or beverages whatsoever for
consumption within the demised premises or elsewhere in the Building. Landlord
expressly reserves the right to act as or to designate at any time, or from time
to time, an exclusive supplier or suppliers of such food and beverages,
including but not limited to suppliers of
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<PAGE> 36
coffee, bottled water and food; and Landlord further expressly reserves the
right to exclude from the Building any person, firm or corporation attempting to
deliver or purvey any such food or beverages but not so designated by Landlord.
It is understood, however, that Tenant or regular office employees of Tenant who
are not employed by any supplier of such food or beverages or by any person,
firm or corporation engaged in the business of purveying such food or beverages,
may personally bring food or beverages into the Building for consumption within
the demised premises by the said Tenant or employees of Tenant, but not for
resale to or for consumption by any other tenant, or the employees or guests of
any other tenant. Landlord may fix in its absolute discretion, at any time and
from time to time, the hours during which, and the regulations under which food
and beverages may be brought into the Building by Tenant or its regular
employees.
ARTICLE 25
BROKERAGE
SECTION 25.01. Tenant represents that in the negotiation of this Lease
it dealt with no real estate broker or salesperson except as set forth in ITEM
11 of the Data Sheet. Landlord shall compensate such broker pursuant to a
separate agreement. Tenant hereby agrees to indemnify Landlord and hold it
harmless from any and all losses, damages and expenses arising out of any
inaccuracy or alleged inaccuracy of the above representation, including court
costs and attorneys' fees. Landlord shall have no liability for brokerage
commissions arising out of a sublease by Tenant, and Tenant shall and does
hereby indemnify and hold Landlord harmless from any and all liability for
brokerage commissions arising out of any such sublease.
ARTICLE 26
NOTICES AND ESTOPPEL CERTIFICATE
SECTION 26.01. All notices, demands or communications given under this
Lease shall be sent to the addresses set forth above, or to such other addresses
as the parties may designate by written notice, and shall be sent by prepaid
registered or certified mail, return receipt requested, and shall be deemed
given on the second business day after the date mailed; provided, however, that
after the Commencement Date any notice to Tenant shall be sent to the Building.
All notices sent to Landlord shall be sent to the attention of the Chief
Executive Officer.
SECTION 26.02. (a) At any time, and from time to time upon not less
than ten (10) days prior written notice by Landlord to Tenant, Tenant shall
execute, acknowledge and deliver to Landlord a statement, in writing in form
satisfactory to Landlord, certifying that this Lease is unmodified and in full
force and effect (or if there have been modifications, that the same is in full
force and effect as modified and stating the modifications), and the dates to
which the Fixed Rent and Additional Rent have been paid in advance, if any,
stating whether there are any offsets to the Tenant's obligation to pay rent
thereunder and describing them, if any, and stating whether or not to the best
knowledge of the signer of such certificate (who shall be a duly authorized
officer or signatory of Tenant) Landlord is in default in performance of any
term, covenant or condition contained in this Lease and, if so, specifying each
such default of which the signer may have knowledge, it being intended that any
such statement delivered pursuant hereto may be relied upon by any prospective
purchaser of the Land and the Building or any part thereof, or of the interest
of Landlord in any part thereof, by any mortgagee or prospective mortgagee
thereof, by any lessor or prospective lessor thereof, by any lessee or
prospective lessee thereof, or by any prospective assignee of any mortgage
thereof. Failure to deliver the certificate within the ten (10) day
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<PAGE> 37
period described above shall be conclusive on Tenant that this Lease is in full
force and effect and has not been modified except as may be represented by
Landlord and that Landlord is not in default of any term, covenant or condition
contained in this Lease.
(b) At the request of Landlord, Tenant shall enter into an agreement to
pay the Fixed Rent and Additional Rent to a mortgagee of Landlord upon receipt
of a notice from such mortgagee that Landlord is in default under the note held
by such mortgagee.
(c) Prior to taking occupancy of the Premises, Tenant will deliver to
Landlord a fully executed Estoppel Certificate in substantially the form
attached hereto as EXHIBIT F.
ARTICLE 27
SECURITY DEPOSIT
SECTION 27.01. Tenant has deposited with Landlord that security
provided for in ITEM 12 of the Data Sheet as security for the faithful
performance and observance by Tenant of the terms, provisions and conditions of
this Lease (the "SECURITY DEPOSIT"). In the event that Tenant defaults in
respect of any of the terms, provisions and conditions of this Lease, including
without limitation the payment of Fixed Rent and Additional Rent, Landlord may
use, apply or retain the whole or any part of the Security Deposit to the extent
required for the payment of any Fixed Rent, Additional Rent, or any other sum as
to which Tenant is in default of, or any sum which Landlord may expend or may be
required to expend by reason of Tenant's default in respect of any of the terms,
covenants and conditions of this Lease, including without limitation, any
damages or deficiency in reletting the Premises accrued before or after any
summary proceedings or other re-entry by Landlord.
SECTION 27.02. In the event that Tenant shall fully and faithfully
comply with all of the terms, provisions, covenants and conditions of this
Lease, the Security Deposit, except as same may have been applied by Landlord in
accordance with this Lease, shall be returned to Tenant after the Expiration
Date or such earlier termination date of this Lease and after Tenant has
delivered entire possession of the Premises to Landlord in accordance with all
of the terms and provisions of this Lease.
SECTION 27.03. Tenant agrees that in the event Landlord applies any
portion of the Security Deposit in accordance with the provisions of this Lease,
Tenant will immediately upon demand of Landlord reimburse or pay Landlord for
the amount of the Security Deposit so applied so that the amount constituting
the Security Deposit during the Term of this Lease shall always be equal to the
amount specified in Section 27.01.
SECTION 27.04. In the event of a sale of the Building or leasing of the
Building, or of the portion of the Building in which the Premises are located,
Landlord shall have the right to transfer the Security Deposit to the vendee or
lessee and Landlord shall thereupon be released by Tenant from all liability for
the return of the Security Deposit, and Tenant agrees to look solely to the new
landlord for the return of the Security Deposit, and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
Security Deposit to a new landlord.
SECTION 27.05. Tenant further agrees that it will not assign or
encumber or attempt to assign or encumber the funds constituting the Security
Deposit and that neither Landlord nor its successors or assigns shall be bound
by any such assignment, encumbrance or attempted assignment or encumbrance.
31
<PAGE> 38
ARTICLE 28
PARTIES BOUND
SECTION 28.01. The terms, covenants and conditions contained in this
Lease shall bind and benefit the successors and assigns of the parties with the
same effect as if mentioned in each instance where a party is named or referred
to, except that no violation of the provisions of Article 7 shall operate to
vest any rights in any successor or assignee or Tenant and that the provisions
of this Article shall not be construed as modifying the conditions of limitation
contained in Article 14.
SECTION 28.02. The obligations of Landlord arising under this Lease
shall no longer be binding upon Landlord named herein after the sale, assignment
or transfer by Landlord named herein (or upon any subsequent landlord after the
sale, assignment or transfer by such subsequent landlord) of its interest in the
Building as owner or lessee, and, in the event of such sale, assignment or
transfer, such obligations shall thereafter be binding upon the grantee,
assignee or other transferee of such interest, and any such grantee, assignee or
transferee, by accepting such interest, shall be deemed to have assumed such
obligations. A lease of Landlord's entire interest in the Building shall be
deemed a transfer for the purposes of this Section.
SECTION 28.03. In connection with the provisions of this Lease and the
obligations and covenants of Landlord herein set forth, if Landlord or any
successor in interest be an individual, joint venture, tenancy-in-common,
co-partnership, unincorporated association, or other unincorporated aggregate of
individuals (all of which are referred to below, individually and collectively,
as an "UNINCORPORATED LANDLORD"), or a limited liability company, a limited
liability partnership or any other entity which possesses the characteristics of
limited liability (all of which are referred to below, individually and
collectively, as a "LIMITED LIABILITY LANDLORD"), then anything elsewhere to the
contrary notwithstanding, Tenant shall look solely to the estate and property of
such unincorporated landlord or limited liability landlord in the Building and
Common Areas for the satisfaction of Tenant's remedies, for the collection of a
judgment (or other judicial process) requiring the payment of money by Landlord
in the event of any default or breach by Landlord with respect to any of the
terms, covenants and conditions of this Lease to be observed and/or performed by
Landlord. No other property or assets of such unincorporated landlord, or any
general or limited partner thereof, or of such limited liability landlord, shall
be subject to levy, execution or other enforcement procedure for the
satisfaction of Tenant's remedies.
SECTION 28.04. Any provision of this Lease which requires Landlord not
to unreasonably withhold its consent shall never be the basis for an award of
damages or give rise to a right of setoff to the other party, but may be the
basis for a declaratory judgment or specific injunction with respect to the
matter in question.
SECTION 28.05. Nothing contained in this Lease shall be deemed to
confer upon any tenant, or anyone claiming under or through any tenant, any
right to insist upon, or to enforce against Landlord or Tenant, the performance
or observance by Tenant of its obligations hereunder or under the Rules and
Regulations.
ARTICLE 29
ENTIRE AGREEMENT; NO OTHER REPRESENTATIONS;
GOVERNING LAW; SEPARABILITY
SECTION 29.01. This Lease contains the entire agreement between the
parties, and all prior negotiations and agreements are merged in this Lease.
This Lease may not be changed, modified or
32
<PAGE> 39
discharged, in whole or in part, except by a written instrument executed by the
party against whom enforcement of the change, modification or discharge is
sought.
SECTION 29.02. Tenant expressly acknowledges that neither Landlord nor
Landlord's agents has made or is making, and Tenant, in executing and delivering
this Lease, is not relying upon any warranties, representations, promises or
statements, except to the extent that the same are expressly set forth in this
Lease. No rights, easements or licenses are or shall be acquired by Tenant, by
implication or otherwise, unless expressly set forth in this Lease.
SECTION 29.03. This Lease shall be governed in all respects by the laws
of the State of Connecticut.
SECTION 29.04. Each covenant and agreement in this Lease shall be
construed to be a separate and independent covenant and agreement, and the
breach of any such covenant or agreement by Landlord shall not discharge or
relieve Tenant from Tenant's obligations to perform every covenant and agreement
of this Lease to be performed by Tenant. If any term or provision of this Lease
or any application thereof shall be invalid or unenforceable, the remainder of
this Lease and any other application of such term shall not be affected thereby.
SECTION 29.05. This Lease may be executed in two or more counterparts,
each of which shall be considered an original, and all of which shall constitute
one and the same instrument.
ARTICLE 30
MISCELLANEOUS PROVISIONS
SECTION 30.01. Terms negotiated by Landlord and Tenant that add to or
vary from the provisions of this Lease, if any, are set forth at ITEM 13 of the
Data Sheet.
SECTION 30.02. All indemnifications contained in this Lease shall
survive the expiration or early termination of this Lease.
IN WITNESS WHEREOF Landlord and Tenant have duly executed this Lease as
of the day and year first above written.
Signed, Sealed and Delivered
in the Presence of:
GHENT LIMITED PARTNERSHIP,
Landlord
____________________________________ By: ________________________________
Steven J. Schacter
____________________________________ Its Authorized Representative
RENAISSANCE COSMETICS INC.
Tenant
____________________________________ By: ________________________________
___________________________________ Its ________________________________
33
<PAGE> 40
STATE OF CONNECTICUT )
) ss. Greenwich March ____, 1996
COUNTY OF FAIRFIELD )
Personally appeared Steven J. Schacter, the authorized representative
of GHENT LIMITED PARTNERSHIP, signer and sealer of the foregoing instrument, and
acknowledged the same to be his free act and deed and the free act and deed of
said Limited Partnership, before me.
_____________________________________________
Commissioner of the Superior Court/
Notary Public
My Commission Expires:_____________________
STATE OF )
) ss. __________________ March ____, 1996
COUNTY OF )
Personally appeared _________________________________, of RENAISSANCE
COSMETICS INC., signer and sealer of the foregoing instrument, and acknowledged
the same to be his free act and deed and the free act and deed of said
Corporation, before me.
_____________________________________________
Commissioner of the Superior Court/
Notary Public
My Commission Expires:_____________________
<PAGE> 41
EXHIBIT A
LAND DESCRIPTION
Beginning at the point on the northerly line of West Putnam Avenue formed by the
intersection of the division line between the premises herein described and land
formerly of Connecticut Shore Realty Co., Inc., now of Harry Jurman and Beatrice
B. Jurman, with the northerly line of West Putnam Avenue and running thence
along land of said Harry Jurman and Beatrice B. Jurman North 12 degrees 40' West
23.3 feet, North 4 degrees 51' West 60.0 feet, North 7 degrees 26' East 32.70
feet, North 1 degree 53' West 32.0 feet, North 2 degrees 31' West 61.0 feet to
land of the Estate of Alfred B. Potterton, thence along land of said Estate of
Alfred B. Potterton North 60 degrees 15' East 286.4 feet to the westerly line of
Valley Drive, thence southerly along the westerly line of Valley Drive to and
along West Putnam Avenue South 22 degrees 02' West 274.0 feet, thence on a curve
to the right with a radius of 100.0 feet a distance of 71.79 feet, thence South
63 degrees 10' West 9.4 feet, South 25 degrees 33' West 1.0 feet, South 63
degrees 52' West 88.9 feet to the point and place of beginning.
<PAGE> 42
EXHIBIT B
LANDLORD'S CONSTRUCTION
Landlord's Construction shall be performed in accordance with plans drawn for
Renaissance entitled Greenwich Office Park Nine - 2nd floor, Greenwich, CT. by
R. S. Granoff Arthitects, P.C. dated February 27, 1996, including drawing A1
(the "Plans") which Plans by this reference are hereby incorporated into the
Lease.
<PAGE> 43
EXHIBIT C
FLOOR PLAN
[TO BE PROVIDED]
<PAGE> 44
EXHIBIT D
CLEANING, JANITOR AND ROUTINE MAINTENANCE SERVICE
Cleaning, Janitor, and Routine Maintenance Service will be provided as follows:
NIGHTLY
Empty and clean wastepaper baskets, ashtrays and other receptacles.
Sweep all flooring, vacuum clean or carpet sweep (as required) all
carpets and rugs. Sweep or dust stone, ceramic tile, marble, terrazzo
and other unwaxed flooring, excluding kitchen area (cleaning of kitchen
is tenant's responsibility).
Dust and wipe clean all office furniture and window sills.
Wipe clean all water fountains and coolers.
Dust all leather and leather-type furniture.
Sweep and dust all private stairways.
Dust all chair rails, baseboards and trim.
Replace plastic bags in wastebaskets when necessary - cost per bag
charged to Tenant.
Remove normal wastepaper and refuse; cost of unusual waste removal to
be charged to Tenant.
Clean and wash one men's and one women's washroom per floor. Paper
towels, toilet tissue and soap provided by Landlord and, unless
bathrooms are common bathrooms, billed to Tenant directly.
After cleaning, all lights shall be turned off, windows closed, doors
locked and offices left in an orderly condition.
MONTHLY
Dust all pictures, frames, charts, graphs, and similar wall hangings
not reached in nightly cleaning.
QUARTERLY
Dust all venetian blinds.
ANNUALLY
Dust ceiling surfaces other than acoustical ceiling material and vacuum
clean only acoustical materials and other similar surfaces, if
necessary.
<PAGE> 45
WINDOW CLEANING
Wash all interior and exterior windows quarterly.
SIDEWALKS, ENTRANCES, ROADWAYS AND PARKING AREAS:
To be kept free and clear of refuse, snow and ice.
AS REQUIRED BY TENANT
Clean inside of all lighting fixtures and globes at cost to Tenant.
<PAGE> 46
EXHIBIT E
RULES AND REGULATIONS ATTACHED TO AND MADE A PART OF
THIS LEASE IN ACCORDANCE WITH ARTICLE 24
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or
encumbered by any tenant or used for any purpose other than for ingress
to and egress from the Premises and for delivery of such merchandise
and equipment in a prompt and efficient manner using elevators and
passageways designated for such delivery by Landlord. There shall not
be used in any space, or in the public hall of the Building, either by
any tenant or any jobbers or others in the delivery or receipt of
merchandise, any hand trucks, except those equipped with rubber tires
and sideguards.
2. The water and wash closets and plumbing fixtures shall not be used for
any purpose other than those for which they were designed or
constructed and no sweepings, rubbish, rags, acids or other substances
shall be deposited therein, and the expense of any breakage, stoppage,
or damage resulting from the violation of this rule shall be borne by
the tenant who, or whose clerks, agents, employees or visitors, shall
have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any
window of the Building; and no tenant shall sweep or throw or permit to
be swept or thrown from the Premises any dirt or other substances into
any of the corridors or halls, elevators, or out of the doors or
windows or stairways of the Building, and Tenant shall not use, keep or
permit to be used or kept any foul or noxious gas or substance in the
Premises, or permit or suffer the Premises to be occupied or used in a
manner offensive or objectionable to Landlord or other occupants of the
building by reason of noise, odors and/or vibrations, or interfere in
any way with other tenants or those having business therein, nor shall
any animals or birds be kept in or about the Building. Smoking or
carrying lighted cigars or cigarettes is prohibited in the Common Areas
of the Building, including, but not limited to, the elevators, lobby,
stairwells and hallways.
4. No awnings or other projections shall be attached to the outside walls
of the Building without the prior written consent of Landlord.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any tenant on any part of the outside
of the Premises or the Building or on the inside of the Premises if the
same is visible from the outside of the Premises without the prior
written consent of Landlord, except that the name of Tenant may appear
on the entrance door of the Premises after approval by Landlord. In the
event of the violation of the foregoing by any tenant, Landlord may
remove same without any liability, and may charge the expense incurred
by such removal to the tenant violating this rule. Interior signs on
doors shall be inscribed, painted or affixed by Tenant, at the expense
of Tenant, and shall be of a size, color and style acceptable to
Landlord.
6. No tenant shall mark, paint, drill into, or in any way deface any part
of the Premises or the Building of which they form a part. No cutting
or stringing of wires shall be permitted, except with the prior written
consent of Landlord, and as Landlord may direct. No tenant shall lay
linoleum, or other similar floor covering, so that the same shall come
in direct contact with the floor of the Premises, and, if linoleum or
other similar floor cover is desired to be used, an interlining of
builder's deadening felt shall be first affixed to the floor, by a
paste or other material, soluble in water, the use of cement or other
adhesive material being expressly prohibited.
7. No tenant shall obtain for use upon the Premises ice, drinking water,
towel and other similar services, or accept barbering or bootblacking
services in the Premises, except from persons authorized by Landlord,
which authorization shall not be unreasonably withheld or delayed, and
at hours and under regulations fixed by Landlord. Canvassing,
soliciting and peddling in the Building is prohibited and each tenant
shall cooperate to prevent the same.
<PAGE> 47
8. Landlord reserves the right to exclude from the Building between the
hours of 6 p.m. and 8 a.m. and all hours on Sundays, and legal holidays
all persons who do not present a pass to the Building signed by
Landlord. Landlord will furnish passes to persons for whom any tenant
requires same in writing. Each tenant shall be responsible for all
persons for whom he requests such pass and shall be liable to Landlord
for all acts of such persons.
9. Landlord shall have the right to prohibit any advertising by any tenant
which, in Landlord's opinion, tends to impair the reputation of the
Building or its desirability as a building for offices, and upon
written notice from Landlord, Tenant shall refrain from or discontinue
such advertising; provided, however, Landlord shall not have the
foregoing right in connection with Tenant advertising its products so
long as Tenant does not use the Building's address or the name
Greenwich Office Park in any such advertisements.
10. Tenant shall not bring or permit to be brought or kept in or on the
Premises, any inflammable, combustible or explosive fluid, material,
chemical or substance, or cause or permit any odors of cooking or other
processes, or any unusual or other objectional odors to emanate from
the Premises except for samples of Tenant's products in small
quantities which are typically kept in Tenant's executive office.
11. If the Building contains central air conditioning and ventilation,
Tenant agrees to keep all windows closed at all times and to abide by
any rules and regulations issued by the Landlord with respect to such
services. If Tenant requires air conditioning or ventilation after the
usual hours, Tenant shall give notice in writing to the Building
superintendent prior to 3 p.m. in the case of services required on week
days, and prior to 3 p.m. on the day prior in the case of service
required on weekends or on holidays.
12. No smoking of cigars or pipes shall be permitted in the Premises or the
Building.
<PAGE> 48
EXHIBIT F
TENANT ESTOPPEL CERTIFICATE
Re:
The undersigned, as Lessee under that certain Lease dated ,
19 , made with , as Lessor, does hereby certify to New York Life
Insurance Company, 51 Madison Avenue, New York, New York 10010:
1. That its leased premises at the above location have been completed in
accordance with the terms of the Lease, that it has accepted possession
of said premises and that it now occupies the same, and is open for
business;
2. That the Lease term began on , 19 , that it began paying
rent on , 19 , that it pays rent on a current basis, that,
save only as may be required by the terms of the Lease, no rent has
been or will be paid by the Lessee during the term of this lease for
more than one month in advance, that the rent payable under the Lease
is the amount of fixed rent provided thereunder, which is net annual
rent payable to Lessor of $ , and that there is no claim or
basis for an adjustment thereto;
3. That there exist no defenses or offsets to enforcement of the Lease by
the Lessor and that there are, as of the date hereof, no defaults or
breaches on the part of the Lessor under the Lease known to the
undersigned and the undersigned has made no claim against the Lessor;
4. That the Lease is now in full force and effect and has not been
amended, modified or assigned and the Lease is the only agreement
between Lessor and the undersigned regarding the leased premises;
5. That all required common areas have been completed and all required
parking spaces have been furnished and/or all parking ratios have been
met.
6. That all and any special conditions to be performed by Lessor prior to
or at commencement of the term of the Lease or as a condition therefor
have been performed and satisfied.
7. That the Lessee shall not look to New York Life, it successors or
assigns for the return of the security deposit, if any, under the Lease
unless the same is actually delivered to New York Life as security for
our performance under the Lease.
8. That Lessee is in full compliance with all Federal, State and Local
laws, ordinances, rules and regulations affecting its use of the
premises, including, but not limited to the handling, storage and
disposal of hazardous and/or toxic materials used or generated as a
result of its business conducted on or about the leased premises.
It is understood that New York Life requires this statement from the
undersigned as a condition to the making of a loan to the owners of the property
comprising the leased premises, secured by a first mortgage thereon and also by
an assignment of the Lease as collateral security.
Dated:__________________________________
Lessee:________________________________
By:____________________________________
Name:__________________________________
Title:_________________________________
<PAGE> 1
Exhibit 10.64
RENAISSANCE COSMETICS, INC.
675 Massachusetts Avenue
Cambridge, Massachusetts 02139
June 1, 1995
Mr. Aldran H. LaJoie
25292 Rockridge Road
Laguna Hills, California 92653
Dear Al:
This letter will confirm our agreement with respect to your new
consulting relationship with Renaissance Cosmetics, Inc., a Delaware corporation
("Renaissance"), ("New Consulting Agreement") which, effective June 1, 1995,
will replace and supersede your previous consulting agreement dated January 11,
1995 ("Old Consulting Agreement") and your employment agreement with
Renaissance and its subsidiary, Cosmar Corporation ("Cosmar" and, together with
Renaissance, the "Companies"), under the employment agreement between you and
the Companies dated August 18, 1994 (the "Employment Agreement").
In that connection, we agree that:
1. Change of Relationship. Except as provided in sections
5 and 6 below, effective on June 1, 1995 the Old Consulting Agreement and the
Employment Agreement will terminate.
2. Consulting Services.
(a) During the period from June 1, 1995 through
December 31, 1996 (the "Consulting Period"), you shall act as a consultant to
the Companies.
(b) You will report directly to Dr. Thomas V.
Bonoma, Chairman, President and Chief Executive Officer of the Companies and
Marc Rovner and will perform your services to Cosmar in the following areas
only, as directed by Dr. Bonoma and the General Manager of Cosmar, and, except
as may be required or contemplated in connection with the activities specified
in clause (iii) of this section 2(b) and in section 2(c) below, solely with
respect to the "Business" as defined in the Employment Agreement (the
"Business"); (i) the mold capture digitalization project; (ii) the development
and manufacture of gel nail tips; and (iii) such other areas, including new
product plans and strategic plans, if any, as may be jointly determined by Dr.
Bonoma and the Cosmar General Manager, on the one hand, and by you. The
foregoing list of areas comprise aspects of the Business in which you have or
have had varying degrees of involvement and expertise, and shall not be taken
as any representation or covenant by you as to
<PAGE> 2
any particular level of expertise or assurance as to the accomplishment of any
particular goal or task.
(c) Although your services will be performed
primarily for Cosmar, you will also be available at the request of Dr. Bonoma to
consult with Dr. Bonoma with respect to new product launches, packaging and
other areas pertaining to the fragrances business of Renaissance, but in no
event shall such consultation result in the inclusion of such activities and/or
the specific subject matter thereof as "Business" for any purpose including
without limitation for the purpose of subjecting such activities and/or such
specific subject matter to the confidentiality and non-competition provisions of
section 3 of the Employment Agreement. However, as to fragrances, you will be
available to consult as aforesaid unless you have previously commenced active
involvement on your own behalf in any aspect of the fragrance businesses and
have previously notified Dr. Bonoma or either of the Companies in writing, and
you are free to reject any consultation request that in your sole discretion may
create or cause any competitive, conflict-of-interest or other concerns relating
to such previously commenced active involvements. If you have not previously
commenced active involvement on your own behalf and given the notice pursuant to
the preceding sentence, then from the time Dr. Bonoma may first request your
consultation as to any specific product or product line of fragrances until the
expiration or earlier termination of this agreement you will refrain from any
active involvement in or with that specific fragrance product and any other
competitive product or product line of fragrances on your own behalf or on
behalf of any third party.
(d) You shall provide your consulting services
pursuant to this section 2 on an as needed basis, as determined by the
Companies in their sole discretion. Arrangements for the rendition of such
consulting services shall be made upon reasonable advance notice. Requests for
consulting services will not exceed one day in each two week period, on a
non-cumulative basis.
(e) If a majority of the Board of Directors of
either of the Companies vote to terminate your consultancy "for cause" (as
defined below), the Companies shall have the right to immediately terminate
your consultancy hereunder and it shall be so terminated effective on the date
specified by such Directors, and in such case you shall receive no further
monies under section 3 hereof or otherwise, except such as may have been accrued
for you. For purposes of this agreement, termination shall not be deemed "for
cause" unless:
(i) such termination shall have been the
result of fraud or embezzlement on the part of you; or
(ii) there has occurred a breach of section 5
of this agreement which has had, or in the reasonable
opinion of the Board of Directors of either of the
Companies may have, a material adverse effect upon the
business or operations of either of the Companies; or
-2-
<PAGE> 3
(iii) you have been convicted of or have pleaded guilty or no
contest to any felony or any crime involving moral turpitude on your
part; or
(iv) you have failed to discharge your consulting duties,
responsibilities or obligations under this agreement; provided,
however, the Directors shall not terminate your consultancy pursuant to
this subparagraph unless the Board of Directors of either of the
Companies shall have given you written notice describing, in as
specific detail as is reasonably possible, the failure by you to
discharge your duties, responsibilities or obligations and unless,
after a reasonable period of time (but not less than 30 days unless
circumstances clearly require otherwise) following that notice, you
have not cured such failure.
(f) In the event that you voluntarily terminate your consultancy
before the expiration of the term of this agreement without the written consent
of either of the Companies or Dr. Bonoma, or as otherwise permitted under this
agreement, you shall be entitled to receive no further monies or benefits under
section 3 hereof or otherwise, except such as may have been accrued for you,
and the Companies (and any affiliate or assignee thereof or successor thereto)
shall not assert any claim or bring any action against you, or against the
Selling Entities (as defined in the Employment Agreement) and their (including
your) affiliates, successors, assigns, representatives and agents, on account
of such voluntary termination by you.
(g) If the Companies terminate your consultancy without cause, you
shall be entitled to, and the Companies shall be obligated to pay to you, your
fee under section 3 through the end of the Consulting Period.
(h) The Companies shall be entitled to commence any action and seek
any appropriate damages and other remedies against you for breach or alleged
breach as described in clauses (i), (ii) or (iii) of section 2(e), but the
Companies shall not seek any remedy against you for breach of clause (iv) of
section 2(e) other than the remedy of termination of this agreement. The
Companies shall jointly and severally indemnify you, and hold you harmless,
from and against any and all damages, costs and expenses in connection with any
and all claims of third parties arising from or relating to the performance
by you of your duties in compliance with the terms hereunder, the terms of the
Old Consulting Agreement or the terms of the Employment Agreement, other than
claims arising from your willful misconduct; provided, however, that you
provide the Companies with prompt written notice of any and all such third
party claims and that the Companies shall have the right to control the defense
of any and all such third party claims; and provided further, however, that if
the Companies shall fail to exercise their right to defend any
-3-
<PAGE> 4
claim, then the costs and expenses referred to above in this sentence shall
include, but shall not be limited to, the reasonable fees and expenses of your
counsel.
3. Consulting Fee. In consideration for the services to be
rendered pursuant to section 2 and your other covenants herein, the Companies
will jointly and severally pay to you during the Consulting Period, an
aggregate annual fee of $250,000 payable in equal monthly installments, this
obligation to be divided between the Companies as the Companies shall
determine. As an independent contractor, you agree to pay, when due, any and
all employment and income taxes applicable to the consulting fees you receive
hereunder.
4. Benefits.
(a) During the Consulting Period:
(i) you will be entitled to the use of the office which
we have leased for you and the use in connection with your
consulting services of such supplies, telephones and other
office equipment and services reasonably determined by the
Companies;
(ii) upon presentation of appropriate documentation,
the Companies will reimburse you, in accordance with their
normal practices, for the reasonable business expenses incurred
by you in the performance of your services hereunder, provided
the nature and extent of such disbursements are approved by Dr.
Bonoma or the General Manager in advance;
(iii) you will be entitled to continue in force your
current group medical and other insurance, and shall be entitled
to participate in any successor group medical or other insurance
made available to the employees of Cosmar, but shall, as an
independent contractor, reimburse the Companies for their cost
of providing same;
(iv) you will not be entitled to the use of any
credit card or automobile;
(v) you will not be entitled to the services of an
assistant or to a development budget, and will have no
responsibility for any product development.
5. Confidentiality: Non-Solicitation and Non-Competition.
Anything to the contrary notwithstanding, except as contemplated in the
following proviso, the confidentiality,
-4-
<PAGE> 5
non-solicitation and non-competition provisions of section 3 of the Employment
Agreement shall remain in full force and effect; provided, however, that
references to "termination of employment" (or words of similar meaning) in the
Employment Agreement shall for all purposes of this agreement be deemed to be
references to the termination of your consulting relationship with the
Companies. The Companies acknowledge that you are free to engage in, and are
unrestricted as to, all segments of the cosmetics industry other than the
Business and, as specifically provided in paragraph 2(c), fragrances. The
Companies accordingly acknowledge that, except as provided herein, your
services hereunder are being furnished to the Companies on a non-exclusive
basis as to those other segments, and that you presently intend to be actively
engaged in other business and investment activities, and that such other
activities will likely include activities in one or more aspects of the
cosmetics industry, subject to the restrictions set forth in section 2(c) and
this section 5.
6. Termination of Option: Repurchase Rights.
(a) The option granted to you pursuant to section 4(g) on
page 7 of the Employment Agreement to purchase 10,204 shares (the "Option
Shares") of Renaissance common stock, at a purchase price of $0.10 per share,
is no longer in effect, and has ceased to be exercisable.
7. Amendment and Modification. This agreement may not be amended,
modified or changed except in a writing signed by the party against whom such
amendment, modification or the like is sought to be enforced.
8. Waiver of Compliance: Consents. Except as otherwise provided
in this agreement, any failure of any of the parties to comply with any
obligation, covenant, agreement or condition herein may be waived by the party
entitled to the benefits thereof only by written instrument signed by the party
granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this agreement requires or permits consent by or on behalf of
a party, such consent shall be given in writing in a manner consistent with the
requirements for a waiver of compliance as set forth in this section 8.
9. Notices. All notices and other communications hereunder shall
be given by personal delivery or by registered or certified mail (return
receipt requested), postage prepaid, to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice,
provided that notices of a change of address shall be effective only upon
receipt thereof):
-5-
<PAGE> 6
1. If to the Companies, to:
Dr. Thomas V. Bonoma
President and Chief Executive Officer
Renaissance Cosmetics, Inc.
675 Massachusetts Avenue
Cambridge, Massachusetts 02139
with a copy to:
Edward R. Mandell
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
2. If to you, to:
Aldran H. LaJoie
25292 Rockridge Road
Laguna Hills, California 92653
with a copy to:
Jeffrey M. Weiner
Golbert Kimball & Weiner
555 South Flower Street
Los Angeles, California 90071
All such notices and other communications shall be deemed given or
delivered when received, or five days after mailing, whichever occurs first.
10. Assignment. Neither this agreement nor any of your rights,
powers, duties or obligations hereunder may be assigned by you. This agreement
shall be binding upon and inure to the benefit of you and your heirs and legal
representatives and the Companies and their successors and assigns. Successors
of the Companies shall include, without limitation, any person acquiring,
directly or indirectly, all or substantially all of the assets of the
Companies, whether by merger, consolidation, purchase, lease or otherwise, and
such successor shall thereafter be deemed the "Companies" for the purposes
hereof.
11. Governing Law. This agreement shall be governed by the laws of
the state of California applicable to agreements made and to be performed
entirely in California, and the
-6-
<PAGE> 7
federal or state courts of Los Angeles shall have exclusive jurisdiction over
all disputes arising hereunder and the parties consent to personal
jurisdiction thereunder.
12. Entire Agreement. This agreement embodies the entire agreement
and understanding of the parties hereto as to your consulting services and the
provisions relating thereto as such matters are set forth herein. Except as
expressly provided herein, this agreement supersedes all prior agreements and
understandings between the parties with respect to such matters.
If the foregoing correctly reflects our understanding, please so
indicate by signing in the space provided.
COSMAR CORPORATION
By: /s/ Thomas V. Bonoma
--------------------------------
Name: Thomas V. Bonoma
Title: President and Chief
Executive Officer
RENAISSANCE COSMETICS, INC.
By: /s/ Thomas V. Bonoma
--------------------------------
Name: Thomas V. Bonoma
Title: President and Chief
Executive Officer
/s/ Aldran H. LaJoie
- --------------------------------
Aldran H. LaJoie
-7-
<PAGE> 1
EXHIBIT 10.70
COSMAR CORPORATION
RENAISSANCE COSMETICS, INC.
7432 Prince Drive
Huntington Beach, California 92647
As of September 8, 1995
Nomura Holding America Inc.,
Individually and as Collateral Agent
2 World Financial Center, Building B
New York, New York 10281-1198
Re: Amendment No. 2 to Note Purchase Agreement
Ladies and Gentlemen:
Reference is hereby made to the Note Purchase Agreement, dated as of
December 21, 1994, as amended by Amendment No. 1 and Waiver to Note Purchase
Agreement, dated as of April 7, 1995 (as so amended, the "Note Purchase
Agreement"), each among Cosmar Corporation, a Delaware corporation (the
"Company"), Renaissance Cosmetics, Inc., a Delaware corporation (the "Parent"),
and Nomura Holding America Inc. (together with its successors and assigns, the
"Purchaser"). All capitalized terms used in this amendment letter (this
"Amendment") and not otherwise defined herein shall have the meanings ascribed
thereto in the Note Purchase Agreement.
The Company and the Parent have requested that the Purchaser increase
the Maximum Revolving Amount to $30,000,000, and the Purchaser has indicated it
is willing to do so on the terms and conditions hereof.
Accordingly, the Company, the Parent and, by your acceptance hereof,
the Purchaser and the Collateral Agent, hereby agree as follows:
1. Amendments. Effective on and as of the Effective Date referred to
below, the following provisions of the Note Purchase Agreement are hereby
amended:
(a) Recitals. The first Recital to the Note Purchase Agreement
is amended by deleting the number "$20,000,000" from the third line
of said Recital and inserting the number "$30,000,000" in lieu
thereof.
(b) Section 1.1. Section 1.1 of the Note Purchase Agreement is
amended by (i) deleting the number "$20,000,000" from the second
line
<PAGE> 2
Amendment No. 2 to
Note Purchase Agreement. among
Renaissance Cosmetics, Inc.,
Cosmar Corporation and
Nomura Holding America Inc.
As of September 8, 1995
Page 2
of the definition for the term Maximum Revolving Amount and inserting
the number "$30,000,000" in lieu thereof; and (ii) adding the following
new definition to said Section in the appropriate alphabetical order:
"Second Amendment Effective Date" means the Effective Date as that
term is defined in the Amendment No. 2 to Note Purchase Agreement,
dated as of September 8, 1995, among the Company, the Parent, the
Purchaser and the Collateral Agent.";
(c) Section 2.1. Section 2.1 of the Note Purchase Agreement is
amended by deleting the number "$20,000,000" from the second line of
subsection (i) of said Section and inserting the number "$30,000,000"
in lieu thereof;
(d) Section 2.2. Section 2.2 of the Note Purchase Agreement is
amended by deleting the first proviso in the fifth sentence of said
Section and inserting the following proviso in lieu thereof:
"provided, however, that in lieu of the execution and delivery
of Revolving Notes by the Company at the time of each such
sale, at the election of the Purchaser on the Second Amendment
Effective Date, the Company shall execute and deliver to the
Purchaser on the Second Amendment Effective Date (against
return by the Purchaser on the Second Amendment Effective Date
of all the Revolving Notes previously issued to it by the
Company), a single Revolving Note registered in the name of
the Purchaser or its nominee, dated as of the Closing Date and
in the principal amount of $30,000,000, which Revolving Note
shall evidence the principal amount of Revolving Notes
initially sold on the Closing Date and the principal amount of
all Revolving Notes subsequently sold hereunder (together with
interest, fees and all other amounts accrued and unpaid in
respect of such aggregate outstanding principal balance), in
such event the date and amount of each sale of principal
amount of Revolving Notes to the
<PAGE> 3
Amendment No. 2 to
Note Purchase Agreement, among
Renaissance Cosmetics, Inc.,
Cosmar Corporation and
Nomura Holding America Inc.
As of September 8, 1995
Page 3
Purchaser by the Company, as well as each payment or
prepayment made on account of the principal thereof, and in
each case the resulting aggregate unpaid principal balance
thereof, shall be noted by the Purchaser on the schedule
attached to such Revolving Note or any extension thereof;";
(e) Section 2.6. Section 2.6 of the Note Purchase Agreement is
amended by deleting the number "$1,000,000" from the last line of
subsection (b) of said Section and inserting the number "$1,400,000" in
lieu thereof; and
(f) Exhibit L. The first Recital in Exhibit L to the Note
Purchase Agreement is hereby amended by deleting the language "Fifty
Million and 00/100 Dollars ($50,000,000.00)" from the ninth line of
said Recital and inserting the language "Sixty Million and 00/100
Dollars ($60,000,000.00)" in lieu thereof.
2. Conditions to Effectiveness. This Amendment shall become effective
on the date (the "Effective Date") on which the Purchaser has received all of
the following documents and payments:
(a) a counterpart of this Amendment, duly executed and
delivered by the Parent and the Company;
(b) the acknowledgement and agreement attached to this
Amendment, duly executed and delivered by each Subsidiary of the
Company which has entered into a Subsidiary Guarantee;
(c) if the Purchaser has made the election contemplated by the
first proviso of the fourth sentence of Section 2.2 of the Note
Purchase Agreement, as amended by this Amendment, the Revolving Note
contemplated thereby, duly executed and delivered by the Company
(against return of the Purchaser's existing Revolving Notes);
<PAGE> 4
Amendment No. 2 to
Note Purchase Agreement, among
Renaissance Cosmetics, Inc.,
Cosmar Corporation and
Nomura Holding America Inc.
