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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1994
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-8797
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HELENE CURTIS INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3398349
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
325 NORTH WELLS STREET, CHICAGO, 60610
ILLINOIS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (312) 661-0222
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock-$.50 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES_X_. NO____.
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [ ]
AGGREGATE MARKET VALUE OF COMMON STOCK (PAR VALUE $.50 PER SHARE) HELD BY
NON-AFFILIATES OF THE REGISTRANT ON MAY 25, 1994 BASED ON THE CLOSING PRICE AS
REPORTED IN THE WALL STREET JOURNAL ON MAY 25, 1994: APPROXIMATELY $171,532,681.
NUMBER OF SHARES OF COMMON STOCK (PAR VALUE $.50 PER SHARE) OUTSTANDING AS
OF MAY 25, 1994: 6,806,791.
NUMBER OF SHARES OF CLASS B COMMON STOCK (PAR VALUE $.50 PER SHARE)
OUTSTANDING AS OF MAY 25, 1994: 3,072,669 (SUCH SHARES ARE GENERALLY
NON-TRANSFERABLE, BUT ARE CONVERTIBLE SHARE-FOR-SHARE INTO COMMON STOCK).
THE PROXY STATEMENT FILED ON MAY 25, 1994, FOR THE ANNUAL MEETING OF
STOCKHOLDERS SCHEDULED FOR JUNE 28, 1994, IS PARTIALLY INCORPORATED BY REFERENCE
INTO PART III, ITEMS 10, 11, 12 AND 13; AND PART IV, ITEM 14, EXCLUDING THE
SECTIONS ENTITLED "COMPENSATION COMMITTEE REPORT" AND "COMPENSATION STOCK
PERFORMANCE" AND THE ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED
FEBRUARY 28, 1994 IS PARTIALLY INCORPORATED BY REFERENCE INTO PART I, PART II
AND PART IV, ITEM 14.
EXHIBIT INDEX IS LOCATED AT PAGE 14.
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DOCUMENTS INCORPORATED BY REFERENCE
Part I
- Business Segments Page 32, Note 11 of the
Annual Report to
Stockholders for the
fiscal year ended
February 28, 1994.
Part II
Item 5 - Market for the Registrant's Page 18 of the Annual
Common Stock and Related Report to Stockholders for
Stockholder Matters the fiscal year ended
February 28, 1994.
Item 6 - Selected Financial Data Pages 18-19 of the Annual
Report to Stockholders for
the fiscal year ended
February 28, 1994.
Item 7 - Management's Discussion and Pages 20-21 of the Annual
Analysis of Financial Report to Stockholders for
Condition and Results of the fiscal year ended
Operations February 28, 1994.
Item 8 - Financial Statements and Pages 22-32 of the Annual
Supplementary Data Report to Stockholders for
the fiscal year ended
February 28, 1994.
Part III
Item 10 - Directors and Executive Pages 6-7 and 21-22 of the
Officers of the Registrant Proxy Statement for the
Company's Annual
Stockholders' Meeting to be
held June 28, 1994.
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Item 11 - Executive Officer Compensation Pages 9-11 of the Proxy
Statement for the Company's
Annual Stockholders'
Meeting to be held June 28,
1994, but excluding
information contained under
"Compensation Committee
Report on Executive
Compensation".
Item 12 - Security Ownership of Pages 2-5 of the Proxy
Certain Beneficial Owners Statement for the Company's
and Management Annual Stockholders'
Meeting to be held
June 28, 1994.
Item 13 - Certain Relationships and Pages 14 and 16 of the Proxy
Related Transactions Statement for the Company's
Annual Stockholders'
Meeting to be held
June 28, 1994.
Part IV
Exhibits, Financial Statement Exhibits as specified in
Schedules and Reports on Form 8-K. Item 14.
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Part I
ITEM 1. BUSINESS
GENERAL
Helene Curtis Industries, Inc. (together with its subsidiaries, the
"Company") is a holding company incorporated in Delaware on April 16, 1984,
whose principal subsidiary, Helene Curtis, Inc., has been operating since
January, 1928.
The Company develops, manufactures and markets personal care products
consisting primarily of consumer brand name hair and skin care products and
antiperspirants and deodorants. The Company is one of the largest sellers of
hair care products in the United States, mainly due to its Suave, Finesse, Salon
Selectives and Vibrance hair care brands.
The Company is also the fourth leading seller in the United States of
antiperspirant/deodorant products through its Degree and Suave brands and the
third leading seller of hand and body lotion products through its Suave brand.
The Company also develops, manufactures and markets professional hair care
products for use and resale by licensed cosmetologists. The Company's Quantum
permanent wave is the leading permanent wave brand sold to licensed
cosmetologists in the United States.
The Company's products, particularly its Finesse and Salon Selectives
brands, are among the market leaders in most countries where the Company has an
operating subsidiary and have been introduced through licensees and others in
over 100 countries throughout the world. Sales of the Company's products
outside the U.S. account for approximately 35 percent of annual volume.
PRODUCTS
U.S. CONSUMER PRODUCTS
The Company markets a wide variety of hair care products to consumers under
the Suave, Finesse, Salon Selectives and Vibrance brand names. It markets
antiperspirants/deodorants under the Suave and Degree brand names and skin care
products under the Suave brand name.
The Company targets its Suave products to those consumers who desire a high
quality product priced considerably below premium-priced lines. This
positioning has proven successful as Suave is both the best-selling shampoo and
the best-selling conditioner in the United States in terms of units sold. The
Company sells Suave shampoo, Suave conditioner and Suave styling aids for this
price-value segment of the market.
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Finesse, the sixth largest hair care brand in the United States on a
dollar-sales basis, is marketed as a premium priced line of products. Finesse
conditioner, relying on a unique patented formulation, was launched in 1982 and
Finesse shampoo was introduced in 1983. The Company also sells Finesse styling
aids, including hair spray, gel and mousse.
The Company's Salon Selectives line of consumer shampoos, conditioners and
styling aids is marketed to consumers who are interested in purchasing products
which were traditionally available only in beauty salons and which can be
customized to their hair and lifestyle needs. Salon Selectives, introduced in
1987, is the third largest brand of hair care products on a dollar-sales basis,
in the United States.
The Company also markets Vibrance hair care products, targeted toward
consumers who desire healthy looking hair.
The Company's Degree antiperspirant/deodorant products were introduced in
1990. The Degree antiperspirant products provide the consumer with additional
odor and wetness protection in response to rises in the consumer's body heat.
The Company's Suave antiperspirant/deodorant products are targeted to the price-
value segment of the market. With its Degree and Suave brands, the Company
ranks fourth in antiperspirant/deodorant sales in the United States.
The Company ranks third in the category of hand and body lotion products in
the U.S. in units sold. The Company sells these products under its Suave brand.
The Company also markets a line of Suave facial care products, which build on
Suave's brand equity and reputation of offering quality products at a value
price.
U.S. PROFESSIONAL PRODUCTS
The Company develops and markets a wide range of permanent waves and other
hair care products to licensed cosmetologists for use in beauty salons and for
resale to consumers through salons. Since its founding, the Company has been a
technological leader in this industry, pioneering, among other things, the
"cold" permanent wave, which is safer and more effective than prior methods of
waving hair. Its Quantum permanent wave is applicable for all hair types and is
the best selling permanent wave brand for professional use in the United States.
During the fiscal year ended February 28, 1994, the Company obtained a patent
for a permanent wave marketed under the ISO brand which allows cosmetologists to
perm hair without damage.
The Company markets numerous professional product lines, including the
following: Quantum, Naturelle and Hair Specifics hair care products and ISO,
Catio Therm, Post Impressions, One Better, Impact, Even Heat, Fine Solutions and
Luxuriance permanent waves.
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INTERNATIONAL PRODUCTS
The Company's products are sold in over 100 countries through wholly-owned
operating subsidiaries in Australia, Canada, Italy, Japan, New Zealand, Sweden
(serving Scandinavia) and the United Kingdom and through licensees and
authorized distributors in other countries and through export sales from the
United States. The Company is among the market leaders in the consumer hair
care business in each market in which it has a subsidiary, except Italy, where
the business has focused on the sale of professional products.
The Company has introduced Degree antiperspirant/deodorant in Canada,
Australia, New Zealand and Scandinavia.
In addition, in some markets, the Company's subsidiaries have developed and
introduced their own brands. For example, during the fiscal year ended
February 28, 1994, the Company's Japanese subsidiary completed the introduction
of Program, a hair care line targeted to women with damaged hair.
The Company's international business is subject to all the risks inherent
in foreign operations in foreign countries. The sales, operating profit and
identifiable assets attributable to each geographic area for the fiscal years
ended in February 1994, 1993 and 1992 are set forth in Note (11) of the Notes to
the Consolidated Financial Statements, which Note is incorporated herein by
reference.
COMPETITION
The markets for the Company's products are intensely competitive and
sensitive to changing consumer preferences and demands. They are characterized
by frequent introductions of competitive products, often accompanied by major
advertising and promotional programs which can significantly affect sales and
earnings of the product sponsor and its competitors. The Company competes
primarily on the basis of product quality, price and brand name recognition
built by advertising and promotion.
At least ten domestic manufacturers, some of which are highly diversified
and have significantly greater financial resources than the Company, can be
regarded as major competitors in the United States and throughout the world.
The Company is a significant competitor in its industry.
MARKETING
The Company competes in businesses where growth is achieved largely by
gaining market share at the expense of competitors. Accordingly, the Company
maintains an aggressive strategy utilizing substantial television advertising,
consumer promotion and merchandising support of existing brands, coupled with
periodic major investments in new products and line extensions of established
brand names. During the fiscal years ended in February 1994, 1993 and 1992, the
Company's advertising and media expenses were approximately $152.3 million,
$147.6 million and $132.5 million, respectively.
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The Company believes there is substantial consumer recognition for its
major brands and that this recognition is a meaningful contributor to its sales.
Significant and repeated advertising and promotion serve to build and retain a
brand's position in the marketplace. In order for a brand's position to be
sustained for many years, as in the case of the Suave brand which has been
marketed for nearly 60 years, product formulas and packaging must continue to be
improved. In addition, major advertising expenditures are necessary from time
to time to maintain the brand's market share. Although these expenditures may
impact the Company's earnings in the year in which they are made, to the extent
that they sustain a brand's position, they support the Company's growth.
New product development also plays a significant role in the Company's
marketing strategy. The Company relies on its market research and new product
development groups to identify consumer needs, to foresee shifts in consumer
preferences and to assess the competitive marketplace. The successful
introduction of any new product is largely dependent on product positioning,
product quality and innovation, packaging, advertising and promotional support
and the level of competitive activity. In view of the intensely competitive
industry in which the Company competes, new product introductions require
substantial advertising and promotional expenditures which are made at a
proportionally higher rate relative to sales than expenditures for well-
established products. Although these expenditures materially impact earnings in
the particular period in which they are made, they foster the Company's growth
well beyond that period if the new product is ultimately successful.
