EXHIBIT 10.1
August 15, 2005
DLI Holding Corp.,
c/o Kelso &
Company,
320 Park Avenue, 24th Floor,
New York, New York
10022.
Members of the Board of Directors:
I am
writing to follow up on the discussions of my continuing role
within
DLI Holding Corp. that were initiated by
Philip Berney.
It has
been my privilege to serve as President and Chief Executive
Officer
of the Company. I believe, however, that it
is in the Company's best interest
for me to step aside and allow the
succession plan that Mr. Berney has discussed
with me to be effected.
Accordingly, subject to your acceptance of the terms of this
letter, I
hereby resign from my positions as
President and Chief Executive Officer. I look
forward to continuing my service to the
Company as a director and as a
consultant on the terms set forth in the
attached Annex.
I
appreciate the arrangements that you have offered in connection
with my
transition, which are memorialized in the
attached Annex. On your acceptance by
signature below, the Annex will become a
binding agreement.
Very truly yours,
William
McMenemy
Accepted and agreed,
including attached Annex:
DLI HOLDING CORP.
By:
------------------------------
Name: Charles J. Hinkaty
Title: Chief Operating
Officer
<PAGE>
DLI HOLDING LLC
By:
------------------------------
Name: Philip Berney
Title: President
cc: James J. Conners II
(DLI Holding
Corp.)
Marc Trevino
(Sullivan &
Cromwell LLP)
David Mason
(Debevoise &
Plimpton LLP)
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<PAGE>
ANNEX
This Annex
sets forth the TRANSITION ARRANGEMENTS among DLI Holding Corp.,
a Delaware corporation (the "COMPANY"), DLI
Holding LLC, a Delaware limited
liability company (the "LLC") and William
McMenemy ("McMenemy").
1. CONTINUING SERVICE AS A DIRECTOR
McMenemy's
resignation is effective on the close of business on August 19,
2005 (the "EFFECTIVE Date"), On the
Effective Date, McMenemy will continue his
service as a director of the Company but
will cease to hold any position as an
officer or employee of the Company, Del
Laboratories, Inc., LLC or their
respective affiliates (together, the
"GROUP"). During his service as a director,
the Company shall provide McMenemy with all
rights and privileges it customarily
affords to directors who are not then
employees of a member of the Group or
affiliated with Kelso & Company. No
other action is required for McMenemy's
resignation to become effective.
Notwithstanding the preceding sentence, LLC
reserves all rights to remove McMenemy as a
director of the Company in
accordance with the Stockholders Agreement,
dated as of January 27, 2005 (as
amended, supplemented or replaced from time
to time, the "STOCKHOLDERS
AGREEMENT") among LLC and certain employees
(including McMenemy) listed on
Schedule A thereto, at any time after the
Effective Date.
2. TERMINATION OF EMPLOYMENT AGREEMENT
McMenemy
and the Company agree that the Employment Agreement, dated as
of
January 27, 2005 (the "EMPLOYMENT
AGREEMENT"), between the Company and McMenemy
is terminated in its entirety as of the
Effective Date (notwithstanding anything
in Section 9(c) to the contrary of the
Employment Agreement). On the Effective
Date, the Employment Agreement shall no
longer define any right, obligation or
privilege existing between McMenemy and the
Company.
3. CONTINUING CONSULTING; NONCOMPETITION
ARRANGEMENTS
The
parties agree to the provisions of Schedule A to these
Transition
Arrangements, which is a part of this
agreement (the "CONSULTING/NONCOMPETITION
SCHEDULE").
4. PAYMENTS AND BENEFITS
The
parties agree to the provisions of Schedule B to these
Transition
Arrangements, which is a part of this
agreement (the "PAYMENTS AND BENEFITS
SCHEDULE").
5. EQUITY INTERESTS
The
Company and McMenemy hereby amend the definition of "Qualifying
Termination Date" in the Option Agreement
to replace the term "termination of
employment" with "separation from service
(within the meaning of Section 409A)"
and agree, in good faith, that McMenemy's
separation from service within such
meaning shall occur at such time as he
ceases to serve as a director of the
Company. Capitalized terms used in this
paragraph but not otherwise defined in
these Transition Arrangements have the
meanings assigned in the Rollover Stock
Option Agreement, dated January 27, 2005
(the "OPTION AGREEMENT"), between the
Company and McMenemy.
<PAGE>
LLC hereby
distributes 571.42 shares of common stock of the Company
("COMPANY STOCK") in full liquidation of
the Common Units held by McMenemy (as
contemplated by Section 7.2(c) of the LLC
Agreement). The shares of Company
Stock will be delivered to McMenemy on the
date the Release referred to below
becomes effective. McMenemy acknowledges
that he retains 5,454.42 Operating
Units and that all of his other Override
Units will be forfeited on the
Effective Date in accordance with Section
7.2 of the LLC Agreement. Capitalized
terms used in this paragraph but not
otherwise defined in these Transition
Arrangements have the meanings assigned in
the Limited Liability Company
Agreement of LLC, dated January 27, 2005
(as amended, supplemented or replaced
from time to time, the "LLC
AGREEMENT").