As of September 8, 1995
Page 4
(d) a copy of the resolutions of the Board of Directors of the
Company authorizing the execution and delivery of this Amendment and
the performance of the Note Purchase Agreement as amended hereby, duly
certified by the Secretary of the Company;
(e) an Officer's Certificate dated the Effective Date as to
the matters set forth in Section 3 hereof, duly executed and delivered
by an Authorized Officer of the Company and the Parent;
(f) payment of a fee in the aggregate amount of $400,000
(which the parties hereto agree shall be deemed to have been paid
pursuant to Section 2.6(b) of the Note Purchase Agreement for purposes
of the last sentence of said Section); and
(g) payment of the fees and expenses of counsel to the
Purchaser in connection with the Note Purchase Agreement as invoiced to
the Company on June 28, 1995.
3. Representations and Warranties; No Default or Event of Default. Each
of the Company and the Parent hereby represents, warrants, covenants and agrees
as follows on and as of the Effective Date:
(a) the representations and warranties contained in Section 4.1 through
4.35, inclusive and elsewhere in the Note Purchase Agreement (including,
without limitation, the representation and warranty in Section 4.35 of the
Note Purchase Agreement, to the effect that, among other things, the
Revolving Note issued pursuant to Section 2 hereof constitutes a part of
the "Credit Facility" as defined in the Indenture). and the
representations and warranties contained in the Related Documents shall be
true and correct on and as of the Effective Date with the same effect as if
such representations and warranties had been made on and as of the
Effective Date, except that any such representation or warranty which is
expressly made only as of a specified date need be true only as of such
date; and
<PAGE> 5
Amendment No. 2 to
Note Purchase Agreement. among
Renaissance Cosmetics. Inc.,
Cosmar Corporation and
Nomura Holding America Inc.
As of September 8, 1995
Page 5
(b) no Default or Event of Default shall have occurred and be
continuing.
4. Effect of Amendment. It is hereby agreed that, except as
specifically provided herein, this Amendment does not in any way amend, modify,
affect or impair the terms, conditions and other provisions of the Note Purchase
Agreement, the Notes or the Related Documents, or the obligations of the Company
and the Parent thereunder, and all terms, conditions and other provisions of the
Note Purchase Agreement, the Notes and the Related Documents shall remain in
full force and effect except to the extent specifically waived or amended
pursuant to the provisions of this Amendment. If any representation or warranty
in this Amendment shall fail to be true and correct in any material respect,
such failure and any failure to fully satisfy any other term or condition of
this Amendment shall automatically, and without the requirement of any notice to
the Company or the Parent, constitute an Event of Default under the Note
Purchase Agreement.
5. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which taken
together shall be deemed to constitute one and the same instrument.
6. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
[The remainder of this page has been intentionally left blank.]
<PAGE> 6
Amendment No. 2 to
Note Purchase Agreement, among
Renaissance Cosmetics, Inc.,
Cosmar Corporation and
Nomura Holding America Inc.
As of September 8, 1995
Page 6
If the foregoing is acceptable, please sign and return a copy of this
Amendment to indicate your agreement to the terms hereof.
Very truly yours,
COSMAR CORPORATION
By: /s/
----------------------------------
Title: Group Vice President - Finance
RENAISSANCE COSMETICS, INC.
By: /s/
----------------------------------
Title: Group Vice President - Finance
Accepted and Agreed as
of date first above written
NOMURA HOLDING AMERICA INC.,
Individually and as Collateral Agent
By:
---------------------------------
Title: Attorney-in-Fact
<PAGE> 7
Amendment No. 2 to
Note Purchase Agreement, among
Renaissance Cosmetics, Inc.,
Cosmar Corporation and
Nomura Holding America Inc.
As of September 8, 1995
Page 7
ACKNOWLEDGEMENT AND AGREEMENT
The terms and provisions of the foregoing Amendment No. 2 to
Note Purchase Agreement, dated as of September 8, 1995 (the "Second Amendment"),
to the Note Purchase Agreement, dated as of December 21, 1994, as amended by
Amendment No. 1 and Waiver to Note Purchase Agreement, dated as of April 7, 1995
(as so amended, the "Note Purchase Agreement"), each among Cosmar Corporation, a
Delaware corporation (the "Company"), Renaissance Cosmetics, Inc., a Delaware
corporation (the "Parent"), and Nomura Holding America Inc., a Delaware
corporation (together with its successors and assigns, collectively, the
"Purchaser"), and the transactions contemplated by the Note Purchase Agreement
as amended by the Second Amendment, are hereby severally and not jointly
acknowledged and agreed to by each of the undersigned Subsidiaries of the
Company, and each hereby severally and not jointly confirms its respective
Subsidiary Guarantee with respect to the Obligations under, and as the foregoing
capitalized terms are defined in, the Note Purchase Agreement, as so amended.
This Acknowledgement and Agreement may be executed by each
Subsidiary of the Company in any number of counterparts, each of which shall be
deemed an original, and all of which taken together shall be deemed to
constitute one and the same instrument.
[The remainder of this page intentionally left blank.]
<PAGE> 8
Amendment No. 2 to
Note Purchase Agreement, among
Renaissance Cosmetics, Inc.,
Cosmar Corporation and
Nomura Holding America Inc.
As of September 8, 1995
Page 8
IN WITNESS WHEREOF, each of the undersigned has caused this
Acknowledgement and Agreement to be executed and delivered by its respective
duly authorized officer as of the date first above written.
PARFUMS PARQUET INCORPORATED
HOUBIGANT (1995) LIMITED/
HOUBIGANT (1995) LIMITEE
NEW DANA ACQUISITION CORP.
LES PARFUMS DE DANA, INC.
DANA PERFUMES CORP.
ROSLYN IMPORTERS INC.
DANA S.A.
PERFUMES DANA S.A.I.C.
FINANCIERA DE PERFUMERIA S.A.
DANA PERFUMES (CANADA) LTD.
ESTALVI S.A.
MARCAFIN S.A.
C.O.M.I.N.S.A.
PERFUMES AND COSMETICS IMPORTERS, INC.
PARFUMS DANA EXPORT CORP.
By /s/
----------------------------
Title:
(of each party hereto)
<PAGE> 1
EXHIBIT 10.71
COSMAR CORPORATION
RENAISSANCE COSMETICS, INC.
7432 PRINCE DRIVE
HUNTINGTON BEACH, CALIFORNIA 92647
As of January 8, 1996
Nomura Holding America Inc.,
Individually and as Collateral Agent
2 World Financial Center, Building B
New York, New York 10281-1198
Re: Amendment No. 3 and Consent to Note Purchase Agreement
Ladies and Gentlemen:
Reference is hereby made to the Note Purchase Agreement, dated as of
December 21, 1994, as amended by Amendment No. 1 and Waiver to Note Purchase
Agreement, dated as of April 7, 1995, and Amendment No. 2 to Note Purchase
Agreement, dated as of September 8, 1995 (as so amended, the "Note Purchase
Agreement"), each among Cosmar Corporation, a Delaware corporation (the
"Company"), Renaissance Cosmetics, Inc., a Delaware corporation (the "Parent"),
and Nomura Holding America Inc. (together with its successors and assigns, the
"Purchaser"). All capitalized terms used in this amendment and consent letter
(this "Amendment") and not otherwise defined herein shall have the meanings
ascribed thereto in the Note Purchase Agreement.
Pursuant to Section 10.18 of the Note Purchase Agreement, the Company
and the Parent have requested that the Purchaser consent to the amendment of the
Subordinated Seller Notes in the manner contemplated by the letter agreement,
dated December 21, 1995, to be entered into between the Parent and Triumph
Connecticut Limited Partnership in the form attached hereto (the "Permitted
Amendment"), and the Purchaser has indicated it is willing to do so on the terms
and conditions hereof.
Accordingly, the Company, the Parent and, by your acceptance hereof,
the Purchaser and the Collateral Agent, hereby agree as follows:
1. Consent. Effective on and as of the Effective Date referred to
below, the Purchaser consents to the amendment of the Subordinated Seller Notes
solely in the manner contemplated by the Permitted Amendment.
2. Amendment Effective on and as of the Effective Date referred to
below, Section 11.1(b) of the Note Purchase Agreement is amended by deleting the
<PAGE> 2
Amendment No. 3 and Consent to
Note Purchase Agreement, among
Renaissance Cosmetics, Inc.,
Cosmar Corporation and
Nomura Holding America Inc.
As of January 8, 1996
Page 2
words "five days" from the last line of said subsection (b) and inserting the
words "two Business Days" in lieu thereof.
3. Conditions to Effectiveness. This Amendment shall become effective
on the date (the "Effective Date") on which the Purchaser has received all of
the following documents:
(a) a counterpart of this Amendment, duly executed and
delivered by the Parent and the Company; and
(b) the acknowledgement and agreement attached to this
Amendment, duly executed and delivered by each Subsidiary of the
Company which has entered into a Subsidiary Guarantee.
4. Representations and Warranties; No Default or Event of Default. Each
of the Company and the Parent hereby represents, warrants, covenants and agrees
as follows on and as of the Effective Date:
(a) the representations and warranties contained in Section
4.1 through 4.35, inclusive and elsewhere in the Note Purchase
Agreement, and the representations and warranties contained in the
Related Documents shall be true and correct on and as of the Effective
Date with the same effect as if such representations and warranties had
been made on and as of the Effective Date, except that any such
representation or warranty which is expressly made only as of a
specified date need be true only as of such date; and
(b) no Default or Event of Default shall have occurred and be
continuing.
5. Effect of Amendment. It is hereby agreed that, except as
specifically provided herein, this Amendment does not in any way amend, modify,
affect or impair the terms, conditions and other provisions of the Note Purchase
Agreement, the Notes or the Related Documents, or the obligations of the Company
and the Parent thereunder, and all terms, conditions and other provisions of the
Note Purchase Agreement, the Notes and the Related Documents shall remain in
full force and effect
<PAGE> 3
Amendment No. 3 and Consent to
Note Purchase Agreement, among
Renaissance Cosmetics, Inc.,
Cosmar Corporation and
Nomura Holding America Inc.
As of January 8, 1996
Page 3
except to the extent specifically amended or otherwise specifically modified
pursuant to the provisions of this Amendment. If any representation or warranty
in this Amendment shall fail to be true and correct in any material respect,
such failure and any failure to fully satisfy any other term or condition of
this Amendment shall automatically, and without the requirement of any notice to
the Company or the Parent, constitute an Event of Default under the Note
Purchase Agreement.
6. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which taken
together shall be deemed to constitute one and the same instrument.
7. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
[The remainder of this page has been intentionally left blank.]
<PAGE> 4
Amendment No. 3 and Consent to
Note Purchase Agreement, among
Renaissance Cosmetics, Inc.,
Cosmar Corporation and
Nomura Holding America Inc.
As of January 8, 1996
Page 4
If the foregoing is acceptable, please sign and return a copy of this
Amendment to indicate your agreement to the terms hereof.
Very truly yours,
COSMAR CORPORATION
By: /s/
-------------------------------------
Title: V.P.
RENAISSANCE COSMETICS, INC.
By: /s/
-------------------------------------
Title: C.F.O.
Accepted and Agreed as
of date first above written
NOMURA HOLDING AMERICA INC.,
Individually and as Collateral Agent
By: /s/
-----------------------------------
Title: Attorney-in-Fact
<PAGE> 5
<PAGE> 6
Amendment No. 3 and Consent to
Note Purchase Agreement, among
Renaissance Cosmetics, Inc.,
Cosmar Corporation and
Nomura Holding America Inc.
As of January 8, 1996
Page 5
ACKNOWLEDGEMENT AND AGREEMENT
The terms and provisions of the foregoing Amendment No. 3 and Consent
to Note Purchase Agreement, dated as of January 8, 1996 (the "Third Amendment"),
to the Note Purchase Agreement, dated as of December 21, 1994, as amended by
Amendment No. 1 and Waiver to Note Purchase Agreement, dated as of April 7,
1995, and Amendment No. 2 to Note Purchase Agreement, dated as of September 8,
1995 (as so amended, the "Note Purchase Agreement"), each among Cosmar
Corporation, a Delaware corporation (the "Company"), Renaissance Cosmetics,
Inc., a Delaware corporation (the "Parent"), and Nomura Holding America Inc., a
Delaware corporation (together with its successors and assigns, collectively,
the "Purchaser"), and the transactions contemplated by the Note Purchase
Agreement as amended by the Third Amendment, are hereby severally and not
jointly acknowledged and agreed to by each of the undersigned Subsidiaries of
the Company, and each hereby severally and not jointly confirms its respective
Subsidiary Guarantee with respect to the Obligations under, and as the foregoing
capitalized terms are defined in, the Note Purchase Agreement, as so amended.
This Acknowledgement and Agreement may be executed by each Subsidiary
of the Company in any number of counterparts, each of which shall be deemed an
original, and all of which taken together shall be deemed to constitute one and
the same instrument.
[The remainder of this page intentionally left blank.]
<PAGE> 7
Amendment No. 3 and Consent to
Note Purchase Agreement, among
Renaissance Cosmetics, Inc.,
Cosmar Corporation and
Nomura Holding America Inc.
As of January 8, 1996
Page 6
IN WITNESS WHEREOF, each of the undersigned has caused this
Acknowledgement and Agreement to be executed and delivered by its respective
duly authorized officer as of the date first above written.
PARFUMS PARQUET INCORPORATED
HOUBIGANT (1995) LIMITED/
HOUBIGANT (1995) LIMITEE
NEW DANA ACQUISITION CORP.
LES PARFUMS DE DANA, INC.
DANA PERFUMES CORP.
ROSLYN IMPORTERS INC.
DANA S.A.
PERFUMES DANA S.A.I.C.
FINANCIERA DE PERFUMERIA SA
DANA PERFUMES (CANADA) LTD.
ESTALVI S.A.
MARCAFIN S.A.
C.O.M.I.N.S.A.
PERFUMES AND COSMETICS IMPORTERS, INC.
PARFUMS DANA EXPORT CORP.
By /s/
------------------------------------
Title: V.P.
(of each party hereto)
<PAGE> 1
Exhibit 10.72
COSMAR CORPORATION
RENAISSANCE COSMETICS, INC.
635 Madison Avenue
New York, New York 10022
As of May 29, 1996
Nomura Holding America Inc.,
Individually and as Collateral Agent
2 World Financial Center, Building B
New York, New York 10281-1198
Re: Amendment No.4 and Waiver to Note Purchase Agreement
and Amendment No.2 to Security Documents
Ladies and Gentlemen:
Reference is hereby made to the Note Purchase Agreement, dated as of
December 21, 1994, as amended or otherwise modified by Waiver No. 1 to Note
Purchase Agreement, dated as of December 22, 1994, Waiver No. 2 to Note Purchase
Agreement, dated as of January 12, 1995, Waiver No. 3 to Note Purchase
Agreement, dated as of February 28, 1995, Waiver No. 4 to Note Purchase
Agreement, dated as of March 24, 1995, Amendment No. 1 and Waiver to Note
Purchase Agreement, dated as of April 7, 1995 ("Amendment No. 1"), Amendment No.
2 to Note Purchase Agreement, dated as of September 8, 1995, Waiver to Note
Purchase Agreement, dated as of September 18, 1995, Waiver to Note Purchase
Agreement, dated as of December 22, 1995, Amendment No. 3 and Consent to Note
Purchase Agreement, dated as of January 8, 1996, Limited Waiver to Note Purchase
Agreement, dated as of February 13, 1996 (as so amended, the "Note Purchase
Agreement"), each among Cosmar Corporation, a Delaware corporation (the
"Company"), Renaissance Cosmetics, Inc., a Delaware corporation (the "Parent"),
and Nomura Holding America Inc. (together with its successors and assigns, the
"Purchaser"). All capitalized terms used in this amendment and waiver letter
(this "Amendment") and not otherwise defined herein shall have the meanings
ascribed thereto in the Note Purchase Agreement.
A. Pursuant to a Plan and Agreement of Merger, dated as of March 25,
1996, and as permitted pursuant to Section 10.4 of the Note Purchase Agreement,
each of Parfums, LPD, DPC and RII have merged (the "Merger") with and into New
Dana, and New Dana has changed its name to "Dana Perfumes Corp.". In connection
with the Merger, effective as of March 29, 1996, Parfums has assigned all its
Intellectual Property to DPC pursuant to a Trademark Assignment dated March 29,
1996. The Company, the Parent and New Dana would like to amend certain of the
schedules to
<PAGE> 2
Amendment No. 4 and Waiver
to Note Purchase Agreement
Dated As of May 29, 1996
Page 2
the Note Purchase Agreement and the Security Documents to reflect the names or
their Subsidiaries, the record ownership of the Capital Stock of such
Subsidiaries and the respective places of business of such Subsidiaries after
giving effect to the Merger and the purchase of the Capital Stock of Dana Brazil
referred to below. The Company and the Parent have also requested a waiver of
any default under Section 10.17 that may have resulted from their failure to
give advance notice of such changes to the Purchaser.
B. New Dana has exercised the option under the Dana Brazil Option
Agreement and has purchased substantially all of the Capital Stock of Dana
Brazil. The Company and the Parent have requested a waiver of any default under
Section 10.4 of the Note Purchase Amendment that resulted from their failure to
obtain the Purchaser's prior consent to such purchase. The Company and the
Parent have also requested a waiver of the requirement under Section 9.5 of the
Note Purchase Agreement that Dana Brazil enter into mortgages in favor of the
Collateral Agent with respect to the real property now owned by Dana Brazil.
C. Pursuant to a Securities Purchase Agreement, dated as of May 29,
1996 (the "Securities Purchase Agreement"), among the Parent and CIBC WG Argosy
Merchant Fund 2, L.L.C. ("CIBC"), the Parent has authorized the issuance of up
to $20,000,000 aggregate liquidation value of its Senior Exchangeable Redeemable
Preferred Stock, Series A, $.01 par value ("Senior Exchangeable Preferred
Stock"). The Parent has requested a waiver of the requirements of Section 3.1(b)
of the Note Purchase Agreement that the Net Cash Proceeds from the sale by the
Parent of any of its Capital Stock be applied to prepay the Notes, in order to
permit the Parent to retain 100% of the Net Cash Proceeds from the sale of up to
$20,000,000 liquidation value of its Senior Exchangeable Preferred Stock to CIBC
pursuant to the Securities Purchase Agreement and to use such proceeds for
working capital purposes and to make a deposit or deposits of up to an aggregate
of $600,000 in connection with the acquisition (or attempted acquisition) of
Great American Cosmetics, Inc. (the "Great American Deposits"), and, at any time
after the Parent has sold an aggregate of $20,000,000 liquidation value of its
Senior Exchangeable Preferred Stock to CIBC pursuant to the Securities Purchase
Agreement, to make an additional deposit or deposits in connection with any
Pending Acquisition (as such term is defined in the Securities Purchase
Agreement) ("Additional Deposits").
D. The Company and the Parent have requested that the Purchaser amend
the provisions of Section 10.12 and Section 10.19 of the Note Purchase Agreement
in
<PAGE> 3
Amendment No. 4 and Waiver
to Note Purchase Agreement
Dated As of May 29, 1996
Page 3
certain respects as they relate to periods ending on March 31, 1996, and the
Purchaser has indicated it is willing to do so on the terms and conditions
hereof.
Accordingly, the Company, the Parent, and, by your acceptance hereof,
the Purchaser and the Collateral Agent, hereby agree as follows:
1. Amendments. Effective on and as of the Effective Date referred to
below, the definition of the terms "New ACB", "New Dana" and "Wholly-owned
Subsidiary" in the Note Purchase Agreement, Sections 10.12 and 10.19 of the Note
Purchase Agreement, the Schedules to the Note Purchase Agreement, the Company
Security Agreement (as amended by an Amendment, dated as of July 31, 1995), the
Intellectual Property Security Agreement and the U.S. Subsidiary Security
Agreement (as amended by an Amendment, dated as of July 31, 1995), between New
Dana and the Collateral Agent (the "New Dana U.S. Subsidiary Security
Agreement"), and Section 7.2 of the New Dana U.S. Subsidiary Security Agreement,
respectively, are amended as follows:
(a) Note Purchase Agreement.
(i) the definitions of the terms "New ACB" and "New
Dana" in Section 1.1 of the Note Purchase Agreement are deleted and replaced as
follows:
"New ACB" means Houbigant (1995) Limited/Houbigant
(1995) Limitee, a Canadian corporation formerly known
as 3088766 Canada Limited which is a direct
Wholly-owned Subsidiary of the Company.
"New Dana" means Dana Perfumes Corp., a Delaware
corporation and the surviving corporation in the
merger of each of Parfums, LPD, DPC and RII with and
into New Dana Acquisition Corp., a direct
Wholly-owned Subsidiary of the Company.";
(ii) the definition of the term "Wholly-owned
Subsidiary" in Section 1.1 of the Note Purchase Agreement is amended by adding
to the end of the clause, "other than director's qualifying shares," in the
third line of said definition the following language:
<PAGE> 4
Amendment No. 4 and Waiver
to Note Purchase Agreement
Dated As of May 29, 1996
Page 4
"or, in the case of any Foreign Subsidiary, shares
representing not more than 1% of the outstanding
Capital Stock of such Foreign Subsidiary which are
owned of record by an officer of the Parent, the
Company or such Foreign Subsidiary";
(iii) Section 10.12 of the Note Purchase Agreement is
amended by deleting the number "$500,000" from the parenthetical added to said
Section by Section 2(c) of Amendment No. 1 and substituting the number
"$600,000" in lieu thereof;
(iv) Section 10.19 of the Note Purchase Agreement is
amended as follows: (A) the ratio "1.50:1.00" appearing opposite the Fiscal
Quarter Ended March 31, 1996, in subsection (a) of said Section is deleted and
replaced by the ratio "1.15:1.00"; (B) the number "$26,000,000" appearing in
clause (i) of subsection (b) of said Section is deleted and replaced by the
number "$18,000,000"; (C) the ratio "4.00:1.00" appearing opposite the Fiscal
Quarter Ended March 31, 1996, in subsection (c) of said Section is deleted and
replaced by the ratio "7.25:1.00"; and (D) the amount "$16,000,000" appearing
opposite the Measuring Date March 31, 1996, in subsection (d) of said Section is
deleted and replaced by the amount "$15,500,000"; and
(v) Schedules 4.4 (Capital Stock), 4.6
(Subsidiaries), 4.29 (Places of Business), and 4.30 (Other Names) to the Note
Purchase Agreement are replaced in their entirety by the Note Purchase Agreement
Schedules 4.4, 4.6, 4.29 and 4.30 which are attached to this Amendment;
(b) Company Security Agreement. Schedule 2 (Pledged Stock) to
the Company Security Agreement is replaced in its entirety by the Company
Security Agreement Schedule 2 which is attached to this Amendment;
(c) Intellectual Property Security Agreement. Annex A
(Trademarks) to the Intellectual Property Security Agreement is replaced in its
entirety by the Intellectual Property Agreement Annex A which is attached to
this Amendment; and
<PAGE> 5
Amendment No. 4 and Waiver
to Note Purchase Agreement
Dated As of May 29, 1996
Page 5
(d) New Dana U.S. Subsidiary Security Agreement.
(i) Section 7.2 of the New Dana U.S. Subsidiary Security
Agreement is amended by adding the following new subsection (f) to the
end of said Section immediately following clause (e) of said Section
(added pursuant to the Amendment, dated as of July 31, 1995):
"(f) Brazilian Pledged Stock. Promptly upon becoming
entitled to receive the Pledged Stock of any Issuer organized
under the laws of Brazil (each a "Brazilian Issuer"), the
Subsidiary shall execute and deliver a pledge agreement in
favor of the Collateral Agent in substantially the form of
Annex III hereto (a "Brazilian Pledge Agreement") and shall
promptly comply with each term and condition of such Brazilian
Pledge Agreement, including, without limitation, to promptly
register a copy thereof at the Registry of Commercial
Companies of the Brazilian State of incorporation of such
Brazilian Issuer.";
(ii) the New Dana U.S. Subsidiary Security Agreement is
amended by adding the form of Brazilian Pledge Agreement attached
hereto as Annex III thereto; and
(iii) Schedule 2 (Pledged Stock) to the New Dana U.S.
Subsidiary Security Agreement is deleted and replaced in its entirety
by the U.S. Subsidiary Security Agreement Schedule 2 which is attached
to this Amendment.
2. Waiver. Effective on and as of the Effective Date referred to below,
the Purchaser waives
(a) the requirements under Section 3.1(b) of the Note Purchase
Agreement solely to permit the Parent to retain 100% of the Net Cash
Proceed from the sale of $20,000,000 liquidation value of its Senior
Exchangeable Preferred Stock (and any Senior Exchangeable Preferred
Stock issuable as a dividend on such Senior Exchangeable Preferred
Stock) to CIBC pursuant to the Securities Purchase Agreement (the
"Preferred Stock Sale"); provided that on any date on which any of such
Net Cash Proceeds are received by the Parent, the Parent shall promptly
contribute such Net Cash Proceeds to the
<PAGE> 6
Amendment No. 4 and Waiver
to Note Purchase Agreement
Dated As of May 29, 1996
Page 6
Company to be used by the Company for working capital or other purposes
permitted by the Note Purchase Agreement, including, without limitation, to
prepay outstanding amounts under the Revolving Notes and to make the Great
American Deposits and the Additional Deposits permitted hereunder (and the
requirements under Section 9.10 or such other applicable provision of the Note
Purchase Agreement, if any, which might prohibit the Parent from issuing and
selling the Senior Exchangeable Preferred Stock to CIBC pursuant to the
Securities Purchase Agreement and retaining the proceeds thereof for the uses
permitted hereunder solely to permit such issuances, sales and such uses of
those proceeds; provided however, that nothing herein shall waive any
restriction on the ability of the Parent and its Subsidiaries to make any
Restricted Payment under Section 10.7 of the Note Purchase Agreement, any
restriction contained in Section 10.8 of the Note Purchase Agreement, any
restriction on the ability of the Parent and its Subsidiaries to enter into any
of the Exchange Documents under Section 10.1 of the Note Agreement, or, except
as specifically provided herein with respect to such issuances, sales and such
uses of those proceeds, any other restriction contained in the Note Purchase
Agreement on the ability of the Parent and its Subsidiaries to exercise any
rights with respect to the Senior Exchangeable Preferred Stock so issued);
(b) any Default or Event of Default that resulted
(i) under Section 7(i) or Section 10.4 of the Note Purchase
Agreement, solely from the Company's and the Parent's failure to obtain
the prior consent of the Purchaser to the purchase of the Capital Stock
of Dana Brazil,
(ii) under Section 7(i) or Section 10.17 of the Note Purchase
Agreement, solely as a result of the Company's and the Parent's failure
to give the Purchaser prior notice pursuant to said Section 10.17 of the
matters more particularly set forth in the revised Schedules to the Note
Purchase Agreement and the Security Documents which are attached to this
Amendment, and
(iii) under Section 7(i), Section 10.12 or Section 10.19 of
the Note Purchase Agreement, solely as a result of the amendments
addressed
<PAGE> 7
Amendment No. 4 and Waiver
to Note Purchase Agreement
Dated As of May 29, 1996
Page 7
in Section 1(a)(iii) and (iv) of this Amendment not having
been effective prior to the Effective Date;
(c) the requirements under Sections 9.5 and 9.6 of the Note
Purchase Agreement, solely as they relate to the obligation of Dana
Brazil to mortgage to the Collateral Agent any real property now owned
by Dana Brazil and, until June 21, 1996, as such requirements relate to
the delivery of the documents more particularly identified in Section 3
hereof; and
(d) the requirements of Section 10.7 of the Note Purchase
Agreement (and any other applicable provision of the Note Purchase
Agreement), solely to permit the Company (i) to make Great American
Deposits up to an aggregate of not more than $600,000 of such deposits,
and (ii) at any time after the Parent has sold an aggregate of
$20,000,000 liquidation value of its Senior Exchangeable Preferred
Stock to CIBC pursuant to the Securities Purchase Agreement (without
giving effect to the liquidation value of any Senior Exchangeable
Preferred Stock issued as a dividend on any such Senior Exchangeable
Preferred Stock), to make Additional Deposits; provided however, after
giving effect to any Great American Deposit or Additional Deposit the
aggregate amount of all such deposits shall not exceed $2,000,000; and
provided further, that nothing in this Section 2(d) shall waive any
requirement under Section 10.4 of the Note Purchase Agreement with
respect to any Pending Acquisition (other than that the Company may
make the deposits with respect thereto permitted hereunder).
3. Subsidiary Guarantee, etc. On or before June 21, 1996, the Company
shall, or shall cause its Subsidiaries, to deliver to the Purchaser each of the
following documents, each in form and substance satisfactory to the Purchaser:
(a) a Subsidiary Guarantee, duly executed and delivered by
Dana Brazil;
(b) a Subsidiary Security Agreement, duly executed and
delivered by Dana Brazil;
(c) a Commitment to Provide a Mortgage Guarantee, duly
executed by the Company and Dana Brazil;
<PAGE> 8
Amendment No. 4 and Waiver
to Note Purchase Agreement
Dated As of May 29, 1996
Page 8
(d) a Brazilian Pledge Agreement in substantially the form of
Annex III to the New Dana U.S. Subsidiary Security Agreement, duly
executed by New Dana;
(e) evidence that the pledge of the Capital Stock of Dana
Argentina has been perfected in the manner set forth in Section 7.2(b)
of the New Dana U.S. Subsidiary Security Agreement;
(f) the certificate(s) representing the outstanding Capital
Stock of Dana Brazil, together with powers of attorney duly executed by
New Dana and the officer of the Parent designated to be the holder of
record of one share of such Capital Stock, respectively; and
(g) a satisfactory opinion of the Company's local counsel in
Brazil addressing those matters set forth in Exhibit F-5 to the Note
Purchase Agreement.
4. Conditions to Effectiveness. This Amendment shall become effective
on the date (the "Effective Date") on which the Purchaser has received all of
the following documents:
(a) a counterpart of this Amendment, duly executed and
delivered by the Parent and the Company;
(b) the acknowledgement and agreement attached to this
Amendment, duly executed and delivered by each Subsidiary of the Company
which has entered into a Subsidiary Guarantee;
(c) such form UCC-3 amendments and form UCC-1 financing
statements as the Collateral Agent may request;
(d) an Assignment for Security in the form of Appendix I to
the Intellectual Property Security Agreement, duly executed and
delivered by New Dana; and
(e) a certificate from an Authorized Officer of the Company
dated the Effective Date, certifying as to the matters set forth in
Section 5 of this Amendment.
<PAGE> 9
Amendment No. 4 and Waiver
to Note Purchase Agreement
Dated As of May 29, 1996
Page 9
5. Representations and Warranties: No Default or Event of Default. Each
of the Company and the Parent hereby represents, warrants, covenants and agrees
as follows, on and as of the Effective Date after giving effect to this
Amendment:
(a) the representations and warranties contained in Section
4.1 through 4.35; inclusive and elsewhere in the Note Purchase
Agreement, and the representations and warranties contained in the
Related Documents shall be true and correct on and as of the Effective
Date with the same effect as if such representations and warranties had
been made on and as of the Effective Date, except that any such
representation or warranty which is expressly made only as of a
specified date need be true only as of such date; and
(b) no Default or Event of Default shall have occurred and be
continuing.
6. Effect of Amendment. It is hereby agreed that, except as
specifically provided herein, this Amendment does not in any way amend, modify,
affect or impair the terms, conditions and other provisions of the Note Purchase
Agreement, the Notes or the Related Documents, or the obligations of the
Company, the Parent or New Dana thereunder, and all terms, conditions and other
provisions of the Note Purchase Agreement, the Notes and the Related Documents
shall remain in full force and effect except to the extent specifically amended
or otherwise specifically modified pursuant to the provisions of this Amendment.
If any representation or warranty in this Amendment shall fail to be true and
correct in any material respect, such failure and any failure to fully satisfy
any other term or condition of this Amendment shall automatically, and without
the requirement of any notice to the Company or the Parent, constitute an Event
of Default under the Note Purchase Agreement.
7. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which taken
together shall be deemed to constitute one and the same instrument.
8. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
[The remainder of this page has been intentionally left blank.]
<PAGE> 10
Amendment No. 4 and Waiver
to Note Purchase Agreement
Dated As of May 29, 1996
Page 10
If the foregoing is acceptable, please sign and return a copy of this
Amendment to indicate your agreement to the terms hereof.
Very truly yours,
COSMAR CORPORATION
By: /s/ John R. Jackson
-----------------------------
Title: VP
RENAISSANCE COSMETICS, INC.
By: /s/ John R. Jackson
-----------------------------
Title: VP
Accepted and Agreed as
of date first above written
NOMURA HOLDING AMERICA INC.,
Individually and as Collateral Agent
By: /s/ Howard Gellis
----------------------------------
Title: Attorney-in-Fact
<PAGE> 11
Amendment No. 4 and Waiver
to Note Purchase Agreement
Dated As of May 29, 1996
Page 11
ACKNOWLEDGEMENT AND AGREEMENT
The terms and provisions of the foregoing Amendment No. 4 and Waiver to
Note Purchase Agreement and Amendment No. 2 to Security Documents, dated as of
May 29, 1996 (the "Fourth Amendment"), with respect to the Note Purchase
Agreement, dated as of December 21, 1994, as amended or otherwise modified by
Waiver No. 1 to Note Purchase Agreement, dated as of December 22, 1994, Waiver
No. 2 to Note Purchase Agreement, dated as of January 12, 1995, Waiver No. 3 to
Note Purchase Agreement, dated as of February 28, 1995, Waiver No. 4 to Note
Purchase Agreement, dated as of March 24, 1995, Amendment No. 1 and Waiver to
Note Purchase Agreement, dated as of April 7, 1995, Amendment No. 2 to Note
Purchase Agreement, dated as of September 8, 1995, Waiver to Note Purchase
Agreement, dated as of September 18, 1995, Waiver to Note Purchase Agreement,
dated as of December 22, 1995, Amendment No. 3, Waiver and Consent to Note
Purchase Agreement, Limited Waiver to Note Purchase Agreement, dated as of
February 13, 1996 (as so amended, the "Note Purchase Agreement"), each among
Cosmar Corporation, a Delaware corporation (the "Company"), Renaissance
Cosmetics, Inc., a Delaware corporation (the "Parent"), and Nomura Holding
America Inc., a Delaware corporation (together with its successors and assigns,
collectively, the "Purchaser"), and the Security Documents referred to in the
Note Purchase Agreement, and the transactions contemplated by the Note Purchase
Agreement and the Security Documents as amended by the Fourth Amendment, are
hereby severally and not jointly acknowledged and agreed to by each of the
undersigned Subsidiaries of the Company, and each hereby severally and not
jointly confirms its respective Subsidiary Guarantee with respect to the
Obligations under, and as the foregoing capitalized terms are defined in, the
Note Purchase Agreement, as so amended, and New Dana hereby confirms its
agreement to the amendment of the U.S Subsidiary Security Agreement to which it
is a party in the manner provided in Section 1(d) of the Fourth Amendment.
This Acknowledgement and Agreement may be executed by each Subsidiary
of the Company in any number of counterparts, each of which shall be deemed an
original, and all of which taken together shall be deemed to constitute one and
the same instrument.
[The remainder of this page intentionally left blank.]
<PAGE> 12
Amendment No. 4 and Waiver
to Note Purchase Agreement
Dated As of May 29, 1996
Page 12
IN WITNESS WHEREOF, each of the undersigned has caused this
Acknowledgement and Agreement to be executed and delivered by its respective
duly authorized officer as of the date first above written.
DANA PERFUMES CORP.
HOUBIGANT (1995) LIMITED/
HOUBIGANT (1995) LIMITEE
DANA PERFUMES (CANADA) LTD.
DANA S.A.
PERFUMES DANA S.A.I.C.
FINANCIERA DE PERFUMERIA S.A.
ESTALVI S.A.
MARCAFIN S.A.
C.O.M.I.N.S.A.
PERFUMES AND COSMETICS IMPORTERS, INC.
PARFUMS DANA EXPORT CORP.
RSH 149, S.A.R.L.
PERFUMES DANA DO BRASIL, S.A.
By /s/ John R. Jackson
---------------------------
Title: VP
(of each party hereto)
<PAGE> 1
Exhibit 10.73
COSMAR CORPORATION
RENAISSANCE COSMETICS, INC.
635 MADISON AVENUE
NEW YORK, NEW YORK 10022
As of June 14, 1996
Nomura Holding America Inc.,
Individually and as Collateral Agent
2 World Financial Center, Building B
New York, New York 10281-1198
Re: Amendment No. 5 to Note Purchase Agreement
Ladies and Gentlemen:
Reference is hereby made to the Note Purchase Agreement, dated as
of December 21, 1994, as amended or otherwise modified by Waiver No. 1 to Note
Purchase Agreement, dated as of December 22, 1994, Waiver No. 2 to Note Purchase
Agreement, dated as of January 12, 1995, Waiver No. 3 to Note Purchase
Agreement, dated as of February 28, 1995, Waiver No. 4 to Note Purchase
Agreement, dated as of March 24, 1995, Amendment No. 1 and Waiver to Note
Purchase Agreement, dated as of April 7, 1995, Amendment No. 2 to Note Purchase
Agreement, dated as of September 8, 1995, Waiver to Note Purchase Agreement,
dated as of September 18, 1995, Waiver to Note Purchase Agreement, dated as of
December 22, 1995, Amendment No. 3 and Consent to Note Purchase Agreement,
dated as of January 8, 1996, Limited Waiver to Note Purchase Agreement, dated
as of February 13, 1996, and Amendment No. 4 and Waiver to Note Purchase
Agreement and Amendment No. 2 to Security Documents, dated as of May 29, 1996
(as so amended, the "Note Purchase Agreement"), each among Cosmar Corporation,
a Delaware corporation (the "Company"), Renaissance Cosmetics, Inc., a Delaware
corporation (the "Parent"), and Nomura Holding America Inc. (together with its
successors and assigns, the "Purchaser"). All capitalized terms used in this
amendment letter (this "Amendment") and not otherwise defined herein shall have
the meanings ascribed thereto in the Note Purchase Agreement.
The Company and the Parent have requested that the Purchaser increase
the Maximum Revolving Amount to $40,000,000, and amend certain of the financial
covenants in the Note Purchase Agreement, and the Purchaser has indicated it is
willing to do so on the terms and conditions hereof.