CUSTOMERS AND DISTRIBUTION
In the United States, the Company's products are distributed through
wholesalers and directly to major drug chains, mass merchandisers and food
outlets and major chains of beauty salons. In international markets, the
Company's products are manufactured and marketed through a network of
subsidiaries, licensees and distributors.
Approximately 13% of the Company's net sales for the fiscal year ended
February 28, 1994 were to one customer. None of the Company's customers has any
continuing contractual obligations to make purchases from the Company.
TRADEMARKS AND PATENTS
The Company markets its products under a number of trademarks and trade
names (e.g., Helene Curtis, Suave, Finesse, Salon Selectives, Degree, Vibrance
and Quantum) which are registered in the United States and many foreign
countries. The Company's position in the marketplace is dependent upon the
goodwill engendered in these trademarks as well as in the individual performance
and price of products using them. The Company considers trademark protection to
be of material importance to its business.
The Company is not materially dependent on any patent, license, franchise
or concession, whether owned by or licensed to the Company. Although the
Company owns certain patents, the loss of any patent would not have a materially
adverse effect on the Company's operations as a whole.
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RESEARCH AND DEVELOPMENT
The Company is continuously engaged in the development of new products and
maintains an extensive laboratory facility for such purpose. The Company relies
principally on its experience in the personal care business in formulating new
products and maintains a staff of approximately 240 people for research and
development. The Company expended $22.5 million, $22.0 million and
$18.7 million during the fiscal years ended in February 1994, 1993 and 1992,
respectively, on research activities relating to the development of new products
and the improvement of existing personal care products.
REGULATION
Government regulation has not materially restricted or impeded the
Company's operations. Certain of the Company's products are subject to
regulation under the Federal Food, Drug and Cosmetic Act and the Fair Packaging
and Labeling Act. The Company is also subject to regulation by the Federal
Trade Commission with respect to the content of its advertising, its trade
practices and other matters.
EMPLOYEES
The Company currently employs approximately 3,500 employees. Virtually all
the Company's employees are non-union. The Company considers its relationship
with its employees to be good.
MANUFACTURING AND SUPPLIES
Most of the Company's products are manufactured, filled and packaged by the
Company at its facilities in Chicago, Illinois and the City of Industry,
California, as well as at its subsidiary operation in New Zealand. See
"Properties." Some of the Company's products sold in the United States or by
its international subsidiaries are manufactured by outside contractors, none of
which manufactures a significant portion of the Company's output.
Raw materials used in the Company's products are available from several
sources. If any single supplier should be unable to furnish materials, the
Company believes that other sources could be obtained without material
disruption to or other adverse effect upon its business.
BACKLOG
As the Company manufactures and ships its products against orders received
in a relatively short period of time thereafter, the dollar amount of backlog
orders at any given date, or from year to year, is not a material element in the
Company's business.
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ITEM 2. PROPERTIES
The principal office of the Company is located at 325 North Wells Street in
Chicago, Illinois. The office building, which has approximately 120,000 square
feet of space used by the Company, was purchased in 1981 and rehabilitated by
the Company.
The Company owns its principal manufacturing plant, which comprises
approximately 315,000 square feet, and is located at 4401 West North Avenue,
Chicago, Illinois. The Company owns a connecting building and land of
approximately 60,500 square feet. An additional 238,000 square feet of land and
building adjacent to said plant is leased until 1996. This lease contains five
renewal options of five years each, giving the Company the right to extend the
term to 2021.
The Company owns approximately 12 acres of property in Chicago adjacent to
its principal manufacturing facility. This property includes a building of
approximately 587,000 square feet, which is used for offices, manufacturing and
warehousing. Approximately one-third of the building has been leased to its
former owner for a ten-year period ending in 2001.
The Company owns its principal warehouse and distribution facility,
comprising approximately 376,000 square feet of building on 32.5 acres of land,
located in Chicago, Illinois. This facility became fully operational in 1989.
The Company also owns a warehouse facility comprising approximately 475,000
square feet of building space on 10.5 acres of land at 1657 N. Kilpatrick
Avenue, Chicago, Illinois. Additional warehouse and shipping facilities are
located at the Company's principal manufacturing plant.
The Company owns a 128,000 square foot manufacturing and warehousing
facility in the City of Industry, California, which was constructed in 1982. In
addition, in 1989, the Company purchased 8.36 acres of property, including an
industrial building of approximately 150,000 square feet, adjacent to the
facility.
In July 1992, the Company agreed to lease an approximately 151,000 square
foot facility located in Rolling Meadows, Illinois until 2012. The building
includes offices and laboratories which will be used to accommodate the
Company's existing research and development facility at 4401 West North Avenue.
The relocation, expected to take place by January 1995, will allow for the
expansion of the Company's principal manufacturing and operations facility. The
lease contains ten (10) renewal options of five (5) years each, giving the
Company the right to extend the term until 2062.
The Company also leases or owns other smaller properties and facilities in
various locations in the United States and in foreign countries.
Although some of the Company's manufacturing plants were constructed a
number of years ago, such plants, together with newer additions, are, in the
opinion of management, deemed to be in good condition and sufficient for the
Company's current needs.
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ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings involving the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted during the fourth quarter of fiscal 1994 to
a vote of security holders.
Information with respect to Executive Officers is given below:
EXECUTIVE OFFICERS:
Title Name Age
----- ---- ---
Chairman of the Board Gerald S. Gidwitz 87
Vice Chairman of the Board Joseph L. Gidwitz 89
President and Chief Executive
Officer Ronald J. Gidwitz 49
Executive Vice President and
Chief Operating Officer Michael Goldman 57
Executive Vice President Gilbert P. Smith 57
Senior Vice President Charles G. Cooper 66
Senior Vice President Colin J. Morgan 58
Vice President Richard W. Frank 50
Vice President Thomas J. Gildea 50
Vice President V. James Marino 44
Vice President Robert K. Niles 49
Vice President and
Corporate Controller Mary J. Oyer 45
Vice President Robert Sack 57
Vice President,
Secretary and General Counsel Roy A. Wentz 44
Vice President Eugene Zeffren 52
Treasurer Arthur A. Schneider 47
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Foreign-Based Officers:
President and Managing Director,
Helene Curtis United Kingdom
and Vice President of the Company Robert G. Kelly 50
President, Helene Curtis Ltd.
(Canada) and Vice President
of the Company Jack D. Pogue 61
Ronald J. Gidwitz is the son of Gerald S. Gidwitz; Joseph L. Gidwitz and
Gerald S. Gidwitz are brothers.
All executives have served in the capacities shown for the last five years
except as follows: Charles G. Cooper, Richard W. Frank, Michael Goldman,
Robert G. Kelly, V. James Marino, Colin J. Morgan, Mary J. Oyer, Jack D. Pogue,
Arthur A. Schneider, Gilbert P. Smith and Roy A. Wentz have been employed by the
Company in other executive capacities for at least five years and were elected
to the positions shown during this five-year period. Prior to joining the
Company in 1991, Robert K. Niles served in various capacities for The Quaker
Oats Company, most recently as Vice President, Human Resources for its Breakfast
Division.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON
STOCK AND RELATED STOCKHOLDER MATTERS
Incorporated by reference to the Company's Annual Report to Stockholders
for the fiscal year ended February 28, 1994, under the caption "Common Stock
Data," page 18.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference to the Company's Annual Report to Stockholders
for the fiscal year ended February 28, 1994, under the caption "Ten-Year
Summary," pages 18-19.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Incorporated by reference to the Company's Annual Report to Stockholders
for the fiscal year ended February 28, 1994, under the caption "Management's
Discussion and Analysis," pages 20-21.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference to the Company's Annual Report to Stockholders
for the fiscal year ended February 28, 1994, see index in Part IV, Item 14 (a).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to directors is incorporated by reference to the
Company's Proxy Statement for the Company's Annual Meeting of Stockholders to be
held June 28, 1994, under the captions "Nominees for Directors," "Continuing
Directors" and "Compliance with Section 16(a)," pages 6-7 and 21-22.
Information with respect to Executive Officers is set forth in Part I, Item 4.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to the Company's Proxy Statement for the Annual
Meeting of Stockholders to be held on June 28, 1994, under the caption
"Executive Officer Compensation" but excluding information contained under
"Compensation Committee Report on Executive Compensation," pages 9-11.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the Company's Proxy Statement for the Annual
Meeting of Stockholders to be held on June 28, 1994, under the captions
"Principal Security Holders" and "Security Ownership of Management," pages 2-5.
Changes in Control: The Company knows of no contractual arrangements which
may, at a subsequent date, result in a change in control of the Company.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the Company's Proxy Statement for the Annual
Meeting of Stockholders to be held on June 28, 1994, under the caption
"Transactions with Affiliated Persons" and "Compensation Committee Interlocks
and Insider Participation," pages 14 and 16.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K
Page in Annual Report
to Stockholders
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(a) 1. Financial Statements:
Consolidated Statements of Earnings
for the years ended February 28 or 29,
1994, 1993 and 1992 22
Consolidated Balance Sheets as of
February 28, 1994 and 1993 23
Consolidated Statements of Cash Flows
for the years ended February 28 or 29, 1994,
1993 and 1992 24
Consolidated Statements of Stockholders'
Equity for the years ended February 28
or 29, 1994, 1993, and 1992 25
Notes to Consolidated Financial Statements 26-32
Independent Accountants' Report 33
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Page in This
Report
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(a) 2. Financial Statement Schedules:
Independent Accountants' Report 19
Schedules:
For the years ended February 28 or 29, 1994,
1993 and 1992
V. Property, Plant and Equipment 20
VI. Accumulated Depreciation, Depletion and
Amortization of Property, Plant and
Equipment 21
IX. Short-Term Borrowings 22
Notes:
(1) All other schedules have been omitted as they are not
applicable, not required, or because the required information
is included in the financial statements or
supplemental notes thereto.
(b) Reports on Form 8-K
During the last quarter of the fiscal year ended February 28, 1994,
the Company did not file any reports on Form 8-K.
(c) Exhibits
3 (a) The Certificate of Incorporation of Helene Curtis Industries,
Inc., as amended, incorporated by reference to the Company's
Annual Report listed on Form 10-K for the fiscal year ended
February 29, 1992, Exhibit 3(a).
(b) The bylaws of the Company, as amended, effective April 24, 1991.
Incorporated by reference to the Company's Annual Report filed on
Form 10-K for the fiscal year ended February 28, 1991,
Exhibit 3(b).
4 (a) Letter of Credit Agreement dated as of October 1, 1986 between
Helene Curtis, Inc. and Harris Trust and Savings Bank, relating
to an Industrial Revenue bond refinancing. Incorporated by
reference to the Company's Annual Report filed on Form 10-K for
the fiscal year ended February 28, 1987, Exhibit 4(a).