The
Company desires to purchase all of McMenemy's Company Stock
pursuant
to Section 3.1 of the Stockholders
Agreement, but it is agreed that the purchase
would be imprudent in view of the financial
condition (present or projected) of
the Company as of the Effective Date. The
Company agrees that, at such time as
it exercises its rights to purchase the
Company Stock, it shall do so for cash.
No further notice or agreement is required
to effect these purchases. At the
reasonable request of McMenemy, the Company
agrees to consult with him from to
time to discuss the ability of the Company
to purchase shares of his Company
Stock pursuant to this Section. It is also
agreed that the rights set forth in
Section 2 and 3 of the Stockholders
Agreement shall commence, with respect to
Company Stock issuable under an Option, at
the time the Option is exercised.
The terms
of the LLC Agreement, Option Agreement and Stockholders
Agreement continue in full force and effect
(subject to the modifications
provided in these Transition
Arrangements).
6. PUBLIC STATEMENTS
McMenemy
and the Group agree to consult with each other as to the form,
substance and timing of any press release
or other public statement regarding
the circumstances relating to McMenemy's
tenure or resignation, and no public
statement will be made by McMenemy or any
member of the Group regarding such
matters without the consent of the other,
which will not be unreasonably
withheld or delayed. However, the Group and
McMenemy may make such disclosures
as are required by law after reasonable
efforts under the circumstances to
consult with the other.
7. RELEASE; EFFECTIVENESS OF THESE
ARRANGEMENTS
In
connection with McMenemy's resignation as an officer and
employee,
McMenemy is executing the attached Release
and Waiver of Claims against the
Group (the "RELEASE"). If McMenemy revokes
the Release before it becomes
irrevocable, these Transition Arrangements
will become null and void.
8. MISCELLANEOUS
These
Transition Arrangements shall be subject to the Miscellaneous
provisions of Schedule C attached
hereto.
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<PAGE>
SCHEDULE A TO
MCMENEMY TRANSITION ARRANGEMENTS
CONTINUING CONSULTING; NONCOMPETITION ARRANGEMENTS
1. CONSULTING
McMenemy
agrees to serve as a consultant to the Company, without payment
of fees in addition to those provided for
in the Payments and Benefits Schedule,
for the 18-month period following the
Effective Date (the "CONTINUATION
PERIOD"). McMenemy's services as a
consultant shall consist of providing
strategic and similar advice (including
advice with respect to any matter
McMenemy worked on as an executive of the
Company) to the Company's President
and Chief Executive Officer, as such advice
may requested from time to time. The
Company agrees that McMenemy's services
shall be structured so that they do not
interfere with McMenemy's other activities
(including any business activities
permitted by Section 2 of this
Consulting/Noncompetition Schedule) or require
travel or any unreimbursed out-of-pocket
expense.
2. NONCOMPETITION
During the
Continuation Period, McMenemy shall not become associated as a
principal, partner, employee, consultant or
shareholder (other than as a holder
of not in excess of 1% of the outstanding
voting shares of any publicly traded
company) that is actively engaged in any
geographic area in which the Company or
any of its subsidiaries does business
during the 12 months the Effective Date in
any business which is in competition with
the business of the Company or any of
its subsidiaries conducted during such
period or any business proposed to be
conducted by the Company or any of its
subsidiaries in the Company's business
plan as in effect as of the Effective Date
(a "COMPETITIVE ENTERPRISE").
3. CONFIDENTIALITY
Following
the Effective Date, except to the extent required by law, rule,
regulation or court order, McMenemy shall
not, without prior written consent of
the Company, disclose any trade secrets,
customer lists, drawings, designs,
information regarding product development,
marketing plans, sales plans,
manufacturing plans, management
organization information (including data and
other information relating to members of
the board of directors of the Company
or management of the Company), operating
policies or manuals, business plans,
financial records, packaging design or
other financial, commercial, business or
technical information relating to the
Company or any of its subsidiaries or
information designated as confidential or
proprietary that the Company or any of
its subsidiaries may receive belonging to
suppliers, customers or others who do
business with the Company or any of its
subsidiaries (collectively,
"CONFIDENTIAL INFORMATION") to any third
person unless such Confidential
Information has been previously disclosed
to the public by the Company or is in
the public domain (other than by reason of
McMenemy's breach of this Section 3).
<PAGE>
4. COMPANY PROPERTY
Other than
material provided to McMenemy in his capacity as a director of
the Company (or material provided after the
date of these Transition
Arrangements to McMenemy as a consultant to
the Company, which shall be subject
to a separate confidentiality agreement),
McMenemy agrees to return to the
Company all property of the Company or any
of it