Accordingly, the Company, the Parent and, by your acceptance hereof,
the Purchaser and the Collateral Agent, hereby agree as follows:
<PAGE> 2
Amendment No. 5 to
Note Purchase Agreement
Dated As of June 14, 1996
Page 2
1. Amendments. Effective on and as of the Effective Date referred to below,
the Note Purchase Agreement is amended as follows:
(a) the first Recital to the Note Purchase Agreement is amended by
adding the following parenthetical immediately after the number
"$30,000,000" in the third line of said Recital: "(or, at any time,
following the Commitment Increase Date, $40,000,000)";
(b) the following new definition for the term "Commitment Increase
Date" shall be added to Section 1.1 of the Note Purchase Agreement in the
appropriate alphabetical order:
"Commitment Increase Date" means the date on which the
Parent shall have issued and sold $20,000,000 aggregate
liquidation value of its Senior Exchangeable Redeemable Preferred
Stock (without giving effect to the liquidation value of any
Senior Exchangeable Redeemable Preferred Stock issued as a
dividend on any such Senior Exchangeable Redeemable Preferred
Stock) to CIBC pursuant to the Securities Purchase Agreement (as
such capitalized terms are defined in Amendment No. 4 and Waiver
to Note Purchase Agreement and Amendment No. 2 to Security
Documents, dated as of May 29, 1996, among the Company, the
Parent, the Purchaser and the Collateral Agent).";
(c) the definition of the term "Maximum Revolving Amount" in Section
1.1 of the Note Purchase Agreement is amended by adding the following
parenthetical immediately after the number "$30,000,000" in the second line
of said definition: "(or, at any time following the Commitment Increase
Date, $40,000,000)";
(d) Section 2.1 of the Note Purchase Agreement is amended by adding
the following parenthetical immediately after the number "$30,000,000" in
the second line of subsection (i) of said Section: "(or, at any time
following the Commitment Increase Date, $40,000,000)";
<PAGE> 3
Amendment No. 5 to
Note Purchase Agreement
Dated As of June 14, 1996
Page 3
(e) Section 2.2 of the Note Purchase Agreement is amended by deleting
the first proviso in the fifth sentence of said Section and inserting the
following proviso in lieu thereof:
"provided, however, that in lieu of the execution and delivery
of Revolving Notes by the Company at the time of each such sale,
at the election of the Purchaser, the Company shall execute and
deliver to the Purchaser (against return by the Purchaser of all
the Revolving Notes previously issued to it by the Company, each
marked "cancelled"), a single Revolving Note registered in the
name of the Purchaser or its nominee, dated as of the Closing
Date and in the principal amount of $40,000,000, which Revolving
Note shall evidence the principal amount of Revolving Notes
initially sold on the Closing Date and the principal amount of
all Revolving Notes subsequently sold hereunder (together with
interest, fees and all other amounts accrued and unpaid in
respect of such aggregate outstanding principal balance), in such
event the date and amount of each sale of principal amount of
Revolving Notes to the Purchaser by the Company, as well as each
payment or prepayment made on account of the principal thereof,
and in each case the resulting aggregate unpaid principal balance
thereof, shall be noted by the Purchaser on the schedule attached
to such Revolving Note or any extension thereof,";
(f) Section 2.6 of the Note Purchase Agreement is amended by deleting
the amount "$1,400,000" from the last line of subsection (b) of said
Section and inserting the amount "$1,600,000" in lieu thereof; and
(g) Section 10.19 of the Note Purchase Agreement is amended as
follows: (i) the ratio "1.40:1.00" appearing opposite the Fiscal Quarter
Ended June 30, 1996, in subsection (a) of said Section is deleted and
replaced by the ratio "1.15:1.00"; (ii) the ratio "1.35:1.00" appearing
opposite the Fiscal Quarter Ended September 30, 1996, in subsection (a) of
said Section is deleted and replaced by the ratio "1.15:1.00"; (iii) the
amount "$17,000,000" appearing opposite the Measuring Date June 30, 1996,
in subsection (d) of said Section is deleted and replaced by the amount
"$13,500,000"; (iv) the amount "$18,500,000" appearing opposite the
Measuring Date September 30, 1996, in subsection (d) of said Section is
deleted and replaced by the amount
<PAGE> 4
Amendment No. 5 to
Note Purchase Agreement
Dated As of June 14, 1996
Page 4
"$14,000,000"; (v) the ratio "1.15:1.00" appearing opposite the
Measuring Date June 30, 1996, in subsection (e) of said Section is
deleted and replaced by the ratio "0.8:1.00"; (vi) the ratio "1.20:1.00"
appearing opposite the Measuring Date September 30, 1996, in subsection
(e) of said Section is deleted and replaced by the ratio "0.8:1.00";
(vii) the ratio "3.00:1.00" appearing opposite the Measuring Date June
30, 1996, in subsection (f) of said Section is deleted and replaced by
the ratio "1.85:1.00"; and (viii) the ratio "3.25:1.00" appearing
opposite the Measuring Date September 30, 1996, in subsection (f) of
said Section is deleted and replaced by the ratio "1.85:1.00".
2. Conditions to Effectiveness. This Amendment shall become effective
on the date (the "Effective Date") on which the Purchaser has received all of
the following documents:
(a) a counterpart of this Amendment, duly executed and delivered by
the Parent and the Company;
(b) the acknowledgement and agreement attached to this Amendment,
duly executed and delivered by each Subsidiary of the Company which has
entered into a Subsidiary Guarantee;
(c) if the Purchaser has made the election contemplated by the first
proviso of the fourth sentence of Section 2.2 of the Note Purchase
Agreement, as amended by this Amendment, the Revolving Note contemplated
thereby, duly executed and delivered by the Company (against return of
the Purchaser's existing Revolving Notes, each marked "cancelled");
(d) a copy of the resolutions of the Board of Directors of the
Company authorizing the execution and delivery of this Amendment and the
performance of the Note Purchase Agreement as amended hereby, duly
certified by the Secretary of the Company;
(e) payment of a fee in the aggregate amount of $400,000 (which the
parties hereto agree shall be deemed to have been paid pursuant to
Section 2.6(b) of the Note Purchase Agreement for purposes of the last
sentence of said Section); and
<PAGE> 5
Amendment No. 5 to
Note Purchase Agreement
Dated As of June 14, 1996
Page 5
(f) a certificate from an Authorized Officer of the Company
dated the Effective Date, certifying as to the matters set forth in
Section 3 of this Amendment.
3. Representations and Warranties; No Default or Event of Default.
Each of the Company and the Parent hereby represents, warrants, covenants and
agrees as follows, on and as of the Effective Date after giving effect to this
Amendment:
(a) the representations and warranties contained in Section 4.1
through 4.35, inclusive and elsewhere in the Note Purchase Agreement,
and the representations and warranties contained in the Related
Documents shall be true and correct on and as of the Effective Date with
the same effect as if such representations and warranties had been made
on and as of the Effective Date, except that any such representation or
warranty which is expressly made only as of a specified date need be
true only as of such date; and
(b) no Default or Event of Default shall have occurred and be
continuing.
4. Effect of Amendment. It is hereby agreed that, except as
specifically provided herein, this Amendment does not in any way amend, modify,
affect or impair the terms, conditions and other provisions of the Note
Purchase Agreement, the Notes or the Related Documents, or the obligations of
the Company or the Parent thereunder, and all terms, conditions and other
provisions of the Note Purchase Agreement, the Notes and the Related Documents
shall remain in full force and effect except to the extent specifically amended
or otherwise specifically modified pursuant to the provisions of this
Amendment. If any representation or warranty in this Amendment shall fail to be
true and correct in any material respect, such failure and any failure to fully
satisfy any other term or condition of this Amendment shall automatically, and
without the requirement of any notice to the Company or the Parent, constitute
an Event of Default under the Note Purchase Agreement.
5. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which taken
together shall be deemed to constitute one and the same instrument.
6. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 6
Amendment No. 5 to
Note Purchase Agreement
Dated As of June 14, 1996
Page 6
If the foregoing is acceptable, please sign and return a copy of this
Amendment to indicate your agreement to the terms hereof.
Very truly yours,
COSMAR CORPORATION
By: /s/ [illegible signature]
-------------------------------------
Title:
RENAISSANCE COSMETICS, INC.
By: /s/ [illegible signature]
-------------------------------------
Title:
Accepted and Agreed as
of date first above written
NOMURA HOLDING AMERICA, INC.,
Individually and as Collateral Agent
By: /s/ Howard Gellis
--------------------------------
Title: Attorney-in-Fact
<PAGE> 7
Amendment No. 5 to
Note Purchase Agreement
Dated As of June 14, 1996
Page 7
ACKNOWLEDGEMENT AND AGREEMENT
The terms and provisions of the foregoing Amendment No. 5 to Note Purchase
Agreement, dated as of June __, 1996 (the "Fifth Amendment"), with respect to
the Note Purchase Agreement, dated as of December 21, 1994, as amended or
otherwise modified by Waiver No. 1 to Note Purchase Agreement, dated as of
December 22, 1994, Waiver No. 2 to Note Purchase Agreement, dated as of January
12, 1995, Waiver No. 3 to Note Purchase Agreement, dated as of February 28,
1995, Waiver No. 4 to Note Purchase Agreement, dated as of March 24, 1995,
Amendment No. 1 and Waiver to Note Purchase Agreement, dated as of April 7,
1995, Amendment No. 2 to Note Purchase Agreement, dated as of September 8, 1995,
Waiver to Note Purchase Agreement, dated as of September 18, 1995, Waiver to
Note Purchase Agreement, dated as of December 22, 1995, Amendment No. 3, Waiver
and Consent to Note Purchase Agreement, Limited Waiver to Note Purchase
Agreement, dated as of February 13, 1996, and Amendment No. 4 and Waiver to Note
Purchase Agreement and Amendment No. 2 to Security Documents, dated as of May
29, 1996 (as so amended, the "Note Purchase Agreement"), each among Cosmar
Corporation, a Delaware corporation (the "Company"), Renaissance Cosmetics,
Inc., a Delaware corporation (the "Parent"), and Nomura Holding America Inc., a
Delaware corporation (together with its successors and assigns, collectively,
the "Purchaser"), and the transactions contemplated by the Note Purchase
Agreement as amended by the Fifth Amendment, are hereby severally and not
jointly acknowledged and agreed to by each of the undersigned Subsidiaries of
the Company, and each hereby severally and not jointly confirms its respective
Subsidiary Guarantee with respect to the Obligations under, and as the foregoing
capitalized terms are defined in, the Note Purchase Agreement, as so amended.
This Acknowledgement and Agreement may be executed by each Subsidiary of
the Company in any number of counterparts, each of which shall be deemed an
original, and all of which taken together shall be deemed to constitute one and
the same instrument.
[The remainder of this page intentionally left blank.]
<PAGE> 8
Amendment No. 5 to
Note Purchase Agreement
Dated As of June 14, 1996
Page 8
IN WITNESS WHEREOF, each of the undersigned has caused this
Acknowledgement and Agreement to be executed and delivered by its respective
duly authorized officer as of the date first above written.
DANA PERFUMES CORP.
HOUBIGANT (1995) LIMITED/
HOUBIGANT (1995) LIMITED
DANA PERFUMES (CANADA) LTD.
DANA S.A.
PERFUMES DANA S.A.I.C.
FINANCIERA DE PERFUMERIA S.A.
ESTALVI S.A.
MARCAFIN S.A.
C.O.M.I.N.S.A.
PERFUMES AND COSMETICS IMPORTERS, INC.
PARFUMS DANA EXPORT CORP.
RSH 149, S.A.R.L.
PERFUMES DANA DO BRASIL, S.A.
By /s/ [illegible signature]
-----------------------------------
Title:
(of each party hereto)
<PAGE> 1
Exhibit 10.74
COSMAR CORPORATION
RENAISSANCE COSMETICS, INC.
635 Madison Avenue
New York, New York 10022
As of August 8, 1996
Nomura Holding America Inc.,
Individually and as Collateral Agent
2 World Financial Center, Building B
New York, New York 10281-1198
Re: Waiver to Note Purchase Agreement
Ladies and Gentlemen:
Reference is hereby made to the Note Purchase Agreement, dated as of
December 21, 1994, as amended or otherwise modified by Waiver No. 1 to Note
Purchase Agreement, dated as of December 22, 1994, Waiver No. 2 to Note Purchase
Agreement, dated as of January 12, 1995, Waiver No. 3 to Note Purchase
Agreement, dated as of February 28, 1995, Waiver No. 4 to Note Purchase
Agreement, dated as of March 24, 1995, Amendment No. 1 and Waiver to Note
Purchase Agreement, dated as of April 7, 1995, Amendment No. 2 to Note Purchase
Agreement, dated as of September 8, 1995, Waiver to Note Purchase Agreement,
dated as of September 18, 1995, Waiver to Note Purchase Agreement, dated as of
December 22, 1995, Amendment No. 3 and Consent to Note Purchase Agreement, dated
as of January 8, 1996, Limited Waiver to Note Purchase Agreement, dated as of
February 13, 1996, Amendment No. 4 and Waiver to Note Purchase Agreement and
Amendment No. 2 to Security Documents, dated as of May 29, 1996, and Amendment
No. 5 to Note Purchase Agreement, dated as of June 14, 1996 (as so amended, the
"Note Purchase Agreement"), each among Cosmar Corporation, a Delaware
corporation (the "Company"), Renaissance Cosmetics, Inc., a Delaware corporation
(the "Parent"), and Nomura Holding America Inc. (together with its successors
and assigns, the "Purchaser"). All capitalized terms used in this waiver letter
(this "Waiver") and not otherwise defined herein shall have the meanings
ascribed thereto in the Note Purchase Agreement.
A. Pursuant to a Securities Purchase Agreement, dated as of the date
hereof (the "Securities Purchase Agreement"), between the Parent and CIBC Wood
Gundy Securities Corp. ("CIBC"), the Parent has authorized the issuance and sale
to CIBC of up to $80,000,000 aggregate liquidation value of its 14.0% Senior
Redeemable
<PAGE> 2
Waiver to
Note Purchase Agreement
Dated As of August 8, 1996
Page 2
Preferred Stock, Series B, $.01 par value (together with any such preferred
stock issuable as a dividend thereon and any preferred stock having
substantially identical terms exchanged therefor in accordance with the terms of
the Registration Rights Agreement, to be dated as of August 15, 1996, between
the Parent and CIBC, as amended, modified or supplemented in accordance with its
terms, collectively, the "Initial Senior Preferred Stock, Series B"), and
Warrants to purchase up to an aggregate of 215,435 shares of Parent Common Stock
(the "New Common Stock Purchase Warrants") for 96.5% of the aggregate
liquidation value of such preferred stock, or $77,200,000 (the "Preferred Stock
Sale"). Pursuant to Section 5.6 of a Securities Purchase Agreement, dated as of
May 29, 1996, as amended (the "Prior Securities Purchase Agreement"), between
the Parent and CIBC WG Argosy Merchant Fund 2, L.L.C. (the "CIBC Affiliate"),
the Parent has authorized the issuance and sale to the CIBC Affiliate of 51,959
shares of Parent Common Stock for $5,000,000 (the "Common Stock Sale"). The
Parent and the Company have requested a waiver of the requirements of Section
3.1(b) of the Note Purchase Agreement (requiring that the Net Cash Proceeds from
the sale by the Parent of any of its Capital Stock be applied to prepay first
the Term Notes and then the Revolving Notes) in order to permit the Parent to
retain 100% of the Net Cash Proceeds from the Preferred Stock Sale and the
Common Stock Sale, and to use (i) up to $20,500,000 of such proceeds to redeem
all outstanding shares of the Parent's Senior Exchangeable Redeemable Preferred
Stock, Series A, $.01 par value, together with accrued dividends thereon (the
"Existing Exchangeable Preferred Stock"), (ii) up to $16,300,000 of such
proceeds to pay the unpaid purchase price for the Capital Stock of Great
American Cosmetics, Inc., a New York corporation ("Great American"), to pay
certain existing Debt of Great American and to pay fees and expenses incurred in
connection with the Great American Acquisition (as defined below), and (iii) the
remainder of such proceeds for working capital and other purposes permitted
under the Note Purchase Agreement. Pursuant to the Securities Purchase
Agreement, the Parent has also granted CIBC an option to purchase up to
$20,000,000 aggregate liquidation preference of additional 14% Senior Redeemable
Preferred Stock, Series B (together with any such preferred stock issuable as a
dividend thereon and any preferred stock having substantially identical terms
exchanged therefor in accordance with the terms of the Registration Rights
Agreement referred to above, collectively, the "Option Senior Preferred Stock,
Series B"), together with additional Warrants to purchase additional Parent
Common Stock (the "Option Stock Sale"). The Parent and the Company have
requested a waiver of the requirements of Section 3.1(b) of the Note Purchase
Agreement in order to permit the Parent to retain a portion of the Net Cash
Proceeds of the Option Stock Sale for working capital purposes.
<PAGE> 3
Waiver to
Note Purchase Agreement
Dated As of August 8, 1996
Page 3
B. Pursuant to a Stock Purchase Agreement, dated June 27, 1996 (the
"Great American Acquisition Agreement"), among the Company, Larry Pallini,
Vincent Carbone and Great American, the Company has agreed to purchase all the
outstanding Capital Stock of Great American (the "Great American Acquisition")
for an aggregate purchase price, including repayment of existing Debt of Great
American, of approximately $16,900,000, $600,000 of which has already been paid
into escrow by the Company. The Company and the Parent have requested a waiver
of the requirements of Section 10.4 of the Note Purchase Agreement (prohibiting
the Company from purchasing the Capital Stock of any other Person) and Section
10.7 of the Note Purchase Agreement (prohibiting the Company from making any
Restricted Investment) in order to permit the Company to consummate the Great
American Acquisition in the manner contemplated by the Great American
Acquisition Agreement.
C. In addition, the Company and the Parent have requested a waiver of
the requirements of Section 3.1(d) of the Note Purchase Agreement (requiring an
automatic payment on the Revolving Notes to the extent the unpaid principal
amount thereof exceed the Revolver Borrowing Base then in effect) and Section
6.4 of the Note Purchase Agreement (requiring as a condition to the Purchaser's
obligation to purchase any additional Revolving Notes that, after giving effect
to any such purchase, the aggregate unpaid principal amount of the Revolving
Notes shall not exceed the Revolving Note Limit) in order to permit the Company
to sell an aggregate of up to $40,000,000 of Revolving Notes to the Purchaser
until the Termination Date without regard to such requirements at such times as
the Revolver Borrowing Base is, and remains, equal to or greater than
$30,000,000.
D. As an inducement to the Purchaser to grant all the foregoing
waivers, the Parent has offered to grant to the Collateral Agent a first
priority perfected Lien in $33,800,000 of the Net Cash Proceeds from the
Preferred Stock Sale and the Common Stock Sale, together with accrued interest
thereon, if any, and to maintain such Lien until the Termination Date on terms
and conditions in all respects satisfactory to the Purchaser and its counsel.
E. The Purchaser has indicated it is willing to grant such waivers on
the terms and conditions hereof.
Accordingly, the Company, the Parent, and, by your acceptance hereof,
the Purchaser and the Collateral Agent, hereby agree as follows:
<PAGE> 4
Waiver to
Note Purchase Agreement
Dated As of August 8, 1996
Page 4
1. Waivers. Effective on and as of the Effective Date referred to
below, the Purchaser waives
(a) the requirements under Section 3.1(b) of the Note Purchase
Agreement as follows:
(A) solely to permit the Parent to retain 100% of the
Net Cash Proceed from the Preferred Stock Sale and the Common Stock
Sale; provided however, that, the aggregate Net Cash Proceeds received
by the Parent from such Preferred Stock Sale and Common Stock Sale
shall not be less than $59,600,000 after giving effect to the
following:
(i) the receipt by the Parent of any refund paid by or
on behalf of the CIBC Affiliate with respect to fees previously
paid by the Parent under the Prior Securities Purchase Agreement;
(ii) the application of not more than $6,000,000 of such
proceeds to purchase discount, fees and expenses (including legal
fees and expenses) incident to the Preferred Stock Sale, the
Common Stock Sale and the Great American Acquisition; and
(iii) the application of not more than $20,500,000 of
such proceeds to pay the redemption price to the CIBC Affiliate to
redeem all the outstanding Existing Exchangeable Preferred Stock,
together with accrued dividends thereon; and,
provided further, that on any date on which any of such Net Cash Proceeds are
received by the Parent, the Parent shall immediately
(i) first, apply such proceeds to the purchase of a
certificate of deposit or other Cash Equivalent in an amount not
less than $33,800,000 which shall be pledged to the Collateral
Agent as contemplated under clause (c) below, and
(ii) thereafter, contribute any remaining Net Cash
Proceeds to the Company for deposit in a Depositary Account of the
Company pending use of such proceeds by the Company for working
capital or other purposes permitted by the Note Purchase
Agreement, including, without limitation, to prepay outstanding
amounts under the Revolving Notes and to pay the unpaid purchase
price in respect of the Great American
<PAGE> 5
Waiver to
Note Purchase Agreement
Dated As of August 8, 1996
Page 5
Acquisition, to repay Debt of Great American and to pay fees and
expenses incurred in connection with the Great American
Acquisition, each as contemplated by clause (d) below; and
(B) with respect to any Net Cash Proceeds of the Option
Stock Sale, solely to permit the Parent:
(i) to contribute the first $5,000,000 of any such Net
Cash Proceeds to the Company for deposit in a Depositary Account
of the Company pending use of such proceeds by the Company for
working capital or other purposes permitted by the Note Purchase
Agreement, including, without limitation, to prepay outstanding
amounts under the Revolving Notes and to pay the unpaid purchase
price in respect of the Great American Acquisition, to repay Debt
of Great American and to pay fees and expenses incurred in
connection with the Great American Acquisition, each as
contemplated by clause (d) below;
(ii) to pay the next $7,000,000 of any such Net Cash
Proceeds to the Purchaser pursuant to said Section 3.1(b) for
application to the unpaid principal amount of the Term Notes in
accordance with Section 3.3 of the Note Purchase Agreement;
(iii) to pay an amount equal to the accrued and unpaid
interest on the principal amount of the Term Notes being repaid
pursuant to clause (B)(ii) above to the date of such repayment
from any remaining amount of such Net Cash Proceeds to the
Purchaser for application to the payment of such accrued and
unpaid interest; and
(iv) to contribute any remaining amount of such Net Cash
Proceeds to the Company for deposit in a Depositary Account of the
Company pending use of such proceeds by the Company for working
capital or other purposes permitted by the Note Purchase
Agreement, including, without limitation, to prepay outstanding
amounts under the Revolving Notes and to pay the unpaid purchase
price in respect of the Great American Acquisition, to repay Debt
of Great American and to pay fees and expenses incurred in
connection with the Great American Acquisition, each as
contemplated by clause (d) below;
(for the avoidance of doubt, the requirements under Section 9.10 of the
Note Purchase Agreement or such other applicable provision of the Note
Purchase
<PAGE> 6
Waiver to
Note Purchase Agreement
Dated As of August 8, 1996
Page 6
Agreement, if any, which might be construed to prohibit the Parent from
issuing and selling the Initial Senior Preferred Stock, Series B, any
Option Senior Preferred Stock, Series B and the New Common Stock
Purchase Warrants to CIBC pursuant to the Securities Purchase Agreement
and the shares of Parent Common Stock to the CIBC Affiliate pursuant to
the Prior Securities Purchase Agreement and retaining the proceeds
thereof for the uses permitted hereunder are also waived solely to
permit such issuances, sales and such uses of those proceeds; provided
however, that nothing herein shall waive any restriction on the ability
of the Parent and its Subsidiaries to make any Restricted Payment under
Section 10.7 of the Note Purchase Agreement (except as specifically
provided in clause (b) below), any restriction contained in Section
10.8 of the Note Purchase Agreement, or, except as specifically
provided herein with respect to such issuances, sales and such uses of
those proceeds, any other restriction contained in the Note Purchase
Agreement on the ability of the Parent and its Subsidiaries to exercise
any rights with respect to the Initial Senior Preferred Stock, Series B
so issued);
(b) the requirements under Section 10.7 of the Note Purchase
Agreement, solely to permit the Parent to redeem all the outstanding
Existing Exchangeable Preferred Stock; provided however, that the
Parent shall only pay the redemption price for Existing Exchangeable
Preferred Stock out of Net Cash Proceeds received by the Parent from
the Preferred Stock Sale, the Common Stock Sale and the Option Stock
Sale and proceeds of any refund of fees received from the CIBC
Affiliate referred to in paragraph 1(a)(i) above and shall not use more
than $20,500,000 of such proceeds for such purpose;
(c) the requirements under Section 3.1(d) of the Note Purchase
Agreement and Section 6.4 of the Note Purchase Agreement; provided
however, that the waiver contemplated by this clause (c) shall not be
effective on the first Business Day immediately following any date that
either
(i) the Company has knowledge or any reason to believe
that the aggregate amount of Eligible Accounts and Eligible
Inventory outstanding as of such date shall be less than the
aggregate amount thereof reflected in the latest Borrowing Base
Report theretofore delivered to the Purchaser pursuant to Section
7(g) of the Note Purchase Agreement to such an extent as to cause
the sum of (A) the Revolver Borrowing Base on such date, plus (B)
$10,000,000, to be less than the outstanding principal amount of
the Revolving Notes on such date (unless, on or before such first
Business Day following the date on
<PAGE> 7
Waiver to
Note Purchase Agreement
Dated As of August 8, 1996
Page 7
which the Company first has such knowledge or a basis for such
belief, the Company shall have repaid a sufficient principal
amount of the Revolving Notes such that the sum of (A) the
Revolver Borrowing Base on such first Business Day, plus (b)
$10,000,000, shall be equal to or greater than the outstanding
principal amount of the Revolving Notes on such first Business Day
after giving effect to such repayment), or
(ii) the Collateral Agent shall not have received a
first priority perfected Lien in $33,800,000 of Cash Equivalents
of the Parent, together with any interest accrued thereon,
pursuant to a security agreement (the "Parent Cash Equivalent
Pledge Agreement") in form and substance satisfactory in all
respects to the Purchaser and its counsel (which agreement need
not be in the form of Exhibit B to the Note Purchase Agreement,
but in any case shall provide that the Lien thereof shall be
maintained by the Parent until the Termination Date), together
with a legal opinion from Paul, Weiss, Rifkind, Wharton & Garrison
to the effect that the Parent Cash Equivalent Pledge Agreement has
been duly authorized, executed and delivered by the Parent, is
enforceable against the Parent in accordance with its terms, and
is effective to create a first priority, perfected Lien on such
cash or Cash Equivalents for the benefit of the Collateral Agent,
and otherwise in form and substance satisfactory in all respects
to the Purchaser and its counsel;
(d) the requirements of Section 10.4 of the Note Purchase
Agreement and Section 10.7 of the Note Purchase Agreement, solely to
permit the Company to consummate the Great American Acquisition in the
manner contemplated by the Great American Acquisition Agreement,
including payment of outstanding Debt of Great American; provided
however, that the Company shall only pay the unpaid portion of the
purchase price for the Capital Stock of Great American and repay
outstanding Debt of Great American and fees and expenses incurred in
connection with the Great American Acquisition out of Net Cash Proceeds
received by the Parent from the Preferred Stock Sale, the Common Stock
Sale and the Option Stock Sale and proceeds of any refund of fees
received by the Parent from the CIBC Affiliate referred to in paragraph
1(a)(i) above (in addition to the $600,000 already paid by the Company
into escrow for such purpose), and the Company shall not use more than
an aggregate of $16,300,000 of such Net Cash Proceeds and such refund
proceeds for such purpose;
<PAGE> 8
Waiver to
Note Purchase Agreement
Dated As of August 8, 1996
Page 8
(e) the requirements of Section 10.6 of the Note Purchase
Agreement, solely to permit the Company and its Subsidiaries to engage
in the business of producing, outsourcing, packaging, marketing,
distributing, advertising, promoting, merchandising and selling nail
polish, lipstick, eyeliners, mascara, make-up and related accessories
and other cosmetics products to the mass markets substantially in the
manner engaged in on the date hereof by Great American; and
(f) the requirements under Section 9.6 of the Note Purchase
Agreement until September 15, 1996, solely as such requirements relate
to the delivery of the documents more particularly identified in
Section 2 hereof.
2. Subsidiary Guarantee, etc. On or before September 15, 1996, the
Company shall, or shall cause its Subsidiaries, to deliver to the Purchaser each
of the following documents, each in form and substance satisfactory to the
Purchaser:
(a) a Subsidiary Guarantee, duly executed and delivered by Dana
Brazil;
(b) a Subsidiary Security Agreement, duly executed and delivered
by Dana Brazil;
(c) a Commitment to Provide a Mortgage Guarantee, duly executed by
the Company and Dana Brazil;
(d) a Brazilian Pledge Agreement in substantially the form of
Annex III to the New Dana U.S. Subsidiary Security Agreement, duly
executed by New Dana;
(e) evidence that the pledge of the Capital Stock of Dana
Argentina has been perfected in the manner set forth in Section 7.2(b)
of the New Dana U.S. Subsidiary Security Agreement;
(f) the certificate(s) representing the outstanding Capital Stock
of Dana Brazil, together with powers of attorney duly executed by New
Dana and the officer of the Parent designated to be the holder of
record of one share of such Capital Stock, respectively; and
(g) an opinion of the Company's local counsel in Brazil addressing
those matters set forth in Exhibit F-S to the Note Purchase Agreement.
<PAGE> 9
Waiver to
Note Purchase Agreement
Dated As of August 8, 1996
Page 9
3. Conditions to Effectiveness. This Waiver shall become effective on
the date (the "Effective Date") on which the Purchaser has received all of the
following documents:
(a) a counterpart of this Waiver, duly executed and delivered by
the Parent and the Company;
(b) the acknowledgement and agreement attached to this Waiver,
duly executed and delivered by each Subsidiary of the Company which has
entered into a Subsidiary Guarantee;
(c) a certificate from an Authorized Officer of the Company dated
the Effective Date, certifying as to the matters set forth in Section 4
of this Waiver;
(d) the Parent Cash Equivalent Pledge Agreement, duly executed and
delivered by the Parent and acknowledged by the bank or other financial
institution which has agreed to issue the certificate of deposit or
other Cash Equivalent proposed to be purchased by the Parent and
pledged thereunder; and
(e) the legal opinion of Paul, Weiss, Rifkind, Wharton & Garrison
with respect to the Parent Cash Equivalent Pledge Agreement
contemplated by Section 1(c)(ii) hereof.
4. Representations and Warranties: No Default or Event of Default. Each
of the Company and the Parent hereby represents, warrants, covenants and agrees
as follows, on and as of the Effective Date after giving effect to this Waiver:
(a) the representations and warranties contained in Section 4.1
through 4.35, inclusive and elsewhere in the Note Purchase Agreement,
the representations and warranties contained in the Related Documents
and the representations and warranties of the Parent contained in
Section 3.1 of the Securities Purchase Agreement shall be true and
correct on and as of the Effective Date with the same effect as if such
representations and warranties had been made on and as of the Effective
Date, except that any such representation or warranty which is
expressly made only as of a specified date need be true only as of such
date; and
(b) no Default or Event of Default shall have occurred and be
continuing.
<PAGE> 10
Waiver to
Note Purchase Agreement
Dated As of August 8, 1996
Page 10
5. Effect of Waiver. It is hereby agreed that, except as specifically
provided herein, this Waiver does not in any way amend, modify, affect or impair
the terms, conditions and other provisions of the Note Purchase Agreement, the
Notes or the Related Documents, or the obligations of the Company or the Parent
thereunder, and all terms, conditions and other provisions of the Note Purchase
Agreement, the Notes and the Related Documents shall remain in full force and
effect except to the extent specifically amended or otherwise specifically
modified pursuant to the provisions of this Waiver. If any representation or
warranty in this Waiver shall fail to be true and correct in any material
respect, such failure and any failure to fully satisfy any other term or
condition of this Waiver shall automatically, and without the requirement of any
notice to the Company or the Parent, constitute an Event of Default under the
Note Purchase Agreement.
6. Counterparts. This Waiver may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which taken
together shall be deemed to constitute one and the same instrument.
7. Governing Law. THIS Waiver SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
[The remainder of this page intentionally left blank.]
<PAGE> 11
Waiver to
Note Purchase Agreement
Dated As of August 8, 1996
Page 11
If the foregoing is acceptable, please sign and return a copy of this
Waiver to indicate your agreement to the terms hereof.
Very truly yours,
COSMAR CORPORATION
By: /s/ Illegible
---------------------------------
Title: Vice President
RENAISSANCE COSMETICS, INC.
By: /s/ Illegible
---------------------------------
Title: Vice President - Secretary
Accepted and Agreed as
of date first above written
NOMURA HOLDING AMERICA INC.,
Individually and as Collateral Agent
By: /s/ Howard Gellis
----------------------------------
Title: Attorney-in-Fact
<PAGE> 12
Waiver to
Note Purchase Agreement
Dated As of August 8, 1996
Page 12
ACKNOWLEDGEMENT AND AGREEMENT
The terms and provisions of the foregoing Waiver to Note Purchase
Agreement, dated as of August 8, 1996 (the "Waiver"), with respect to the Note
Purchase Agreement, dated as of December 21, 1994, as amended or otherwise
modified by Waiver No. 1 to Note Purchase Agreement, dated as of December 22,
1994, Waiver No. 2 to Note Purchase Agreement, dated as of January 12, 1995,
Waiver No. 3 to Note Purchase Agreement, dated as of February 28, 1995, Waiver
No. 4 to Note Purchase Agreement, dated as of March 24, 1995, Amendment No. 1
and Waiver to Note Purchase Agreement, dated as of April 7, 1995, Amendment No.
2 to Note Purchase Agreement, dated as of September 8, 1995, Waiver to Note
Purchase Agreement, dated as of September 18, 1995, Waiver to Note Purchase
Agreement, dated as of December 22, 1995, Amendment No. 3, Waiver and Consent to
Note Purchase Agreement, Limited Waiver to Note Purchase Agreement, dated as of
February 13, 1996, Amendment No. 4 and Waiver to Note Purchase Agreement and
Amendment No. 2 to Security Documents, dated as of May 29, 1996, and Amendment
No. 5 to Note Purchase Agreement, dated as of June 14, 1996 (as so amended, the
"Note Purchase Agreement"), each among Cosmar Corporation, a Delaware
corporation (the "Company"), Renaissance Cosmetics, Inc., a Delaware corporation
(the "Parent"), and Nomura Holding America Inc., a Delaware corporation
(together with its successors and assigns, collectively, the "Purchaser"), and
the transactions contemplated by the Note Purchase Agreement as modified by the
Waiver, are hereby severally and not jointly acknowledged and agreed to by each
of the undersigned Subsidiaries of the Company, and each hereby severally and
not jointly confirms its respective Subsidiary Guarantee with respect to the
Obligations under, and as the foregoing capitalized terms are defined in, the
Note Purchase Agreement, as so modified.
This Acknowledgement and Agreement may be executed by each Subsidiary
of the Company in any number of counterparts, each of which shall be deemed an
original, and all of which taken together shall be deemed to constitute one and
the same instrument.
[The remainder of this page intentionally left blank.]
<PAGE> 13
Waiver to
Note Purchase Agreement
Dated As of August 8, 1996
Page 13
IN WITNESS WHEREOF, each of the undersigned has caused this
Acknowledgement and Agreement to be executed and delivered by its respective
duly authorized officer as of the date first above written.
DANA PERFUMES CORP.
HOUBIGANT (1995) LIMITED/
HOUBIGANT (1995) LIMITEE
DANA PERFUMES (CANADA) LTD.
DANA S.A.
PERFUMES DANA S.A.I.C.
FINANCIERA DE PERFUMERIA S.A.
ESTALVI S.A.
MARCAFIN S.A.
C.O.M.I.N.S.A.
PERFUMES AND COSMETICS IMPORTERS, INC.
PARFUMS DANA EXPORT CORP.
RSH 149, S.A.R.L.
PERFUMES DANA DO BRASIL, S.A.
By /s/ Illegible
------------------------------
Title: Vice President
(of each party hereto)
<PAGE> 1
Exhibit 10.95
PARENT CASH EQUIVALENT PLEDGE AGREEMENT
NOMURA HOLDING AMERICA INC.,
as Collateral Agent
Two World Financial Center, Building B
New York, New York 10281-1198
As of August 15, 1996
THE CHASE MANHATTAN BANK,
as Agent for Issuing Bank
Corporate Trust Group
450 West 33rd Street
New York, New York 10041
Attention: Escrow Administrator
15th Floor
Re: Renaissance Cosmetics, Inc.
Gentlemen/Ladies:
Reference is made to the negotiable certificate of deposit more
particularly described on Schedule 1 hereto issued by The Chase Manhattan Bank,
as issuer of such certificate of deposit (in such capacity, the "Issuing Bank"),
to Renaissance Cosmetics, Inc., a Delaware corporation (the "Obligor"), together
with interest accrued thereon, any proceeds thereof and any other certificate of
deposit or other instrument or security in which such proceeds may be reinvested
(collectively, the "Instrument").
The Obligor has granted to Nomura Holding America Inc., as collateral
agent (in such capacity, the "Secured Party"), and by its execution of a
counterpart of this Agreement the Obligor does hereby confirm and grant to the
Secured Party, a security interest in the Instrument and all proceeds thereof as
collateral security for the prompt and complete payment and performance when due
by the Obligor of the Parent Obligations pursuant to, and as such term is
defined in, the Pledge and Security Agreement, dated as of December 21, 1994,
between the Obligor and the Secured Party, as amended (the "Parent Security
Agreement"). Upon the Obligor's receipt of the Instrument from the Issuing Bank,
the Obligor hereby agrees to immediately deliver the Instrument to the Secured
Party to hold in pledge pursuant to this Agreement and the Parent Security
Agreement until the date on which the Parent Obligations are paid in full.
<PAGE> 2
1. The Chase Manhattan Bank, Corporate Trust Group, as Agent for the
Issuing Bank (in such capacity, the "Agent"), the Secured Party and the Obligor
hereby agree that:
(a) upon receipt by the Agent of the Instrument and a written
certificate signed by the Secured Party certifying that an Event of
Default (as defined in the Parent Security Agreement) shall have occurred
and be continuing, then the Agent shall follow the written instructions of
the Secured Party as to the disposition of the Instrument; and
(b) upon receipt by the Agent of the Instrument and a joint written
certificate signed by the Obligor and the Secured Party, the Agent shall
follow the written instructions of the Obligor set forth in such
certificate as to the disposition of the Instrument. Until the date on
which the Parent Obligations are paid in full, the Secured Party shall be
under no obligation to sign any such certificate requested by the Obligor
or to deliver the Instrument to the Agent in connection therewith, and the
decision of the Secured Party as to the execution of any such certificate
and the delivery of the Instrument to the Agent shall remain in the sole
and absolute discretion of the Secured Party, both before and after the
initial maturity of the Instrument and whether or not a Default or Event
of Default shall then have occurred or be continuing.
2. The Agent undertakes to perform only such duties as are expressly set
forth herein.
3. The Agent may rely and shall be protected in acting or refraining from
acting upon any written notice, instruction or request furnished to it hereunder
and believed by it to be genuine and to have been signed or presented by the
proper party or parties. The Agent shall be under no duty to inquire into or
investigate the validity, accuracy or content of any such document. The Agent
shall have no duty to solicit any payments which may be due it hereunder.
4. The Agent shall not be liable for any action taken or omitted by it in
good faith unless a court of competent jurisdiction determines that the Agent's
willful misconduct was the primary cause of any loss to the Obligor. In the
administration of its duties hereunder, the Agent may execute any of its powers
and perform its duties hereunder directly or through agents or attorneys and may
consult with counsel, accountants and other skilled persons to be selected and
retained by it. The Agent shall not be liable for anything done, suffered or
omitted in good faith by it in accordance with the advice or opinion of any such
counsel, accountants or other skilled persons.
2
<PAGE> 3
5. The Agent may resign and be discharged from its duties or obligations
hereunder by giving notice in writing to the Obligor and the Secured Party of
such resignation specifying a date when such resignation shall take effect.
6. The Obligor hereby agrees to: (a) pay the Agent upon execution of this
Agreement $20,000 for the services to be rendered hereunder, and (b) pay the
Agent upon request for all expenses, disbursement and advances, including
reasonable attorneys' fees, incurred or made by it in connection with the
preparation, execution, performance, delivery modification and termination of
this Agreement.