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(b) Revolving Credit Agreement dated as of September 13, 1990 between
Helene Curtis, Inc. and the Harris Trust and Savings Bank; The
First National Bank of Chicago; Bank of America National Trust &
Savings Association; NBD Bank, N.A., Mellon Bank, N.A.; Chemical
Bank; The Industrial Bank of Japan, Limited; and The Mitsubishi
Bank, Limited. Incorporated by reference to the Company's Annual
Report filed on Form 10-K for the fiscal year ended February 28,
1991, Exhibit 4(c).
(c) Note Purchase Agreement dated as of January 31, 1992 between
Helene Curtis, Inc. and Nationwide Life Insurance Company, West
Coast Life Insurance Company, Financial Horizons Life Insurance
Company, Farmland Life Insurance Company and Wisconsin Health
Care Liability Insurance Plan. Incorporated by reference to the
Company's Annual Report filed on Form 10-K for the fiscal year
ended February 29, 1992, Exhibit 4(d).
(d) Note Agreement dated as of March 1, 1994 between Helene Curtis,
Inc. and Connecticut Mutual Life Insurance Company, Connecticut
General Life Insurance Company, Life Insurance Company of North
America, Great-West Life and Annuity Insurance Company,
Nationwide Life Insurance Company, Financial Horizons Life
Insurance Company and Employers Life Insurance Company of Wausau.
10 Executive Compensation Plans and Arrangements
(a) Executive Pension Agreement. Incorporated by reference to the
Helene Curtis, Inc. Annual Report filed on Form 10-K for the
fiscal year ended February 28, 1981, Exhibit 10(a).
(b) 1983 Stock Option Plan, as amended. Incorporated by reference to
the Company's Annual Report filed on Form 10-K for the fiscal
year ended February 28, 1989, Exhibit 3(d).
(c) Death Benefit Agreement. Incorporated by reference to the Helene
Curtis, Inc. Annual Report filed on Form 10-K for the fiscal year
ended February 28, 1982, Exhibit 10(c).
(d) Stockholder Value Creation Plan. Incorporated by reference to
the Company's Annual Report filed on Form 10-K for the fiscal
year ended February 28, 1987, Exhibit 10(g).
(e) Directors Stock Option Plan. Incorporated by reference to the
Proxy Statement for the Helene Curtis Industries, Inc. Annual
Meeting of Stockholders held June 21, 1988.
(f) 1992 Stock Option Plan. Incorporated by reference to the Proxy
Statement for the Helene Curtis Industries, Inc. Annual Meeting
of Stockholders held June 16, 1992.
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(g) 1994 Stock Appreciation Right Plan. Incorporated by reference to
the Proxy Statement for Helene Curtis Industries, Inc. Annual
Meeting of Stockholders held June 28, 1994.
(h) Executive Management Incentive Plan. Incorporated by reference
to the Proxy Statement for Helene Curtis Industries, Inc. Annual
Meeting of Stockholders held June 28, 1994.
11 Statement Re Computation of Per Share Earnings.
13 Annual Report to Stockholders, for the fiscal year ended February 28,
1994 (only those portions incorporated by reference in this document
are deemed "filed").
21 List of Subsidiaries.
22 Definitive Proxy Material for the Company's Annual Meeting of
Stockholders to be held June 28, 1994, filed via EDGAR on May 25,
1994.
23 Consent of Coopers & Lybrand.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
(REGISTRANT) HELENE CURTIS INDUSTRIES, INC.
BY (SIGNATURE) s/Ronald J. Gidwitz
(NAME AND TITLE) President and Chief Executive Officer
DATE May 27, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
BY (SIGNATURE) s/Marshall L. Burman
(NAME AND TITLE) Marshall L. Burman, Director
DATE May 27, 1994
BY (SIGNATURE) s/Frank W. Considine
(NAME AND TITLE) Frank W. Considine, Director
DATE May 27, 1994
BY (SIGNATURE) s/Charles G. Cooper
(NAME AND TITLE) Charles G. Cooper, Director
DATE May 27, 1994
BY (SIGNATURE) s/Gerald S. Gidwitz
(NAME AND TITLE) Gerald S. Gidwitz, Chairman of the Board; Director
DATE May 27, 1994
BY (SIGNATURE) s/Michael Goldman
(NAME AND TITLE) Michael Goldman, Director
DATE May 27, 1994
<PAGE>
-18-
BY (SIGNATURE) s/Joseph L. Gidwitz
(NAME AND TITLE) Joseph L. Gidwitz, Director
DATE May 27, 1994
BY (SIGNATURE) s/Ronald J. Gidwitz
(NAME AND TITLE) Ronald J. Gidwitz, President; Principal Executive
Officer; Director
DATE May 27, 1994
BY (SIGNATURE) s/Mary J. Oyer
(NAME AND TITLE) Mary J. Oyer, Vice President and Corporate
Controller; Principal Financial and Accounting Officer
DATE May 27, 1994
BY (SIGNATURE) s/John C. Stetson
(NAME AND TITLE) John C. Stetson, Director
DATE May 27, 1994
BY (SIGNATURE) s/Abbie J. Smith
(NAME AND TITLE) Abbie J. Smith, Director
DATE May 27, 1994
BY (SIGNATURE) s/Gilbert P. Smith
(NAME AND TITLE) Gilbert P. Smith, Director
DATE May 27, 1994
<PAGE>
-19-
To the Stockholders and
Board of Directors
Helene Curtis Industries, Inc.
Our report on the consolidated financial statements of Helene Curtis
Industries, Inc. and Subsidiaries has been incorporated by reference in this
Form 10-K from Page 33 of the 1994 Annual Report to Stockholders of Helene
Curtis Industries, Inc. and Subsidiaries. In connection with our audit of such
financial statements, we have also audited the related financial statement
schedules listed in the index under item 14(a)2 on page 14 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information required to be included
therein.
BY (SIGNATURE) s/COOPERS & LYBRAND
(NAME AND TITLE) COOPERS & LYBRAND
Chicago, Illinois
DATE April 4, 1994
<PAGE>
-20-
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
for the years ended February 28 or 29, 1994, 1993 and 1992
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Other
Balance at Changes Balance at
Beginning Additions Sales and Add End of
Classification of Period at Cost Retirements (Deduct) (a) Period
- -------------- ---------- --------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Year ended Feb. 28, 1994:
Land $ 16,129 $ -- $ -- $ 13 $ 16,142
Buildings & improvements 90,852 11,756 17 (320) 102,271
Machinery & equipment 112,715 20,681 2,389 (2,995) 128,012
Construction in progress 33,692 12,554 (b) -- -- 46,246
--------- ------- ------ ------- --------
$253,388 $44,991 $2,406 $(3,302) $292,671
--------- ------- ------ ------- --------
--------- ------- ------ ------- --------
Year ended Feb. 28, 1993:
Land $ 15,274 $ 860 $ -- $ (5) $ 16,129
Buildings & improvements 80,637 10,821 194 (412) 90,852
Machinery & equipment 98,941 20,147 1,209 (5,164) 112,715
Construction in progress 30,139 3,553 (b) -- -- 33,692
--------- ------- ------ ------- --------
$224,991 $35,381 $1,403 $(5,581) $253,388
--------- ------- ------ ------- --------
--------- ------- ------ ------- --------
Year ended Feb. 29, 1992:
Land $ 15,273 $ -- $ -- $ 1 $ 15,274
Buildings & improvements 75,677 6,114 1,129 (25) 80,637
Machinery & equipment 71,798 34,323 3,962 (3,218) 98,941
Construction in progress 34,993 (4,854) (b) -- -- 30,139
--------- ------- ------ ------- --------
$197,741 $35,583 $5,091 $(3,242) $224,991
--------- ------- ------ ------- --------
--------- ------- ------ ------- --------
<FN>
Notes:
- -----
(a) Write-off of fully depreciated assets, transfers between classifications
and the effect of the translation adjustment on property, plant and
equipment of foreign subsidiaries.
(b) Represents the net of additions at cost and transfers of completed assets.
</TABLE>
<PAGE>
-21-
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
for the years ended February 28 or 29, 1994, 1993 and 1992
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Additions
Charged Other
Balance at to Costs Changes Balance at
Beginning and Sales and Add End of
Classification of Period Expenses Retirements (Deduct) (a) Period
- -------------- ---------- --------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Year ended Feb. 28, 1994:
Buildings & improvements $20,917 $ 5,640 $ 16 $ (471) $26,070
Machinery & equipment 40,069 15,396 1,206 (2,927) 51,332
------- ------- ------ ------- -------
$60,986 $21,036 $1,222 $(3,398) $77,402
------- ------- ------ ------- -------
------- ------- ------ ------- -------
Year ended Feb. 28, 1993:
Buildings & improvements $16,747 $ 4,561 $ 186 $ (205) $20,917
Machinery & equipment 31,145 14,510 718 (4,868) 40,069
------- ------- ------ ------- -------
$47,892 $19,071 $ 904 $(5,073) $60,986
------- ------- ------ ------- -------
------- ------- ------ ------- -------
Year ended Feb. 29, 1992:
Buildings & improvements $13,880 $ 3,762 $ 668 $ (227) $16,747
Machinery & equipment 25,122 12,206 2,846 (3,337) 31,145
------- ------- ------ ------- -------
$39,002 $15,968 $3,514 $(3,564) $47,892
------- ------- ------ ------- -------
------- ------- ------ ------- -------
<FN>
Note:
- ----
(a) Write-off of fully depreciated assets, transfers between classifications
and the effect of the translation adjustment on property, plant and
equipment of foreign subsidiaries.
</TABLE>
<PAGE>
-22-
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
for the years ended February 28 or 29, 1994, 1993 and 1992
(Dollars Amounts in Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
- -------- -------- -------- -------- -------- --------
Maximum Weighted Weighted
Amount Average Average
Out- Out- Interest
Category of Weighted standing standing Rate
Aggregate Balance Average During During During
Short-Term at End Interest the the the
Borrowings of Period Rate Period(a) Period(b) Period(c)
- ---------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1994
- ----
Domestic $3,000 3.8% $29,100 $15,658 3.6%
Foreign 3,705 6.2% 5,917 4,373 6.3%
------ ------- -------
6,705 $35,017 $20,031
------- -------
------- -------
Current maturities of
long-term debt 656
------
$7,361
------
------
1993
- ----
Domestic $5,000 3.6% $34,000 $18,232 4.1%
Foreign 3,724 7.5% 2,636 2,889 7.4%
------ ------- -------
8,724 $36,636 $21,121
------- -------
------- -------
Current maturities of
long-term debt 528
------
$9,252
------
------
1992
- ----
Domestic $ 0 0% $30,500 $12,675 6.0%
Foreign 3,082 9.0% 3,245 3,914 10.8%
------ ------- -------
3,082 $33,745 $16,589
------- -------
------- -------
Current maturities of
long-term debt 460
------
$3,542
------
------
<FN>
Notes:
- -----
(a) Maximum amount relates to consolidated total, not individual domestic and
foreign components.
(b) Computed by averaging the total month-end outstanding principal balances.