7. The Obligor hereby agrees to indemnify the Agent for, and to hold it
harmless against any loss, liability or expense arising out of or in connection
with this Agreement and carrying out its duties hereunder, including the costs
and expenses of defending itself against any claim of liability, except in those
cases where the Agent has been guilty of gross negligence or willful misconduct.
Anything in this Agreement to the contrary notwithstanding, in no event shall
the Agent be liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the Agent
has been advised of the likelihood of such loss or damage and regardless of the
form of action.
8. The duties and responsibilities of the Agent hereunder shall be
determined solely by the express provisions of this Agreement, and no other or
further duties or responsibilities shall be implied. The Agent shall not have
any liability under, nor duty to inquire into the terms and provisions of any
agreement or instructions, other than outlined in the Agreement.
9. All notices and communications hereunder shall be in writing and shall
be deemed to be duly given if sent by registered mail, return receipt requested,
as follows:
If to the Agent: The Chase Manhattan Bank
Corporate Trust Group
450 West 33rd Street
New York, New York 10001
Attention: Escrow Administration, 15th Floor
If to the Secured Party: Nomura Holding America Inc.
Two World Financial Center, Building B
New York, New York 10281-1198
Attention: Mr. Howard Gellis
If to the Obligor: Renaissance Cosmetics Inc.
635 Madison Avenue
New York, New York 10022
Attention: General Counsel
3
<PAGE> 4
or at such other address or addresses as any of the above may have furnished to
the other parties in writing by registered mail, return receipt requested, and
any such notice or communication given in the manner specified in this paragraph
9 shall be deemed to have been given as of the date so mailed except with
respect to the Agent as to which date shall be deemed to have been given on the
date received by the Agent. In the event that Agent, in its sole discretion,
shall determine that an emergency exists, the Agent may use such other means of
communication as the Agent deems advisable.
10. The provisions of this Agreement may be waived, altered, amended or
supplemented, in whole or in part, only by a writing signed by all of the
parties hereto.
11. Neither this Agreement nor any right or interest hereunder may be
assigned in whole or in part by any party without the prior consent of the other
parties.
12. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
13. The Agent shall not incur any liability for following the instructions
herein contained or expressly provided for, or written instructions given by the
parties hereto.
14. In the event that the Agent shall be uncertain as to its duties or
rights hereunder or shall receive instructions, claims or demands from any party
hereto which, in its opinion, conflict with any of the provisions of this
Agreement, it shall be entitled to refrain from taking any action and its sole
obligation shall be to keep safely all property held in escrow until it shall be
directed otherwise in writing by all of the other parties hereto or by a final
order or judgment of a court of competent jurisdiction.
15. Any corporation into which the Agent in its individual capacity may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Agent in its
individual capacity shall be a party, or any corporation to which substantially
all the corporate trust business of the Agent in its individual capacity may be
transferred, shall be the Agent under this Agreement without further act.
16. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to its principles of conflicts
of laws or any action brought hereunder shall be brought in the courts of the
State of New York, located in the County of New York. Each party hereto
irrevocably waives any objection on the grounds of venue, forum non conveniens
or any similar grounds and
4
<PAGE> 5
irrevocably consents to service of process by mail or in any other manner
permitted by applicable law and consents to the jurisdiction of said courts.
17. The Agent, the Obligor and the Secured Party hereby agree that, from
the date hereof until the date on which a notice shall be given to the Agent
pursuant to clause (i) or (ii) of Section 1 above, no portion of the Instrument
shall be subject to any deduction, setoff, banker's lien, or any other right in
favor of the Issuing Bank, the Agent or any other person or entity other than
the Secured Party.
18. The Obligor's agreement to the terms hereof as provided below shall
constitute notification to the Issuing Bank and the Agent pursuant to Section
8-313(h) of the New York Uniform Commercial Code of the Secured Party's security
interest in the Instrument. By its agreement to the terms hereof as provided
below, the Agent recognize the Secured Party's continuing security interest in
the Instrument and in the proceeds thereof and confirms that, as of the date
hereof, the Issuing Bank and the Agent have received notice of no lien in or on
the Instrument other than the lien in favor of the Secured Party.
19. The Agent will from time to time deliver to the Secured Party, upon
the written request of the Secured Party, such information regarding the
Instrument as the Secured Party may reasonably request.
5
<PAGE> 6
If the foregoing instructions and agreements are acceptable, please
indicate your acceptance by signing this Agreement in the space provided below.
Sincerely,
NOMURA HOLDING AMERICA INC.,
as Collateral Agent
By: /s/ [Illegible]
--------------------------------
Title: Attorney-In-Fact
ACCEPTED AND AGREED:
RENAISSANCE COSMETICS, INC.
By: /s/ [Illegible] Dated: 8/15/96
-----------------------
Title: Vice President, Secretary
ACCEPTED AND AGREED:
THE CHASE MANHATTAN BANK,
Corporate Trust Group,
as Agent for the Issuing Bank
By: /s/ John Sciacchitano
-----------------------
Title: Vice President Dated: 8/15/96
6
<PAGE> 7
Schedule 1
to
Parent Cash Equivalent Pledge Agreement
Description of Instrument
The negotiable certificate of deposit referred to in this Agreement:
(i) was issued by the Issuing Bank to the Obligor on August __, 1996, in the
initial amount of $33,800,000, (ii) shall accrue interest on such amount from
the date of issuance at an interest rate of __% per annum, (iii) shall mature on
the _________ month/year anniversary of the date of issuance, and (iv) bears the
control no. ____________.
7
<PAGE> 1
Exhibit 10.105
SUBSCRIPTION AGREEMENT
August 15, 1996
Renaissance Cosmetics, Inc.
635 Madison Avenue
New York, NY 10022
Gentlemen:
Reference is hereby made to Section 5.6 of the Securities Purchase
Agreement (the "Securities Purchase Agreement), dated as of May 29, 1996, as
amended, by and between Renaissance Cosmetics, Inc., a Delaware corporation (the
"Company"), and CIBC WG Argosy Merchant Fund 2, L.L.C. Capitalized terms not
otherwise defined herein shall have the meaning set forth in the Securities
Purchase Agreement.
1. The undersigned hereby subscribes for fifty-one thousand nine hundred
and fifty-nine (51,959) shares of Common Stock, par value $0.01, of the Company
(the "Shares"). Payment therefor will be made on August 15, 1996 (upon the
issuance of an appropriate certificate or certificates representing such Shares
to and in the name of the undersigned), in cash, by wire transfer to an account
designated by the Company, for an aggregate purchase price of five million
dollars ($5,000,000).
2. The Shares, when issued, shall be fully paid and non-assessable and the
certificate or certificates therefor shall so state.
<PAGE> 2
2
3. The Company hereby acknowledges that:
3.1 each of the representations, warranties, covenants and
agreements contained in Section 3.1 of the Securities Purchase Agreement is true
and correct in all material respects on and as of the date hereof, except for
the representations and warranties made as of an earlier date which were true
and correct as of such earlier date.
3.2 the Company has complied in all material respects with all
agreements set forth in the Securities Purchase Agreement required to be
performed by the Company at or prior to the date hereof.
3.3 the indemnification provisions contained in Article VII of the
Securities Purchase Agreement shall apply to the representations, warranties,
covenants and agreements made by the Company pursuant to this Section 3.
4. The undersigned hereby acknowledges that each of the representations,
warranties, covenants and agreements contained in Section 3.2 of the Securities
Purchase Agreement is true and correct in all material respects on and as of the
date hereof.
<PAGE> 3
3
5. The undersigned hereby agrees that the Shares will be subject to the
restrictions on transfer of capital stock set forth in the Stockholders
Agreement and agrees that upon amendment to the Stockholders Agreement it will
execute a joinder agreement to the Stockholders Agreement in form and substance
reasonably satisfactory to the Company.
Very truly yours,
CIBC WG ARGOSY MERCHANT FUND 2, L.L.C.
By: __________________________
Name:
Title:
Accepted: As of August 15, 1996
RENAISSANCE COSMETICS, INC.
By: _____________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.106
WARRANT AGREEMENT
BETWEEN
RENAISSANCE COSMETICS, INC.
AND
AMERICAN BANK NATIONAL ASSOCIATION,
AS WARRANT AGENT
------------------------------------
DATED AS OF AUGUST 18, 1994
------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. Appointment of Warrant Agent ........................ 2
SECTION 2. Warrant Certificates ................................ 2
SECTION 3. Execution of Warrant Certificates ................... 3
SECTION 4. Registration and Countersignature ................... 3
SECTION 5. Transfers of Notes and Unit Warrants Prior
to Separation; Separation ......................... 5
SECTION 6. Registration of Transfers and Exchanges ............. 5
(a) Transfer and Exchange of Definitive Warrants ........ 5
(b) Transfer of a Definitive Warrant
for a Beneficial Interest in Global Warrant ....... 6
(c) Transfer and Exchange of Global Warrant ............. 7
(d) Transfer of a Beneficial Interest in Global Warrant
for a Definitive Warrant .......................... 7
(e) Transfer and Exchange of Global Warrant ............. 8
(f) Cancellation and/or Adjustment of Global Warrant .... 8
(g) Obligations with Respect to Transfers and
Exchanges of Definitive Warrants .................. 8
SECTION 7. Warrants; Exercise of Warrants ...................... 9
SECTION 8. Payment of Taxes .................................... 12
SECTION 9. Mutilated or Missing Warrant Certificates ........... 12
SECTION 10. Reservation of Warrant Shares ....................... 13
</TABLE>
- ----------------
* This Table of Contents does not constitute a part of this Agreement or
have any bearing upon the interpretation of any of its terms or
provisions.
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 11. Government Approvals and Stock Exchange
Listings .................................. 13
SECTION 12. Adjustments; etc. ........................... 14
(a) Adjustment for Change in Capital Stock ...... 14
(b) Distributions ............................... 15
(c) Common Stock Issue .......................... 15
(d) Convertible Securities Issue ................ 16
(e) Current Market Price ........................ 17
(f) When No Adjustment or Action Required ....... 17
(g) Reorganization of Company ................... 18
(h) When Issuance or Payment May Be Deferred .... 18
(i) Form of Warrants ............................ 19
SECTION 13. Fractional Interests ........................ 19
SECTION 14. Notices to Warrant Holders .................. 19
SECTION 15. Registration Rights ......................... 21
(a) Incidental Registration ..................... 21
(b) Demand Registration ......................... 22
(c) Registration Procedures ..................... 23
(d) Effective Registration Statement ............ 28
(e) Reductions in Demand Registration ........... 28
(f) Indemnification ............................. 28
(g) Registration Expenses ....................... 33
(h) Certain Definitions ......................... 34
SECTION 16. Tag-Along and Drag-Along Rights ............. 35
SECTION 17. Concerning the Warrant Agent ................ 35
SECTION 18. Merger or Consolidation or Change of Name of
Warrant Agent ............................. 36
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 19. Duties of Warrant Agent .................................. 36
SECTION 20. Change of Warrant Agent .................................. 39
SECTION 21. Legends .................................................. 40
SECTION 22. Notices .................................................. 41
SECTION 23. Supplements and Amendments ............................... 42
SECTION 24. Determinations and Actions by Board of Directors, etc. ... 42
SECTION 25. Successors ............................................... 43
SECTION 26. Governing Law ............................................ 43
SECTION 27. Severability ............................................. 44
SECTION 28. Descriptive Headings ..................................... 44
SECTION 29. Counterparts ............................................. 44
EXHIBIT A .......................................................... A-1
EXHIBIT B .......................................................... B-1
</TABLE>
iii
<PAGE> 5
WARRANT AGREEMENT dated as of August 18, 1994 between Renaissance
Cosmetics, Inc., a Delaware corporation (together with its permitted successors
and assigns, the "Company") and American Bank National Association, as Warrant
Agent (together with its permitted successors and assigns, the "Warrant Agent").
WHEREAS, pursuant to a certain purchase agreement (the "PURCHASE
AGREEMENT"), dated August 18, 1994, the Company has agreed to offer in a private
placement (A) to the Unit Purchasers (as defined therein), 65,000 Units (the
"Units") consisting of (i) an aggregate of $65,000,000 principal amount of
13 3/4 % Senior Notes due 2001, Series A, of the Company (the "NOTES") to be
issued under an indenture to be dated as of the date hereof (the "INDENTURE"),
among the Company, the Guarantors named therein and American Bank National
Association, as Trustee, and (ii) Common Stock Purchase Warrants (the "UNIT
WARRANTS"), initially to purchase an aggregate of 130,000 shares of Common
Stock, par value $0.01 per share (the "COMMON STOCK"), of the Company, and
(B) to the Preferred Purchasers (as defined therein), (i) 50,000 shares of the
Company's Cumulative Exchangeable Preferred Stock, par value $0.01 per share,
and (ii) Common Stock Purchase Warrants (the "PREFERRED WARRANTS" and, together
with the Unit Warrants, the "WARRANTS"), initially to purchase an aggregate of
50,000 shares of Common Stock (the Common Stock and other consideration issuable
on exercise of the Warrants being referred to herein as the "Warrant Shares");
WHEREAS, each Unit consists of $1,000 aggregate principal amount of
Notes and Unit Warrants initially to purchase two (2) shares of Common Stock;
WHEREAS, prior to Separation (defined below), record ownership of the
Notes and beneficial ownership of the Unit Warrants, respectively, will be
evidenced by record ownership of the Notes containing thereon an endorsement
specified by the indenture (the "Warrant Endorsement");
WHEREAS, definitive certificates (the "CUSTODIAN WARRANTS") evidencing
the Unit Warrants will be held by the Warrant Agent as custodian for the
registered holders of the Notes containing a Warrant Endorsement;
WHEREAS, the Company wishes the Warrant Agent to act as Warrant Agent
on behalf of the Company in connection with the issuance,
<PAGE> 6
division, transfer, exchange, substitution and exercise of the Warrants, and the
Warrant Agent is willing to so act.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions set forth hereinafter in this Agreement, and the Warrant Agent
hereby accepts such appointment.
SECTION 2. WARRANT CERTIFICATES. Prior to Separation, beneficial
ownership of the Unit Warrants will be evidenced by record ownership of the
Notes containing a Warrant Endorsement.
The Preferred Warrants and, from and after Separation, the Unit
Warrants will be issued (i) in global form (the "GLOBAL WARRANT"), substantially
in the form of Exhibit A attached hereto (including footnotes 1 and 2 thereto),
and (ii) in definitive form (the "DEFINITIVE WARRANTS"), substantially in the
form of Exhibit A (excluding footnotes 1 and 2 thereto). The Global Warrant
shall represent the aggregate amount of outstanding Warrants from time to time
endorsed thereon; provided that the aggregate amount of outstanding Warrants
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of the Global
Warrant to reflect the amount of any increase or decrease in the amount of
outstanding Warrants represented thereby shall be made by the Warrant Agent in
accordance with instructions given by the holder thereof.
The Depository with respect to the Global Warrant (the "DEPOSITORY")
shall be The Depository Trust Company until a successor shall be appointed by
the Company and become such Depository. The Global Warrant shall be registered
in the name of the Depository, or the nominee of such Depository. So long as the
Depository or its nominee is the registered owner of such Global Warrant it will
be deemed the sole owner and holder of such Global Warrant for all purposes
hereunder and under such Global Warrant. The certificates (the "WARRANT
CERTIFICATES") evidencing the Global Warrant and the Definitive Warrants to be
delivered pursuant to this Agreement shall be substantially in the form set
forth in Exhibit A attached hereto. Neither the Company nor the Warrant Agent
will have any responsibility or liability for any aspects of the records
relating to beneficial ownership interests of the Global Warrant in the name of
the
2
<PAGE> 7
Depository or its nominee or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
SECTION 3. EXECUTION OF WARRANT CERTIFICATES. Warrant Certificates
shall be signed on behalf of the Company by its Chairman of the Board, its
President or a Vice President, and by its Secretary or an Assistant Secretary.
Each such Signature may be in the form of a facsimile signature of the present
or any future Chairman of the Board, President, Vice President, Secretary or
Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant
Certificates and for that purpose the Company may adopt and use the facsimile
signature of any person who shall have been Chairman of the Board, President,
Vice President, Secretary or Assistant Secretary, notwithstanding the fact that
at the time the Warrant Certificates shall be delivered or disposed of he shall
have ceased to hold such office.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been disposed of by the Company, such Warrant
Certificates nevertheless may be delivered or disposed of as though such person
had not ceased to be such officer of the Company; and any Warrant Certificate
may be signed on behalf of the Company by any person who, at the actual date of
the execution of such Warrant Certificate, shall be a proper officer of the
Company to sign such Warrant Certificate, although at the date of the execution
of this Warrant Agreement any such person was not such officer.
SECTION 4. REGISTRATION AND COUNTERSIGNATURE. Warrant Certificates
shall be manually countersigned by the Warrant Agent and shall not be valid for
any purpose unless so countersigned. The Warrant Agent shall, upon written
instructions of the Chairman of the Board, Chief Executive Officer, Chief
Operating Officer, or Chief Financial Officer of the Company, countersign and
deliver Warrant Certificates as provided in this Agreement entitling the holders
thereof initially to purchase not more than the number of Warrant Shares
referred to in the first recital hereof. The registered holder of the Note
containing a Warrant Endorsement relating to a Unit Warrant shall be deemed the
registered holder of such Unit Warrant for all purposes hereunder. The Company
agrees to arrange for the Trustee under the Indenture (or any other registrar
thereunder) to act as registrar with respect to the Unit Warrants that are not
Separated (as defined below). The Company has appointed the Warrant Agent as the
registrar with respect to the Unit Warrants that are Separated and with respect
to the
3
<PAGE> 8
Preferred Warrants. The Warrant Agent shall number and register the Warrant
Certificates in a register (with respect to the Unit Warrants, after
Separation).
The Company and the Warrant Agent may deem and treat the registered
holder(s) of the Warrants as the absolute owner(s) thereof (notwithstanding any
notation of ownership or other writing or the certificate relating thereto), for
all purposes, and shall not be affected by any notice to the contrary and shall
not be bound to recognize any equitable or other claim to or in the Warrant on
the part of any other person.
SECTION 5. TRANSFERS OF NOTES AND UNIT WARRANTS PRIOR TO SEPARATION;
SEPARATION. Prior to the close of business on the Separation Date (as defined
below), the Unit Warrants and the Notes constituting the Units may be
transferred only as Units as provided in the Indenture.
The Custodian Warrants will be held by the Warrant Agent, as custodian
for the holders of the Units, until such time on or after the Separation Date as
the registered holder of a Note containing a Warrant Endorsement shall have
surrendered such Note to the Warrant Agent for the exchange of such Unit, in
whole or in part, for a Definitive Warrant or Warrants and for a Note or Notes
of a like aggregate principal amount of authorized denominations and not
containing a Warrant Endorsement (such surrender and exchange, together with the
exchange for the Global Warrant referred to below, are herein referred to as a
"SEPARATION" and the related Warrants are referred to as being "SEPARATED").
Each Note containing a Warrant Endorsement presented for Separation shall be
duly endorsed by the registered holder thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney-in-fact. The Warrant
Agent shall deliver such Note to the Trustee pursuant to the provisions of the
Indenture, with instructions to issue new Notes not containing a Warrant
Endorsement in authorized denominations for an aggregate principal amount equal
to the aggregate principal amount of the Notes surrendered in the name of such
registered holder or holders. The Warrant Agent, as custodian, shall deliver (or
cause to be delivered) the Notes so received from the Trustee and a Warrant
Certificate or Certificates executed by the Company and countersigned by the
Warrant Agent in the name of such registered holder or holders for such
aggregate number of Warrants as shall equal Warrants initially to purchase two
(2) shares of Common Stock for each $1,000 principal amount of Notes so
exchanged for Separation, bearing numbers or other distinguishing symbols not
contemporaneously outstanding, to the holder or holders entitled thereto.
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In the case of the Global Warrant, on the Separation Date, the Warrant
Agent shall instruct the Depository, in accordance with the standing
instructions and procedures existing between the Depository and the Warrant
Agent, to exchange the global certificate evidencing the Notes (the "Global
Note") for the Global Warrant and for a global certificate evidencing the Notes
and not containing a Warrant Endorsement. The Global Warrant shall be executed
by the Company and countersigned by the Warrant Agent pursuant to Sections 3 and
4.
The term "SEPARATION DATE" shall mean the earlier of (i) the date 180
days following the date hereof, (ii) the business day immediately preceding the
date on which the Shelf Registration Statement or the Exchange Offer
Registration Statement (as such terms are defined in the Registration Rights
Agreement, dated the date hereof, among the Company, the Guarantors and the Unit
Purchasers) is filed with the Securities and Exchange Commission as required by
the Registration Rights Agreement or (iii) such earlier date as Jefferies &
Company, Inc. may determine, provided that if the Company redeems or otherwise
acquires all or a portion of the Notes in accordance with the Indenture pursuant
to Article 3 thereof or pursuant to a "Change of Control Offer" or an "Asset
Sale Offer" (as such terms are defined in the Indenture) prior to the date that
would otherwise be the Separation Date, the Separation Date shall be the day
immediately preceding such redemption or other acquisition.
SECTION 6. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) TRANSFER AND EXCHANGE OF DEFINITIVE WARRANTS. When Definitive
Warrants are presented to the Warrant Agent with a request (i) to register the
transfer of the Definitive Warrant or (ii) to exchange such Definitive Warrants
for an equal number of Definitive Warrants of other authorized denominations,
the Warrant Agent shall register the transfer or make the exchange as requested
if its requirements for such transactions are met; provided, however, that the
Definitive Warrants so presented (A) have been duly endorsed or accompanied by a
written instruction of transfer in form satisfactory to the Warrant Agent, duly
executed by the holder thereof or by his attorney, duly authorized in writing;
and (B) in the case of Warrants that were acquired by the holder thereof other
than pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "Securities Act") or Rule 144 thereunder ("Restricted
Warrants"), such request shall be accompanied by the following additional
documents:
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(1) if such Restricted Warrant is being delivered to the Warrant
Agent by a holder for registration in the name of such
holder, without transfer, a certification from such holder
to that effect (in substantially the form of Exhibit B
hereto); or
(2) if such Restricted Warrant is being transferred to a QIB in
accordance with Rule 144A or pursuant to an effective
registration statement under the Securities Act, a
certification to that effect (in substantially the form of
Exhibit B hereto); or
(3) if such Restricted Warrant is being transferred in reliance
on another exemption from the registration requirements of
the Securities Act, a certification to that effect (in
substantially the form of Exhibit B hereto) and an opinion
of counsel from such Warrant holder or the transferee
reasonably acceptable to the Company and the Warrant Agent
to the effect that such transfer is in compliance with the
Securities Act.
(b) TRANSFER OF A DEFINITIVE WARRANT FOR A BENEFICIAL INTEREST IN
GLOBAL WARRANT. A Definitive Warrant may be exchanged for a beneficial interest
in the Global Warrant only upon receipt by the Warrant Agent of a Definitive
Warrant, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Warrant Agent, together with:
(i) written instructions directing the Warrant Agent to make an
endorsement on the Global Warrant to reflect an increase in the number
of Warrants and Warrant Shares represented by the Global Warrant, and
(ii) if such Definitive Warrant is a Restricted Warrant,
certification from the holder thereof (in substantially the form of
Exhibit B hereto) to the effect that such Definitive Warrant is being
transferred to a QIB in accordance with Rule 144A;
then the Warrant Agent shall cancel such Definitive Warrant and cause the number
of Warrants and Warrant Shares represented by the Global Warrant to be increased
accordingly. If no Global Warrant is then outstanding, the Company shall issue
and the Warrant Agent shall countersign a new Global Warrant representing the
appropriate number of Warrants and Warrant Shares.
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(c) TRANSFER AND EXCHANGE OF GLOBAL WARRANT. The transfer and exchange
of the Global Warrant or beneficial interests therein shall be effected through
the Depository, in accordance with this Warrant Agreement and the procedures of
the Depository therefor, which shall include the restrictions on transfer
comparable to those set forth herein and to the extent required by the
Securities Act.
(d) TRANSFER OF A BENEFICIAL INTEREST IN GLOBAL WARRANT FOR A
DEFINITIVE WARRANT. Upon receipt by the Warrant Agent of written transfer
instructions (or such other form of instructions as is customary for the
Depository) from the Depository (or its nominee) on behalf of any person having
a beneficial interest in the Global Warrant, the Warrant Agent shall cause, in
accordance with the standing instructions and procedures existing between the
Depository and Warrant Agent (the "Standing Instructions"), the number of
Warrants and Warrant Shares represented by the Global Warrant to be reduced and,
following such reduction, the Company shall execute and the Warrant Agent shall
countersign and deliver to the transferee, as the case may be, a Definitive
Warrant, provided, that in the case of a Restricted Warrant, such instructions
shall be accompanied by the following additional documents:
(1) if such beneficial interest is being transferred to the
person designated by the Depository as being the beneficial
owner, a certification from such person to that effect (in
substantially the form of Exhibit B hereto); or
(2) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A or pursuant to an effective
registration statement under the Securities Act, a
certification to that effect from the transferee or
transferor (in substantially the form of Exhibit B hereto);
or
(3) if such beneficial interest is being transferred in reliance
on another exemption from the registration requirements of
the Securities Act, a certification to that effect from the
transferee or transferor (in substantially the form of
Exhibit B hereto) and an opinion of counsel from the
transferee or transferor reasonably acceptable to the
Company and to the Warrant Agent to the effect that such
transfer is in compliance with the Securities Act.
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Definitive Warrants issued in exchange for a beneficial interest in the
Global Warrant shall be registered in such names and in such authorized
denominations as the Depository shall instruct the Warrant Agent.
(e) TRANSFER AND EXCHANGE OF GLOBAL WARRANT. Notwithstanding any other
provisions of this Warrant Agreement, the Global Warrant may not be transferred
as a whole except by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository or another nominee of the Depository
or by the Depository or any such nominee to a successor Depository or a nominee
of such successor Depository; provided, that if:
(i) the Depository notifies the Company that the Depository is
unwilling or unable to continue as Depository for the Global Warrant
and a successor Depository for the Global Warrant is not appointed by
the Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Warrant
Agent in writing that it elects to cause the issuance of Definitive
Warrants under this Warrant Agreement,
then the Company shall execute, and the Warrant Agent shall countersign and
deliver, Definitive Warrants, in an aggregate number equal to the number of
Warrants evidenced by the Global Warrant, in exchange for such Global Warrant.
(f) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL WARRANT. At such time as
all beneficial interests in the Global Warrant have either been exchanged for
Definitive Warrants, exercised or cancelled, the Global Warrant shall be
returned to or retained and cancelled by the Warrant Agent. At any time prior to
such cancellation, if any beneficial interest in the Global Warrant is exchanged
for Definitive Warrants, exercised or cancelled, the number of Warrants and
Warrant Shares represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant, by the Warrant Agent to
reflect such reduction.
(g) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF DEFINITIVE
WARRANTS. To permit registrations of transfers and exchanges, the Company shall
execute and the Warrant Agent is hereby authorized to countersign, in accordance
with the provisions of Sections 3 and 4 and this Section 6, Definitive Warrants
and the Global Warrant as required pursuant to the provisions of this Section 6.
All Definitive Warrants and Global Warrants issued upon any registration of
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transfer or exchange of Definitive Warrants or Global Warrants shall be the
valid obligations of the Company, entitled to the same benefits under this
Warrant Agreement, as the Definitive Warrants or the Global Warrant surrendered
upon such registration of transfer or exchange.
Prior to due presentment for registration of transfer of any Warrant,
the Warrant Agent and the Company may deem and treat the person in whose name
any Warrant is registered as the absolute owner of such Warrant and neither the
Warrant Agent, nor the Company shall be affected by notice to the contrary.
No service charge shall be made to a holder for any registration,
transfer or exchange.
SECTION 7. WARRANTS; EXERCISE OF WARRANTS.
(a) Subject to the terms of this Agreement, each Warrant holder shall
have the right, which may be exercised commencing at the opening of business on
August 19, 1994 and until 5:00 p.m., New York City time on August 15, 2001 to
receive from the Company the number of fully paid and nonassessable Warrant
Shares which the holder may at the time be entitled to receive on exercise of
such Warrants and payment of the Exercise Price (as herein defined) then in
effect for such Warrant Shares. Each Warrant not exercised prior to 5:00 p.m.,
New York City time, on August 15, 2001 shall become void and all rights
thereunder and all rights in respect thereof under this Agreement shall cease as
of such time.
(b) A Definitive Warrant may be exercised upon surrender to the Company
at the principal office of the Warrant Agent of the certificate or certificates
evidencing the Definitive Warrants to be exercised, with the form of election to
purchase on the reverse thereof duly filled in and signed, which signature shall
be guaranteed by an "eligible guarantor institution" (an "Eligible Guarantor
Institution") as defined in Rule 17Ad-715(a)(2) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and upon payment to the
Company of the exercise price of $0.01 (the "Exercise Price"), as adjusted as
provided herein, for each Warrant Share in respect of which a Warrant is then
exercised. Payment of the aggregate Exercise Price shall be made in cash or by
certified or official bank check in lawful money of the United States of America
to the order of the Company or by surrendering unexercised Warrants. Warrants so
surrendered shall have a value equal to the
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Current Market Price (as hereinafter defined) of the Warrants Shares issuable
upon exercise of such Warrant minus the Exercise Price of such Warrant.
Subject to the provisions of Section 8 hereof, upon such surrender of
Definitive Warrants and payment of the Exercise Price, the Company shall issue
and cause to be delivered with all reasonable dispatch to or upon the written
order of the holder and in such name or names as the holder may designate, a
certificate or certificates for the number of full Warrant Shares issuable upon
the exercise of such Warrants together with cash as provided in Section 13;
provided, however, that if any consolidation, merger or lease or sale of assets
is proposed to be effected by the Company as described in subsection (i) of
Section 12 hereof, or a tender offer or an exchange offer for shares of Common
Stock of the Company shall be made, upon such surrender of Definitive Warrants
and payment of the Exercise Price as aforesaid, the Company shall, as soon as
possible, but in any event not later than two business days thereafter, issue
and cause to be delivered the full number of Warrant Shares issuable upon the
exercise of such Definitive Warrants in the manner described in this sentence
together with cash as provided in Section 13. Such certificate or certificates
shall be deemed to have been issued and any person so designated to be named
therein shall be deemed to have become a holder of record of such Warrant Shares
as of the date of the surrender of such Definitive Warrants and payment of the
Exercise Price in accordance with the terms hereof. The method of delivery of
Definitive Warrants to the Warrant Agent is at the option and risk of the holder
thereof.
The Definitive Warrants shall be exercisable, at the election of the
holders thereof, either in full or from time to time in part and, in the event
that a certificate evidencing Definitive Warrants is exercised in respect of
fewer than all of the Warrant Shares issuable on such exercise at any time prior
to the date of expiration of the Warrants, a new certificate evidencing the
remaining Warrant or Warrants will be issued and the Warrant Agent is hereby
irrevocably authorized to countersign and to deliver the required new Warrant
Certificate or Certificates pursuant to the provisions of this Section and of
Section 4 hereof, and the Company, whenever required by the Warrant Agent, will
supply the Warrant Agent with Warrant Certificates duly executed on behalf of
the Company for such purpose.
(c) In order to exercise Unit Warrants prior to Separation, the
registered holder of the related Note or Notes must (i) surrender such Note or
Notes to the Warrant Agent with the form of election to purchase set forth on
the reverse thereof duly filled in and signed, which signature shall be
guaranteed by
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an Eligible Guarantor Institution, and (ii) pay in full to the Warrant Agent for
the account of the Company by certified or official bank check payable in lawful
money of the United States of America to the order of the Company, the Exercise
Price relating to the Unit Warrants exercised. Prior to Separation, the Unit
Warrants may only be exercised in integral multiples of two (2).
Upon receipt of the items referred to in the preceding paragraph, the
Warrant Agent shall:
(1) deliver such Note or Notes to the Trustee pursuant to the
provisions of the Indenture with instructions to issue in the name of the
registered holder of such Note or Notes (i) a new Note or Notes containing
$1,000 of principal amount or other multiples thereof and, if prior to
Separation, a Warrant Endorsement for each two (2) Unit Warrants
surrendered but not exercised and (ii) a new Note or Notes not containing a
Warrant Endorsement in the aggregate principal amount equal to the
difference between (x) the principal amount of the Note or Notes so
surrendered and (y) the principal amount of the Note or Notes to be issued
pursuant to the preceding clause (i);
(2) after Separation, issue in the name of the registered holder of the
Note or Notes so surrendered a Warrant Certificate representing the number
of Unit Warrants equal to the difference between (x) the number of Unit
Warrants represented by the Note or Notes so surrendered and (y) the Unit
Warrants exercised on behalf of such holder as provided in this Section 7;
and
(3) as custodian of the underlying Unit Warrants on behalf of such
registered holder, cause such Unit Warrants to be exercised on behalf of
such holder as provided in this Section 7.
(d) All Warrant Certificates (or Notes containing a Warrant
Endorsement, as the case may be) surrendered upon exercise of Warrants shall be
cancelled by the Warrant Agent and disposed of by the Company in accordance with
applicable law. The Warrant Agent shall account promptly to the Company with
respect to Warrants exercised and concurrently pay to the Company all monies
received by the Warrant Agent for the purchase of the Warrant Shares through the
exercise of such Warrants. The Warrant Agent shall keep copies of this Agreement
and any notices given or received hereunder available for inspection by the
holders and the Company during normal business hours at its office.
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The Company shall supply the Warrant Agent from time to time with such numbers
of copies of this Agreement as the Warrant Agent may request.
(e) The holder of the Global Warrant (and/or, prior to Separation, the
holder of the Global Note) shall not be able to exercise the Global Warrant (or
any Unit Warrant related to the Global Note) for Warrant Shares. In order to
exercise the Global Warrant (or any Unit Warrant related to the Global Note),
the beneficial owner thereof must first obtain a Definitive Warrant pursuant to
the provisions of this Agreement (or a definitive Note containing a Warrant
Endorsement pursuant to the provisions of the Indenture) and comply with the
procedures set forth in this Section 7.
SECTION 8. PAYMENT OF TAXES. The Company shall pay any documentary
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; provided that the Company shall not be required to pay any
tax or taxes that may be payable in respect of any transfer involved in the
issuance of any Warrant Certificates or any certificates for Warrant Shares in a
name other than that of the registered holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such Warrant Certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid or is not due.
SECTION 9. MUTILATED OR MISSING WARRANT CERTIFICATES. If any mutilated
Warrant Certificate is surrendered to the Warrant Agent, or the Company and the
Warrant Agent receive evidence to their satisfaction of the destruction, loss or
theft of any Warrant Certificate, the Company shall issue and the Warrant Agent,
upon the written order of the Company signed by two Officers of the Company,
shall countersign a replacement Warrant Certificate if the Warrant Agent's
requirements for replacements of Warrant Certificates are met. If required by
the Warrant Agent or the Company, an indemnity bond must be supplied by the
holder of such Warrant Certificate that is sufficient in the judgment of the
Warrant Agent and the Company to protect the Company, the Warrant Agent or any
agent from any loss that any of them may suffer if a Warrant Certificate is
replaced. The Company or the Warrant Agent may charge for its expenses in
replacing a Warrant Certificate.
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Every replacement Warrant Certificate is an obligation of the Company
and shall be entitled to all of the benefits of this Agreement equally and
proportionately with all other Warrant Certificates duly issued hereunder.
SECTION 10. RESERVATION OF WARRANT SHARES. The Company shall at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock that may then be deliverable upon the
exercise of all outstanding Warrants and all other securities of the Company
that may be exercisable for or exchangeable into Common Stock.
The Company or, if appointed, the transfer agent for the Common Stock
shall be irrevocably authorized and directed at all times to reserve such number
of authorized shares of Common Stock as shall be required for such purpose. The
Company shall keep a copy of this Agreement on file with the transfer agent for
the Common Stock.
Before taking any action that would cause an adjustment pursuant to
Section 12 hereof to reduce the Exercise Price below the then par value (if any)
of the Warrant Shares, the Company shall take all action that may, in the
opinion of its counsel (which may be counsel employed by the Company), be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares at the Exercise Price as so adjusted.
The Company covenants that all Warrant Shares issued upon exercise of
Warrants shall, upon issue, be fully paid, nonassessable, free of preemptive
rights and free from all taxes, liens, charges and security interests with
respect to the issue thereof.
SECTION 11. GOVERNMENT APPROVALS AND STOCK EXCHANGE LISTINGS. The
Company shall use its best efforts to (a) obtain and keep effective any and all
permits, consents and approvals of governmental agencies and authorities and to
make securities acts filings under Federal and state laws, if any, that are
required to permit the exercise of the Warrants and the issuance, sale, transfer
and delivery of the Warrant Shares issued upon exercise of the Warrants, and (b)
have the Warrant Shares, immediately upon their issuance, listed on the
principal securities exchanges and markets within the United States of America,
if any, on which other shares of Common Stock are then listed.
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SECTION 12. ADJUSTMENTS; ETC. The number of Warrant Shares issuable
upon the exercise of each Warrant are subject to adjustment from time to time
upon the occurrence of the events enumerated in this Section 12. For purposes of
this Section 12, "Common Stock" means shares now or hereafter authorized of any
class of common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount.
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK.
If the Company:
(1) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock or other shares of its capital stock;
(2) subdivides its outstanding shares of Common Stock into a greater
number of shares;
(3) combines its outstanding shares of Common Stock into a smaller
number of shares; or
(4) issues by reclassification of its Common Stock any shares of its
capital stock;
then the number of Warrant Shares issuable upon exercise of the Warrant
immediately prior to such action shall be proportionately adjusted so that the
holder of any Warrant thereafter exercised may receive the aggregate number and
kind of shares of capital stock of the Company that such holder would have owned
immediately following such action if such Warrant had been exercised immediately
prior to such action.
The adjustment shall become effective immediately after the record date
in the case of a dividend or distribution and immediately after the effective
date in the case of a subdivision, combination or reclassification.
Such adjustment shall be made successively whenever any event listed
above shall occur.
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(b) DISTRIBUTIONS.
If the Company distributes to all holders of its Common Stock any of
its assets (including but not limited to cash), securities (other than capital
stock), or any rights or warrants to purchase securities (including but not
limited to Common Stock) of the Company, the Company shall make the same
distribution to holders of the Warrants as though, immediately prior to the
record date with respect to such distribution, each such holder owned the number
of shares of Common Stock such holder could have purchased upon the exercise of
the Warrants held by such holder.
(c) COMMON STOCK ISSUE.
If the Company shall propose to issue shares of Common Stock for a
consideration per share less than the Current Market Price (defined below) per
share on the date the Company fixes the offering price of such additional shares
(the "Additional Shares"), the Company shall notify each holder of Warrants in
writing at least 30 days prior to such issuance and offer to sell to each holder
of Warrants, at the same price and on the same terms offered to all other
prospective buyers (provided that the holders of Warrants shall not be required
to buy any other securities in order to buy such Additional Shares), a portion
of the Additional Shares equal to (i) the number of shares of Common Stock that
may be purchased upon the exercise of such holder's Warrants divided by (ii) the
sum of (A) the number of all the shares of Common Stock then outstanding and (B)
the number of shares of Common Stock that would be issued upon the exercise of
all the Warrants then outstanding (such portion, the "Pro Rata Portion"). Each
such holder may elect to buy all or any portion of the Additional Shares offered
to such holder pursuant to the preceding sentence by delivering written notice
to the Company during the 30 day period prior to such issuance or may decline
such offer. The payment for such purchase by the holders of Warrants so electing
shall be made on the later of (i) the payment by all other persons purchasing
Additional Shares and (ii) expiration of such 30 day period, in each case
against delivery of certificates for such Common Stock registered in the name of
such electing holders or their respective designees.
This subsection (c) does not apply to:
(1) any of the transactions or distributions described in
subsections (a) or (b) of this Section 12.
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(2) the exercise of Warrants,
(3) the conversion or exchange of securities convertible or
exchangeable for Common Stock and the exercise of rights or warrants issued
to the holders of Common Stock, in each case only if the issuance of such
securities, rights or warrants were subject to the provisions of this
Section 12.
(4) Common Stock or stock appreciation rights issued to employees of
the Company and its subsidiaries under bona fide employee benefit plans
adopted by the Board of Directors and approved by the holders of Common
Stock when required by law (but only to the extent that the aggregate
number of shares excluded hereby and issued after the date of this
Agreement shall not exceed 12% of the Common Stock outstanding at the time
of the adoption of each such plan, exclusive of antidilution adjustments
thereunder), or
(5) issuances of Common Stock pursuant to (x) a bona fide public
offering pursuant to a firm commitment underwriting, or (y) a bona fide
private placement through a placement agent that is a nationally recognized
investment banking firm and member firm of the National Association of
Securities Dealers, Inc. ("NASD") (except to the extent that any discount
from the current market price attributable to restrictions on
transferability of the Common Stock, as determined in good faith by the
Board of Directors and described in a board resolution which shall be filed
with the Warrant Agent, shall exceed 25%).
(d) CONVERTIBLE SECURITIES ISSUE.
If the Company shall propose to issue any securities convertible
into or exchangeable for Common Stock (other than securities issued in
transactions described in subsection (b) of this Section 12) for a consideration
per share of Common Stock initially deliverable upon conversion or exchange of
such securities that is less than the Current Market Price per share on the date
of issuance of such securities, the Company shall notify each holder of Warrants
in writing at least 30 days prior to such issuance and offer to sell to each
holder of Warrants, at the same price and on the same terms offered to all other
prospective buyers (provided that the holders of Warrants shall not be required
to buy any other security in order to buy such convertible securities), such
holder's Pro Rata Portion of such convertible securities. Each such holder may
elect to buy
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all or any portion of the securities offered to such holder pursuant to the
preceding sentence by delivering written notice to the Company during the 30 day
period prior to such issuance or may decline such offer. The payment for such
purchase by the holders of Warrants so electing shall be made on the later of
(i) the payment by all other persons purchasing such convertible securities and
(ii) expiration of such 30 day period, in each case against delivery of
certificates representing such convertible securities registered in the name of
such electing holders or their respective designees.
(e) CURRENT MARKET PRICE.
The "Current Market Price" per share of Common Stock on any date is
the average of the Quoted Prices of the Common Stock for 30 consecutive trading
days commencing 45 trading days before the date in question. The "Quoted Price"
of the Common Stock is the last reported sales price of the Common Stock as
reported by NASDAQ National Market System, or if the Common Stock is listed on a
securities exchange, the last reported sales price of the Common Stock on such
exchange which shall be for consolidated trading if applicable to such exchange,
or if neither so reported or listed, the last reported bid price of the Common
Stock. In the absence of one or more such quotations, the Current Market Price
shall be determined in good faith by a nationally recognized investment banking
firm that is a member firm of the NASD and independent of the Company. If
applicable, in connection with the sale of units consisting of Common Stock and
other securities, such investment bank shall take into consideration the value
of each component of such unit.
(f) WHEN NO ADJUSTMENT OR ACTION REQUIRED.
Notwithstanding anything in this Section 12 to the contrary, no
adjustment or action under this Section 12 need be made for a transaction
referred to in subsections (a), (b), (c), and (d) of this Section 12(i) for a
change solely in the par value or no par value of the Common Stock, provided
that the Company shall not increase the par value to exceed the Exercise Price,
(ii) the conversion or exchange (other than pursuant to a reclassification), in
any case on a share-for-share basis, of Common Stock for non-voting common stock
that has rights (other than voting rights) identical to the Common Stock
("Non-voting Stock") or of Non-voting Stock for Common Stock, (iii) for shares
of Common Stock (or options to purchase such shares) issued to employees of the
Company or any of its subsidiaries pursuant to a stock option agreement or other
employee benefit plan of the Company or any of its subsidiaries in an amount up
to 12% of the
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number of shares of Common Stock, excluding any Warrant Shares, then outstanding
on a fully diluted basis after giving effect to the exercise of all stock
options or (iv) the exercise of the Warrants.
To the extent the Warrants become exercisable for cash only, no
adjustment need be made thereafter as to the cash. Interest shall not accrue on
the cash.
(g) REORGANIZATION OF COMPANY.
If the Company consolidates or merges with or into, or transfers or
leases all or substantially all its assets to, any person, upon consummation of
such transaction the Warrants shall automatically become exercisable for the
kind and amount of securities, cash or other assets that the holder of a Warrant
would have owned immediately after the consolidation, merger or transfer or
lease if the holder had exercised the Warrant immediately before the effective
date of the transaction. Concurrently with the consummation of such transaction,
the corporation formed by or surviving any such consolidation or merger if other
than the Company, or the person to which such sale or conveyance shall have been
made, shall enter into a supplemental Warrant Agreement so providing and further
providing for adjustments which shall be as nearly equivalent as may be
practical to the adjustments provided for in this Section. The successor
Company shall mail to Warrant holders a notice describing the supplemental
Warrant Agreement.
If the issuer of securities deliverable upon exercise of Warrants
under the supplemental Warrant Agreement is an affiliate of the formed,
surviving, transferee or lessee corporation, that issuer shall join in the
supplemental Warrant Agreement.
If this subsection (g) applies to any transaction, subsections (a),
(b), (c) and (d) of this Section 12 shall not apply to such transaction.
(h) WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED.
In any case in which Section 12(a) shall require that an adjustment
be made effective as of a record date for a specified event, the Company may
elect to defer until the occurrence of such event (i) issuing to the holder of
any Warrant exercised after such record date the Warrant Shares and other
capital stock of the Company, if any, issuable upon such exercise over and above
the
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Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise on the basis of the Exercise Price in effect prior to such
adjustment and (ii) paying to such holder any amount in cash in lieu of a
fractional share pursuant to Section 13; provided that the Company shall deliver
to such holder a due bill or other appropriate instrument evidencing such
holder's right to receive such additional Warrant Shares, other capital stock or
cash, as the case may be, upon the occurrence of the event requiring such
adjustment.
(i) FORM OF WARRANTS.
The Company may, at its option, issue new Warrant Certificates
evidencing Warrants in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Exercise Price per Warrant Share and the
number or kind or class of shares or other securities or property purchasable
under the Warrant Certificates made in accordance with the provisions of this
Agreement. However, irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
SECTION 13. FRACTIONAL INTERESTS. The Company shall not be required
to issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 13,
be issuable on the exercise of any Warrants (or specified portion thereof), upon
payment in full of the Exercise Price with respect to such fraction of a Warrant
Share the Company shall pay an amount in cash equal to the same fraction of the
Current Market Price of such share of Common Stock on the day immediately
preceding the date the Warrant is presented for exercise, provided that at the
request of the Warrant holder, the Exercise Price with respect to such fraction
of a Warrant Share may be netted against the cash to be paid by the Company
under this Section 13.
SECTION 14. NOTICES TO WARRANT HOLDERS. Upon any adjustment or
action required to be taken pursuant to Section 12, the Company shall (a)
promptly prepare a certificate setting forth such adjustment or action and a
brief
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statement of the facts accounting for such adjustment or action, (b) promptly
file with the Warrant Agent and with each transfer agent for the Common Stock a
copy of such certificate and (c) send a brief summary thereof to each holder of
a Warrant Certificate in accordance with Section 22 hereof. In addition, if the
adjustment or action arises pursuant to subsection (a) of Section 12, the
Company shall deliver to the Warrant Agent and each registered holder a
certificate which includes the report of a "Big-6" accounting firm selected by
the Board of Directors of the Company (who may be the regular accountants
employed by the Company) setting forth the number of Warrant Shares issuable
upon exercise of each Warrant and the Exercise Price of such Warrant Shares
after such adjustment, setting forth a brief statement of the facts requiring
such adjustment and setting forth the computation by which such adjustment was
made. Where appropriate, such notice may be given in advance and may be included
as a part of the notice required to be sent under the other provisions of this
Section 14.
In case:
(a) of any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company is required, or
of the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of
Common Stock issuable upon exercise of the Warrants (other than a change in
par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or a tender offer
or exchange offer for shares of Common Stock; or
(b) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be given to each of the registered holders of
the Warrant Certificates at his address appearing on the Warrant register, at
least 20 days prior to the applicable record date hereinafter specified, or
promptly in the case of events for which there is no record date, in accordance
with Section 23 hereof, a written notice stating, as appropriate, (i) the
initial expiration date set forth in any tender offer or exchange offer for
shares of Common Stock, or (ii) the date on which any such consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up is expected
to become effective or consummated, and the date as of which it is expected that
holders of record of shares of Common Stock shall be entitled to exchange such
shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger,
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conveyance, transfer, dissolution, liquidation or winding up. The failure to
give the notice required by this Section 14 or any defect therein shall not
affect the legality or validity of any consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as stockholders in respect of the
meetings of stockholders or the election of Directors of the Company or any
other matter, or any rights whatsoever as stockholders of the Company.
SECTION 15. REGISTRATION RIGHTS.
(a) INCIDENTAL REGISTRATION.
If the Company at any time proposes to register any of its equity
securities (as defined in the Exchange Act) under the Securities Act (other than
pursuant to a registration statement on Forms S-4 or S-8, or any successor
forms), whether or not for sale for its own account, and the registration form
to be used may be used for the registration of Registrable Securities (as
defined below), it shall at such time give written notice to all registered
holders of Warrants or Registrable Securities of its intention to do so at least
20 days prior to the anticipated filing thereof and, upon the written request of
any such holder made within 20 days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of by
such holder and the intended method of disposition thereof), the Company shall
use its best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the holders thereof, to the extent required to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered, provided that:
(1) if, at any time after giving written notice of its intention to
register any securities and, prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such securities,
the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon,
shall be relieved of its obligation to register any Registrable
Securities in connection with such
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registration (but not from its obligation to pay the Registration
Expenses (as provided in Section 15(d) below) in connection therewith);
and
(2) if such registration shall be in connection with an underwritten
public offering and the managing underwriters shall advise the Company
in writing that in their opinion the number of Registrable Securities
requested to be included in such registration exceeds the number of
such securities which can be sold in such offering, the Company shall
include in such registration the number (if any) of Registrable
Securities so requested to be included that, in the opinion of such
underwriters, can be sold and shall not include in such registration
any securities (other than securities being sold by the Company) so
requested to be included other than Registrable Securities unless all
Registrable Securities requested to be so included are included therein
(and if in the opinion of such underwriters, some but not all of the
Registrable Securities may be so included, all holders of Registrable
Securities requested to be included therein shall share pro rata in the
number of shares of Registrable Securities included in such
underwritten public offering on the basis of the number of Registrable
Securities requested to be included therein), except that, in the case
of a registration initially requested or demanded by a holder or
holders of securities other than Registrable Securities, the holders of
the Registrable Securities requested to be included therein and the
holders of such other securities shall share pro rata (based on the
number of shares if the requested or demanded registration is to cover
only Common Stock and, if not, based on the proposed offering price of
the total number of securities included in such underwritten public
offering requested to be included therein); and the Company shall so
provide in any registration agreement hereinafter entered into with
respect to any of its securities.
The Company shall pay all Registration Expenses (as defined herein)
in connection with each registration of Registrable Securities.
(b) DEMAND REGISTRATION.
At any time and from time to time on or after 90 days following the
Initial Public Offering, the holders of Registrable Securities and their
respective transferees may make written requests for registration of their
Registrable Securities under the Securities Act (a "DEMAND REGISTRATION");
provided that in no event shall the holders of Registrable Securities and their
respective transferees make, in the aggregate, more than three (3) such
requests; provided further that
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the holders making any such Demand Registration (the "INITIATING HOLDERS") shall
own and include in such Demand Registration in the aggregate at least 20% of the
then issued and outstanding Registrable Securities; and provided further that
the managing underwriter of the Initial Public Offering may require the holders
of Registrable Securities to wait for a period of up to 180 days following the
Initial Public Offering to make a sale pursuant to such Demand Registration by
giving the Company notice of such intention in writing (with a copy to each
holder of Registrable Securities requesting registration). Only holders of
Registrable Securities may participate in a registration of securities done in
connection with a Demand Registration pursuant to this Section 15(b).
Upon the written request of one or more Initiating Holders,
requesting that the Company effect the registration under the Securities Act of
all or part of such Initiating Holders' Registrable Securities and specifying
the intended method of disposition thereof, the Company will promptly give
written notice of such requested registration to all registered holders of
Registrable Securities, and thereupon the Company will, subject to the terms of
this Agreement, use its best efforts to effect the registration under the
Securities Act of the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for disposition in accordance
with the intended method of disposition stated in such request to the extent
requisite to permit the disposition (in accordance with the intended methods
thereof as aforesaid) of the Registrable Securities to be registered.
(c) REGISTRATION PROCEDURES.
In connection with any registration of Registrable Securities under
the Securities Act pursuant to this Section 15, the Company shall promptly:
(1) prepare and file with the Securities and Exchange Commission a
registration statement on an appropriate form selected by the Company
(provided that in the case of a Demand Registration, (i) the registration
statement form shall be reasonably approved by a majority (by number of
shares) of the holders of the Registrable Securities so to be registered,
(ii) the registration statement shall be filed within 90 days after a
written request for such Demand Registration and (iii) the registration
statement shall permit the disposition of such Registrable Securities in
accordance with the intended method or methods of disposition specified in
their request for the Demand Registration; and provided further that if the
Company proposes that a registration be on Form S-3 or any similar short
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form registration statement which is a successor to Form S-3, and the
managing underwriters, if any, advise the Company in writing that in their
opinion the use of another permitted form is of material importance to the
success of the offering, then such registration shall be on such other
permitted form) with respect to such securities, make all required filings
with the NASD and use best efforts to cause such registration statement to
become effective;
(2) if a registration pursuant to this Section 15 involves an
underwritten offering, select the managing underwriter or underwriters
thereof; provided, however, in the case of a Demand Registration pursuant
to Section 15(b), such selection is subject to reasonable approval by a
majority (by number of shares) of the holders of the Registrable Securities
as to which registration has been requested;
(3) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such registration statement until such time as all of such securities have
been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof set forth in such registration statement, but
in no event for a period of more than six months after such registration
statement becomes effective;
(4) furnish to counsel (if any) elected by holders of a majority (by
number of shares) of the Registrable Securities covered by such
registration statement copies of all documents proposed to be filed with
the Securities and Exchange Commission in connection with such
registration, which documents shall be subject to the review of such
counsel;
(5) furnish to each seller of such securities (i) a copy of the
order of the Securities and Exchange Commission declaring such registration
statement and any amendment thereto effective, (ii) such reasonable number
of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including any documents
incorporated therein by reference and all exhibits), (iii) such reasonable
number of copies of the prospectus included in such registration statement
(including such preliminary prospectus and any summary
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prospectus), in conformity with the requirements of the Securities Act, and
(iv) such other documents as such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
seller;
(6) use its best efforts to register or qualify such securities
covered by such registration statement under such other securities or blue
sky laws of such jurisdictions as each seller shall request, keep each such
registration or qualification (or exemption therefrom) effective until such
time as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth
in such registration statement, but in no event for a period of more than
six months after such registration statement becomes effective and do any
and all other acts and things which may be necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller, except that the Company shall
not for any such purpose be required to qualify generally to do business as
a foreign corporation in any jurisdiction wherein it is not so qualified,
or to consent to general service of process in any such jurisdiction;
(7) furnish to each seller a signed counterpart, addressed to the
sellers, of
(i) an opinion of counsel for the Company, dated the effective
date of the registration statement, and
(ii) subject to the accountants obtaining the necessary
representations as specified in Statement on Auditing Standards No.
72, a "comfort" letter signed by the independent public accountants
who have certified the Company's financial statements included in
the registration statement,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to changes subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities;
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(8) notify each seller of any Registrable Securities covered by such
registration statement (i) of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of such
registration statement or of any order preventing or suspending the use of
the prospectus included in such registration statement or the initiation of
any proceedings for that purpose or (ii) of the receipt by the Company of
any notification with respect to the suspension of the qualification or
exemption from qualification of such registration statement or any of the
Registrable Securities for offer or sale in any jurisdiction, or the
contemplation, initiation or threatening of any proceeding for such
purpose;
(9) use its best efforts to prevent the issuance of any order
suspending the effectiveness of such registration statement or of any order
preventing or suspending the use of the prospectus included in such
registration statement or suspending the qualification (or exemption from
qualification) of any of the Registrable Securities for offer or sale in
any jurisdiction, and, if any such order is issued, to use its best efforts
to obtain the withdrawal of any such order at the earliest possible moment;
(10) notify each seller of any Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the happening of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and at the request of any such seller prepare
and furnish to such seller a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing; provided, that the six month period described above will be
tolled from the time a prospectus contains such a statement or omission
until a prospectus correcting such statement or omission has been
delivered;
(11) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable,
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an earnings statement covering the period of at least twelve months, but
not more than eighteen months, beginning with the first month after the
effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act; and
(12) use its best efforts to cause such securities (i) to be listed
on each securities exchange, if any, on which the Common Stock is then
listed or (ii) to be authorized to be quoted on the Nasdaq Stock Market or
the Nasdaq National Market, if the Common Stock is so authorized, and to
provide a transfer agent and registrar for such Registrable Securities not
later than the effective date of such registration statement.
The Company may require each seller of any securities as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing and as shall be required by law
in connection therewith. Each such holder agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such holder not materially
misleading.
By acquisition of Registrable Securities, each holder of such
Registrable Securities shall be deemed to have agreed that upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 15(c)(9) hereof, such holder shall promptly discontinue such holder's
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 15(c)(9)
hereof. If so directed by the Company, each holder of Registrable Securities
shall deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such holder's possession of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the period
mentioned in Section 15(c)(2) hereof shall be extended by the number of days
during the period from and including the date of the giving of such notice to
and including the date when each seller of any Registrable Securities covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by Section 15(c)(9) hereof.
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(d) EFFECTIVE REGISTRATION STATEMENT. A registration requested pursuant
to Section 15(b) shall not be deemed to have been effected, and shall not count
as one of the three Demand Registrations permitted under Section 15(b), (i)
unless a registration statement with respect thereto has become effective,
provided that a registration which does not become effective after the Company
has filed a registration statement with respect thereto solely by reason of the
refusal to proceed of the Initiating Holders (other than a refusal to proceed
based upon the advice of counsel relating to a matter with respect to the
Company) shall be deemed to have been effected by the Company at the request of
such Initiating Holders unless the Initiating Holders shall have elected to pay
all Registration Expenses in connection with such registration, (ii) if, after
it has become effective, such registration becomes subject to any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason, or (iii) the conditions to closing specified in
the purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied, other than by reason of some act or
omission by such Initiating Holders.
(e) REDUCTIONS IN DEMAND REGISTRATION. If a Demand Registration
pursuant to Section 15(b) involves an underwritten offering, and the managing
underwriter advises the Company in writing (with a copy to each holder of
Registrable Securities requesting registration) that, in its opinion, the number
of securities requested to be included in such registration exceeds the number
which can be sold in such offering within a price range acceptable to the
holders of a majority of the Registrable Securities requesting to be included in
such registration, the Company will include in such registration, to the extent
of the number which the Company is so advised can be sold in such offering,
Registrable Securities requested to be included in such registration by the
holder or holders of Registrable Securities, pro rata among such holders
requesting such registration on the basis of the number of such securities
requested to be included by such holders.
(f) INDEMNIFICATION.
(1) INDEMNIFICATION BY THE COMPANY.
The Company shall, without limitation as to time, indemnify
and hold harmless each holder of Registrable Securities (a "Holder"),
each Person who controls each such Holder (within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act)
and the offi-
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cers, directors, agents and employees of each such Holder and control
Person (each such Person being sometimes hereinafter referred to as an
"Indemnified Holder"), to the fullest extent lawful, from and against
any and all losses, claims, damages, liabilities, costs (including,
without limitation, costs of preparation and reasonable attorneys'
fees) and expenses (including, without limitation, costs and expenses
incurred in connection with investigating, preparing, pursuing or
defending against any of the foregoing) (collectively, "Losses"), as
incurred, directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged
untrue statement of a material fact contained in any registration
statement, prospectus or form of prospectus, or in any amendment or
supplement thereto, or in any preliminary prospectus, or any omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, except
insofar as such Losses are based solely upon information relating to
such Indemnified Holder and furnished in writing to the Company by such
Indemnified Holder expressly for use therein. The Company shall also
indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution,
their officers, directors, agents and employees and each Person who
controls such Persons (within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act) to the same extent
as provided above with respect to the indemnification of the Holders.
Prior to reimbursing any Indemnified Holder for any Losses pursuant to
this Section 15(f)(1), the Company may require such Indemnified Holder
to provide a written undertaking to reimburse the Company if it is
finally judicially determined by a court of competent jurisdiction
(which determination is not subject to appeal) that such Indemnified
Holder was not entitled to indemnification pursuant to this Section
15(f)(1).
(2) CONDUCT OF INDEMNIFICATION PROCEEDINGS.
If any action, claim, suit or proceeding (including, without
limitation, an investigation or partial proceeding, such as a
deposition) (collectively, "Proceedings") shall be brought or asserted
against an Indemnified Holder in respect of which indemnity may be
sought from the Company, such Indemnified Holder shall promptly notify
the Company in writing, provided, however, that the failure to so
notify the Company shall not
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relieve the Company from any obligation or liability except to the
extent (but only to the extent) that it shall finally be determined by
a court of competent jurisdiction (which determination is not subject
to appeal) that the Company has been prejudiced materially by such
failure.
The Company shall have the right, exercisable by giving
written notice to the Indemnified Holder, within 20 business days after
receipt of written notice from such Indemnified Holder of such
Proceeding, to assume, at its expense, the defense of any such
Proceeding, provided, however, that such Indemnified Holder shall have
the right to employ separate counsel in any such Proceeding and to
participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Holder unless (i)
the Company has agreed to pay such fees and expenses or (ii) the
Company shall have failed promptly to assume the defense of such
Proceeding or has failed to employ counsel reasonably satisfactory to
such Indemnified Holder or (iii) the named parties to any such
Proceeding (including any impleaded parties) include both such
Indemnified Holder and the Company or an affiliate or controlling
person of the Company, and such Indemnified Holder shall have been
advised by counsel that there may be one or more material defenses
available to such Indemnified Holder that are in addition to, or in
conflict with, those available to the Company or such affiliate or
controlling person (in which case, if such Indemnified Holder notifies
the Company in writing that it elects to employ separate counsel at the
expense of the Company, the Company shall not have the right to assume
the defense thereof and the reasonable fees and expenses of such
counsel shall be at the expense of the Company); it being understood,
however, that the Company shall not, in connection with any one such
Proceeding or separate but substantially similar or related Proceedings
in the same jurisdiction, arising out of the same general allegations
or circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys (together with appropriate local counsel) at
any time for such Indemnified Holder).
Whether or not such defense is assumed by the Company, no
Indemnified Holder shall be subject to any liability for any settlement
made without its consent (but such consent shall not be unreasonably
withheld). The Company shall not be liable for any settlement of any
such Proceeding effected without its written consent, but if settled
with its written consent, or if there be a final judgment for the
plaintiff in any such Proceeding, the Company agrees, subject to the
exceptions and
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limitations set forth above, to indemnify and hold harmless such
Indemnified Holders from and against any and all Losses by reason of
such settlement or judgment. The Company shall not consent to entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
each Indemnified Holder of a release, in form and substance reasonably
satisfactory to the Indemnified Holder, from all liability in respect
of such Proceeding for which such Indemnified Holder would be entitled
to indemnification hereunder (whether or not any Indemnified Holder is
a party thereto).
(3) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES.
In connection with any registration statement in which a
Holder of Registrable Securities is participating, such Holder of
Registrable Securities shall furnish to the Company in writing such
information as the Company may be required to include in any
registration statement or prospectus and shall indemnify the Company,
its directors, officers, agents and employees, each Person, if any, who
controls the Company (within the meaning of either Section 15 of the
Securities Act or Section 20(a) of the Exchange Act), and the
directors, officers, agents or employees of such controlling persons,
to the same extent as the foregoing indemnity from the Company to such
Holders, but only to the extent that the untrue statement or omission
is contained in information relating to such Holders furnished in
writing by such Holders to the Company expressly for use in any
registration statement or prospectus, or any amendment or supplement
thereto, or any preliminary prospectus. In case any action or
proceeding shall be brought against the Company or its directors or
officers or any such controlling person, in respect of which indemnity
may be sought against a Holder of Registrable Securities, such Holder
shall have the rights and duties given to the Company and the Company
or its directors or officers or such controlling person shall have the
rights and duties given to each Holder by the preceding paragraph. In
no event shall the liability of any Holder of Registrable Securities
hereunder be greater in amount than the dollar amount of the proceeds
(net of payment of all expenses) received by such Holder upon the sale
of the Registrable Securities giving rise to such indemnification
obligation. No Holder of Registrable Securities shall be required to
enter into any agreement or undertaking providing for any
indemnification or contribution obligation greater than under this
Section.
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(4) CONTRIBUTION.
If the indemnification provided for in this Section 15(f) is
unavailable to an indemnified party or is insufficient to hold such
indemnified party harmless for any Losses in respect of which this
Section 15(f) would otherwise apply by its terms (other than by reason
of exceptions provided in this Section 15(c)), then each applicable
indemnifying party, in lieu of indemnifying such indemnified party,
shall have a joint and several obligation to contribute to the amount
paid or payable by such indemnified party as a result of such Losses,
in such proportion as is appropriate to reflect the relative fault of
the indemnifying party, on the one hand, and such indemnified party on
the other hand, in connection with the actions, statements or omissions
that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of the indemnifying party, on the
one hand, and of the indemnified party, on the other hand, shall be
determined by reference to, among other things, whether any untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact, relates to information supplied by
such indemnifying party or indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by an
indemnified party as a result of any Losses shall be deemed to include
any legal or other fees or expenses incurred by such party in
connection with any Proceeding, to the extent such party would have
been indemnified for such fees and expenses if the indemnification
provided for in Section 15(f)(1) or 15(f)(3) was available to such
party.
The Company and each Holder agree that it would not be just
and equitable if contribution pursuant to this Section 15(f)(4) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to
in the immediately preceding paragraph. Notwithstanding the provisions
of this Section 15(f)(4), an Indemnified Holder shall not be required
to contribute, in the aggregate, any amount in excess of such
Indemnified Holder's Maximum Contribution Amount. An Indemnified
Holder's "Maximum Contribution Amount" shall equal the excess of (i)
aggregate proceeds received by such Indemnified Holder pursuant to the
sale of such Registrable Securities over (ii), the aggregate amount of
damages that such Indemnified Holder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person
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guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 15
are in addition to any liability that the indemnifying parties may have to the
indemnified parties.
(g) REGISTRATION EXPENSES.
(1) All fees and expenses incident to the performance of or
compliance with this Section 15 by the Company shall be borne by the Company,
including, without limitation:
(i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be
made with the NASD and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable
fees and disbursements of counsel in connection with Blue Sky
qualifications of the Registrable Securities);
(ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable
Securities in a form eligible for deposit with The Depository Trust
Company and of printing prospectuses if the printing of prospectuses is
requested by the managing underwriters, if any);
(iii) messenger, telephone, duplication, word
processing and delivery expenses incurred by the Company in the
performance of its obligations hereunder;
(iv) fees and disbursements of counsel for the
Company;
(v) fees and disbursements of all independent
certified public accountants referred to in Section 15(c)(6)
(including, without limitation, the expenses of any special audit and
"cold comfort" letters required by or incident to such performance);
(vi) fees and expenses of any "qualified independent
underwriter" or other independent appraiser participating in an
offering pursuant
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<PAGE> 38
to Section 3 of Schedule E to the By-laws of the NASD, but only where
the need for such a "qualified independent underwriter" arises due to a
relationship with the Company;
(vii) Securities Act liability insurance, if the
Company so desires such insurance;
(viii) fees and expenses of all other Persons
retained by the Company; internal expenses of the Company (including,
without limitation, all salaries and expenses of officers and employees
of the Company performing legal or accounting duties); and the expense
of any annual audit; and
(ix) rating agency fees and the fees and expenses
incurred in connection with the listing of the securities to be
registered on any securities exchange.
(2) The Company shall reimburse the holders of the Registrable
Securities for the reasonable fees and disbursements of not more than one
counsel (in addition to appropriate local counsel approved by the Company)
chosen by the holders of a majority of the Registrable Securities to be included
in any Registration Statement and for other reasonable and necessary
out-of-pocket expenses of the holders of Registrable Securities incurred in
connection with the registration of the Registrable Securities. Notwithstanding
the provisions of this Section 15, each holder shall pay its proportionate share
of underwriting discounts and commissions (but no other fees and expenses of
underwriters).
(h) CERTAIN DEFINITIONS. The term "Registrable Securities"
shall mean the Warrant Shares and any other securities issued or issuable upon
exercise of the Warrants. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (A) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (B) they shall have
been distributed to the public pursuant to Rule 144 (or any successor provision)
or are saleable pursuant to Rule 144(k) (or any successor provision) under the
Securities Act, (C) they shall have been otherwise transferred, new certificates
for them not bearing a legend restricting further transfer shall have been
delivered by the Company and subsequent disposition of them shall not require
registration or qualification
34
<PAGE> 39
of them under the Securities Act or any similar state law then in force, or (D)
they shall have ceased to be outstanding.
The term "Initial Public Offering" shall mean, with respect to
the Company, the initial sale of Common Stock of the Company by the Company or
its security holders pursuant to an effective registration statement under the
Securities Act (other than a registration statement on Form S-8 or otherwise
relating exclusively to securities issuable under any employee benefit plan of
the Company).
SECTION 16. TAG-ALONG AND DRAG-ALONG RIGHTS. The holders of
Warrants or Warrant Shares shall be entitled and subject to the tag-along and
drag-along rights pursuant to Sections 5 and 6 of the Stockholders Agreement,
dated as of August 18, 1994, by and among the Company and certain of its
stockholders, as in effect on the date hereof (the "Stockholders Agreement"), as
if for purposes thereunder and hereunder the holders of Warrant Shares were
deemed to be "Other Stockholders" (as defined in the Stockholders Agreement).
SECTION 17. CONCERNING THE WARRANT AGENT. The Company agrees
to pay to the Warrant Agent reasonable compensation for all services rendered by
it hereunder and, from time to time, on demand of the Warrant Agent, its
reasonable expenses and counsel fees and disbursements and other reasonable
disbursements incurred in the administration and execution of this Agreement and
the exercise and performance of its duties hereunder. The Company also agrees to
indemnify the Warrant Agent for, and to hold it harmless against, any loss,
liability, or expense incurred without negligence, bad faith or willful
misconduct on the part of the Warrant Agent for anything done or omitted by the
Warrant Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability arising therefrom, directly or indirectly. The indemnification
provided for hereunder shall survive the expiration of the Warrants and the
termination of this Agreement.
The Warrant Agent shall be protected and shall incur no
liability for, or in respect of, any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any
Warrant Certificate or certificate for Warrant Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it, after proper inquiry or
examination, to be genuine and to be
35
<PAGE> 40
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons.
SECTION 18. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF
WARRANT AGENT. Any corporation into which the Warrant Agent or any successor
Warrant Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Warrant
Agent or any successor Warrant Agent shall be a party, or any corporation
succeeding to the corporate trust or stock transfer business of the Warrant
Agent or any successor Warrant Agent, shall be the successor to the Warrant
Agent under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Warrant Agent under
the provisions of Section 20 hereof. In case at the time such successor Warrant
Agent shall succeed to the agency created by this Agreement any of the Warrant
Certificates shall have been countersigned but not delivered, any such successor
Warrant Agent may adopt the countersignature of the predecessor Warrant Agent
and deliver such Warrant Certificates so countersigned; and, in case at that
time any of the Warrant Certificates shall not have been countersigned, any
successor Warrant Agent may countersign such Warrant Certificate either in the
name of the predecessor or in the name of the successor Warrant Agent; and in
all such cases such Warrant Certificates shall have the full force provided in
the Warrant Certificates in this Agreement.
In case at any time the name of the Warrant Agent shall be
changed, and at such time any of the Warrant Certificates shall have been
countersigned but not delivered, the Warrant Agent may adopt the
countersignature under its prior name and deliver Warrant Certificates so
countersigned; and, in case at that time any of the Warrant Certificates shall
not have been countersigned, the Warrant Agent may countersign such Warrant
Certificates either in its prior name or in its changed name; and in all such
cases such Warrant Certificates shall have the full force provided in the
Warrant Certificates and in this Agreement.
SECTION 19. DUTIES OF WARRANT AGENT. The Warrant Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, all of which the Company, by its acceptance
hereof, and the holders of Warrant Certificates, by their acceptance thereof,
shall be bound:
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<PAGE> 41
(a) The Warrant Agent may consult with legal counsel selected
by it (who may be legal counsel for the Company), and the opinion of such
counsel shall be full and complete authorization and protection to the Warrant
Agent as to any action taken or omitted by it in good faith and in accordance
with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Warrant Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Company prior to taking or suffering
any action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by a person reasonably believed
by the Warrant Agent to be the Chairman of the Board, the President, any Vice
President, the Treasurer, the Secretary or any Assistant Secretary of the
Company and delivered to the Warrant Agent; and such certificate shall be full
authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Warrant Agent shall be liable hereunder only for its
own negligence, bad faith or willful misconduct.
(d) The Warrant Agent shall not be liable for, or by reason
of, any of the statements of fact or recitals contained in this Agreement or in
the Warrant Certificates (except as to the fact that it has countersigned the
Warrant Certificates) or be required to verify the same, but all such statements
and recitals are and shall be deemed to have been made by the Company only.
(e) The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Warrant Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 12 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Warrants evidenced by
Warrant Certificates after receipt of the certificate described in Section 14
hereof); nor shall it by any act hereunder be deemed to make any representation
or warranty as to the authorization or reservation of any shares of Common Stock
37
<PAGE> 42
or other securities to be issued under this Agreement or any Warrant Certificate
or as to whether any shares of Common Stock or other securities shall, when so
issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Warrant Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder and
certificates delivered pursuant to any provision hereof from any person
reasonably believed by the Warrant Agent to be the Chairman of the Board, the
President, any Vice President, the Secretary, any Assistant Secretary or the
Treasurer of the Company, and is authorized to apply to such officers for advice
or instructions in Connection with its duties, and it shall not be liable for
any action taken or suffered to be taken by it in good faith in accordance with
written instructions of any such person. Any application by the Warrant Agent
for written instructions from the Company may, at the option of the Warrant
Agent, set forth in writing any action proposed to be taken or omitted by the
Warrant Agent under this Agreement and the date on and/or after which such
action shall be taken or such omission shall be effective. The Warrant Agent
shall not be liable for any action taken by, or omission of, the Warrant Agent
in accordance with a proposal included in such application on or after the date
specified in such application (which date shall not be less than five business
days after the date any officer of the Company actually receives such
application, unless any such officer shall have consented in writing to any
earlier date) unless, prior to taking any such action (or the effective date in
the case of an omission), the Warrant Agent shall have received written
instructions in response to such application specifying the action to be taken
or omitted.
(g) The Warrant Agent and any stockholder, director, officer
or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement to the extent lawfully permitted to so act.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
(h) The Warrant Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents (which shall not include its
employees), and the Warrant Agent shall not be answerable or accountable for any
act, omission, default, neglect or misconduct of any such attorneys or agents or
for any loss to
38
<PAGE> 43
the Company or to the holders of the Warrants resulting from any such act,
omission, default, neglect or misconduct, provided reasonable care was exercised
in the selection and continued employment thereof.
(i) No provision of this Agreement shall require the Warrant
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(j) If, with respect to any Warrant Certificate surrendered to
the Warrant Agent for exercise or transfer, the form of election to purchase or
transfer, as the case may be, has not been completed, the Warrant Agent shall
not take any further action with respect to such requested exercise or transfer
without first consulting with the Company.
(k) The Warrant Agent shall not be required to take notice of,
or be deemed to have notice of, any fact, event or determination under this
Agreement unless and until the Warrant Agent shall be specifically notified in
writing of such fact, event or determination.
SECTION 20. CHANGE OF WARRANT AGENT. The Warrant Agent or any
successor Warrant Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Stock by registered or certified mail. The Company
may remove the Warrant Agent or any successor Warrant Agent upon 30 days' notice
in writing mailed to the Warrant Agent or successor Warrant Agent, as the case
may be, and to each transfer agent of the Common Stock by registered or
certified mail. If the Warrant Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Warrant Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent, then the holder of any Warrant Certificate may
apply to any court of competent jurisdiction for the appointment of a new
Warrant Agent. Notwithstanding any provision to the contrary contained herein,
the removal or resignation of the Warrant Agent will not be effective until such
time as a successor Warrant Agent has been appointed in accordance with the
terms of this Agreement. Any successor Warrant Agent, whether appointed by the
Company
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or by such a court, shall be (a) a corporation organized and doing business
under the laws of the United States or any state of the United States, in good
standing, which is authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or examination by federal or
state authority and which has at the time of its appointment as Warrant Agent a
combined capital and surplus of at least $25,000,000 or (b) an affiliate of a
corporation described in clause (a) of this sentence. After appointment, the
successor Warrant Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed; but the predecessor Warrant Agent shall deliver and
transfer to the successor Warrant Agent any property at the time held by it
hereunder and execute and deliver any further assurance, conveyance, act or deed
necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Warrant Agent and each transfer agent of the Common Stock and mail a
notice thereof in writing to the registered holders of the Warrant Certificates.
Failure to give any notice provided for in this Section 20, or any defect
therein, shall not affect the legality or validity of the resignation or removal
of the Warrant Agent or the appointment of the successor Warrant Agent, as the
case may be.
SECTION 21. LEGENDS.
(1) Except for any sale or transfer of a Restricted Warrant
(including any Restricted Warrant represented by the Global Warrant)
pursuant to an effective registration statement under the Securities
Act or pursuant to an opinion of counsel reasonably satisfactory to the
Company and the Warrant Agent that no legend is required, each Warrant
Certificate and each certificate representing the Warrant Shares shall
bear a legend in substantially the form set forth on Exhibit A hereto.
(2) Upon any sale or transfer of a Restricted Warrant
(including any Restricted Warrant represented by the Global Warrant)
pursuant to an effective registration statement under the Securities
Act or pursuant to an opinion of counsel reasonably satisfactory to the
Company and the Warrant Agent that no legend is required:
(A) in the case of any Restricted Warrant that is a Definitive
Warrant, the Warrant Agent shall permit the holder thereof to
exchange such Restricted Warrant for a Definitive Warrant that
does not bear the legend required by subsection (1) above; and
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<PAGE> 45
(B) in the case of any Restricted Warrant represented by the
Global Warrant, such Restricted Warrant shall not be required
to bear the legend required by subsection (1) above but shall
continue to be subject to the provisions of Section 6(c)
hereof; provided, however, that with respect to any request
for an exchange of a Restricted Warrant that is represented by
the Global Warrant for a Definitive Warrant that does not bear
the legend set forth in clause (i) above, which request is
made in reliance upon Rule 144, the holder thereof shall
certify in writing to the Warrant Agent that such request is
being made pursuant to Rule 144.