(c) Computed by dividing interest expense by the weighted average outstanding
during the period.
</TABLE>
<PAGE>
EXHIBIT 4(d)
CONFORMED COPY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
HELENE CURTIS, INC.
NOTE AGREEMENT
Dated as of March 1, 1994
$27,500,000 Principal Amount
6.11% Senior Notes
Due March 15, 2001
$22,500,000 Principal Amount
6.50% Senior Notes
Due March 15, 2004
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section 1. DESCRIPTION OF NOTES AND COMMITMENT................................1
1.1. Description of Notes.........................................1
1.2. Commitment; Closing Date.....................................2
Section 2. PREPAYMENT OF NOTES................................................2
2.1. Optional Prepayments.........................................2
2.2. Notice of Prepayments........................................2
2.3. Surrender of Notes on Prepayment or Exchange.................3
2.4. Direct Payment and Deemed Date of Receipt....................3
2.5. Allocation of Payments.......................................4
2.6. Payments Due on Saturdays, Sundays and Holidays..............4
Section 3. REPRESENTATIONS....................................................4
3.1. Representations of the Company...............................4
3.2. Representations of the Purchasers...........................10
Section 4. CLOSING CONDITIONS...............................................11
4.1. Representations and Warranties .............................11
4.2. Legal Opinions..............................................11
4.3. Events of Default...........................................11
4.4. Payment of Fees and Expenses................................11
4.5. Sale of Notes to Other Purchasers...........................11
4.6. Legality of Investment......................................11
4.7. Private Placement Number....................................11
4.8. Proceedings and Documents...................................11
Section 5. INTERPRETATION OF AGREEMENT.......................................12
5.1. Certain Terms Defined.......................................12
5.2. Accounting Principles.......................................20
5.3. Valuation Principles........................................20
5.4. Direct or Indirect Actions..................................20
Section 6. AFFIRMATIVE COVENANTS............................................20
6.1. Corporate Existence.........................................20
6.2. Insurance...................................................21
6.3. Taxes, Claims for Labor and Materials.......................21
6.4. Maintenance of Properties...................................21
(i)
<PAGE>
6.5. Maintenance of Records......................................21
6.6. Financial Information and Reports...........................21
6.7. Inspection of Properties and Records........................23
6.8. ERISA.......................................................24
6.9. Compliance with Laws........................................25
6.10. Acquisition of Notes........................................25
6.11. Private Placement Number....................................25
Section 7. NEGATIVE COVENANTS...............................................25
7.1. Interest Coverage...........................................25
7.2. Indebtedness................................................25
7.3. Liens.......................................................26
7.4. Restricted Payments.........................................27
7.5. Merger or Consolidation.....................................28
7.6. Sale of Assets..............................................28
7.7. Disposition of Stock or Indebtedness of Subsidiaries........29
7.8. Transactions with Affiliates................................29
7.9. Consolidated Tax Returns....................................29
7.10. Nature of Business..........................................29
Section 8. EVENTS OF DEFAULT AND REMEDIES THEREFOR..........................29
8.1. Nature of Events............................................30
8.2. Remedies on Default.........................................31
8.3. Annulment of Acceleration of Notes..........................32
8.4. Other Remedies..............................................32
8.5. Conduct No Waiver; Collection Expenses......................32
8.6. Remedies Cumulative.........................................32
8.7. Notice of Default...........................................32
Section 9. AMENDMENTS, WAIVERS AND CONSENTS.................................33
9.1. Matters Subject to Modification.............................33
9.2. Solicitation of Holders of Notes............................33
9.3. Binding Effect..............................................34
Section 10. FORM OF NOTES, REGISTRATION, TRANSFER, EXCHANGE AND
REPLACEMENT.....................................................34
10.1. Form of Notes...............................................34
10.2. Note Register...............................................34
10.3. Issuance of New Notes upon Exchange or Transfer.............34
10.4. Replacement of Notes........................................34
(ii)
<PAGE>
Section 11. MISCELLANEOUS...................................................35
11.1. Expenses....................................................35
11.2. Notices.....................................................35
11.3. Reproduction of Documents...................................35
11.4. Successors and Assigns......................................36
11.5. Law Governing...............................................36
11.6. Headings....................................................36
11.7. Counterparts................................................36
11.8. Reliance on and Survival of Provisions......................36
11.9. Integration and Severability................................36
ANNEXES......................................................................50
I - Subsidiaries...........................................50
II - Liens..................................................51
III - Indebtedness...........................................52
EXHIBITS.....................................................................53
A Form of Senior Note.........................................53
B Form of Senior Note.........................................55
C Form of Opinion of Purchasers' Counsel......................57
D Form of Opinion of Company's' Counsel.......................58
(iii)
<PAGE>
HELENE CURTIS, INC.
NOTE AGREEMENT
Dated as of March 1, 1994
To Each of the Purchasers
Named in the Attached Schedule I
Ladies and Gentlemen:
HELENE CURTIS, INC., an Illinois corporation (the "Company"), agrees with
you as follows:
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT
1.1. DESCRIPTION OF NOTES. The Company has authorized the issuance and
sale of $ 50,000,000 aggregate principal amount of its Senior Notes (the
"Notes"), to be dated the date of issuance, to bear interest from such date
(computed on the basis of a 360-day year comprised of twelve 30-day months),
payable semi-annually on September 15 and March 15 of each year, commencing
September 15, 1994, and at maturity, at the following rates: (i) $27,500,000
aggregate principal amount of the Notes (the "Series A Notes") shall bear
interest at the rate of 6.11% per annum prior to maturity and shall bear
interest on any overdue principal (including any overdue prepayment), on any
overdue Make-Whole Amount, and (to the extent legally enforceable) on any
overdue installment of interest at a rate per annum equal to the greater of (A)
8.11% or (B) the sum of the rate announced by The First National Bank of Chicago
from time to time as its prime rate for United States domestic loans in United
States dollars plus 2%; and (ii) $22,500,000 aggregate principal amount of the
Notes (the "Series B Notes") shall bear interest at the rate of 6.50% per annum
prior to maturity and shall bear interest on any overdue principal (including
any overdue prepayment), on any overdue Make-Whole Amount, and (to the extent
legally enforceable) on any overdue installment of interest at a rate per annum
equal to the greater of (A) 8.50% or (B) the sum of the rate announced by The
First National Bank of Chicago from time to time as its prime rate for United
States domestic loans in United States dollars plus 2%. The Series A Notes
shall be expressed to mature on March 15, 2001, the Series B Notes shall be
expressed to mature on March 15, 2004 and such Notes shall be substantially in
the forms attached as Exhibits A and B, respectively. The term "Notes" as used
herein shall include each Note delivered pursuant to this Note Agreement (the
"Agreement") and each Note delivered in substitution or exchange therefor and,
where applicable, shall include the singular number as well as the plural. Any
reference to you in this Agreement shall in all instances be deemed to include
any nominee of yours or any separate account or other person on whose behalf you
are purchasing Notes. You and the other purchasers are sometimes referred to
herein individually as a "Purchaser" and collectively as the "Purchasers."
<PAGE>
1.2. COMMITMENT; CLOSING DATE. Subject to the terms and conditions
hereof and on the basis of the representations and warranties hereinafter set
forth, the Company agrees to issue and sell to you, and you agree to purchase
from the Company, Notes in the aggregate principal amount set forth opposite
your name in the attached Schedule I at a price of 100% of the principal amount
thereof.
Delivery of and payment for the Notes shall be made at the offices of
Gardner, Carton & Douglas, 321 North Clark Street, Quaker Tower, Chicago,
Illinois 60610, at 9:00 A.M., Chicago time, on March 15, 1994 or at such other
time or on such later date not later than March 31, 1994 as the Company and the
Purchasers may mutually agree (the "Closing Date"). The Notes shall be
delivered to you in the form of one or more Notes in fully registered form,
issued in your name or in the name of your nominee. Delivery of the Notes to
you on the Closing Date shall be against payment of the purchase price thereof
in Federal funds or other funds in U.S. dollars immediately available at Harris
Trust and Savings Bank, Chicago, Illinois, A.B.A. No. 071000288, for deposit in
the Company's Account No. 0004168. If on the Closing Date the Company shall
fail to tender the Notes to you, you shall be relieved of all remaining
obligations under this Agreement. Nothing in the preceding sentence shall
relieve the Company of any liability occasioned by such failure to deliver the
Notes. The funding and other obligations of the Purchasers under this Agreement
shall be several and not joint.
SECTION 2. PREPAYMENT OF NOTES
2.1. OPTIONAL PREPAYMENTS.
(a) Upon notice as provided in Section 2.2(a) and (b), the Company may
prepay the Notes, in whole or in part, at any time on or after the first
anniversary of the Closing Date, in an aggregate principal amount not less than
$1,000,000, an integral multiple of $100,000 in excess thereof or such lesser
amount as shall constitute payment in full of the Notes. Each such prepayment
shall be at a price of 100% of the principal amount to be prepaid, plus interest
accrued thereon to the date of prepayment, plus the Make-Whole Amount.
(b) Upon the occurrence of a Change of Control, the Company, pursuant
to the notice provided in Section 2.2(c), shall offer to prepay the entire
principal amount of the Notes at a price of 100% of the principal amount
thereof, plus interest accrued thereon to the date of prepayment.
(c) Except as provided in this Section 2.1, the Notes shall not be
prepayable in whole or in part.
2.2. NOTICE OF PREPAYMENTS.
(a) The Company shall give notice of any optional prepayment of the
Notes pursuant to Section 2.1(a) to each holder of the Notes not less than 30
days nor more than 60 days before the date fixed for prepayment, specifying (i)
such date, (ii) the principal amount of the holder's Notes to be prepaid on such
date, (iii) the Determination Date for calculating the Make-Whole Amount, (iv) a
calculation of the estimated amount of the Make-Whole Amount showing in
- 2-
<PAGE>
detail the method of calculation and (v) the accrued interest applicable to the
prepayment. Notice of prepayment having been so given, the aggregate principal
amount of the Notes specified in such notice, together with the actual Make-
Whole Amount, if any, and accrued interest thereon shall become due and payable
on the prepayment date.
(b) The Company also shall give notice to each holder of the Notes to
be prepaid pursuant to Section 2.1(a), by telecopy, telegram, telex or other
same-day written communication, 1 Business Day prior to the prepayment date, of
the Make-Whole Amount applicable to such prepayment and the details of the
calculations used to determine the amount of such Make-Whole Amount.
(c) The Company shall give notice of any offer to prepay the Notes
pursuant to Section 2.1(b) to each holder of the Notes immediately following the
occurrence of a Change of Control. Such notice shall be certified by an
authorized officer of the Company and shall specify (i) the nature of the Change
of Control, (ii) the date fixed for prepayment which shall be not less than 30
or more than 45 calendar days after the date of such notice, (iii) the accrued
interest applicable to the prepayment and (iv) the date by which any holder of a
Note that wishes to accept such offer must deliver notice thereof to the Company
which shall not be later than 10 calendar days prior to the date fixed for
prepayment. Not earlier than 7 calendar days prior to the date fixed for
prepayment, the Company shall give written notice to all holders of Notes
identifying each holder (and the principal amount of Notes held) who has given
notice of acceptance of the Company's offer, and thereafter any holder may
change its response to the Company's offer by written notice to such effect
delivered to the Company not less than 3 calendar days prior to the date fixed
for prepayment. The aggregate principal amount of Notes held by holders who
have accepted the Company's offer and not revoked such acceptance shall become
due and payable on the prepayment date.