SECTION 22. Notices. Any notice or demand authorized by this
Agreement to be given or made by the registered holder of any Warrant
Certificate to or on the Company shall be sufficiently given or made when and if
deposited in the mail, first class or registered, postage prepaid, or next-day
air courier, addressed to the office of the Company expressly designated by the
Company at its office for purposes of this Agreement (until the Warrant holders
are otherwise notified in accordance with this Section by the Company), as
follows:
Renaissance Cosmetics, Inc.
c/o Kidd Kamm & Company
Three Pickwick Plaza
Greenwich, Connecticut 06830
Attention: William J. Kidd
with a copy to:
Parker Chapin Flattau & Klimpl
1211 Avenue of the Americas
New York, New York 10036-8735
Attention: Edward R. Mandell
Subject to the provisions of Section 18, any notice or demand
authorized by this Agreement to be given or made by the Company or by the
registered holder of any Warrant Certificate to or on the Warrant Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
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American Bank National Association
101 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Department
Any notice pursuant to this Agreement to be given by the
Company to the registered holder(s) of any Warrant Certificate shall be
sufficiently given when and if deposited in the mail, first class or registered,
postage prepaid, or next-day air courier, addressed (until the Company is
otherwise notified in accordance with this Section by such holder) or next-day
air courier to such holder at the address appearing on the Warrant register of
the Company.
SECTION 23. SUPPLEMENTS AND AMENDMENTS. The Company and the
Warrant Agent may from time to time supplement or amend this Agreement without
the approval of any holders of Warrant Certificates in order (i) to cure any
ambiguity or (ii) to correct or supplement any provision contained herein that
may be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company may deem necessary or desirable and which shall not in any way
materially adversely affect the interests of the holders of Warrant
Certificates. Any amendment or supplement to this Agreement that has a material
adverse effect on the interests of holders shall require the written consent of
registered holders of a majority of the then outstanding Warrants. The consent
of each registered holder of a Warrant affected shall be required for any
amendment pursuant to which the Exercise Price would be increased or the number
of Warrant Shares purchasable upon exercise of Warrants would be decreased. The
Warrant Agent shall be entitled to receive and, subject to Section 19 shall be
fully protected in relying upon an officers' certificate and opinion of counsel
as conclusive evidence that any such amendment or supplement is authorized or
permitted hereunder, that it is not inconsistent herewith, and that it will be
valid and binding upon the Company in accordance with its terms. The Company may
not sign any amendment or supplement until the Company's board of directors
approves it.
SECTION 24. DETERMINATIONS AND ACTIONS BY THE BOARD OF
DIRECTORS, ETC. All actions, calculations, interpretations and determinations
(including, without limitation, all omissions with respect to the foregoing)
which are done or made by the Board of Directors in good faith shall not subject
the Board of Directors, or any member thereof, to any liability to the holders
of the Warrant Certificates.
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SECTION 25. SUCCESSORS. All the covenants and provisions of
this Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its successors and assigns hereunder. Upon becoming a successor to
the Company, such successor shall be deemed to be the Company for the purposes
of this Agreement.
SECTION 26. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED,
INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW (OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. WITHOUT IN ANY WAY
LIMITING THE PRECEDING CONSENTS TO JURISDICTION AND VENUE, THE PARTIES INTEND
(AMONG OTHER THINGS) TO THEREBY AVAIL THEMSELVES OF THE BENEFIT OF SECTION
5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK. THE COMPANY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE COMPANY
IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE COMPANY AT ITS ADDRESS SET FORTH HEREIN,
SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF ANY HOLDER TO
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<PAGE> 48
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
SECTION 27. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
SECTION 28. DESCRIPTIVE HEADINGS. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
SECTION 29. COUNTERPARTS. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
(Signature Page Follows)
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<PAGE> 49
[Signature Page of Warrant Agreement)
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
RENAISSANCE COSMETICS, INC.
By /s/ William J. Kidd
------------------------
Name: William J. Kidd
Title: Chairman
AMERICAN BANK NATIONAL ASSOCIATION,
as Warrant Agent
By: [Illegible]
-----------------------
Name: [Illegible]
Title: [Illegible]
By: [Illegible]
-----------------------
Name: [Illegible]
Title: [Illegible]
<PAGE> 50
EXHIBIT A
[Form of Warrant Certificate]
[Face]
[Unless and until it is exchanged in whole or in part for
Warrants in definitive form, this Warrant may not be transferred except as a
whole by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository or by the
Depository or any such nominee to a successor Depository or a nominee of such
successor Depository. Unless this certificate is presented by an authorized
representative of The Depository Trust Company ("DTC"), New York, New York, to
the issuer or its agent for registration of transfer, exchange or payment, and
any certificate issued is registered in the name of Cede & Co. or such other
name as may be requested by an authorized representative of DTC (and any payment
hereon is made to Cede & Co. or such other entity as may be requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.](1)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
- ----------
(1) This paragraph is to be included only if the Warrant is in global form.
A-1
<PAGE> 51
WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUB-PARAGRAPH (A)(1), (2), (3) OR
(7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR,"
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE WARRANT AGENT'S RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY
IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE WARRANT AGENT.
EXERCISABLE ON OR BEFORE AUGUST 15, 2001
A-2
<PAGE> 52
No. Warrants initially to purchase ___ shares of Common Stock
Warrant Certificate
RENAISSANCE COSMETICS, INC.
This Warrant Certificate certifies that _______________, or
registered assigns, is the registered holder of Warrants expiring August 15,
2001 (the "Warrants") to purchase Common Stock, $0.01 par value (the "Common
Stock"), of Renaissance Cosmetics, Inc., a Delaware corporation (the "Company").
The holder hereof, upon exercise on or before 5:00 p.m. New York City Time on
August 15, 2001, is entitled to receive from the Company, initially an aggregate
of ___ fully paid and nonassessable shares of Common Stock (a "Warrant Share")
at the initial exercise price (the "Exercise Price") of $0.01 per Warrant Share
payable in lawful money of the United States of America or with unexercised
Warrants upon surrender of this Warrant Certificate and payment of the Exercise
Price at the office of the Warrant Agent (as defined in the Warrant Agreement
referred to on the reverse hereof), subject to the conditions set forth herein
and in the Warrant Agreement.
The Exercise Price and number of Warrant Shares issuable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events set forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City
Time on August 15, 2001, and to the extent not exercised by such time such
Warrants shall become void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent as such term is used in the Warrant
Agreement.
This Warrant Certificate shall be governed and construed in
accordance with the internal laws of the State of New York.
A-3
<PAGE> 53
IN WITNESS WHEREOF, Renaissance Cosmetics, Inc. has caused
this Warrant Certificate to be signed by its duly authorized officers, each by a
facsimile of his signature, and has caused a facsimile of its corporate seal to
be affixed hereunto or imprinted hereon.
Dated:
RENAISSANCE COSMETICS, INC.
By: __________________________
[Title]
By: __________________________
Secretary
COUNTERSIGNED
AMERICAN BANK NATIONAL ASSOCIATION
Warrant Agent
By:__________________________
Authorized Signature
A-4
<PAGE> 54
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants expiring August 15, 2001, entitling the
holder on exercise to receive shares of Common Stock, $0.01 par value, of the
Company (the "Common Stock"), and are issued or to be issued pursuant to a
Warrant Agreement, dated as of August 18, 1994 (the "Warrant Agreement"), duly
executed and delivered by the Company, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Warrants. A copy of the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company.
The holder of Warrants evidenced by this Warrant Certificate
may exercise them by surrendering this Warrant Certificate, with the form of
election to purchase set forth hereon properly completed and executed, together
with payment of the Exercise Price in cash or in unexercised Warrants at the
office of the Warrant Agent designated for such purpose. In the event that upon
any exercise of Warrants evidenced hereby the number of Warrants exercised shall
be less than the total number of Warrants evidenced hereby, there shall be
issued to the holder hereof or his assignee a new Warrant Certificate evidencing
the number of Warrants not exercised.
The Warrant Agreement provides that upon the occurrence of
certain events the number of Warrant Shares and/or the Exercise Price set forth
on the face hereof may, subject to certain conditions, be adjusted. The Warrant
Agreement also provides that certain distributions may be made to the holders
and that offers to purchase securities may be made to the holders. No fractions
of a share of Common Stock shall be issued upon the exercise of any Warrant, but
the Company shall pay the cash value thereof determined as provided in the
Warrant Agreement.
The holders of the Warrants are entitled to certain
registration rights with respect to the Common Stock purchasable upon exercise
thereof. Said registration rights are set forth in Section 15 of the Warrant
Agreement.
A-5
<PAGE> 55
The holders of the Warrants and the Warrant Shares are
entitled to certain tag-along and drag-along rights as set forth in Section 16
of the Warrant Agreement.
Capitalized terms not otherwise defined herein shall have the meaning
given thereto in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the
Warrant Agent by the registered holder thereof in person or by legal
representative or attorney duly authorized in writing, may be exchanged, in the
manner and subject to the limitations provided in the Warrant Agreement, but
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of the Warrant Agent, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided in
the Warrant Agreement, without charge except for any tax or other governmental
charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder(s) thereof as the absolute owner(s) of this Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone), for the purpose of any exercise hereof, of any distribution to
the holder(s) hereof, and for all other purposes, and the Company and the
Warrant Agent shall not be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
A-6
<PAGE> 56
FORM OF ELECTION TO PURCHASE
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to receive __________ shares of
Common Stock and herewith tenders payment for such shares to the order of
Renaissance Cosmetics, Inc. in the amount of (or, in the case of payment by
surrendering unexercised Warrants, with a value of) $_____ in accordance with
the terms hereof.
The undersigned requests that a certificate for such shares be
registered in the name of ________________, whose address is ___________________
_______________ and that such shares be delivered to ___________________________
whose address is __________________________________.
If said number of shares is less than all of the shares of
Common Stock purchasable hereunder, the undersigned requests that a new Warrant
Certificate representing the remaining balance of such shares be registered in
the name of _________________________________, whose address is ________________
______________________________, and that such Warrant Certificate be delivered
to ______________________, whose address is _______________________________.
Signature(s):_______________________________
NOTE: The above signature(s) must
correspond with the name written
upon the face of this Warrant
Certificate in every particular,
without alteration or enlargement
or any change whatever. If this
Warrant is held of record by two or
more joint owners, all such owners
must sign.
Date: _____________________
Signature Guaranteed*:________________________________________
*NOTICE: The signature must be guaranteed by an institution which is a
member of one of the following recognized signature guarantee
programs:
(1) The Securities Transfer Agent Medallian Program (STAMP);
(2) The New York Stock Exchange Medallian Program (MSP);
A-7
<PAGE> 57
(3) The Stock Exchange Medallian Program (SEMP).
FORM OF ASSIGNMENT
(To be signed only upon assignment of Warrant Certificate)
FOR VALUE RECEIVED, hereby sells, assigns and
transfers unto whose address is and whose
social security number or other identifying number is ,
the within Warrant Certificate, together with all right, title and interest
therein and to the Warrants represented thereby, and does hereby irrevocably
constitute and appoint , attorney, to transfer said Warrant Certificate
on the books of the within-named Company, with full power of substitution in the
premises.
Signature(s): ____________________________________
NOTE: The above signature(s) must correspond
with the name written upon the face of
this Warrant Certificate in every
particular, without alteration or
enlargement or any change whatever. If
this Warrant is held of record by two or
more joint owners, all such owners must
sign.
Date:_____________________
Signature Guaranteed*:_____________________________________________
*NOTICE: The signature must be guaranteed by an institution which is a
member of one of the following recognized signature guarantee
programs:
(1) The Securities Transfer Agent Medallian Program
(STAMP);
(2) The New York Stock Exchange Medallian Program
(MSP);
(3) The Stock Exchange Medallian Program (SEMP).
A-8
<PAGE> 58
SCHEDULE OF EXCHANGES OF DEFINITIVE WARRANTS(2)
The following exchanges of a part of this Global Warrant for definitive Warrants
have been made:
<TABLE>
<CAPTION>
Number of Warrants
Amount of decrease Amount of increase in of this Global
in Number of Number of Warrants Warrant following Signature of
Warrants of this of this Global such decrease (or authorized officer of
Date of Exchange Global Warrant Warrant increase) Warrant Agent
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------
(2) This is to be included only if the Warrant is in global form.
A-9
<PAGE> 59
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of Renaissance
Cosmetics, Inc.
This Certificate relates to Warrants initially to purchase ___ shares
of Common Stock of Renaissance Cosmetics, Inc. held in * / / book-entry or * / /
definitive form by _________ (the "Transferor"). The Transferor* by written
order, has requested the Warrant Agent:
/ / to deliver, in exchange for its beneficial interest in the
Global Warrant held by the depository, a Warrant or Warrants
in definitive, registered form of authorized denominations and
an aggregate amount equal to its beneficial interest in such
Global Warrant (or the portion thereof indicated above); or
/ / to exchange or register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each such
Warrant, the Transferor does hereby certify that the
Transferor is familiar with the Warrant Agreement relating to
such Warrants and that the transfer of this Warrant is
pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act") or
does not require registration under the Securities Act because
such Warrant:
/ / is being acquired for the Transferor's own account,
without transfer;
/ / is being transferred to a qualified institutional
buyer (as defined in Rule 144A under the Securities Act), in
reliance on such Rule 144A;
/ / is being transferred pursuant to an exemption from
registration in accordance with Rule 904 under the Securities
Act;**
/ / is being transferred pursuant to Rule 144 under the
Securities Act;**
/ / is being transferred pursuant to another exemption
from the registration requirements of the Securities Act
(explain:_____ _________________________ ).**
_______________________________
[INSERT NAME OF TRANSFEROR]
By:______________________ Date:________
- ----------
*Check applicable box.
**If this box is checked, this certificate must be accompanied by an
opinion of counsel to the effect that such transfer is in compliance
with the Securities Act.
B-1
<PAGE> 1
Exhibit 10.115
RENAISSANCE COSMETICS, INC.
Issuer,
and
CERTAIN GUARANTORS
and
AMERICAN BANK NATIONAL ASSOCIATION,
Trustee
--------------------
FIFTH SUPPLEMENTAL INDENTURE
Dated as of August 21, 1996
--------------------
13-3/4% Senior Notes due 2001,
Series A and Series B,
and
13-3/4% Senior Notes due 2002
<PAGE> 2
FIFTH SUPPLEMENTAL INDENTURE dated as of August 21, 1996 between
Renaissance Cosmetics, Inc., a Delaware corporation (the "Company"), Great
American Cosmetics, Inc., a New York corporation, as guarantor ("GAC"), and
American Bank National Association, as trustee (the "Trustee").
The Company, Cosmar Corporation ("Cosmar"), and Parfums Parquet
Incorporated executed and delivered to the Trustee an indenture dated as of
August 18, 1994 (as amended or supplemented by a first supplemental indenture
dated November 19, 1994, a second supplemental indenture dated December 15,
1994, a third supplemental indenture dated December 23, 1994 and a fourth
supplemental indenture dated February 27, 1996, the "Indenture") relating to the
Company's 13-3/4% Senior Notes due 2001, Series A, 13-3/4% Senior Notes due
2001, Series B, and 13-3/4% Senior Notes due 2002. Capitalized terms used but
not defined in this Fifth Supplemental Indenture shall have the meanings given
them in the Indenture.
Section 4.22 of the Indenture requires the Company to cause each
Subsidiary of the Company created or acquired after the Closing Date to enter
into a supplemental indenture for the purpose of jointly, severally and
unconditionally guaranteeing, on a subordinated basis, the Company's obligation
to pay principal and interest on the Notes.
The Company has directly or indirectly created or acquired GAC as a
Subsidiary and the Company and GAC desire that GAC become a Guarantor under the
Indenture, as provided below, and GAC intends to be bound as a Guarantor, and
all covenants and conditions necessary for the execution of this Fifth
Supplemental Indenture have been complied with.
Therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the Company and GAC, it is
therefore agreed, for the benefit of the Company, GAC and the Trustee, and for
the ratable benefit of the holders of the Notes issued under the Indenture, as
follows:
1. GAC is hereby irrevocably and unconditionally bound, as a
Guarantor, by each and every one of the terms and conditions of Article 10 of
the Indenture, the terms of which are hereby incorporated by reference in this
Fifth Supplemental Indenture and made a part hereof as though set forth herein
in full, in the same manner and to the same extent as if GAC were an original
signatory, as a Guarantor, to the Indenture. As contemplated in section 1.1 of
the Indenture, the parties acknowledge and agree that the definition of
"Guarantor" under the Indenture shall include GAC.
2. Except as expressly set forth herein, the Indenture is in all
respects ratified and confirmed and all the terms, conditions and provisions
thereof shall remain in full force and effect.
<PAGE> 3
2
3. This Fifth Supplemental Indenture shall form a part of the
Indenture for all purposes, and every holder of Notes heretofore or hereafter
authenticated and delivered shall be bound hereby.
4. This Fifth Supplemental Indenture shall be construed, interpreted
and the rights of the parties determined in accordance with the laws of the
state of New York, as applied to contracts made and performed within the state
of New York, without regard to principles of conflicts of law (other than
section 5-1401 of the New York General Obligations Law).
RENAISSANCE COSMETICS, INC.
By: /s/ Thomas T.S. Kaung
-----------------------------------
Name: Thomas T.S. Kaung
Title: Group vice President
GREAT AMERICAN COSMETICS, INC.
By: /s/ Thomas T.S. Kaung
-----------------------------------
Name: Thomas T.S. Kaung
Title: Vice President
AMERICAN BANK NATIONAL
ASSOCIATION
By: /s/ [Illegible]
-----------------------------------
Name:
Title: Vice President
By: /s/ [Illegible]
-----------------------------------
Name:
Title: Trust Officer
<PAGE> 1
Exhibit 10.116
WAIVER
WAIVER, dated as of August 12, 1996, among Renaissance Cosmetics,
Inc. a Delaware corporation (the "Company"), and the holders set forth on the
signature page hereto (the "Consenting Holders") of the Company's 13.75% Senior
Notes due 2001, Series A, 13.75% Senior Notes due 2001, Series B, and 13.75%
Senior Notes due 2002 (together, with the Guarantees, the "Notes") issued
pursuant to the Indenture (the "Indenture"), dated as of August 18, 1994,
between the Company, as issuer, the Guarantors and American Bank National
Association, as trustee. Capitalized terms used herein and not otherwise defined
have the respective meanings given those terms in the Indenture.
WHEREAS, the Company and Renaissance Acquisition, Inc., a
wholly-owned subsidiary of the Company ("RAI"), have entered into an Agreement
and Plan of Merger, dated as of August 6, 1996, with MEM Company, Inc., a New
York corporation ("MEM"), pursuant to which RAI will be merged with and into MEM
(the "Merger") and each outstanding share of MEM common stock, other than
dissenters' shares, will be converted into the right to receive $7.50 per share
in cash;
WHEREAS, the Consenting Holders are willing to waive a certain
provision of the Indenture in order to permit the Company and RAI to consummate
the Merger; and
<PAGE> 2
2
WHEREAS, each Consenting Holder owns the amount of outstanding principal
amount of Notes set forth opposite such Holder's name on the signature page
hereto, which represents, in the aggregate, a majority in principal amount of
the outstanding Notes.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto agree as follows:
Section 1. Waiver. Each of the Consenting Holders hereby waives Section
5.1(b) of the Indenture in order to permit the Merger to be consummated.
Section 2. Effectiveness. This Waiver shall become effective immediately,
and shall bind all present and future holders of the Notes. This Waiver shall
not, except as expressly provided herein, constitute a waiver of any provision
of, or operate as a waiver of any right, power or remedy of any of the Holders
under, the Indenture or the Notes.
Section 3. Descriptive Headings; Governing Law. The descriptive headings
of this Waiver are inserted for convenience only and do not constitute a part of
this Waiver. The construction, validity and interpretation of this Waiver will
be governed by the internal law of New York, as applied to contracts made and
performed within the State of New York, without regard to principles of
conflicts of law.
<PAGE> 3
3
Section 4. Counterparts. This Waiver may be executed in one or more
counterparts, any one of which need not contain the signature of more than one
party, but all such counterparts taken together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Waiver on the
date first written above.
Date: as of August 12, 1996 RENAISSANCE COSMETICS, INC.
By: /s/ Thomas T.S. Kaung
-----------------------------------
Name: Thomas T.S. Kaung
Title: Group Vice President
<PAGE> 4
<TABLE>
<CAPTION>
DTC Principal Amount
Date Holder Account No. of Notes Held
---- ------ ----------- ---------------
<S> <C> <C> <C>
as of August 09, Name: SunAmerica Life
1996 Insurance Company 099530 $12,000,000
By: Kevin Buckel
------------------
Name: Kevin Buckle
Title: Authorized Agent
as of August 09, Name: Anchor National Life
1996 Insurance Company 099527 $ 3,000,000
By: Kevin Buckel
------------------
Name: Kevin Buckle
Title: Authorized Agent
as of August 09, Name: SunAmerica Inc.
1996 099522 $ 3,000,000
By: Kevin Buckel
------------------
Name: Kevin Buckle
Title: Authorized Agent
as of August 09, Name: First SunAmerica Life
1996 Insurance Company 099537 $ 1,000,000
By: Kevin Buckel
------------------
Name: Kevin Buckle
Title: Authorized Agent
as of August 09, Name: Ford Life Insurance
1996 Company 099546 $ 5,000,000
By: Kevin Buckel
------------------
Name: Kevin Buckle
Title: Authorized Agent
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Principal
DTC Account Amount of
Date Holder No. Notes Held
---- ------ ----------- ----------
<S> <C> <C> <C>
as of August 12, Name: BRINSON RELATIONSHIP FUNDS -- BRINSON HIGH
1996 YIELD FUND
By: B. Craig Hutson 903 $3,500,000.00
------------------------------
Name: B. Craig Hutson
-------------------------
Title: Trust Officer
-------------------------
as of August , Name:
1996 --
By: $
------------------------------
Name:
--------------------------
Title:
-------------------------
as of August , Name:
1996 --
By: $
------------------------------
Name:
--------------------------
Title:
-------------------------
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Principal
DTC Account Amount of
Date Holder No. Notes Held
- ---------- ------------ ----------------- ----------------
<S> <C> <C> <C>
as of August 9, 1996 Name: Equitable Life Assurance - Nutmeg Account
902 custody
By: /s/ Nelson R. Jantzen #G04675 $10,000,000
------------------------------------------- ----------------- ----------------
Name: Nelson R. Jantzen
Title: Investment Officer
as of August 9, 1996 Name: Equitable Life Assurance Corp High Yield
902 custody
By: /s/ Nelson R. Jantzen #G06138 $ 2,000,000
------------------------------------------- ----------------- ----------------
Name: Nelson R. Jantzen
Title: Investment Officer Custody Acct.
as of August , 1996 Name:
By:
------------------------------------------- ----------------- ----------------
Name:
Title:
</TABLE>
<PAGE> 1
Exhibit 10.117
CLOSING ESCROW AGREEMENT
CLOSING ESCROW AGREEMENT ("Agreement"), dated as of August 21, 1996,
by and among COSMAR CORPORATION, a Delaware corporation (the "Buyer"), LARRY
PALLINI, individually and VINCENT CARBONE, individually (each of whom is
refereed to herein as a "Seller" and both of whom are collectively referred to
herein as the "Sellers"), LARRY PALLINI, in his capacity as Sellers'
Representative and the law firm of TODTMAN, YOUNG, TUNICK, NACHAMIE, HENDLER &
SPIZZ, P.C. (the "Escrow Agent").
The Buyer, the Sellers and Great American Cosmetics, Inc., a New
York corporation ("GACI"), are parties to that certain Stock Purchase Agreement,
dated as of June 27, 1996 (the "Stock Purchase Agreement"). Pursuant to the
Stock Purchase Agreement, Buyer is acquiring from Sellers all of the outstanding
capital stock of GACI. Capitalized terms used herein and not otherwise defined
have the meanings assigned to them in the Stock Purchase Agreement.
Sections 1.2 and 1.4 of the Stock Purchase Agreement provide for the
payment and delivery by Buyer of a portion of the Purchase Price, consisting of
a Closing Deposit (as defined in the Stock Purchase Agreement) in the amount of
One Million Dollars ($1,000,000) into the escrow hereby established, to be held
and dealt with by the Escrow Agent as herein provided.
The Sellers hereby designate Larry Pallini to serve as the "Sellers'
Representative" for all purposes under this Agreement, to hold such position
unless and until the Sellers designate a replacement Sellers' Representative in
writing, signed by both Sellers , delivered to the Buyer and Escrow Agent. Each
Seller hereby designates the Sellers' Representative to take all actions
required or permitted to be taken by the Sellers' Representative hereunder, each
Seller agrees to be bound by the acts of the Sellers' Representative hereunder
and each Seller acknowledges that the Escrow Agent and the Buyer may rely on the
acts of the Sellers' Representative hereunder as if such acts were taken
directly by each Seller.
Accordingly, the parties agree as follows:
1. ESTABLISHMENT OF ESCROW ACCOUNT.
1.1 ESCROW DEPOSIT. Pursuant to Sections 1.2 and 1.4 of the
Stock Purchase Agreement, the Closing Deposit (referred to herein as
the "Deposit") shall be deposited with the Escrow Agent by the Buyer
at the time or times specified therein, such Deposit to be held and
disbursed in accordance with the terms hereof.
1.2 ACCOUNT. The Escrow Agent agrees to accept the Deposit, to
establish and maintain a separate escrow account (the "Account")
therefor and to deposit the Deposit in such Account, all as provided
herein.
-1-
<PAGE> 2
2. INVESTMENT OF MONIES IN THE ACCOUNT.
2.1 INVESTMENT. The Escrow Agent shall invest all of the
Deposit in the Account and any income or interest earned or accrued
with respect thereto (the "Account Earnings") in the bank account
identified on Schedule A hereto. The Escrow Agent shall not change
the bank account identified on Schedule A hereto without the prior
written consent of the Buyer and the Sellers' Representative. Except
as otherwise provided in Section 5.3 hereof, in no event shall the
Escrow Agent have any liability for any investment permitted
hereunder, including, without limitation, any loss of the principal
amount of any investment or in connection with the rate of return on
any investment.
2.2 BANK ACCOUNT STATEMENT. The Escrow Agent shall make
available, upon request, monthly Account statements, prepared by the
bank with respect to the Account, which shall set forth, with
respect to the Account, all income or other items earned on and
distributions from or other items charged against the Account. If
any distributions are made from the Account, or there are other
items charged against the Account, the Escrow Agent shall promptly
advise the Buyer and Sellers. Escrow Agent shall have no obligation
to maintain any Account records other than the monthly bank
statements.
3. DISTRIBUTIONS FROM THE ACCOUNT; PROCEDURES WITH RESPECT TO
CLAIMS.
3.1 DUTIES LIMITED - DISTRIBUTIONS FROM THE ACCOUNT.
(a) On the six-month anniversary of the Closing Date,
the Escrow Agent shall cause to be distributed to the Sellers
(by wire transfer in immediately available funds pursuant to
written wire instructions for each Seller, which instructions
shall set forth the amount to be distributed to each Seller)
an amount equal to fifty percent (50%) of the balance in the
Account on such date, reduced (but not below zero) by an
amount equal to one hundred and ten percent (110%) of the
aggregate amount of the Disputed Amounts (as defined in
Section 3.1(d) below) on such date.
(b) On the first anniversary of the Closing Date, the
Escrow Agent shall cause to be distributed to the Sellers (by
wire transfer in immediately available funds pursuant to
written wire instructions for each Seller, which instructions
shall set forth the amount to be distributed to each Seller)
an amount equal to the entire balance in the Account, reduced
(but not below zero) by an amount equal to the aggregate
amount of the Disputed Amounts (as defined in Section 3.1(d)
below) on such date.
(c) If the Buyer has a claim against Sellers for amounts
due under Section 8 of the Stock Purchase Agreement, Buyer may
deliver a copy to the Escrow Agent of a written notice (with
respect to claims against the Sellers for amounts due under
Section 8 of the Stock Purchase Agreement, delivered by Buyer
to Sellers' Representative), describing the
-2-
<PAGE> 3
nature and basis of such claim and indicating the amount
(estimated if necessary) (the "CLAIMED AMOUNT") allegedly so
owed by Sellers to Buyer (a "CLAIM NOTICE").
(d) Unless Sellers' Representative by written notice
delivered to Buyer (with respect to claims against the Sellers
for amounts due under Section 8 of the Stock Purchase
Agreement) (with a copy to the Escrow Agent) (the "OBJECTION
NOTICE") objects to the payment requested in a Claim Notice
within thirty (30) days after the date the Buyer delivers the
Claim Notice to the Sellers' Representative (the "OBJECTION
PERIOD"), the Escrow Agent shall release the Claimed Amount
promptly to Buyer (pursuant to written instructions from
Buyer). Such Objection Notice by Sellers' Representative shall
state the portion, if any, of the Claimed Amount as to which
Sellers' Representative does not object and the Escrow Agent
shall release such portion promptly to Buyer. If Sellers'
Representative delivers to the Escrow Agent an Objection
Notice within the Objection Period, the Escrow Agent shall not
release to Buyer all or any portion of the Claimed Amount as
to which Sellers' Representative object until (a) promptly
following receipt by the Escrow Agent of joint written
instructions from Buyer and Sellers' Representative or (b) the
resolution of such objection in accordance with the
arbitration procedures set forth in Section 8.5(a) of the
Stock Purchase Agreement, which the parties hereto agree shall
be the exclusive dispute resolution mechanism under this
Section 3.1(f). The aggregate amounts of any Claimed Amounts
as to which Sellers' Representative timely objects and any
amount specified in a Claim Notice for which the Objection
Period has not lapsed, are referred to herein as "Disputed
Amounts".
4. TERMINATION OF THIS ESCROW AGREEMENT. This Agreement shall
terminate upon the distribution of all monies held in the Account to
the Sellers and/or the Buyer, as the case may be.
5. DUTIES OF ESCROW AGENT.
5.1 DUTIES LIMITED. The Escrow Agent shall perform only the
duties expressly set forth herein, and shall not have any liability
under, or duty to inquire into, the terms and provisions of any
other agreement, including but not limited to the Stock Purchase
Agreement, except as expressly set forth herein, in performing its
duties hereunder. Except as to the due execution and delivery of
this Agreement by its duly authorized officers, the Escrow Agent has
no responsibility as to the validity of this Agreement or any
document related thereto.
5.2 RELIANCE. The Escrow Agent may rely upon, and shall incur
no liability for acting or refraining from acting upon, any written
notice, instruction, request, consent, certificate, statement or
other document furnished to it pursuant to this Agreement and
believed by it to be genuine and to have been signed or
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<PAGE> 4
presented by the proper party or parties, and the Escrow Agent shall
be under no duty to inquire into or investigate the validity,
accuracy, authenticity or content of any such document.
5.3 GOOD FAITH. In no event shall the Escrow Agent have any
liability for any error of judgment or for any act done or omitted
by it in good faith, or for any mistake of fact or law, or for
anything which it may do or refrain from doing hereunder, except for
its own gross negligence or willful misconduct on its part, arising
out of or in connection with this Agreement. Buyer, on the one hand,
and Sellers together, on the other hand, agree to indemnify the
Escrow Agent (severally, as to fifty percent (50%) each, and not
jointly and severally) for, and hold it harmless against, any loss,
liability, claim or expense arising out of or in connection with its
actions as Escrow Agent hereunder, including the reasonable costs
and expenses incurred in defending any such claim of liability,
except that neither Buyer nor Sellers shall be liable for any loss,
liability or expense incurred on account of the gross negligence or
willful misconduct on the part of the Escrow Agent. The Escrow Agent
may consult with counsel from time to time and the opinion of such
counsel shall be full and complete authorization and protection in
respect of any action taken or omitted to be taken by the Escrow
Agent hereunder or in good faith and in accordance with the opinion
of such counsel. The reasonable fees and disbursements of such
counsel shall be promptly paid by Buyer and Sellers pursuant to the
provisions of Section 7 hereof.
5.4 LIMITED NOTICE. The Escrow Agent shall be deemed to have
no notice of, or duties with respect to, any agreement or agreements
(whether or not a copy thereof is delivered to the Escrow Agent),
other than as expressly set forth herein.
5.5 LIMITED ACTIONS. The Escrow Agent shall not take any
action by reason of any notice or instruction given by any of the
parties or by any other person, firm or corporation, except only (i)
such notices or instructions as are herein specifically provided for
and (ii) orders or process of any court entered or issued with
competent jurisdiction. In the event that the Escrow Agent shall be
uncertain as to its duties or rights hereunder, it shall be entitled
to refrain from taking any action until it shall be directed
otherwise in writing by both Buyer and the Sellers' Representative
or by an order of a court of competent jurisdiction.
5.6 CONFLICTS. In the event that any of the terms and
provisions of any other agreement between any of the parties
conflict or are inconsistent with any of the terms and provisions of
this Agreement, the terms and provisions of this Agreement shall
govern and control in all respects the duties and liabilities of the
Escrow Agent.
5.7 REPRESENTATION. The Buyer acknowledges that the Escrow
Agent has represented the Sellers and GACI in connection with the
negotiation, execution and closing of the transactions contemplated
in the Stock Purchase
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<PAGE> 5
Agreement. Escrow Agent represents to the Buyer that it does not
have and has not had any business relationships with the Sellers or
any Affiliate of the Seller (other than the relationship described
in the immediately preceding sentence of this Section 5.7) that
would cause the Escrow Agent not to act impartially and fairly in
carrying out its responsibilities under this Agreement.
5.8 BANKRUPTCY OF A PARTY.
(a) The obligations of the Escrow Agent to the Sellers
hereunder shall not be released, discharged, limited in any
way or otherwise effected by any voluntary or involuntary
participation by the Buyer in any settlement or composition
for the benefit of creditors, through liquidation,
receivership, bankruptcy or otherwise, or the Buyer becoming
insolvent or bankrupt or otherwise subject to the provisions
of any bankruptcy proceeding.
(b) The obligations of the Escrow Agent to the Buyer
hereunder shall not be released, discharged, limited in any
way or otherwise effected by any voluntary or involuntary
participation by either of the Sellers in any settlement or
composition for the benefit of creditors, through liquidation,
receivership, bankruptcy or otherwise, or either of the
Sellers becoming insolvent or bankrupt or otherwise subject to
the provisions of any bankruptcy proceeding.
5.9 DISAGREEMENTS. If any disagreement or dispute arises
between the parties to this Agreement concerning the meaning or
validity of any provision under this Agreement or concerning any
other matter relating to this Agreement, the Escrow Agent (i) shall
be under no obligation to act, except under process or order of
court, or until it has been adequately indemnified to its full
satisfaction, and shall sustain no liability for its failure to act
pending such process or court order or indemnification, and (ii) may
deposit, in its sole and absolute discretion, the Deposit or that
portion of the Escrow Amount it then holds with any New York court
and to interplead the parties. Upon such deposit and filing of
interpleader, the Escrow Agent shall be relieved of all liability as
to the Deposit and shall be entitled to recover from the parties (as
to fifty percent (50%) to each of the Buyer, on the one hand, and
the two Sellers together, on the other hand) its reasonable
attorneys' fees and other costs, including reasonable travel
expenses, incurred in commencing and maintaining such action.
5.10 DISCLOSURE. No printed or other matter in any language
(including, without limitation, the Memorandum, notices, reports and
promotional material) which mentions the Escrow Agent's name or the
rights, powers, or duties of the Escrow Agent shall be issued by the
other parties hereto or on such parties' behalf unless the Escrow
Agent shall first have given its specific written consent thereto.
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<PAGE> 6
6. RESIGNATION; SUCCESSOR ESCROW AGENT.
6.1 RESIGNATION. The Escrow Agent may resign at any time by
giving thirty (30) days' prior written notice of such resignation to
Buyer and Sellers' Representative, provided that a replacement,
substitute or successor escrow agent is in place pursuant to this
Section 6.1. If Buyer and Sellers' Representative are unable to
agree upon a successor escrow agent within thirty (30) days of
receipt of notice from the Escrow Agent, the Escrow Agent may
designate its successor, and if the Escrow Agent declines to
designate its successor, Buyer shall designate the successor escrow
agent. The Escrow Agent shall promptly deliver the Account and any
other amounts held by it pursuant to this Agreement to such
successor escrow agent and shall thereafter have no further
obligations hereunder. Upon receipt of the Account and other
amounts, the successor escrow agent shall thereupon be bound by all
of the provisions hereof.
6.2 TERMINATION. Buyer and Sellers' Representative together
may terminate the appointment of the Escrow Agent hereunder upon
notice specifying the date upon which such termination shall take
effect. In the event of such termination, Buyer and Seller shall
jointly appoint and designate in such termination notice a successor
escrow agent and the Escrow Agent shall turn over to such successor
escrow agent the Account and any other amounts held by it pursuant
to this Agreement. Upon receipt of the Account and other amounts,
the successor escrow agent shall thereupon be bound by all of the
provisions hereof, and the Escrow Agent shall have no further
obligations hereunder.
7. FEES AND EXPENSES OF ESCROW AGENT. The two Sellers together, on
the one hand, and Buyer, on the other hand, shall each pay one-half
of the reasonable compensation of the Escrow Agent for the Escrow
Agent's services hereunder and all expenses, disbursements and
advances (including reasonable attorneys' fees) incurred in carrying
out the Escrow Agent's duties hereunder (the "ESCROW AGENT'S FEES").
Sellers and Buyer shall pay their respective portion of the Escrow
Agent's Fees directly to the Escrow Agent at the time of Closing and
annually thereafter as invoiced.
8. MISCELLANEOUS.
8.1 NOTICES. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be
deemed given when delivered personally, when received if sent by
facsimile transmission, on the date after deposit with an overnight
courier if deposited, postage prepaid, addressed as follows or on
the third day after mailing if mailed by certified or registered
mall, postage prepaid, addressed as follows (or addressed to such
other address as may be requested in writing from time to time by a
party desiring to change the address to which such communications
are to be delivered or mailed):
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<PAGE> 7
If to the Sellers:
Larry Pallini
304A Main Street
Roslyn, New York 11576
Vincent Carbone
19150 Cloister Lake Lane
Boca Raton, Florida 33491
[Sellers' Representative]
Larry Pallini
304A Main Street
Roslyn, New York 11576
With a copy to:
Todtman, Young, Tunick, Nachamie,
Hendler & Spizz, P.C.
425 Park Avenue
New York, New York 10022
Attention: Martin Todtman, Esq.
Telephone No.: (212) 754-9400
Telecopy No.: (212) 754-6262
If to the Buyer:
Cosmar Corporation
c/o Renaissance Cosmetics, Inc.
635 Madison Avenue
New York, New York 10022
Attention: Mr. Thomas Bonoma, Chairman, President
and Chief Executive Officer
Telephone No.: (212) 751-3700
Telecopy No.: (212) 373-7868
With a copy to:
Brownstein Hyatt Farber & Strickland, P.C.
Twenty-Second Floor
410 Seventeenth Street
Denver, Colorado 80202
Attention: John L. Ruppert, Esq.
Telephone No.: (303) 534-6335
Telecopy No.: (303) 623-1956
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<PAGE> 8
If to the Escrow Agent:
Todtman, Young, Tunick, Nachamie,
Hendler & Spizz, P.C.
425 Park Avenue
New York, New York 10022
Attention: Martin Todtman, Esq.
Telephone No.: (212) 754-9400
Telecopy No.: (212) 754-6262
If any notice is required to be given to both the Escrow Agent and
another party, such notice shall be given in a manner that results in the same
effective date for each such notice.
8.2 GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the internal laws of the State of New
York applicable to agreements made and to be performed entirely
within such State, not including the conflicts of laws provisions
thereof.
8.3 ENTIRE AGREEMENT. This Agreement is entered into and
delivered pursuant to the Stock Purchase Agreement and this
Agreement and the Stock Purchase Agreement set forth the entire
agreement among the parties with respect to the subject matter
hereof and supersede all prior agreements, written or oral, with
respect thereto.
8.4 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors
and assigns.
8.5 WAIVERS AND AMENDMENTS. This Agreement may be amended,
modified, superseded, cancelled, renewed or extended, and the terms
or conditions hereof may be waived, only by a written instrument
signed by all of the parties, or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as
a waiver thereof, nor shall any waiver on the part of any party of
any right, power or privilege hereunder, nor any single or partial
exercise of any right, power or privilege hereunder, preclude any
other or further exercise thereof or the exercise of any other,
right, power or privilege hereunder.
8.6 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
8.7 FURTHER ASSURANCES. Each of the parties shall execute such
documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof
and the transactions contemplated hereby.
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<PAGE> 9
8.8 VARIATIONS IN PRONOUNS. All pronouns and any variations
thereof refer to the masculine, feminine or neuter, singular or
plural, as the identity of the person or persons may require.
8.9 HEADINGS. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
COSMAR CORPORATION
By: /s/
___________________________________________
Name: ___________________________________________
Title: ___________________________________________
LARRY PALLINI (individually)
/s/ Larry H. Pallini
__________________________________________________
VINCENT CARBONE (individually)
/s/ Vincent Carbone, V. Pres.
__________________________________________________
TODTMAN, YOUNG, TUNICK, NACHAMIE,
HENDLER & SPIZZ, P.C. (Escrow Agent)
By: ___________________________________________
Name: ___________________________________________
Title: ___________________________________________
__________________________________________________
(in his capacity as Sellers' Representative)
/s/ Larry H. Pallini
__________________________________________________
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<PAGE> 10
SCHEDULE A
Bank Account
Republic National Bank
Sch. A-1
<PAGE> 1
Exhibit 10.118
PRE-CLOSING ESCROW AGREEMENT
PRE-CLOSING ESCROW AGREEMENT ("Agreement"), dated as of June 27,
1996, by and among (1) Cosmar Corporation, a Delaware corporation (the "Buyer"),
(2) Larry Pallini, individually and Vincent Carbone, individually, (each of whom
is referred to herein as a "Seller" and both of whom are collectively referred
to herein as the "Sellers"), (3) Larry Pallini, in his capacity as Sellers'
Representative and (4) the law firm of Todtman, Young, Tunick, Nachamie, Hendler
& Spizz, P.C. (the "Escrow Agent").
The Buyer, the Sellers and Great American Cosmetics, Inc. , a New
York corporation ("GACI"), are parties to that certain Stock Purchase Agreement,
dated as of June 27, 1996 (the "Stock Purchase Agreement"). Pursuant to the
Stock Purchase Agreement, Buyer is acquiring from Sellers all of the outstanding
capital stock of GACI. Capitalized terms used herein and not otherwise defined
have the meanings assigned to them in the Stock Purchase Agreement.
Sections 1.3 and 1.4 of the Stock Purchase Agreement provide for the
payment and delivery by Buyer of certain Pre-Closing Deposits (as defined in the
Stock Purchase Agreement), aggregating up to Six Hundred Thousand Dollars
($600,000) into the escrow hereby established, to be held and dealt with by the
Escrow Agent as herein provided.
The Sellers hereby designate Larry Pallini to serve as the "Sellers'
Representative" for all purposes under this Agreement, to hold such position
unless and until the Sellers designate a replacement Sellers' Representative in
writing, signed by both Sellers, delivered to the Buyer and Escrow Agent. Each
Seller hereby designates the Sellers' Representative to take all actions
required or permitted to be taken by the Sellers' Representative hereunder, each
Seller agrees to be bound by the acts of the Sellers' Representative hereunder
and each Seller acknowledges that the Escrow Agent and the Buyer may rely on the
acts of the Sellers' Representative hereunder as if such acts were taken
directly by each Seller.
Accordingly, the parties agree as follows:
1. Establishment of Escrow Account.
1.1 Escrow Deposit. Pursuant to Sections 1.3 and 1.4 of the
Stock Purchase Agreement, the Pre-Closing Deposits (collectively referred to
herein as the "Deposits") shall be deposited with the Escrow Agent by the Buyer
at the time or times specified therein, such Deposits to be held and disbursed
in accordance with the terms hereof.
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<PAGE> 2
1.2 Account. The Escrow Agent agrees to accept the Deposits,
to establish and maintain a separate escrow account (the "Account") therefor and
to deposit the Deposits in such Account, all as provided herein.
2. Investment of Monies in the Account.
2.1 Investment. The Escrow Agent shall invest all of the
Deposits in the Account and any income or interest earned or accrued with
respect thereto (the "Account Earnings") in the bank account identified on
Schedule A hereto. The Escrow Agent shall not change the bank account identified
on Schedule A hereto without the prior written consent of the Buyer and the
Sellers' Representative. Except as otherwise provided in Section 5.3 hereof, in
no event shall the Escrow Agent have any liability for any investment permitted
hereunder, including, without limitation, any loss of the principal amount of
any investment or in connection with the rate of return on any investment.
2.2 Bank Account Statement. The Escrow Agent shall make
available upon request, monthly bank statements prepared by the bank with
respect to the Account, which shall set forth, with respect to the Account, all
income or other items earned on and distributions from or other items charged
against the Account. If any distributions are made from the Account or there are
other items charged against the Account, the Escrow Agent shall promptly advise
the Buyer and Sellers. Escrow Agent shall have no obligation to maintain any
Account records other than the monthly bank statements.
3. Distributions from the Account.
3.1 Duties Limited - Distributions from the Account.
(a) Within five (5) business days following receipt by
the Escrow Agent of a written notice executed by an officer of the Buyer and the
Sellers' Representative informing the Escrow Agent that the Sellers and the
Buyer have terminated the Stock Purchase Agreement (see Sections 9.1 and 9.2 of
the Stock Purchase Agreement), the Escrow Agent shall cause to be distributed to
the Buyer (by wire transfer in immediately available funds pursuant to wire
instructions from the Buyer) an amount equal to the entire balance in the
Account; provided, however, that, if the Stock Purchase Agreement is terminated
by Buyer as a result of the Buyer not having closed the financing for the
transactions contemplated in the Stock Purchase Agreement on terms and
conditions and in such amounts as are acceptable to the Buyer, in its sole and
absolute discretion, then the Escrow Agent shall cause to be distributed to the
Sellers (by wire transfer in immediately available funds pursuant to wire
instructions from the Sellers, which instructions shall set forth the amount to
be distributed to each Seller) an amount equal to the entire balance in the
Account. The Escrow Agent shall be entitled, in making distributions under this
Section 3.1(a), to rely on a written notice from an officer of the Buyer stating
that the reason for the termination of the Stock Purchase Agreement is that the
Buyer did not close the financing for the transactions
2
<PAGE> 3
contemplated in the Stock Purchase Agreement on terms and conditions and in such
amounts as were acceptable to the Buyer, in its sole and absolute discretion.
(b) On the Closing Date, the Escrow Agent shall cause to
be distributed to the Buyer (by wire transfer in immediately available funds
pursuant to written wire instructions for each Seller, which instructions shall
set forth the amount to be distributed to each Seller) an amount equal to the
entire balance in the Account. In the alternative, on the Closing Date, as set
forth in Section 1.4(c) of the Stock Purchase Agreement, upon receipt of written
notice executed by an officer of the Buyer and Sellers' Representative, the
Escrow Agent shall cause the Deposits to be distributed to Sellers as part of
the Purchase Price (as defined in the Stock Purchase Agreement).
4. Termination of this Escrow Agreement. This Agreement shall
terminate upon the distribution of all monies held in the Account to the Sellers
and/or the Buyer, as the case may be.
5. Duties of Escrow Agent(in
5.1 Duties Limited. The Escrow Agent shall perform only the
duties expressly set forth herein, and shall not have any liability under, or
duty to inquire into, the terms and provisions of any other agreement, including
but not limited to the Stock Purchase Agreement, except as expressly set forth
herein, in performing its duties hereunder. Except as to the due execution and
delivery of this Agreement by its duly authorized officers, the Escrow Agent has
no responsibility as to the validity of this Agreement or any document related,
thereto.
5.2 Reliance. The Escrow Agent may rely upon, and shall incur
no liability for acting or refraining from acting upon, any written notice,
instruction, request, consent, certificate, statement or other document
furnished to it pursuant to this Agreement and believed by it to be genuine and
to have been signed or presented by the proper party or parties, and the Escrow
Agent shall be under no duty to inquire into or investigate the validity,
accuracy, authenticity or content of any such document.
5.3 Good Faith. In no event shall the Escrow Agent have any
liability for any error of judgment or for any act done or omitted by it in good
faith, or for any mistake of fact or law, or for anything which it may do or
refrain from doing hereunder, except for its own gross negligence or willful
misconduct on its part, arising out of or in connection with this Agreement.
Buyer, on the one hand, and Sellers together, on the other hand, agree to
indemnify the Escrow Agent (severally, as to fifty percent (50%) each, and not
jointly and severally) for, and hold it harmless against, any loss, liability,
claim or expense arising out of or in connection with its actions as Escrow
Agent hereunder, including the reasonable costs and expenses incurred in
defending any such claim of liability, except that neither Buyer nor Sellers
shall be liable for any loss, liability or expense incurred on account of the
gross negligence or willful misconduct on the part of the Escrow Agent. The
Escrow Agent may consult with counsel from time to
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<PAGE> 4
time and the opinion of such counsel shall be full and complete authorization
and protection in respect of any action taken or omitted to be taken by the
Escrow Agent hereunder or in good faith and in accordance with the opinion of
such counsel. The reasonable fees and disbursements of such counsel shall be
promptly paid by Buyer and Sellers pursuant to the provisions of Section 7
hereof.
5.4 Limited Notice. The Escrow Agent shall be deemed to have
no notice of, or duties with respect to, any agreement or agreements (whether or
not a copy thereof is delivered to the Escrow Agent), other than as expressly
set forth herein.
5.5 Limited Actions. The Escrow Agent shall not take any
action by reason of any notice or instruction given by any of the parties or by
any other person, firm or corporation, except only (i) such notices or
instructions as are herein specifically provided for and (ii) orders or process
of any court entered or issued with competent jurisdiction. In the event that
the Escrow Agent shall be uncertain as to its duties or rights hereunder, it
shall be entitled to refrain from taking any action until it shall be directed
otherwise in writing by both Buyer and the Sellers' Representative or by an
order of a court of competent jurisdiction.
5.6 Conflicts. In the event that any of the terms and
provisions of any other agreement between any of the parties conflict or are
inconsistent with any of the terms and provisions of this Agreement, the terms
and provisions of this Agreement shall govern and control in all respects the
duties and liabilities of the Escrow Agent.
5.7 Representation. The Buyer acknowledges that the Escrow
Agent has represented the Sellers and GACI in connection with the negotiation,
execution and closing of the transactions contemplated in the Stock Purchase
Agreement. Escrow Agent represents to the Buyer that it does not have and has
not had any business relationships with the Sellers or any Affiliate of the
Seller (other than the relationship described in the immediately preceding
sentence of this Section 5.7) that would cause the Escrow Agent not to act
impartially and fairly in carrying out its responsibilities under this
Agreement.
5.8 Bankruptcy of a Party.
(a) The obligations of the Escrow Agent to the Sellers
hereunder shall not be released, discharged, limited in any way or otherwise
effected by any voluntary or involuntary participation by the Buyer in any
settlement or composition for the benefit of creditors, through liquidation,
receivership, bankruptcy or otherwise, or the Buyer becoming insolvent or
bankrupt or otherwise subject to the provisions of any bankruptcy proceeding.
(b) The obligations of the Escrow Agent to the Buyer
hereunder shall not be released, discharged, limited in any way or otherwise
effected by any voluntary or involuntary participation by either of the Sellers
in any settlement or composition for the benefit of creditors, through
liquidation, receivership, bankruptcy or otherwise, or either of the Sellers
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<PAGE> 5
becoming insolvent or bankrupt or otherwise subject to the provisions of any
bankruptcy proceeding.
5.9 Disagreements. If any disagreement or dispute arises
between the parties to this Agreement concerning the meaning or validity of any
provision under this Agreement or concerning any other matter relating to this
Agreement, the Escrow Agent (i) shall be under no obligation to act, except
under process or order of court of competent jurisdiction , or until it has been
adequately indemnified to its full satisfaction, and shall sustain no liability
for its failure to act pending such process or court order or indemnification,
and (ii) may deposit, in its sole and absolute discretion, the Deposit or that
portion of the Escrow Amount it then holds with any New York court and to
interplead the parties. Upon such deposit and filing of interpleader, the Escrow
Agent shall be relieved of all liability as to the Deposit and shall be entitled
to recover from the parties (as to fifty percent (50%) to each of the Buyer, on
the one hand, and the two Sellers together, on the other hand) its reasonable
attorneys' fees and other costs, including reasonable travel expenses, incurred
in commencing and maintaining such action.
5.10 Disclosure. No printed or other matter in any language
(including, without limitation, the Memorandum, notices, reports and promotional
material) which mentions the Escrow Agent's name or the rights, powers, or
duties of the Escrow Agent shall be issued by the other parties hereto or on
such parties' behalf unless the Escrow Agent shall first have given its specific
written consent thereto.
6. Resignation: Successor Escrow Agent.
6.1 Resignation. The Escrow Agent may resign at any time by
giving thirty (30) days' prior written notice of such resignation to Buyer and
Sellers' Representative, provided that a replacement, substitute or successor
escrow agent is in place pursuant to this Section 6.1. If Buyer and Sellers'
Representative are unable to agree upon a successor escrow agent within thirty
(30) days of receipt of notice from the Escrow Agent, the Escrow Agent may
designate its successor, and if the Escrow Agent declines to designate its
successor, Buyer shall designate the successor escrow agent. The Escrow Agent
shall promptly deliver the Account and any other amounts held by it pursuant to
this Agreement to such successor escrow agent and shall thereafter have no
further obligations hereunder. Upon receipt of the Account and other amounts,
the successor escrow agent shall thereupon be bound by all of the provisions
hereof.
6.2 Termination. Buyer and Sellers' Representative together
may terminate the appointment of the Escrow Agent hereunder upon notice
specifying the date upon which such termination shall take effect. In the event
of such termination, Buyer and Seller shall jointly appoint and designate in
such termination notice a successor escrow agent and the Escrow Agent shall turn
over to such successor escrow agent the Account and any other amounts held by it
pursuant to this Agreement. Upon receipt of the Account and other amounts, the
successor
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<PAGE> 6
escrow agent shall thereupon be bound by all of the provisions hereof, and the
Escrow Agent shall have no further obligations hereunder.
7. Fees and Expenses of Escrow Agent. The two Sellers together, on
the one hand, and Buyer, on the other hand, shall each pay one-half of the
reasonable compensation of the Escrow Agent for the Escrow Agent's services
hereunder and all expenses, disbursements and advances (including reasonable
attorneys' fees) incurred in carrying out the Escrow Agent's duties hereunder
(the "Escrow Agent's Fees"). Sellers and Buyer shall pay their respective
portion of the Escrow Agent's Fees directly to the Escrow Agent at the time of
Closing and annually thereafter as invoiced.
8. Miscellaneous.
8.1 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed
given when delivered personally, when received if sent by facsimile
transmission, on the date after deposit with an overnight courier if deposited,
postage prepaid, addressed as follows or on the third day after mailing if
mailed by certified or registered mail, postage prepaid, addressed as follows
(or addressed to such other address as may be requested in writing from time to
time by a party desiring to change the address to which such communications are
to be delivered or mailed):
If to the Sellers:
Larry Pallini
304A Main Street
Roslyn, New York 11576
Vincent Carbone
19150 Cloister Lake Lane
Boca Raton, Florida 33491
With a copy to:
Todtman, Young, Tunick, Nachamie, Hendler & Spizz, P.C.
425 Park Avenue
New York, New York 10022
Attention: Martin Todtman, Esq.
Telephone Number: 212-754-9400
Telecopy Number: 212-754-6262
If to the Buyer:
Cosmar Corporation
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<PAGE> 7
c/o Renaissance Cosmetics, Inc.
635 Madison Avenue
New York, New York 10022
Attention: Mr. Thomas Bonoma, Chairman, President and Chief
Executive Officer
Telephone Number: 212-751-3700
Telecopy Number: 212-373-7868
With a copy to:
Brownstein Hyatt Farber & Strickland, P.C.
Twenty-Second Floor
410 Seventeenth Street
Denver, Colorado 80202-4437
Attention: John L. Ruppert, Esq.
Telephone Number: (303) 534-6335
Telecopy Number: (303) 623-1956
If to the Escrow Agent:
Todtman, Young, Tunick, Nachamie, Hendler & Spizz, P.C.
425 Park Avenue
New York, New York 10022
Attention: Martin Todtman, Esq.
Telephone Number: 212-754-9400
Telecopy Number: 212-754-6262
If any notice is required to be given to both the Escrow Agent and
another party, such notice shall be given in a manner that results in the same
effective date for each such notice.
8.2 Governing Law. This Agreement shall be governed and
construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State,
not including the conflicts of laws provisions thereof.
8.3 Entire Agreement. This Agreement is entered into and
delivered pursuant to the Stock Purchase Agreement and this Agreement and the
Stock Purchase Agreement set forth the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements, written
or oral, with respect thereto.
8.4 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
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<PAGE> 8
8.5 Waivers and Amendments. This Agreement may be amended,
modified, superseded, cancelled, renewed or extended, and the terms or
conditions hereof may be waived, only by a written instrument signed by all of
the parties, or, in the case of a waiver , by the party waiving compliance. No
delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
any party of any right, power or privilege hereunder, nor any single or partial
exercise of any right, power or privilege hereunder, preclude any other or
further exercise thereof or the exercise of any other, right, power or privilege
hereunder.
8.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8.7 Further Assurances. Each of the parties shall execute such
documents and other papers and take such further actions as may be reasonable
required or desirable to carry out the provisions hereof and the transactions
contemplated hereby.
8.8 Variations in Pronouns. All pronouns and any variations
thereof refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person or persons may require.
8.9 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
COSMAR CORPORATION
By: /s/ John R. Jackson
-----------------------------------
Name: John R. Jackson
-----------------------------
Title: VP
----------------------------
LARRY PALLINI (individually)
________________________________________
VINCENT CARBONE (individually)
________________________________________
TODTMAN, YOUNG, TUNICK, NACHAMIE,
HENDLER & SPIZZ, P.C. (Escrow Agent)
By: ___________________________________
Name:______________________________
Title:_____________________________
Larry Pallini (in his capacity' as
Sellers' Representative)
________________________________________
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<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
COSMAR CORPORATION
By:_____________________________________
Name:______________________________
Title:_____________________________
LARRY PALLINI (individually)
/s/ Larry H. Pallini
----------------------------------------
VINCENT CARBONE (individually)
________________________________________
TODTMAN, YOUNG, TUNICK, NACHAMIE,
HENDLER & SPIZZ, P.C. (Escrow Agent)
By:_____________________________________
Name:______________________________
Title:_____________________________
Larry Pallini (in his capacity' as
Sellers' Representative)
/s/ Larry H. Pallini
----------------------------------------
9
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
COSMAR CORPORATION
By:_____________________________________
Name:______________________________
Title:_____________________________
LARRY PALLINI (individually)
/s/ Larry H. Pallini
----------------------------------------
VINCENT CARBONE (individually)
/s/ Vincent M. Carbone
----------------------------------------
TODTMAN, YOUNG, TUNICK, NACHAMIE,
HENDLER & SPIZZ, P.C. (Escrow Agent)
By: /s/
-------------------------------------
Name:______________________________
Title:_____________________________
Larry Pallini (in his capacity' as
Sellers' Representative)
/s/ Larry H. Pallini
----------------------------------------
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SCHEDULE A
Bank Account
Republic National Bank
10
<PAGE> 1
Exhibit 10.119
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made this 21st
day of August 1996, by and between HILLTOP SALES, INC., a New York corporation
("Hilltop") which is owned 100% by VINCENT CARBONE ("Carbone") (Hilltop and
Carbone are collectively known as the "Consultant"), whose mailing address is
19150 Cloister Lake Lane, Boca Raton , Florida 33491, COSMAR CORPORATION, a
Delaware corporation (the "Company"), whose mailing address is c/o Renaissance
Cosmetics, Inc. ("RCI"), 635 Madison Avenue, New York , New York 10022 and RCI,
a Delaware corporation.
WITNESSETH:
WHEREAS, simultaneously with the execution of this Agreement, the
Company is purchasing from Carbone and Larry Pallini all of the issued and
outstanding common stock of Great American Cosmetics, Inc. ("GACI") on the terms
and conditions set forth in that certain Stock Purchase Agreement (the "Purchase
Agreement"), dated as of June 27, 1996, by and among the Company (as Buyer),
Carbone and Larry Pallini (as Sellers) and GACI (the "Acquisition"), and that
certain Closing Escrow Agreement, dated as of even date herewith, by and among
the Company, Carbone, Larry Pallini and the Escrow Agent (as defined therein)
(the "Closing Escrow Agreement");
WHEREAS, the Company is a wholly-owned subsidiary of RCI;
WHEREAS, GACI is engaged in the business of producing,
outsourcing, packaging, marketing, distributing, advertising, promoting,
merchandising and selling cosmetic products to the mass markets, including, but
not limited to, nail polish, lipstick, eyeliners, mascara, make-up and related
accessories, sold under the brand name "NAT ROBBINS" (collectively refereed to
herein as the "Business");
WHEREAS, GACI possesses trade secrets, confidential business
relationships and other confidential and proprietary property and information in
connection with the Business and GACI's operations which are essential and
integral components of GACI's success, profitability and competitive advantage;
WHEREAS, prior to the Acquisition, Carbone was a principal
shareholder of GACI and was actively involved in the business of GACI as an
employee and, as a result, possesses Confidential Information (as defined in
Section 7 below) relating to the Business;
WHEREAS, the Company desires to hire Hilltop/Carbone to provide,
and Hilltop/Carbone desire to be engaged to provide, consulting services for the
Company and its affiliates as provided herein , all in accordance with the terms
and conditions set forth in this
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<PAGE> 2
Agreement, and with the express understanding that Carbone will be the sole and
exclusive provider of consulting services hereunder on behalf of Hilltop.
NOW, ThEREFORE, in consideration of the premises, the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Consulting Agreement. The Company hereby engages Consultant as
a consultant to the Company and each of its affiliated entities and businesses
and Consultant hereby accepts such engagement for a term extending from the date
hereof until the first anniversary of the date hereof (the "Consulting Term").
2. Consulting Duties; Acknowledgment. During the Consulting Term,
Consultant will provide such advisory and consulting services to the Company
and its affiliates as may be designated from time to time by the Company
(consistent with the Consultant's duties, responsibilities and title(s) with
GACI immediately prior to the closing of the transactions contemplated by the
Purchase Agreement). It is understood and agreed by the parties hereto that
Consultant shall perform such consulting services as may be requested by
Consultant at any time and from time to time by the Board of Directors of the
Company and/or the President and/or Chief Executive Officer of the Company.
Such services shall include, but not be limited to, (a) the launch of new
products, (b)the support of existing products, (c) assisting with key accounts,
key customers, key suppliers, key vendors and (d) carrying out other related
assignments consistent with serving as a consultant (taking into account the
Consultant's duties, responsibilities and title(s) with GACI immediately prior
to the closing of the transactions contemplated by the Purchase Agreement).
Consultant shall give the Company and its affiliates the benefit of
Consultant's expertise in related businesses and Consultant's familiarity with
marketing of such products as well as Consultant's good relationships with
potential customers. In this connection, the Company acknowledges the
Consultant has operated and managed the Business as an owner for many years and
Consultant will not be required to adhere to rigid personal schedules but will
be afforded appropriate latitude in performing Consultant's consulting
services. Consultant shall report to the senior management of the Company and
RCI and shall perform Consultant's consulting duties consistent with the best
interest of the Company, to the best of Consultant's ability, in a diligent
manner and consistent with the policies and guidelines of the Company as in
effect at any time and from time to time.
During the Consulting Term, Consultant will devote the following
amounts of time to providing the consulting services described in this Section
2: (a) thirty (30) hours, on average, per month during each of the first four
(4) months of the Consulting Term; (b)twenty (20) hours, on average, per month
during each of the second four months of the Consulting Term; and (c) ten (10)
hours, on average, per month during each of the last four (4) months of the
Consulting Term. The Company acknowledges that Consultant shall not be required
or expected (i) to relocate Consultant's office/residence to provide the
consulting services described in this Section 2. and/or (ii) to travel away from
Consultant's office/residence with any
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<PAGE> 3
frequency or regularity to provide the consulting services described in this
Section 2. In the event that Consultant is required to travel on behalf of the
Company, then Consultant shall be provided with at least five (5) business days
prior notice and the Company shall arrange and pay for Consultant's travel and
accommodations, which shall at least be on a level consistent with past
practices. The Company and Consultant also agree that the Consultant shall be
permitted to perform substantially all of the consulting services described in
this Section 2. by telephone, telecopy, electronic mall, letter or other written
correspondence or telecommunication.
Consultant acknowledges that this Agreement is non-exclusive and
that the Company may engage the services of other parties to pursue the
objectives stated herein on the same or different terms, as determined by the
Company in its sole and absolute discretion.
3. Consulting Fee. During the Consulting Term, the Company agrees
to pay (or cause to be paid) to Consultant a consulting fee (the "Consulting
Fee") in the amount of One Hundred Fifty Thousand Dollars ($150,000) annually,
to be paid monthly in arrears in twelve (12) equal payments of $12,500.00 each.
The Company will reimburse Consultant for Consultant's reasonable expenses which
are incurred during the Consulting Term in connection with Consultant's
engagement with the Company, provided that (a) any expense in excess of Five
Hundred Dollars ($500.00) is pre-approved by an authorized officer of the
Company and (b)standard documentation and/or receipts are submitted to the
Company by Consultant at the time reimbursement is requested. All dollar
references herein are to United States dollars.
4. Independent Contractor. The parties hereby acknowledge,
understand and agree that Consultant is an independent contractor and shall not
be considered an employee or agent of the Company or any of its affiliates
pursuant to the terms of this Agreement for any purposes whatsoever and
Consultant shall have no right or authority to assume or create any obligation
or liability, express or implied, on behalf of the Company or any of its
affiliates, or to bind the Company or such affiliates in any manner or thing
whatsoever, without the Company's express prior written consent. Consultant
shall be responsible for all income taxes , Social Security and other tax
liabilities with respect to payment of the Consulting Fee(s) to Consultant
hereunder.
5. Termination.
(a) Anything herein to the contrary notwithstanding, upon
the happening of any one of the following events, the Company may terminate this
Agreement by giving Consultant written notice of such termination: (i) an act or
omission of Consultant constituting Cause (as defined below); or (ii) a
violation by Consultant of any of the provisions of Section 6., 7. or 8. hereof.
For the purpose of clause (i) of this subsection 5(a), "Cause" shall mean (A)
conviction in a court of law of any crime or offense involving money or other
property of the Company or any of its affiliates, or (B) the determination by
the Board of Directors of RCI, acting in good faith, that the Consultant has
willfully committed an act of fraud with respect to money or other property of
the Company or an affiliate of the Company.
3
<PAGE> 4
(b) The Company's right of termination shall be in addition
to and shall not affect its rights and remedies under Sections 6., 7., 8. and 9.
of this Agreement, and such rights and remedies under such sections shall
survive termination of this Agreement.
(c) In the event of termination of this Agreement pursuant
to the terms hereof, Consultant shall have no right to receive any compensation
for any period subsequent to the date of such termination, except for any
pro-rated amounts earned prior to such termination, and all rights of the
Consultant to receive compensation for any period subsequent to the date of such
termination shall terminate in their entirety effective on and as of the
termination date.
6. Non-Competition Agreement. Consultant hereby agrees that, for
a period extending from the date hereof until the second anniversary of the date
hereof, Consultant will not engage or participate, directly or indirectly,
either as principal, agent, employee, employer, consultant, director, partner,
shareholder, officer, equity owner, lender with an equity "kicker" interest or
in any other individual or representative capacity whatsoever, in the conduct or
management of any business engaged in the distribution or sale of fragrances,
and/or cosmetics in North America, Central America, South America or Europe (a
"Competing Business"), nor own, legally or beneficially, directly or indirectly,
or have the right or option, legally or beneficially, directly or indirectly, to
acquire or own any stock or other proprietary or equity interest in any
Competing Business; provided, however, that nothing contained in this Agreement
shall prohibit Consultant from acquiring not more than five percent (5%) of the
outstanding shares of any equity security of an issuer, the ownership of whose
shares would otherwise be prohibited by this Agreement, of a Competing Business
listed for trading on the New York Stock Exchange, the American Stock
Exchange, or quoted on the National Association of Securities Dealers Automated
Quotation System.
7. Confidentiality Agreement. Consultant acknowledges that
Confidential Information (as defined below) is a valuable, special and unique
asset of the Company and its affiliates. Consultant agrees that Consultant shall
not disclose, for a period extending from the date hereof until the fifth
anniversary of the date hereof, any Confidential Information to which Consultant
becomes privy to any person, firm, corporation, association, partnership or
other entity for any reason or purpose whatsoever, other than employees of the
Company and its affiliates who have a need to know such information in
connection with the performance of their duties on behalf of the Company and its
affiliates, or use any Confidential Information for any purpose not expressly
authorized in writing by the Company. For purposes of this Agreement,
"Confidential Information" means any information, whether disclosed
electronically, in writing or orally, heretofore or hereafter designated or
otherwise treated as "confidential" by the Company, including, but not limited
to, all financial statements, corporate records and other information and data
relating to the operations, assets, liabilities, financial condition, future
prospects, employees, vendors, financing and litigation of any business unit of
the Company, all technical and business information, know-how or trade secrets,
or any other information relating to the Company or any unit thereof, which is
of a confidential or proprietary nature.
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<PAGE> 5
However, the term "Confidential Information" does not include information that
(a) is or becomes generally available to the public other than as a result of a
disclosure by Consultant or anyone to whom Consultant transmits the Confidential
Information to in accordance with this Agreement, or (b) becomes available to
Consultant on a non-confidential basis from a source other than the Company.
8. Nonsolicitation of Employees. Consultant hereby agrees that
Consultant will not, directly or indirectly, for a period extending from the
date hereof until the fifth anniversary of the date hereof, solicit, interfere
with, employ or retain in any other capacity any employee of the Company or any
of its affiliates, nor permit, encourage or allow any entity in which the
Consultant owns, directly or indirectly, more than a five percent (5%) equity or
proprietary interest or the right or option, legally or beneficially, directly
or indirectly, to acquire or own any stock or other proprietary or equity
interest to solicit, interfere with, employ or retain in any other capacity any
employee of the Company or any of its affiliates.
9. Remedies. Consultant specifically acknowledges and agrees that
(a) the covenants contained in Sections 6., 7. and 8. above are reasonable in
content and scope, are entered into by Consultant in partial consideration for
the compensation to be paid to Consultant hereunder and are a necessary and
material inducement to the Company to go forward with the engagement
contemplated by this Agreement and the consummation of the Acquisition, on the
terms and conditions set forth in the Purchase Agreement, and (b) the services
and agreements to be performed hereunder by Consultant are of a unique, special
and extraordinary character , and that a breach by Consultant of any of the
covenants contained in Sections 6., 7. and 8. above would result in irreparable
damage to the Company and its affiliates which may be unascertainable, and,
with respect to such covenants may involve the wrongful use or disclosure of
Confidential Information. Accordingly, Consultant agrees that, in the event of
any breach or threatened breach of any of the agreements contained in Sections
6., 7. or 8. above, the Company and its affiliates shall be entitled, in
addition to money damages and reasonable attorneys' fees and the right, on the
part of the Company, in its sole and absolute discretion, to terminate this
Agreement, to seek an injunction or other appropriate equitable relief to
prevent such breach or any continuation thereof in any court of competent
jurisdiction.
Notwithstanding anything to the contrary herein, in the Purchase
Agreement or in the Closing Escrow Agreement, the Consultant acknowledges and
agrees that the Company shall have the right, in its sole and absolute
discretion, at any time after the first six months of the Consulting Term, to
offset against any Consulting Fees remaining to be paid to Consultant hereunder
any Claimed Amount (as defined in Section 3.1 of the Closing Escrow Agreement)
if and to the extent that there are insufficient funds in the Escrow (as defined
in the Closing Escrow Agreement) to cover all or any portion of such Claimed
Amount; provided, however , that the amount of the offset permitted hereunder
shall not exceed $75,000 in the aggregate; and provided, further, that the
Company shall comply with the notice provisions in Section 3.1 of the Closing
Escrow Agreement before availing itself of the offset right afforded to it under
this paragraph.
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<PAGE> 6
10. Guarantee. RCI hereby absolutely and unconditionally
guarantees payment of any and all amounts due to Consultant under this Agreement
and covenants that it will promptly perform and observe each and every
obligation of the Company hereunder. This Guarantee shall be a continuing
guarantee and Consultant may act in reliance hereon.
11. General Provisions. Except to the extent inconsistent with
the express language of the foregoing provisions of this Agreement, the
following provisions shall govern the interpretation, application, construction
and enforcement of this Agreement:
(a) Notices. Any notice to any party under this Agreement
shall be in writing and shall be effective in accordance with Section 10.3 of
the Purchase Agreement, a copy of which is attached as Exhibit A to this
Agreement.
(b) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto, and their respective
successors in interest and assigns, but in no event shall any party be relieved
of its obligations hereunder without the express written consent of the other
party.
(c) Entire Agreement. This Agreement, together with the
instruments and agreements contemplated hereby, represents the entire agreement
of the parties with respect to the subject brought hereof, and all agreements
entered into prior hereto with respect to the subject matter hereof are revoked
and superseded by this Agreement, and no representations, warranties,
inducements or oral agreements have been made by any of the parties except as
expressly set forth herein, or in other contemporaneous written agreements. This
Agreement may not be changed, modified or rescinded except in writing, signed
by all parties hereto, and any attempt at oral modification of this Agreement
shall be void and of no effect.
(d) Captions. Captions and paragraph headings used herein
are for convenience only, are not a part of this Agreement and shall not be
deemed to limit or alter any provisions hereof or to be relevant in construing
this Agreement.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, excluding its
laws regarding choice of law.
(f) Attorneys' Fees. In the event of any litigation or
arbitration arising out of this Agreement, the cost of such litigation or
arbitration, including reasonable attorneys' fees and expenses (whether incurred
at or before trial, on appeal or at or before the arbitration), of the
prevailing party shall be paid by the non-prevailing party.
(g) Counterparts; Facsimile Signatures. This Agreement may
be executed simultaneously in one or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument. Each party hereto agrees
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<PAGE> 7
to be bound by its own facsimile signature and to accept the facsimile signature
of the parties to this Agreement.
(h) No Third Party Beneficiaries. This Agreement shall not
confer any rights, benefits or remedies upon any person other than the parties
hereto and their respective successors and assigns.
(i) Severability. If any provisions of this Agreement shall
be held to be excessively broad as to duration, geographical scope, activity or
subject, such provisions shall be construed by limiting or reducing the same so
as to render such provision enforceable to the extent compatible with applicable
law.
(j) Sole Provider of Consulting Services. Notwithstanding
anything in this Agreement to the contrary, Carbone and Hilltop agree that
Carbone shall be the sole provider of consulting services on behalf of Hilltop
and that Hilltop shall not have the right, without the prior written permission
of the Company to substitute any person, or designate or appoint any person,
other than Carbone as the sole provider of consulting services hereunder on
behalf of Hilltop.
(k) Waiver. Failure on the part of the Company to exercise
any right or option arising out of a breach of this Agreement shall not be
deemed a waiver of any right or option with respect to any subsequent or
different breach, or the continuance of any existing breach.
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<PAGE> 8
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the date first above written.
CONSULTANT:
HILLTOP SALES, INC.
By: /s/ Vincent Carbone, V. Pres.
-------------------------------
Vincent Carbone, President
/s/ Vincent Carbone, V. Pres.
-------------------------------
Name: Vincent Carbone
COMPANY:
COSMAR CORPORATION
By: /s/ John R. Jackson
-------------------------------
Name:
-----------------------------
Title:
----------------------------
RCI:
RENAISSANCE COSMETICS, INC.
(with respect to Section 10)
By: /s/ John R. Jackson
-------------------------------
Name:
-----------------------------
Title:
----------------------------
8
<PAGE> 1
Exhibit 10.120
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made this 21st day
of August, 1996, by and between PAGEANT GROUP, LTD., a New York corporation
("Pageant") which is 100% owned by LARRY PALLINI ("Pallini") (Pageant and
Pallini are collectively referred to as the "Consultant"), whose mailing address
is 304A Main Street, Roslyn, New York 11576, COSMAR CORPORATION, a Delaware
corporation (the "Company"), whose mailing address is c/o Renaissance Cosmetics,
Inc. ("RCI"), 635 Madison Avenue, New York, New York 10022 and RCI, a Delaware
corporation.
W I T N E S S E T H:
WHEREAS, simultaneously with the execution of this Agreement,
the Company is purchasing from Pallini and Vincent Carbone all of the issued and
outstanding common stock of Great American Cosmetics, Inc. ("GACI"), on the
terms and conditions set forth in that certain Stock Purchase Agreement (the
"Purchase Agreement"), dated as of June 27, 1996, by and among the Company (as
Buyer), Pallini and Vincent Carbone (as Sellers) and GACI (the "Acquisition"),
and that certain Closing Escrow Agreement, dated as of even date herewith, by
and among the Company, Pallini, Vincent Carbone and the Escrow Agent (as defined
therein) (the "Closing Escrow Agreement");
WHEREAS, the Company is a wholly-owned subsidiary of RCI;
WHEREAS, GACI is engaged in the business of producing,
outsourcing, packaging, marketing, distributing, advertising, promoting,
merchandising and selling cosmetic products to the mass markets, including, but
not limited to, nail polish, lipstick, eyeliners, mascara, make-up and related
accessories, sold under the brand name "NAT ROBBINS" (collectively referred to
herein as the "Business");
WHEREAS, GACI possesses trade secrets, confidential business
relationships and other confidential and proprietary property and information in
connection with the Business and GACI's operations which are essential and
integral components of GACI's success, profitability and competitive advantage;
WHEREAS, prior to the Acquisition, Pallini was a principal
shareholder of GACI and was actively involved in the business of GACI as an
employee and, as a result, possesses Confidential Information (as defined in
Section 7. below) relating to the Business;
WHEREAS, the Company desires to hire Pageant/Pallini to provide,
and Pageant/Pallini desire to be engaged to provide, consulting services for the
Company and its affiliates as provided herein, all in accordance with the terms
and conditions set forth in this Agreement, and with the express understanding
that Pallini will be the sole and exclusive provider of consulting services
hereunder on behalf of Pageant.
1 7/10/96
<PAGE> 2
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
l. Consulting Agreement. The Company hereby engages Consultant as
a consultant to the Company and each of its affiliated entities and businesses
and Consultant hereby accepts such engagement for a term extending from the date
hereof until the third anniversary of the date hereof (the "Consulting Term").