2.3. SURRENDER OF NOTES ON PREPAYMENT OR EXCHANGE. Subject to
Section 2.4, upon any partial prepayment of a Note pursuant to this Section 2 or
partial exchange of a Note pursuant to Section 10.3, such Note may, at the
option of the holder thereof, (i) be surrendered to the Company pursuant to
Section 10.3 in exchange for a new Note or Notes equal to the principal amount
remaining unpaid on the surrendered Note, or (ii) be made available to the
Company, at the Company's principal office, for notation thereon of the portion
of the principal so prepaid or exchanged. In case the entire principal amount
of any Note is prepaid or exchanged, such Note shall be surrendered to the
Company following such prepayment for cancellation and shall not be reissued,
and no Note shall be issued in lieu of such Note.
2.4. DIRECT PAYMENT AND DEEMED DATE OF RECEIPT. Notwithstanding any
other provision contained in the Notes or this Agreement, the Company will pay
all sums becoming due on each Note held by you or any subsequent Institutional
Holder by wire transfer of immediately available funds to such account as you
have designated in Schedule I, or as you or such subsequent Institutional Holder
may otherwise designate by notice to the Company, in each case without
presentment and without notations being made thereon, except that any such Note
so paid or prepaid in full shall be surrendered to the Company for cancellation.
Any wire transfer shall identify such payment in the manner set forth in
Schedule I and shall identify the
-3-
<PAGE>
payment as principal, Make-Whole Amount, if any, and/or interest. Any payment
made pursuant to this Section 2.4 shall be deemed received on the payment date
only if received before 11:00 A.M., Chicago time. Payments received after 11:00
A.M., Chicago time, shall be deemed received on the next succeeding Business
Day.
2.5. ALLOCATION OF PAYMENTS. In the case of a prepayment pursuant to
Section 2.1(a), if less than the entire principal amount of all of the Notes of
each series outstanding is to be paid, the Company will prorate the aggregate
principal amount to be prepaid between the Series A and Series B Notes in
proportion to the aggregate unpaid principal amounts thereof and among the
outstanding Notes of each series in proportion to the unpaid principal amounts
thereof.
2.6. PAYMENTS DUE ON SATURDAYS, SUNDAYS AND HOLIDAYS. If any interest
payment date on the Notes or the date fixed for any other payment of any Note or
exchange of any Note is a day other than a Business Day, then such payment or
exchange shall be made on the next succeeding Business Day.
Section 3. REPRESENTATIONS
3.1. REPRESENTATIONS OF THE COMPANY. As an inducement to, and as part
of the consideration for, your purchase of the Notes pursuant to this Agreement,
the Company represents and warrants to you as follows:
(a) CORPORATE ORGANIZATION AND AUTHORITY. The Company is a solvent
corporation duly organized, validly existing and in good standing under the laws
of the State of Illinois, has all requisite corporate power and authority to own
and operate its properties, to carry on its business as now conducted and as
presently proposed to be conducted, to enter into and perform the Agreement and
to issue and sell the Notes as contemplated in the Agreement. The only Voting
Stock of the Company which is issued and outstanding is its common stock, and
all of its outstanding common stock is validly issued, fully paid, non-
assessable and beneficially owned by Industries. The Company is the only
presently existing subsidiary of Industries other than inactive subsidiaries.
There are no outstanding options, warrants or rights to acquire Voting Stock of
the Company, nor are there any outstanding securities of the Company or
Industries or any Subsidiary of either thereof which are convertible into Voting
Stock of the Company.
(b) QUALIFICATION TO DO BUSINESS. The Company is duly qualified or
licensed and in good standing as a foreign corporation authorized to do business
in each jurisdiction where the nature of the business transacted by it or the
character of its properties owned or leased makes such qualification or
licensing necessary, except for jurisdictions, individually or in the aggregate,
where the failure to be so licensed or qualified could not reasonably be
expected to have a Material Adverse Effect.
(c) SUBSIDIARIES. The Company has no Subsidiaries except those listed
in the attached Annex I, which correctly sets forth the jurisdiction of
incorporation and the percentage of the outstanding Voting Stock of each
Subsidiary which is owned, of record or beneficially, by the Company and/or one
or more Subsidiaries. Each Subsidiary which is active is so designated on Annex
I. Each active Subsidiary has been duly organized and is validly existing and
in good
-4-
<PAGE>
standing under the laws of its jurisdiction of incorporation or organization and
is duly licensed or qualified and in good standing as a foreign corporation or
other organization in each other jurisdiction where the nature of the business
transacted by it or the character of its properties owned or leased makes such
qualification or licensing necessary, except for jurisdictions, individually or
in the aggregate, where the failure to be so licensed or qualified could not
reasonably be expected to have a Material Adverse Effect. Each active
Subsidiary has full corporate or other power and authority to own and operate
its properties and to carry on its business as now conducted and as presently
proposed to be conducted. The Company and each active Subsidiary have good and
transferable title to all of the shares they purport to own of the capital stock
of each active Subsidiary, free and clear in each case of any lien, and all such
shares have been duly issued and are fully paid and non-assessable.
(d) FINANCIAL STATEMENTS. The consolidated balance sheets of
Industries, the Company and its Subsidiaries as of February 29 or 28, 1987
through 1993, and the related consolidated statements of earnings and
stockholders' equity and cash flows (or changes in financial position for 1986)
for each of the years ended on such dates, accompanied by the reports and
unqualified opinions of Coopers & Lybrand, independent public accountants,
copies of which have heretofore been delivered to you, were prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved (except as otherwise noted therein) and present
fairly the consolidated financial condition of Industries, the Company and its
Subsidiaries on such dates and their consolidated results of operations and cash
flows for the years then ended. The unaudited consolidated balance sheets of
Industries, the Company and its Subsidiaries as of November 30, August 31 and
May 31, 1993, and the unaudited consolidated statements of earnings and cash
flows for the three months, three months and six months and three months and
nine months ended on such dates and on the comparable dates in the preceding
year, copies of which have heretofore been delivered to you, were prepared in
accordance with generally accepted accounting principles and the unaudited
financial information presented in such financial statements reflects all
adjustments consisting only of normal recurring accruals necessary for a fair
presentation of the consolidated financial condition of Industries, the Company
and its Subsidiaries as of such dates and the consolidated results of their
operations and changes in their cash flows for the periods then ended, except
that such financial statements omit certain footnotes and are subject to normal
year-end audit adjustments.
(e) NO CONTINGENT LIABILITIES OR ADVERSE CHANGES. Neither the Company
nor any of its Subsidiaries has any contingent liabilities which, individually
or in the aggregate, are material to the Company and its Subsidiaries taken as a
whole, other than as indicated in the most recent audited and unaudited
financial statements described in the foregoing paragraph (d) of this Section
3.1, and, except as set forth in such financial statements, since February 28,
1993, there have been no changes in the condition, financial or otherwise, of
the Company and its Subsidiaries on a consolidated basis except changes which,
individually or in the aggregate, are not material and are not required to be
disclosed in the Company's consolidated financial statements in accordance with
generally accepted accounting principles or changes occurring in the ordinary
course of business, none of which, individually or in the aggregate, have had a
Material Adverse Effect.
-5-
<PAGE>
(f) NO PENDING LITIGATION OR PROCEEDINGS. There are no actions, suits
or proceedings pending or, to the Company's knowledge, threatened against or
affecting the Company or any of its Subsidiaries, at law or in equity or before
or by any Federal, state, municipal or other governmental department,
commission, board, arbitration board, bureau, agency or instrumentality,
domestic or foreign, which could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
(g) COMPLIANCE WITH LAW.
(i) Neither the Company nor any Subsidiary is: (x) in
default with respect to any order, writ, injunction or decree of any
court, government authority or arbitration board to which it is a named
party; or (y) in default under any law, rule, regulation, ordinance or
order relating to its or their respective businesses, the sanctions and
penalties resulting from which defaults described in clauses (x) and (y)
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
(ii) Neither the Company nor any Subsidiary is an entity
defined as a "designated national" within the meaning of the Foreign
Assets Control Regulations, 31 C.F.R. Chapter V, or is in violation of any
Federal statute or Presidential Executive Order, or any rules or
regulations of any department, agency or administrative body promulgated
under any such statute or Order, concerning trade or other relations with
any foreign country or any citizen or national thereof or the ownership or
operation of any property and no restriction or prohibition under any such
statute, Order, rule or regulation has a Material Adverse Effect.
(h) ERISA. In reliance on your representations in Section 3.2, neither
the purchase of the Notes by you nor the consummation of any of the other
transactions contemplated by this Agreement is or will constitute a "prohibited
transaction" within the meaning of Section 4975 of the Code or Section 406 of
ERISA. The Internal Revenue Service has issued a determination or an opinion
letter that each "employee pension benefit plan," as defined in Section 3(2) of
ERISA established, maintained or contributed to by the Company, any Subsidiary
or any ERISA Affiliate (except for any such plan which is unfunded and
maintained primarily for the purpose of providing deferred compensation for a
select group of management, key executives or highly compensated employees
pursuant to ERISA Sections 201, 301 and 401 or for any such plan which is
otherwise exempt from Title I of ERISA) (a "Plan") is qualified under Section
401(a) and related provisions of the Code and that each related trust or
custodial account is exempt from taxation under Section 501(a) of the Code.
Each Plan of the Company, any Subsidiary or any ERISA Affiliate complies with
ERISA and other applicable laws, except for such instances of noncompliance
which, individually and in the aggregate, could not reasonably be expected to
have a Material Adverse Effect. There exists with respect to the Company or any
Subsidiary no "multi-employer plan," as defined in Section 4001(a)(3) of ERISA,
for which a material withdrawal or termination liability may be incurred. There
does not exist with respect to any Plan or trust established or maintained by
the Company, any Subsidiary or any ERISA Affiliate: (i) an accumulated funding
deficiency within the meaning of ERISA; (ii) any termination of any
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Plan or trust which could result in any liability to the Pension Benefit
Guaranty Corporation ("PBGC") or any "reportable event," as that term is defined
in Section 4043 of ERISA as to which 30 day notices would be required to be
filed with the PBGC, which could constitute grounds for termination of any Plan
or trust by the PBGC; and (iii) any "prohibited transaction," as that term is
defined in ERISA, which could subject any Plan, trust or party dealing with any
such Plan or trust to any tax or penalty on prohibited transactions imposed by
Section 4975 of the Code, other than any of the foregoing that, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect. As of the most recent valuation date, the Unfunded Vested Liabilities
of all Plans did not exceed $500,000.
(i) TITLE TO PROPERTIES. Except as disclosed on the most recent
audited consolidated balance sheet described in the foregoing paragraph (d) of
this Section 3.1, the Company and each Subsidiary have (i) good and marketable
title in fee simple or its equivalent under applicable law to all the real
property owned by them and (ii) good title to all of the other personal property
reflected in such balance sheet or subsequently acquired by the Company or any
Subsidiary (except as sold or otherwise disposed of in the ordinary course of
business), in each case free from all Liens or defects in title except those
permitted by Section 7.3.
(j) LEASES. The Company and each Subsidiary enjoy peaceful and
undisturbed possession under all leases under which the Company or such
Subsidiary is a lessee or is operating, none of which are in default, except for
leases the termination of which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(k) FRANCHISES, PATENTS, TRADEMARKS AND OTHER RIGHTS. The Company and
each Subsidiary have all franchises, permits and licenses necessary to carry on
or used in their businesses as now being conducted, except for franchises,
permits and licenses the lack of which could not be reasonably expected to have
a Material Adverse Effect, and none are in default under any of such franchises,
permits or licenses except for defaults, individually or in the aggregate, which
could not reasonably be expected to have a Material Adverse Effect. The Company
and each Subsidiary own or possess all patents, trademarks, service marks, trade
names, copyrights, and licenses, or rights with respect to the foregoing,
necessary for, or used by them in, the present conduct of their businesses,
without any known conflict with the rights of others, except to the extent that
failure to own or possess the same, or such conflict, could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
(l) AUTHORIZATION. This Agreement and the Notes have been duly
authorized on the part of the Company and the Agreement does, and the Notes when
issued will, constitute the legal, valid and binding obligations of the Company,
enforceable in accordance with their terms, except to the extent that
enforcement of this Agreement or the Notes may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application relating to or affecting the enforcement of the rights of creditors
or by equitable principles, regardless of whether enforcement is sought in
equity or at law. The sale of the Notes and compliance by the Company with all
of the provisions of this Agreement and of the Notes (i) are within the
corporate powers of the Company, (ii) have been duly authorized by proper
corporate action, (iii) are legal and will not violate any provisions of any law
or regulation or
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order of any court, governmental authority or agency and (iv) will not result in
any breach of any of the provisions of, or constitute a default under, or result
in the creation of any Lien on any property of the Company or any Subsidiary
under the provisions of, any charter document, by-law, loan agreement or other
agreement or instrument to which the Company or any Subsidiary is a party or by
which any of them or their property may be bound.
(m) NO DEFAULTS. No event has occurred and no condition exists which,
upon the issuance of the Notes, would constitute a Default or an Event of
Default under this Agreement. Neither the Company nor any Subsidiary is in
default under any charter document, by-law, loan agreement or other material
agreement or material instrument to which it is a party or by which it or its
property may be bound.
(n) GOVERNMENTAL CONSENT. No consent, approval or authorization of, or
withholding of objection on the part of, or filing, registration or
qualification with, any governmental authority on the part of the Company,
Industries or any Subsidiary is required in connection with the execution and
delivery of this Agreement or the offer, issuance, sale or delivery of the
Notes.
(o) TAXES. All income tax returns and all other material tax returns
required to be filed by Industries, the Company or any Subsidiary in any
jurisdiction have been timely filed, and all taxes, assessments, fees and other
governmental charges upon Industries, the Company or any Subsidiary, or upon any
of their respective properties, income or franchises, which are due and payable,
have been paid timely or contested in good faith by appropriate proceedings that
stay the collection thereof by the applicable governmental authority during the
period of the contest and as to which adequate reserves are maintained in
accordance with generally accepted accounting principles. The Company does not
know of any proposed additional tax assessment against Industries, it or any
Subsidiary for which adequate provision has not been made on its or Industries'
books in accordance with generally accepted accounting principles. The Federal
income tax liability of Industries, the Company and its Subsidiaries has been
finally determined by the Internal Revenue Service and satisfied for all taxable
years up to and including the taxable year ended February 28, 1990 and no
material controversy in respect of additional taxes due since such date is
pending or, to the Company's knowledge, threatened. The provisions for taxes on
the books of Industries, the Company and each Subsidiary are adequate for all
open years and the current fiscal period.
(p) STATUS UNDER CERTAIN STATUTES. Neither the Company nor any
Subsidiary is: (i) a "public utility company" or a "holding company," or an
"affiliate" or a "subsidiary company" of a "holding company," or an "affiliate"
of such a "subsidiary company," as such terms are defined in the Public Utility
Holding Company Act of 1935, as amended, or (ii) a "public utility" as defined
in the Federal Power Act, as amended, or (iii) an "investment company" or an
"affiliated person" thereof or an "affiliated person" of any such "affiliated
person," as such terms are defined in the Investment Company Act of 1940, as
amended.
(q) PRIVATE OFFERING. Neither the Company, nor The First National Bank
of Chicago (the only Person authorized or employed by the Company as agent,
broker, dealer or otherwise in connection with the offering of the Notes or any
similar security of the Company) has offered
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any of the Notes or any similar security of the Company for sale to, or
solicited offers to buy any thereof from, or otherwise approached or negotiated
with respect thereto with, any prospective purchaser, other than institutional
investors, including the Purchasers, each of whom was offered all or a portion
of the Notes at private sale for investment. Neither the Company nor anyone
acting on its express authorization will offer the Notes or any part thereof or
any similar security for issuance or sale to, or solicit any offer to acquire
any of the same from, anyone so as to cause the issuance and sale of the Notes
to be subject to the provisions of Section 5 of the Securities Act.
(r) EFFECT OF OTHER INSTRUMENTS. Neither the Company nor any
Subsidiary is bound by any agreement or instrument or subject to any charter or
other corporate restriction which (i) in any way restricts the Company's ability
to perform its obligations under this Agreement or the Notes or any Subsidiary's
ability to pay dividends or make advances to the Company or (ii) has a Material
Adverse Effect.
(s) USE OF PROCEEDS. The Company will apply the net proceeds from the
sale of the Notes to general corporate purposes and to the repayment of
Indebtedness. None of the transactions contemplated in this Agreement
(including, without limitation thereof, the use of the proceeds from the sale of
the Notes) will violate or result in a violation of Section 7 of the Exchange
Act, or any regulations issued pursuant thereto, including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System (12 C.F.R., Chapter II). Neither the Company nor any Subsidiary owns nor
does the Company or any Subsidiary intend to carry or purchase any "margin
stock" within the meaning of Regulation G, and none of the proceeds from the
sale of the Notes will be used to purchase or carry or refinance any borrowing
the proceeds of which were used to purchase or carry any "margin stock" or
"margin security" in violation of Regulations G, T, U or X.
(t) CONDITION OF PROPERTY. All of the properties of the Company and
its Subsidiaries are in sound operating condition and repair, except for
facilities being repaired in the ordinary course of business or facilities
which, individually or in the aggregate, are not material to the Company and its
Subsidiaries, on a consolidated basis.
(u) BOOKS AND RECORDS. The Company and each Subsidiary (i) maintain
books, records and accounts in reasonable detail which accurately and fairly
reflect in all material respects their respective transactions and business
affairs, and (ii) maintain a system of internal accounting controls sufficient
to provide reasonable assurances that transactions are executed in accordance
with management's general or specific authorization and to permit preparation of
financial statements in accordance with generally accepted accounting principles
applicable in the place where the Company or the respective Subsidiary is
located.
(v) ENVIRONMENTAL COMPLIANCE. The Company and each Subsidiary
(including their operations and the conditions at or in the Facilities now owned
or used by them) comply in all material respects with all Environmental Laws;
the Company and each Subsidiary have obtained all permits under Environmental
Laws necessary to their respective operations, all such permits are in full
force and effect, and the Company and each Subsidiary are in compliance with all
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material terms and conditions of such permits except, in each of the foregoing
cases, for permits, the failure of which to obtain, maintain and comply with,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect; and neither the Company nor any Subsidiary has any
liability (contingent or otherwise) in connection with any Release of any
Hazardous Material or the existence of any Hazardous Material on, under or about
any Facility that could give rise to an Environmental Claim that could
reasonably be expected to have a Material Adverse Effect.
(w) FULL DISCLOSURE. Neither the Confidential Offering Memorandum
(including its attachments and enclosures), the financial statements referred to
in paragraph (d) of this Section 3.1, nor this Agreement, nor any other written
statement or document furnished by the Company to you in connection with the
negotiation of the sale of the Notes, taken together, contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading in light of the
circumstances under which they were made. There is no fact (exclusive of
general economic, political or social conditions or trends) particular to the
Company and known by the Company that the Company has not disclosed to you in
writing and that has a Material Adverse Effect or, so far as the Company can now
reasonably foresee, will have, individually or in the aggregate, a Material
Adverse Effect.
(x) INDEBTEDNESS. Annex III contains a description of all outstanding
Indebtedness of the Company and its Subsidiaries.
3.2. REPRESENTATIONS OF THE PURCHASERS. You represent, and in entering
into this Agreement the Company understands, that you are acquiring the Notes
for your own account and not with a view to any distribution thereof, provided
that the disposition of your property shall at all times be and remain within
your control, subject, however, to compliance with Federal securities laws. You
agree that you will only transfer the Notes in compliance with Federal
securities laws.
You further represent that either: (i) no part of the funds to be used by
you to purchase the Notes will constitute assets allocated to any separate
account (as defined in ERISA) maintained by you; or (ii) no part of the funds to
be used by you to purchase the Notes will constitute assets allocated to any
separate account maintained by you such that the application of such funds will
constitute a prohibited transaction under Section 4975 of the Code or Section
406 of ERISA; or (iii) all or a part of such funds will constitute assets of
one or more separate accounts maintained by you, and you have disclosed to the
Company the names of such employee benefit plans whose assets in such separate
account or accounts exceed 10% of the total assets or are expected to exceed 10%
of the total assets of such account or accounts as of the date of such purchase
and the Company has advised you in writing that the Company is not a party-in-
interest nor are the Notes employer securities with respect to the particular
employee benefit plans disclosed to the Company by you as aforesaid (for the
purpose of this clause (iii), all employee benefit plans maintained by the same
employer or employee organization are deemed to be a single plan). As used
herein, the terms "separate account," "party-in-interest," "employer
securities," and "employee benefit plan" have the meanings assigned to them in
ERISA.
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SECTION 4. CLOSING CONDITIONS
Your obligation to purchase the Notes on the Closing Date shall be subject
to the performance by the Company of its agreements hereunder which are to be
performed at or prior to the time of delivery of the Notes, and to the following
conditions to be satisfied on or before the Closing Date:
4.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in this Agreement or otherwise made in writing in
connection herewith shall be true and correct on or as of the Closing Date and
the Company shall have delivered to you a certificate to such effect, dated the
Closing Date and executed by the president, the chief financial officer, the
chief accounting officer or the Treasurer of the Company.