2. Consulting Duties: Acknowledgment. During the Consulting Term,
Consultant will provide such advisory and consulting services to the Company and
its affiliates as may be designated from time to time by the Company (consistent
with the Consultant's duties, responsibilities and title(s) with GACI
immediately prior to the closing of the transactions contemplated by the
Purchase Agreement). It is understood and agreed by the parties hereto that
Consultant shall perform such consulting services as may be requested by
Consultant at any time and from time to time by the Board of Directors of the
Company and/or the President and/or Chief Executive Officer of the Company. Such
services shall include, but not be limited to, (a) the launch of new products,
(b)the support of existing products, (c) assisting with key accounts, key
customers, key suppliers, key vendors and (d) carrying out other related
assignments consistent with serving as a consultant (taking into account the
Consultant's duties, responsibilities and title(s) with GACI immediately prior
to the closing of the transactions contemplated by the Purchase Agreement).
Consultant shall give the Company and its affiliates the benefit of Consultant's
expertise in related businesses and Consultant's familiarity with marketing of
such products as well as Consultant's good relationships with potential
customers. In this connection, the Company acknowledges the Consultant has
operated and managed the Business as an owner for many years and Consultant will
not be required to adhere to rigid personal schedules but will be afforded
appropriate latitude in performing Consultant's consulting services. Consultant
shall report to the senior management of the Company and RCI and shall perform
Consultant's consulting duties consistent with the best interest of the Company,
to the best of Consultant's ability, in a diligent manner and consistent with
the policies and guidelines of the Company as in effect at any time and from
time to time.
During the Consulting Term, Consultant will devote the following
amounts of time to providing the consulting services described in this Section
2: (a) one hundred and twenty (120) hours during the first month of the
Consulting Term; (b) eighty (80) hours during the second month of the Consulting
Term; (c) sixty (60) hours during the third month of the Consulting Term; (d)
forty (40) hours, on average, per month during the fourth, fifth and sixth
months of the Consulting Term; (e) twenty (20) hours, on average, per month for
the remainder of the first year of the Consulting Term; and (f) three (3) hours,
on average, per month for the second and third years of the Consulting Term. The
Company acknowledges that Consultant shall not be required or expected (i) to
relocate Consultant's office/residence to provide the consulting services
described in this Section 2. and/or (ii) to travel away from Consultant's
office/residence with any frequency or regularity to provide the consulting
services described in this Section 2. In the event that Consultant is required
to travel on behalf of the Company,
2 7/10/96
<PAGE> 3
then Consultant shall be provided with at least five (S) business days prior
notice and the Company shall arrange and pay for Consultant's travel and
accommodations, which shall at least be on a level consistent with past
practices. The Company and Consultant also agree that the Consultant shall be
permitted to perform no less than one-half of all of the consulting services
described in this Section 2. by telephone, telecopy, electronic mall, letter or
other written correspondence or telecommunication for the first year of this
Agreement, and Consultant will be permitted to perform all of such consulting
services by telephone for the remainder of the Consulting Term.
Consultant acknowledges that this Agreement is non-exclusive and
that the Company may engage the services of other parties to pursue the
objectives stated herein on the same or different terms, as determined by the
Company in its sole and absolute discretion.
3. Consulting Fee. During the Consulting Term, the Company agrees
to pay (or cause to be paid) to Consultant a consulting fee (the "Consulting
Fee") in the amount of Two Hundred Thousand Dollars ($200,000) annually, to be
paid monthly in arrears in thirty-six (36) equal payments of $16,666.67 each.
The Company will reimburse Consultant for Consultant's reasonable expenses which
are incurred during the Consulting Term in connection with Consultant's
engagement with the Company, provided that (a) any expense in excess of Five
Hundred Dollars ($500.00) is pre-approved by an authorized officer of the
Company and (b) standard documentation and/or receipts are submitted to the
Company by Consultant at the time reimbursement is requested. All dollar
references herein are to United States dollars.
4. Independent Contractor. The parties hereby acknowledge,
understand and agree that Consultant is an independent contractor and shall
not be considered an employee or agent of the Company or any of its affiliates
pursuant to the terms of this Agreement for any purposes whatsoever and
Consultant shall have no right or authority to assume or create any obligation
or liability, express or implied, on behalf of the Company or any of its
affiliates, or to bind the Company or such affiliates in any manner or thing
whatsoever, without the Company's express prior written consent. Consultant
shall be responsible for all income taxes, Social Security and other tax
liabilities with respect to payment of the Consulting Fee(s) to Consultant
hereunder.
5. Termination.
(a) Anything herein to the contrary notwithstanding, upon
the occurrence of any one of the following events, the Company may terminate
this Agreement by giving Consultant written notice of such termination: (i) an
act or omission of Consultant constituting Cause (as defined below); or (il) a
violation by Consultant of any of the provisions of Section 6., 7. or 8. hereof.
For the purpose of clause (i) of this subsection 5(a), "Cause" shall mean (A)
conviction in a court of law of any crime or offense involving money or other
property of the Company or any of its affiliates, or (B) the determination by
the Board of Directors of RCI, acting in good faith, that the Consultant has
willfully committed an act of fraud with respect to money or other property of
the Company or an affiliate of the Company.
3 7/10/96
<PAGE> 4
(b) The Company's right of termination shall be in addition
to and shall not affect its rights and remedies under Sections 6., 7., 8. and 9.
of this Agreement, and such rights and remedies under such sections shall
survive termination of this Agreement.
(c) In the event of termination of this Agreement pursuant
to the terms hereof, Consultant shall have no right to receive any compensation
for any period subsequent to the date of such termination, except for any
pro-rated amounts earned prior to such termination, and all rights of the
Consultant to receive compensation for any period subsequent to the date of such
termination shall terminate in their entirety effective on and as of the
termination date.
6. Non-Competition Agreement. Consultant hereby agrees that, for
a period extending from the date hereof until the third anniversary of the date
hereof, Consultant will not engage or participate, directly or indirectly,
either as principal, agent, employee, employer, consultant, director, partner,
shareholder, officer, equity owner, lender with an equity "kicker" interest or
in any other individual or representative capacity whatsoever, in the conduct or
management of any business engaged in the distribution or sale of fragrances
and/or, cosmetics in North America, Central America, South America or Europe (a
"Competing Business"), nor own, legally or beneficially, directly or indirectly,
or have the right or option, legally or beneficially, directly or indirectly, to
acquire or own any stock or other proprietary or equity interest in any
Competing Business; provided, however, that nothing contained in this Agreement
shall prohibit Consultant from acquiring not more than five percent (5%) of the
outstanding shares of any equity security of an issuer, the ownership of whose
shares would otherwise be prohibited by this Agreement, of a Competing Business
listed for trading on the New York Stock Exchange, the American Stock Exchange,
or quoted on the National Association of Securities Dealers Automated Quotation
System.
7. Confidentiality Agreement. Consultant acknowledges that
Confidential Information (as defined below) is a valuable, special and unique
asset of the Company and its affiliates. Consultant agrees that Consultant shall
not disclose, for a period extending from the date hereof until the fifth
anniversary of the date hereof, any Confidential Information to which Consultant
becomes privy to any person, firm, corporation, association, partnership or
other entity for any reason or purpose whatsoever, other than employees of the
Company and its affiliates who have a need to know such information in
connection with the performance of their duties on behalf of the Company and its
affiliates, or use any Confidential Information for any purpose not expressly
authorized in writing by the Company. For purposes of this Agreement,
"Confidential Information" means any information, whether disclosed
electronically, in writing or orally, heretofore or hereafter designated or
otherwise treated as "confidential" by the Company, including, but not limited
to, all financial statements, corporate records and other information and data
relating to the operations, assets, liabilities, financial condition, future
prospects, employees, vendors, financing and litigation of any business unit of
the Company, all technical and business information, know-how or trade secrets,
or any other information relating to the Company or any unit thereof, which is
of a confidential or proprietary nature. However, the term "Confidential
Information" does not include information that (a) is or
4 7/10/96
<PAGE> 5
becomes generally available to the public other than as a result of a disclosure
by Consultant or anyone to whom Consultant transmits the Confidential
Information to in accordance with this Agreement, or (b) becomes available to
Consultant on a non-confidential basis from a source other than the Company.
8. Nonsolicitation of Employees. Consultant hereby agrees that it
will not, directly or indirectly, for a period extending from the date hereof
until the fifth anniversary of the date hereof, solicit, interfere with, employ
or retain in any other capacity any employee of the Company or any of its
affiliates, nor permit, encourage or allow any entity in which the Consultant
owns, directly or indirectly, more than a five percent (5%) equity or
proprietary interest or the right or option, legally or beneficially, directly
or indirectly, to acquire or own any stock or other proprietary or equity
interest to solicit, interfere with, employ or retain in any other capacity any
employee of the Company or any of its affiliates.
9. Remedies. Consultant specifically acknowledges and agrees that
(a) the covenants contained in Sections 6., 7. and 8. above are reasonable in
content and scope, are entered into by Consultant in partial consideration for
the compensation to be paid to Consultant hereunder and are a necessary and
material inducement to the Company to go forward with the engagement
contemplated by this Agreement and the consummation of the Acquisition, on the
terms and conditions set forth in the Purchase Agreement, and (b) the services
and agreements to be performed hereunder by Consultant are of a unique, special
and extraordinary character, and that a breach by Consultant of any of the
covenants contained in Sections 6., 7. and 8. above would result in irreparable
damage to the Company and its affiliates which may be unascertainable, and, with
respect to such covenants may involve the wrongful use or disclosure of
Confidential Information. Accordingly, Consultant agrees that, in the event of
any breach or threatened breach of any of the agreements contained in Sections
6., 7. or 8. above, the Company and its affiliates shall be entitled, in
addition to money damages and reasonable attorneys' fees and the right, on the
part of the Company, in its sole and absolute discretion, to terminate this
Agreement, to seek an injunction or other appropriate equitable relief to
prevent such breach or any continuation thereof in any court of competent
jurisdiction.
Notwithstanding anything to the contrary herein , in the Purchase
Agreement or in the Closing Escrow Agreement, the Consultant acknowledges and
agrees that the Company shall have the right, in its sole and absolute
discretion, at any time after the first six months of the Consulting Term, for a
period of one year from the date of this Agreement, to offset against any
Consulting Fees remaining to be paid to Consultant hereunder any Claimed Amount
(as defined in Section 3.1 of the Closing Escrow Agreement) if and to the extent
that there are insufficient funds in the Closing Escrow (as defined in the
Closing Escrow Agreement) to cover all or any portion of such Claimed Amount;
provided, however, that the amount of the offset permitted hereunder shall not
exceed $75,000 in the aggregate; and provided, further, that the Company shall
comply with the notice provisions in Section 3.1 of the Closing Escrow Agreement
before availing itself of the offset right afforded to it under this paragraph.
5 7/10/96
<PAGE> 6
10. Guarantee. RCI hereby absolutely and unconditionally
guarantees payment of any and all amounts due to Consultant under this Agreement
and covenants that it will promptly perform and observe each and every
obligation of the Company hereunder. This Guarantee shall be a continuing
guarantee and Consultant may act in reliance hereon.
11. General Provisions, Except to the extent inconsistent with
the express language of the foregoing provisions of this Agreement, the
following provisions shall govern the interpretation, application, construction
and enforcement of this Agreement:
(a) Notices. Any notice to any party under this Agreement
shall be in writing and shall be effective in accordance with Section 10.3 of
the Purchase Agreement, a copy of which is attached as Exhibit A to this
Agreement.
(b) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto, and their respective
successors in interest and assigns, but in no event shall any party be relieved
of its obligations hereunder without the express written consent of the other
party.
(c) Entire Agreement. This Agreement, together with the
instruments and agreements contemplated hereby, represents the entire agreement
of the parties with respect to the subject brought hereof, and all agreements
entered into prior hereto with respect to the subject matter hereof are revoked
and superseded by this Agreement, and no representations, warranties,
inducements or oral agreements have been made by any of the parties except as
expressly set forth herein, or in other contemporaneous written agreements. This
Agreement may not be changed, modified or rescinded except in writing, signed
by all parties hereto, and any attempt at oral modification of this Agreement
shall be void and of no effect.
(d) Captions. Captions and paragraph headings used herein
are for convenience only, are not a part of this Agreement and shall not be
deemed to limit or alter any provisions hereof or to be relevant in construing
this Agreement.
(e) Governing Law . This Agreement shall be governed by and
construed in accordance with the law of the State of New York, excluding its
laws regarding choice of law.
(f) Attorneys' Fees. In the event of any litigation or
arbitration arising out of this Agreement, the cost of such litigation or
arbitration, including reasonable attorneys' fees and expenses (whether incurred
at or before trial, on appeal or at or before the arbitration), of the
prevailing party shall be paid by the non-prevailing party.
(g) Counterparts: Facsimile Signatures. This Agreement may
be executed simultaneously in one or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument. Each party hereto agrees
6 7/10/96
<PAGE> 7
to be bound by its own facsimile signature and to accept the facsimile signature
of the parties to this Agreement.
(h) No Third Party Beneficiaries. This Agreement shall not
confer any rights, benefits or remedies upon any person other than the parties
hereto and their respective successors and assigns.
(i) Severability. If any provisions of this Agreement shall
be held to be excessively broad as to duration, geographical scope, activity or
subject, such provisions shall be construed by limiting or reducing the same so
as to render such provision enforceable to the extent compatible with applicable
law.
(j) Sole Provider of Consulting Services. Notwithstanding
anything in this Agreement to the contrary, Pallini and Pageant agree that
Pallini shall be the sole provider of consulting services on behalf of Pageant
and that Pageant shall not have the right, without the prior written permission
of the Company to substitute any person, or designate or appoint any person,
other than Pallini as the sole provider of consulting services hereunder on
behalf of Pageant.
(k) Waiver. Failure on the part of the Company to exercise
any right or option arising out of a breach of this Agreement shall not be
deemed a waiver of any right or option with respect to any subsequent or
different breach, or the continuance of any existing breach.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the date first above written.
CONSULTANT:
PAGEANT GROUP, LTD.
By: /s/ Larry H. Pallini
--------------------------------
Larry Pallini, President
/s/ Larry H. Pallini
-----------------------------------
Name: Larry Pallini
COMPANY:
COSMAR CORPORATION
By: /s/ John R. Jackson
--------------------------------
Name:
------------------------------
Title:
-----------------------------
7
<PAGE> 8
RCI:
RENAISSANCE COSMETICS, INC.
(with respect to Section 10)
By: /s/ John R. Jackson
----------------------------
Name:
-------------------------
Title:
-------------------------
8
<PAGE> 1
Exhibit 10.123
CIBC WOOD GUNDY SECURITIES CORP.
1325 Avenue of the Americas
New York, New York 10019
September 6, 1996
Mr. Thomas V. Bonoma
Chief Executive Officer
Renaissance Cosmetics, Inc.
635 Madison Avenue
New York, NY 10022
Gentlemen:
In accordance with Section 8.3 of the Purchase Agreement, this letter
("Letter Agreement") will represent the understanding between Renaissance
Cosmetics, Inc., a Delaware corporation (hereinafter the "Company"), and CIBC
Wood Gundy Securities Corp., as Initial Purchaser (hereinafter the "Initial
Purchaser"), that both parties desire to hereby amend the Securities Purchase
Agreement (the "Purchase Agreement"), dated as of August 8, 1996, between the
Company and the Initial Purchaser. All capitalized terms used herein without
definition have the meanings specified in the Purchase Agreement.
The Initial Purchaser hereby requests that Section 2.1 of Purchase
Agreement be amended so that the Purchase Option be increased by $15,000,000
aggregate liquidation value of Preferred Stock and 15,000 Warrants to a total
of $35,000,000 aggregate liquidation value of Preferred Stock and 35,000
Warrants to purchase shares of Common Stock representing 7% of the Common Stock
on a fully diluted basis and that the expiration date of the Purchase Option be
extended to September 30, 1996. Accordingly, the term "Securities", as defined
in the Purchase Agreement, will cover the additional Option Units as
contemplated hereby.
The Initial Purchaser acknowledges that the amendments contained herein
shall become effective upon the Company obtaining consent of the holders of a
majority of the outstanding Preferred Stock and Warrants.
Nothing herein contained shall in any way alter, waive, annul, vary or
affect any terms, conditions or
<PAGE> 2
-2-
provisions of the Purchase Agreement, except as required to effect the
foregoing amendments, it being the intent of the parties hereto that all of the
terms, conditions, and provisions of the Purchase Agreement shall continue in
full force and effect, except as hereby amended.
The construction, validity and interpretation of this Letter Agreement
will be governed by the laws of the State of New York, as applied to contracts
made and performed within the State of New York, without regard to principles
of conflicts of law. Each of the parties hereto agrees to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Letter Agreement. This Letter Agreement may
be executed in counterparts.
Very truly yours,
CIBC WOOD GUNDY SECURITIES CORP.
By: /s/ BRUCE SPOHLER
--------------------------------
Name: Bruce Spohler
Title: MANAGING DIRECTOR
Accepted and agreed to with respect
to the above amendments as of the
date hereof:
RENAISSANCE COSMETICS, INC.
By: /s/ THOMAS T.S. KAUNG
----------------------------
Name: Thomas T.S. Kaung
Title: GROUP VICE PRESIDENT
<PAGE> 1
Exhibit 10.124
FIRST AMENDMENT TO WARRANT AGREEMENT
This Amendment ("Amendment") is entered into as of this 27th day of
September, 1996 between Renaissance Cosmetics, Inc., a Delaware corporation
(hereinafter the "Company"), and Firstar Trust Company, as Warrant Agent
(hereinafter the "Warrant Agent" or "Firstar").
WHEREAS, on August 15, 1996, the Company previously issued and sold
pursuant to a Securities Purchase Agreement (the "Purchase Agreement"), dated
as of August 8, 1996, between the Company and CIBC Wood Gundy Securities Corp.,
as Initial Purchaser (the "Initial Purchaser"), 85,000 Units consisting of
$85,000,000 in aggregate liquidation value of its Senior Redeemable Preferred
Stock, Series B along with 85,000 Warrants for the purchase of shares of its
Common Stock, par value $.01 per share; and
WHEREAS, on September 16, 1996, pursuant to the Purchase Agreement, the
Company issued and sold 10,000 Units consisting of $10,000,000 in aggregate
liquidation value of its Senior Redeemable Preferred Stock, Series B along with
10,000 Warrants (collectively with the 85,000 Warrants sold on August 15, 1996
the "Warrants") for the purchase of shares of its Common Stock, par value $.01
per share (collectively with the shares underlying the 85,000 Warrants sold on
August 15, 1996 the "Warrant Shares"); and
WHEREAS, the Company and Firstar, as Warrant Agent, have previously
entered into a Warrant Agreement dated as of August 15, 1996 (the "Warrant
Agreement"), pursuant to which Firstar agreed to act on behalf of the Company
as Warrant Agent in connection with the issuance by the Company of up to
100,000 Warrants; and
WHEREAS, the Company desires and a majority of the Warrant holders have
agreed to amend the Warrant Agreement in order to permit the issuance of up to
15,000 additional Warrants which, as a result of adjustment provisions
contained in the Warrant Agreement, will result in an increase following the
issuance of all such additional Warrants of the Exercise Rate in effect
immediately prior to the issuance and sale to the Initial Purchaser of such
additional Warrants so that the holders of Warrants will be entitled to receive
shares that represent in the aggregate approximately 23% of the Common Stock on
a fully diluted basis; and
<PAGE> 2
-2-
WHEREAS, the Board of Directors of the Company have approved this
Amendment and the Company has received the requisite consents from a majority
of the Warrant holders approving and agreeing to be bound by this Amendment;
and
WHEREAS, the Company and Firstar desire to amend the Warrant Agreement
as set forth herein.
NOW THEREFORE, in consideration of the premises, and other goods and
valuable consideration, the sufficiency and receipt of which is hereby
acknowledged, the parties agree as follows:
1. Capitalized terms used herein without definition have the meanings
specified in the Warrant Agreement.
2. The first recital on page 1 of the Warrant Agreement is hereby
amended to read in its entirety as follows:
"WHEREAS, the Company proposes to issue and sell pursuant to a
Securities Purchase Agreement (the "Purchase Agreement"), dated as of
August 8, 1996, as amended, between the Company and CIBC Wood Gundy
Securities Corp., as Initial Purchaser (the "Initial Purchaser"),
$95,000,000 in aggregate liquidation value of its Senior Redeemable
Preferred Stock, Series B, par value $.01 per share (the "Preferred
Stock"), along with 95,000 Warrants (each an "Initial Warrant," and
collectively, the "Initial Warrants"), for the purchase of shares of
its Common Stock, par value $.01 per share (the "Common Stock")
constituting approximately 19% of the Company's fully diluted Common
Stock as of the date hereof;"
3. The second recital on page 1 of the Warrant Agreement is hereby
amended to read in its entirety as follows:
"WHEREAS, the Company has granted to the Initial Purchaser an
option (the "Purchase Option") exercisable until September 30, 1996, to
acquire up to an additional $20,000,000 in aggregate liquidation value
of the Preferred Stock, along with an additional 20,000 Warrants (the
"Additional Warrants" and together with the Initial Warrants,
collectively, the "Warrants") constituting approximately 4% of the
Company's fully
<PAGE> 3
-3-
diluted Common Stock as of the date of such issuance (the shares of
Common Stock issuable upon exercise of the Warrants being referred to
herein as the "Warrant Shares"); provided that if there is more than
one issuance of Additional Warrants, "Initial Warrants," with respect
to each such issuance of Additional Warrants, shall include any
Additional Warrants outstanding prior to such new issuance of
Additional Warrants shall be reduced accordingly;"
4. The Warrant Agreement, as amended by this Amendment, and the
warrant certificates constitute the entire understanding of the parties with
respect to the subject matter of the Warrants and the Warrant Shares and
supersedes all prior discussions, agreements and representations, whether oral
or written, and whether or not executed by the Company and the Warrant Agent.
5. It is understood and agreed that the new warrant certificates being
issued concurrently with the issuance of the Additional Warrants replace the
warrant certificates issued by the Company to the Warrant Agent pursuant to the
Warrant Agreement and that the original warrant certificates shall be cancelled
and returned to the Company by the Warrant Agent simultaneously with the
delivery of the new warrant certificates.
6. Nothing herein contained shall in any way alter, waive, annul, vary
or affect any terms, conditions or provisions of the Warrant Agreement, except
as specifically provided herein, it being the intent of the parties hereto that
all of the terms, conditions, and provision of the Warrant Agreement shall
continue in full force and effect, except as hereby amended.
7. The construction, validity and interpretation of this Amendment
will be governed by the laws of the State of New York, as applied to contracts
made and performed within the State of New York, without regard to principles
of conflicts of law.
8. This Amendment may be executed in counterparts, any one of which
need not contain the signature of more than one party, but all such
counterparts taken together shall constitute one and the same instrument.
<PAGE> 4
-4-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly appointed officers or
representatives as of the day and year first above written.
RENAISSANCE COSMETICS, INC.
By:/s/ THOMAS T.S. KAUNG
--------------------------
Name: Thomas T.S. Kaung
Title: Group Vice President
FIRSTAR TRUST COMPANY,
as Warrant Agent
By:/s/ SUZANNE P. NORMAN BARNES
----------------------------
Name: Suzanne P. Norman Barnes
Title: Assistant Vice President
<PAGE> 1
Exhibit 10.125
FIRST AMENDMENT TO THE
REGISTRATION RIGHTS AGREEMENT
This Amendment ("Amendment") is entered into as of this 27th day of
September, 1996 between Renaissance Cosmetics, Inc., a Delaware corporation
(hereinafter the "Company"), and CIBC Wood Gundy Securities Corp., as Initial
Purchaser (hereinafter the "Initial Purchaser").
WHEREAS, the Company and the Initial Purchaser are parties to a
Registration Rights Agreement, dated as of August 15, 1996 (the "Registration
Agreement"), entered into in connection with the Securities Purchase Agreement
(the "Purchase Agreement"), dated as of August 8, 1996, between the Company and
the Initial Purchaser, relating to the sale by the Company to the Initial
Purchaser of 85,000 Units consisting of $85,000,000 in aggregate liquidation
value of its Senior Redeemable Preferred Stock, Series B along with 85,000
Warrants for the purchase of shares of its Common Stock, par value $.01 per
share; and
WHEREAS, on September 16, 1996, pursuant to the Purchase Agreement, the
Company issued and sold to the Initial Purchaser 10,000 Units consisting of
$10,000,000 in aggregate liquidation value of its Senior Redeemable Preferred
Stock, Series B along with 10,000 Warrants (collectively with the 85,000
Warrants sold on August 15, 1996, the "Warrants") for the purchase of shares of
its Common Stock, par value $.01 per share (collectively with the shares
underlying the 85,000 Warrants sold on August 15, 1996 the "Warrant Shares");
and
WHEREAS, the Purchase Agreement was amended by a Letter Agreement,
dated as of September 6, 1996, which provided for an increase in the Purchase
Option by 15,000 Units to a total of 35,000 Units consisting of $35,000,000 in
aggregate liquidation value of its Senior Redeemable Preferred Stock, Series B
and 35,000 Warrants and that the expiration of such Purchase Option be extended
to September 30, 1996; and
WHEREAS, the Company desires and a majority of the holders of
outstanding Preferred Stock, as evidenced by written consents, have agreed to
amend the Registration Rights Agreement in order to permit the issuance of up to
15,000 additional Units and to change certain definitions providing for an
extension of the period in which the Exchange offer can be effected which is
necessary as a result of the delay from the issuance of the additional Units;
and
<PAGE> 2
-2-
WHEREAS, the Board of Directors of the Company has approved this
Amendment and the Company has received the requisite consents from a majority
of the holders of outstanding Preferred Stock approving and agreeing to be
bound by this Amendment; and
WHEREAS, the Company and the Initial Purchaser desire to amend the
Registration Rights Agreement as set forth herein.
NOW THEREFORE, in consideration of the premises, and other goods and
valuable consideration, the sufficiency and receipt of which is hereby
acknowledged; the parties agree as follows:
1. Capitalized terms used herein without definition have the meanings
specified in the Registration Rights Agreement.
2. In the first paragraph on page 1 of the Registration Rights
Agreement, the date "May 29, 1996" shall be deleted and replaced with "August
15, 1996."
3. The first sentence in the second paragraph on page 1 of the
Registration Rights Agreement is hereby deleted in its entirety and substituted
with the following:
"This Agreement is entered into in connection with the Securities
Purchase Agreement, dated as of August 8, 1996, as amended by the Letter
Agreement dated September 6, 1996, between the Company and the Initial
Purchaser (the "Purchase Agreement") relating to the sale by the Company
to the Initial Purchaser of $80,000,000 aggregate liquidation value of
the Company's Senior Redeemable Preferred Stock, Series B, par value
$.01 per share (the "Preferred Shares") and the option to the Initial
Purchaser to purchase an additional $35,000,000 aggregate liquidation
value of the Company's Senior Redeemable Preferred Stock, Series B, par
value $.01 per share (the "Option Shares") and warrants to purchase
Company Stock (the "Warrants")."
4. The following terms in Section 1. Definitions shall be deleted in
their entirety and substituted with the following:
<PAGE> 3
"Certificate of Designation: The Certificate of Designation duly
adopted by the Board of Directors of the Company setting forth the
rights, preferences and priorities of the Preferred Shares and filed
with, and accepted for filing, so as to be effective, by the Secretary
of State of the State of Delaware prior to the Closing hereunder and
which is substantially in the form of Exhibit 1 to the Purchase
Agreement, as may be amended from time to time pursuant to the terms
thereof."
"Effectiveness Date: The 149th day after the Issue Date."
"Filing Date: The 74th day after the Issue Date."
"Issue Date: The first date on which the Preferred Shares are
sold to the Initial Purchaser pursuant to the Purchase Agreement."
5. In Section 4. Additional Dividends, subsection (a)(iii)(A), the
number "195" shall be deleted and replaced with the number "209."
6. Nothing herein contained shall in any way alter, waive, annul, vary
or affect any terms, conditions or provisions of the Registration Rights
Agreement, except as specifically provided herein, it being the intent of the
parties hereto that all of the terms, conditions, and provisions of the
Registration Rights Agreement shall continue in full force and effect, except
as hereby amended.
7. The construction, validity and interpretation of this Amendment
will be governed by the laws of the State of New York, as applied to contracts
made and performed within the State of New York, without regard to principles
of conflicts of law. Each of the parties hereto agrees to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Amendment.
8. This Amendment may be executed in counterparts, any one of which
need not contain the signature of more than one party, but all such
counterparts taken together shall constitute one and the same instrument.
<PAGE> 4
-4-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly appointed officers or
representatives as of the day and year first above written.
CIBC WOOD GUNDY SECURITIES CORP.
By: /s/ BRUCE SPOHLER
-----------------------------
Name: Bruce Spohler
Title: Managing Director
RENAISSANCE COSMETICS, INC.
By: /s/ THOMAS T.S. KAUNG
----------------------------
Name: Thomas T.S. Kaung
Title: Group Vice President
<PAGE> 1
EXHIBIT 10.126
FIRST AMENDMENT TO THE
COMMON STOCK REGISTRATION RIGHTS AGREEMENT
This Amendment ("Amendment") is entered into as of this 27th day of
September, 1996 between Renaissance Cosmetics, Inc., a Delaware corporation
(hereinafter the "Company"), and CIBC Wood Gundy Securities Corp., as Initial
Purchaser (hereinafter the "Initial Purchaser").
WHEREAS, the Company and the Initial Purchaser are parties to a Common
Stock Registration Rights Agreement, dated as of August 15, 1996 (the "Common
Stock Registration Rights Agreement"), entered into in connection with the
Securities Purchase Agreement (the "Purchase Agreement"), dated as of August 8,
1996, between the Company and the Initial Purchaser, relating to the sale by the
Company to the Initial Purchaser of 85,000 Units consisting of $85,000,000 in
aggregate liquidation value of its Senior Redeemable Preferred Stock, Series B
along with 85,000 Warrants for the purchase of shares of its Common Stock, par
value $.01 per share; and
WHEREAS, on September 16, 1996, pursuant to the Purchase Agreement, the
Company issued and sold to the Initial Purchaser 10,000 Units consisting of
$10,000,000 in aggregate liquidation value of its Senior Redeemable Preferred
Stock, Series B along with 10,000 Warrants (collectively with the 85,000
Warrants sold on August 15, 1996 the "Warrants") for the purchase of shares of
its Common Stock, par value $.01 per share; and
WHEREAS, the Purchase Agreement was amended by a Letter Agreement, dated
as of September 6, 1996, which provided for an increase in the Purchase Option
to a total of 35,000 Units consisting of $35,000,000 in aggregate liquidation
value of its Senior Redeemable Preferred Stock, Series B and 35,000 additional
Warrants and that the expiration of such Purchase Option be extended to
September 30, 1996; and
WHEREAS, the Company desires and a majority of the holders of
outstanding Warrants, as evidenced by written consents, have agreed to amend the
Common Stock Registration Rights Agreement in order to permit the issuance of up
to 15,000 additional Units; and
WHEREAS, the Board of Directors of the Company has approved this
Amendment and the Company has received the requisite consents from a majority of
the holders of outstanding
<PAGE> 2
-2-
Warrants approving and agreeing to be bound by this Amendment; and
WHEREAS, the Company and the Initial Purchaser desire to amend the
Common Stock Registration Rights Agreement as set forth herein.
NOW THEREFORE, in consideration of the premises, and other goods and
valuable consideration, the sufficiency and receipt of which is hereby
acknowledged, the parties agree as follows:
1. Capitalized terms used herein without definition have the meanings
specified in the Common Stock Registration Rights Agreement.
2. In the first paragraph on page 1 of the Registration Rights
Agreement, the date shall read "August 15, 1996."
3. The first sentence in the second paragraph on page 1 of the Common
Stock Registration Rights Agreement is hereby deleted in its entirety and
substituted with the following:
"This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of August 8, 1996, as amended by the Letter
Agreement dated September 6, 1996, between the Company and the Initial
Purchaser (the "Purchase Agreement") relating to the sale by the
Company to the Initial Purchaser of up to $80,000,000 aggregate
liquidation value of the Company's Senior Redeemable Preferred Stock,
Series B, par value $.01 per share (the "Preferred Shares") along with
80,000 warrants to purchase Company Common Stock, par value $.01 per
share ("Common Stock"), and the option to the Initial Purchaser to
purchase an additional $35,000,000 aggregate liquidation value of the
Company's Senior Redeemable Preferred Stock, Series B, par value $.01
per share along with 35,000 warrants to purchase Company Common Stock
(the initial warrants and the option warrants are collectively referred
to as the "Warrants."
4. The following terms in Section 1. Definitions shall be amended as
follows:
<PAGE> 3
-3-
The definition of "Certificate of Designation" shall be deleted in
its entirety and substituted with the following:
"Certificate of Designation" means the Certificate of Designation
duly adopted by the Board of Directors of the Company setting forth the
rights, preferences and priorities of the Preferred Shares and filed
with, and accepted for filing, so as to be effective, by the Secretary
of State of the State of Delaware, as may be amended from time to time
pursuant to the terms thereof."
The first sentence of the definition for "Registrable Securities"
shall be deleted in its entirety and substituted with the following:
"Registrable Securities" shall mean shares of Common Stock acquired
upon exercise of the 115,000 Warrants issued pursuant to the Warrant
Agreement, as amended."
5. Nothing herein contained shall in any way alter, waive, annul, vary
or affect any terms, conditions or provisions of the Common Stock Registration
Rights Agreement, except as specifically provided herein, it being the intent
of the parties hereto that all of the terms, conditions, and provisions of the
Common Stock Registration Rights Agreement shall continue in full force and
effect, except as hereby amended.
6. The construction, validity and interpretation of this Amendment
will be governed by the laws of the State of New York, as applied to contracts
made and performed within the State of New York, without regard to principles
of conflicts of law. Each of the parties hereto agrees to submit to the
jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Amendment.
7. This Amendment may be executed in counterparts, any one of which
need not contain the signature of more than one party, but all such
counterparts taken together shall constitute one and the same instrument.
<PAGE> 4
-4-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly appointed officers or
representatives as of the day and year first above written.
CIBC WOOD GUNDY SECURITIES CORP.,
as Initial Purchaser
By: /s/ BRUCE SPOHLER
------------------------------
Name: Bruce Spohler
Title: Managing Director
RENAISSANCE COSMETICS, INC.
By: /s/ THOMAS T.S. KAUNG
-------------------------------
Name: Thomas T.S. Kaung
Title: Group Vice President
<PAGE> 1
EXHIBIT 12.1
Renaissance Cosmetics, Inc.
Calculation of historical and pro forma deficiency of earnings to combined fixed
charges and preferred dividends
<TABLE>
<CAPTION>
Historical Pro Forma
--------------------------------------------------- --------------------------------------------
Period From Three Months
April 15, 1994 Ended June 30, Three Months
(Inception) to Year Ended ------------------ Year Ended Ended
March 31, 1995 March 31, 1996 1995 1996 March 31, 1996 June 30, 1996
-------------- -------------- ------- ------- -------- -------- -------- ---------
(A) (B) (A) (B)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pretax income (5,494) (10,753) (1,494) (4,349) (8,655) (6,985) (3,057) (5,012)
Interest Expense 8,694 19,458 4,434 5,201 18,728 15,923 4,989 4,375
------ ------- ------ ------ ------- ------- ------ -------
Total earnings 3,200 8,705 2,940 852 10,073 8,938 1,932 (637)
------ ------- ------ ------ ------- ------- ------ -------
Fixed Charges:
Interest Expense 8,694 19,458 4,434 5,201 18,728 15,923 4,989 4,375
Preferred Dividends 715 1,333 290 488 19,159 19,159 5,352 5,352
------ ------- ------ ------ ------- ------- ------ -------
9,409 20,791 4,724 5,689 37,887 35,082 10,341 9,727
====== ======= ====== ====== ======= ======= ====== =======
Deficiency of earnings to
combined fixed charges
and preferred dividends (6,209) (12,086) (1,784) (4,837) (27,814) (26,144) (8,409) (10,364)
====== ======= ====== ====== ======= ======= ====== =======
</TABLE>
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF RENAISSANCE COSMETICS, INC.
1. RENAISSANCE ACQUISITION INC., incorporated in the State of Delaware
2. GREAT AMERICAN COSMETICS, INC., incorporated in the State of New York
3. COSMAR CORPORATION, incorporated in the State of Delaware
4. HOUBIGANT (1995) LTEE, incorporated in Canada
5. DANA PERFUMES CORP., incorporated in the State of Delaware
6. PERFUMES DANA DO BRAZIL, S.A., incorporated in Brazil
7. MARCAFIN S.A., incorporated in Switzerland
8. ESTALVI S.A., incorporated in Switzerland
9. FINANCIERA DE PERFUMERIA S.A. (FIPE), incorporated in Panama
10. DANA S.A., incorporated in Spain
11. PARFUMS DANA EXPORT CORP., incorporated in New York
12. C.O.M.I.N.S.A., incorporated in Panama
13. DANA PERFUMES (CANADA) LTD., incorporated in Canada
14. PERFUMES DANA S.A.I.C., incorporated in Argentina
15. PERFUMES & COSMETICS IMPORTERS, INC., incorporated in Puerto Rico
16. RSH 149 S.A.R.L., incorporated in France
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES
To the Board of Directors and Stockholders of
Renaissance Cosmetics, Inc.
New York, NY
We consent to the use in this Registration Statement relating to 115,000 shares
of 14.0% Senior Redeemable Preferred Stock, Series C of Renaissance Cosmetics,
Inc. on Form S-4 of our report dated June 14, 1996 on the financial statements
of Renaissance Cosmetics Inc. (the "Company") as of March 31, 1996 and 1995 and
for the year ended March 31, 1996 and for the period from April 15, 1994
(Inception) to March 31, 1995, and our report dated October 28, 1994 relating to
the combined statements of operations of assets acquired and liabilities assumed
and changes in excess of assets acquired over liabilities assumed and of cash
flows of assets acquired and liabilities assumed of Cosmar Corporation and
Affiliate ("Cosmar") for the period from January 1, 1994 to August 17, 1994,
appearing in the Prospectus, which is a part of this Registration Statement, and
to the references to us under the heading "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned reports
also included the financial statement schedule of Renaissance Cosmetics Inc.,
and the financial statement schedule for Cosmar Corporation and Affiliate for
the periods mentioned above, each listed in the Index at Item 21. These
financial statement schedules are the responsibility of the Company's and
Cosmar's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
New York, New York
September 30, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 21, 1996, with respect to the consolidated
financial statements of MEM Company, Inc. included in the Registration
Statement (Form S-4 dated September 30, 1996) and related Prospectus of
Renaissance Cosmetics, Inc. for the registration of 110,000 shares of its 14.0%
Senior Redeemable Preferred Stock, Series C.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
Hackensack, New Jersey
September 26, 1996
<PAGE> 1
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement on Form S-4 of Renaissance
Cosmetics Inc. of our report dated April 26, 1994 on the combined statements of
income and cash flows of Cosmar Corporation and Affiliates, as of December 31,
1993, appearing in the Prospectus, which is part of such Registration Statement,
and to the reference to us under the heading "Experts" in such Prospectus.
/s/ Windes & McClaughry
- -------------------------------------------
WINDES & McCLAUGHRY ACCOUNTANCY CORPORATION
Long Beach, California
September 30, 1996
<PAGE> 1
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Renaissance Cosmetics,
Inc. on Form S-4 of our report on the financial statements of Great American
Cosmetics, Inc. for the year ended December 31, 1995 appearing in the
Prospectus, which is part of this Registration Statement, and to the reference
to us under the heading "Experts" in such Prospectus.
/s/ Deutsch, Marin & Company
- ----------------------------
DEUTSCH, MARIN & COMPANY
East Meadow, New York
September 30, 1996