4.2. LEGAL OPINIONS. You shall have received from Gardner, Carton &
Douglas, who is acting as your special counsel in this transaction, and from Roy
A. Wentz, Secretary and General Counsel of Industries and the Company, their
opinions, dated such Closing Date, in form and substance satisfactory to you and
covering substantially the matters set forth or provided in the attached
Exhibits C and D, respectively.
4.3. EVENTS OF DEFAULT. No Default or Event of Default shall have
occurred and be continuing on the Closing Date, and the Company shall have
delivered to you a certificate to such effect, dated the Closing Date and
executed by the president, the chief financial officer, the chief accounting
officer or the Treasurer of the Company.
4.4. PAYMENT OF FEES AND EXPENSES. The Company shall have paid the fees
and expenses of Gardner, Carton & Douglas, your special counsel, incident to the
proceedings in connection with, and transactions contemplated by, this Agreement
and the Notes.
4.5. SALE OF NOTES TO OTHER PURCHASERS. The Company shall have
consummated the sale of the entire $50,000,000 principal amount of the Notes to
be sold on the Closing Date pursuant to this Agreement.
4.6. LEGALITY OF INVESTMENT. Your acquisition of the Notes shall
constitute a legal investment as of the Closing Date under the laws and
regulations of each jurisdiction to which you may be subject (without resort to
any "basket" or "leeway" provision which permits the making of an investment
without restrictions as to the character of the particular investment being
made), and such acquisition shall not subject you to any penalty or other
onerous condition in or pursuant to any such law or regulation; and you shall
have received such certificates or other evidence as you may reasonably request
to establish compliance with this condition.
4.7. PRIVATE PLACEMENT NUMBER. A private placement number with respect
to the Notes shall have been issued by Standard & Poor's Corporation.
4.8. PROCEEDINGS AND DOCUMENTS. All proceedings taken in connection
with the transactions contemplated by this Agreement, and all documents
necessary to the consummation of such transactions shall be satisfactory in form
and substance to you and your special counsel,
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and you and your special counsel shall have received copies (executed or
certified as may be appropriate) of all legal documents or proceedings which you
and they may reasonably request.
SECTION 5. INTERPRETATION OF AGREEMENT
5.1. CERTAIN TERMS DEFINED. The terms hereinafter set forth when used
in this Agreement shall have the following meanings:
AFFILIATE - Any Person (other than a Subsidiary or an original Purchaser)
(i) who is a director or executive officer of Industries or the Company, (ii)
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (iii) which
beneficially owns or holds securities representing 5% or more of the combined
voting power of the Voting Stock of the Company or any Subsidiary or (iv) of
which securities representing 5% or more of the combined voting power of its
Voting Stock (or in the case of a Person not a corporation, 5% or more of its
equity) is beneficially owned or held by the Company or any Subsidiary. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
AGREEMENT - As defined in Section 1.1
BUSINESS DAY - Any day, other than Saturday, Sunday or a legal holiday or
any other day on which banking institutions in Chicago, Illinois or New York,
New York generally are authorized by law to close.
CAPITALIZED LEASE - Any lease the obligation for Rentals with respect to
which, in accordance with generally accepted accounting principles, would be
required to be capitalized on a balance sheet of the lessee.
CAPITALIZED LEASE OBLIGATION - The obligation for Rentals required, in
accordance with generally accepted accounting principles, to be capitalized on
the balance sheet of the lessee under a Capitalized Lease.
CHANGE OF CONTROL - The (x) acquisition (including the agreement to act in
concert) by any Person or group (within the meaning of Section 13 or 14 of the
Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated by the SEC under the Exchange Act) of 20% or more in voting power
of the outstanding Voting Stock of Industries other than (i) the Gidwitz Family
Group or (ii) Persons acquiring such voting power by gift, bequest or descent
from any member of the Gidwitz Family Group or trustees acting for any of the
aforementioned or (y) failure of Industries to own and control 100% of the
Voting Stock of the Company.
CLOSING DATE - As defined in Section 1.2.
CODE - The Internal Revenue Code of 1986, as amended.
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CONSOLIDATED EARNINGS BEFORE INTEREST AND TAXES - For any fiscal quarter,
the sum of (i) earnings before income taxes for such fiscal quarter, plus (ii)
Interest Expense for such fiscal quarter, plus (iii) Rentals for such fiscal
quarter under all Non-Cancellable Operating Leases, minus (iv) equity in the
unremitted earnings for such quarter of any Person other than a Subsidiary, all
as determined on a consolidated basis for the Company and its Subsidiaries in
accordance with generally accepted accounting principles.
CONSOLIDATED INDEBTEDNESS - Indebtedness of the Company and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles.
CONSOLIDATED NET EARNINGS- For any period, the net income (or deficit) of
the Company and its Subsidiaries for such period, determined on a consolidated
basis in accordance with generally accepted accounting principles and, without
limiting the foregoing, after deduction from gross income of all charges and
reserves, including charges and reserves for all taxes on or measured by income,
but excluding in any event gains or losses on the sale or other disposition,
other than in the ordinary course, of fixed or capital assets or on the
acquisition, retirement, repurchase, sale or other disposition of capital stock
or other securities of Industries, the Company or any Subsidiary.
CONSOLIDATED NET WORTH - As of any date of determination, (a) the sum of
the amounts which would be set forth as nonredeemable preferred stock, common
stock, capital in excess of par value or paid-in surplus and retained earnings
on a consolidated balance sheet of the Company and its Subsidiaries prepared as
of such date in accordance with generally accepted accounting principles, minus
(b) the sum of the amounts which would be set forth on such consolidated balance
sheet as (i) the cost of any shares of the Company's common stock held in
treasury and (ii) any surplus resulting from any writeup of assets other than a
writeup in connection with an acquisition of assets to reflect the fair market
value of such assets in accordance with generally accepted accounting
principles.
CONSOLIDATED TOTAL ASSETS - The total assets of the Company and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles.
CONSOLIDATED TOTAL CAPITALIZATION - The sum of Consolidated Net Worth and
Consolidated Indebtedness.
DEFAULT - Any event which, with the lapse of time or the giving of notice,
or both, would become an Event of Default.
DETERMINATION DATE - The day 1 Business Day before the date fixed for a
prepayment pursuant to Section 2.1(a) or (b) or Section 7.6 or the date of
declaration pursuant to Section 8.2.
ENVIRONMENTAL CLAIM - Any written notice of violation, claim, demand,
abatement order or other order by any Person for any damage, including personal
injury (including sickness, disease or death), tangible or intangible property
damage, contribution, indemnity, indirect or consequential damages, damage to
the environment, nuisance, pollution, contamination or other adverse effects on
the environment, or for fines, penalties or restrictions, resulting from or
based
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upon (i) the existence of a Release (whether sudden or non-sudden or accidental
or non-accidental) of, or exposure to, any Hazardous Material in, into or onto
the environment at, in, by, from or related to any Facility, (ii) the use,
handling, transportation, storage, treatment or disposal of Hazardous Materials
in connection with the operation of any Facility, or (iii) the violation, or
alleged violation, of any statute, rule, regulation, ordinance, order, permit,
license or authorization of or from any governmental authority, agency or court
relating to environmental matters pertaining to the Facilities.
ENVIRONMENTAL LAWS - All laws relating to environmental matters, including
those relating to (i) fines, orders, injunctions, penalties, damages,
contribution, cost recovery compensation, losses or injuries resulting from the
Release or threatened Release of Hazardous Materials and to the generation, use,
storage, transportation, or disposal of Hazardous Materials, in any manner
applicable to the Company or any of its Subsidiaries or any of their respective
properties, including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. Section 9601 ET SEQ.), the
Hazardous Material Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the
Federal Water Pollution Control Act (33 U.S.C. Section 1251 ET SEQ.), the Clean
Air Act (42 U.S.C. Section 7401 ET SEQ.), the Toxic Substances Control Act (15
U.S.C. Section 2601 ET SEQ.), the Occupational Safety and Health Act (29 U.S.C.
Section 651 ET SEQ.), and the Emergency Planning and Community Right-to-Know Act
(42 U.S.C. Section 11001 ET SEQ.), and (ii) environmental protection, including
the National Environmental Policy Act (42 U.S.C. Section 4321 ET SEQ.), and
comparable state and foreign laws, each as amended or supplemented, and any
similar or analogous local, state, federal and foreign statutes and regulations
promulgated pursuant thereto, each as in effect as of the date of determination.
ERISA - The Employee Retirement Income Security Act of 1974, as amended.
ERISA AFFILIATE - The Company and (i) any corporation that is a member of
a controlled group of corporations within the meaning of Section 414(b) of the
Code of which the Company is a member; (ii) any trade or business (whether or
not incorporated) which is a member of a group of trades or businesses under
common control within the meaning of Section 414(c) of the Code of which the
Company is a member; and (iii) any member of an affiliated service group within
the meaning of Section 414(m) or (o) of the Code of which the Company, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is a member.
EVENT OF DEFAULT - As defined in Section 8.1.
EXCHANGE ACT - The Securities Exchange Act of 1934, as amended, and as it
may be further amended from time to time.
FACILITIES - Any and all real property (including all buildings, fixtures
or other improvements located thereon) now or heretofore owned, leased, operated
or used (under permit or otherwise) by the Company or any of its Subsidiaries.
THE GIDWITZ FAMILY GROUP - (i) Gerald S. Gidwitz, his children, their
spouses, grandchildren of Gerald S. Gidwitz and various trusts, partnerships and
other entities holding
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shares for their benefit, and (ii) Joseph L Gidwitz, his children, their
spouses, grandchildren of Joseph L. Gidwitz and various trusts, partnerships and
other entities holding shares for their benefit.
GUARANTIES - All obligations (other than endorsements in the ordinary
course of business of negotiable instruments for deposit or collection) of a
Person, including Letters of Credit, guaranteeing or, in effect, guaranteeing
any Indebtedness, dividend or other obligation of any other Person in any
manner, whether directly or indirectly, including, without limitation, all
obligations incurred through an agreement, contingent or otherwise, by such
Person: (i) to purchase such Indebtedness or obligation or any property or
assets constituting security therefor, (ii) to advance or supply funds (x) for
the purchase or payment of such Indebtedness or obligation, (y) to maintain
working capital or other balance sheet condition or (z) otherwise to advance or
make available funds for the purchase or payment of such Indebtedness or
obligation, (iii) to lease property or to purchase securities or other property
or services primarily for the purpose of assuring the owner of such Indebtedness
or obligation against loss in respect thereof, or (iv) otherwise to assure the
owner of the Indebtedness or obligation against loss in respect thereof.
Notwithstanding the foregoing, in no event shall any of the following be deemed
to be a Guaranty: (v) guaranties with respect to products of the Company or a
Subsidiary in the ordinary course of business; (w) Letters of Credit issued in
connection with commercial transactions for the purchase of goods in the
ordinary course of business; (x) guaranties of payment obligations of
Subsidiaries under operating leases in an annual aggregate amount not exceeding
$1,000,000 or its equivalent in other currencies; (y) standby Letters of Credit
for maintenance of insurance up to an aggregate face amount outstanding at any
time of $7,500,000 and additional standby Letters of Credit up to an aggregate
face amount outstanding at any time of $1,000,000; and (z) Guaranties by the
Company in connection with sales of notes receivable permitted by Section
7.6(b)(ii). For the purposes of all computations made under this Agreement,
Guaranties in respect of any Indebtedness for borrowed money shall be deemed to
be Indebtedness equal to the principal amount of such Indebtedness for borrowed
money which has been guaranteed (or the maximum amount to which such Guaranty is
specifically limited), and Guaranties in respect of any other obligation or
liability or any dividend shall be deemed to be Indebtedness equal to the
maximum aggregate amount of such obligation, liability or dividend (or the
maximum amount to which such Guaranty is specifically limited).
HAZARDOUS MATERIALS - (i) Any chemical, material or substance defined as
or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," or "toxic substances" or words of similar import under any Environmental
Laws; (ii) any oil, petroleum or petroleum derived substance, any drilling
fluid, produced water or other waste associated with the exploration,
development or production of crude oil, any flammable substance or explosive,
any radioactive material, any hazardous waste or substance, any toxic waste or
substance or any other material or pollutant that (x) poses a hazard to any
property of the Company or any Subsidiary or to Persons on or about such
property or (y) causes such property to be in violation of any Environmental
Law; (iii) any friable asbestos, urea formaldehyde foam insulation, electrical
equipment which contains any oil or dielectric fluid with levels of
polychlorinated biphenyls in excess of fifty parts per million;
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and (iv) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority.
INDEBTEDNESS - For any Person, without duplication, the outstanding
principal amount of all borrowings which in accordance with generally accepted
accounting principles would be included in determining total liabilities of such
Person as shown on the liability side of a balance sheet, and in any event all
(i) obligations for borrowed money or to pay the deferred purchase price of
property or assets (except trade account payables arising in the ordinary course
of business), (ii) obligations secured by any Lien upon, or payable from the
proceeds of or production from, property or assets owned by such Person, even
though such Person has not assumed or become liable for the payment of such
obligations, (iii) Capitalized Leases, and (iv) Guaranties of obligations of
others of the character referred to in this definition.
INDUSTRIES - Helene Curtis Industries, Inc., a Delaware corporation.
INSTITUTIONAL HOLDER - Any bank, trust company, insurance company, pension
fund, mutual fund or other similar financial institution which is or becomes a
holder of any Note.
INTEREST EXPENSE - For any fiscal quarter, the amount properly includable
as interest expense (including the interest component of Rentals under
Capitalized Leases), in accordance with generally accepted accounting
principles, of the company and its Subsidiaries during such period.
INVESTMENTS - All investments made, in cash or by delivery of property,
directly or indirectly, in any Person or in property, whether by acquisition of
shares of capital stock, Indebtedness or other obligations or securities or by
loan, advance, capital contribution or otherwise. Investments shall not include
capital stock of Industries or the Company held in the Company's treasury.
LETTER OF CREDIT - With respect to any Person, a letter of credit or
similar instrument which is issued upon the application of such Person, with
respect to which such Person is an account party or for which such Person is in
any way liable.
LIEN - Any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind, including any agreement to grant any of the foregoing, any
conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to file any financing statement under
the Uniform Commercial Code of any jurisdiction in connection with any of the
foregoing, other than filings of financing statements in respect of operating
leases and other similar filings of merely a precautionary nature including
filings of financing statements in respect of sales of (and not security
interests in) receivables and other accounts.
MAKE-WHOLE AMOUNT - As of any Determination Date, to the extent that the
Reinvestment Yield on such Determination Date is lower than the interest rate
payable on or in respect of the Notes, the excess of (a) the present value of
the principal and interest payments to be foregone by any prepayment (exclusive
of accrued interest on such Notes through the date of prepayment) on such Note,
determined by discounting (semi-annually on the basis of a 360-day
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year composed of twelve 30-day months), such payments at a rate that is equal to
the Reinvestment Yield over (b) the aggregate principal amount of such Notes
then to be prepaid or paid. To the extent that the Reinvestment Yield on any
Determination Date is equal to or higher than the interest rate payable on or in
respect of such Notes, the Make-Whole Amount is zero.
MATERIAL ADVERSE EFFECT - (i) A material adverse effect on the business,
properties, profits, prospects, operations or financial condition of the Company
and its Subsidiaries, taken as a whole, (ii) the material impairment of the
ability of the Company to perform its obligations under this Agreement or the
Notes or (iii) the material impairment of the ability of the holders of the
Notes to enforce the Company's obligations under this Agreement or the Notes.
NON-CANCELLABLE OPERATING LEASE - For any fiscal quarter, any lease, other
than a Capitalized Lease, with a remaining term, as of the first day of such
quarter, including automatic renewals or renewals at the option of the lessor,of
no less than three years.
NOTES - As defined in Section 1.1.
PBGC - As defined in Section 3.1(h).
PERSON - Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any governmental authority, agency or political subdivision.
PLAN - As defined in Section 3.1(h).
PURCHASER - As defined in Section 1.1.
REINVESTMENT YIELD. - The sum of (i) 0.60% plus (ii) the yield reported,
as of 10:00 a.m. (New York City time) on the Determination Date, on the Cantor-
Fitzgerald Brokerage Screen available on the Bloomberg and Knight Ridder
Information System (or, if not available, any other nationally recognized
trading screen reporting on-line intraday trading in United States government
securities) for actively traded U.S. Treasury securities having a maturity equal
to the Weighted Average Life to Maturity of the principal of Notes then being
prepaid or paid as of the date of prepayment or payment, rounded to the nearest
month, or if such yields shall not be reported as of such time or the yields
reported as of such time are not ascertainable in accordance with the preceding
clause, then the arithmetic mean of the yields published in the statistical
release designated H.15(519) (or any successor publication) of the Board of
Governors of the Federal Reserve System under the caption "U.S. Government
Securities--Treasury Constant Maturities" (the "statistical release") for the
maturity corresponding to the remaining Weighted Average Life to Maturity of the
Notes as of the date of such prepayment or payment rounded to the nearest month.
For purposes of calculating the Reinvestment Yield, the most recent weekly
statistical release published prior to the applicable Determination Date shall
be used. In the event the statistical release is not published, the arithmetic
mean of such reasonably comparable index as may be designated by the holders of
at least 51% in aggregate principal amount of the Notes, for the maturity
corresponding to the remaining Weighted Average Life to Maturity of the Notes as
of the date of prepayment or payment, as the case may be, rounded to the nearest
month shall
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be used. If no maturity exactly corresponding to such rounded Weighted Average
Life to Maturity shall appear therein, yields for the two most closely
corresponding published maturities (one of which occurs prior and the other
subsequent to the Weighted Average Life to Maturity) shall be calculated
pursuant to the foregoing sentence and the Reinvestment Yield shall be
interpolated from such yields on a straight-line basis (rounding, in each of
such relevant periods, to the nearest month).
RELEASE - Any release, spill, emission, leaking, pumping, pouring,
emptying, dumping, injection, escaping, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment (including the
abandonment or disposal of any barrel, container or other closed receptacle
containing any Hazardous Material), or into or out of any Facility, including
the movement of any Hazardous Material through the air, soil, surface water,
groundwater or property.
RENTALS - As of the date of any determination thereof, all fixed payments
(including all payments which the lessee is obligated to make to the lessor on
termination of the lease or surrender of the property) payable by the Company or
a Subsidiary, as lessee or sublessee under a lease of real or personal property,
but exclusive of any amounts required to be paid by the Company or a Subsidiary
(whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes, assessments, amortization and similar
charges. Fixed rents under any so-called "percentage leases" shall be computed
on the basis of the minimum rents, if any, required to be paid by the lessee,
regardless of sales volume or gross revenues.
RESTRICTED INVESTMENTS - Any Investments of the Company and its
Subsidiaries except:
(i) Investments in Subsidiaries or in a Person which,
concurrently with such Investment becomes a Subsidiary, or in property
that constitutes substantially all of the assets of a Person or all or
substantially all of a line of business or business division of a Person;
(ii) Investments in property to be used or consumed by the
Company or a Subsidiary in the ordinary course of its business;
(iii) Investments in current assets arising from the sale of
goods and services in the ordinary course of business of the Company and
its Subsidiaries;
(iv) Investments in direct obligations of the United States
of America, or any agency thereof, or obligations guaranteed by the United
States of America, maturing not more than one year from the date of
acquisition thereof;
(v) Investments in certificates of deposits maturing not
more than one year from the date of acquisition thereof, issued by any
bank or trust company organized under the laws of the United States or any
state thereof having capital, surplus and undivided profits aggregating at
least $500,000,000;
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(vi) Investments in commercial paper given the highest
rating by both Moody's Investors Service, Inc. and Standard and Poor's
Corporation and maturing not more than 270 days from the date of creation
thereof; and
(vii) Investments in direct obligations of a state of the
United States, or a municipality thereof, given the highest rating by both
Moody's Investors Service, Inc. and Standard and Poor's Corporation and
maturing not more than one year from the date of acquisition thereof.
SECURITIES ACT - The Securities Act of 1933, as amended, and as it may be
further amended from time to time.
SENIOR CONSOLIDATED INDEBTEDNESS - Any Consolidated Indebtedness other
than Subordinated Indebtedness.
SUBORDINATED INDEBTEDNESS - Any Indebtedness of the Company which is
expressly subordinate in right of payment to the Notes.
SUBISDIARY - (a) Any Person of which shares of Voting Stock (in the case
of a corporation) representing more than 50% of the combined voting power of
each outstanding class of Voting Stock are, or more than 50% of the equity (in
the case of any Person which is not a corporation) is, owned or controlled,
directly or indirectly, by the Company and (b) any corporation of which less
than a majority of the combined voting power of the outstanding classes of
Voting Stock is owned or controlled, directly or indirectly, by the Company, but
which, in accordance with generally accepted accounting principles, is fully
consolidated in the Company's financial statements.
UNFUNDED VESTED LIABILITIES - With respect to any Plan, the amount (if
any) by which (i) the present value of all vested nonforfeitable accrued
benefits under such Plan exceeds (ii) the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan.
VOTING STOCK - Capital stock of any class of a corporation having power to
vote for the election of members of the board of directors of such corporation,
or persons performing similar functions.
WEIGHTED AVERAGE LIFE TO MATURITY - As applied to any prepayment of
principal of the Notes, at any date, the number of years obtained by dividing
(a) the principal amount of the Notes to be prepaid, into (b) the sum of the
products obtained by multiplying (i) the amount of each scheduled payment of
principal, including payment at final maturity, foregone by virtue of such
prepayment of the Notes, by (ii) the number of years (calculated to the nearest
1/12th) which would have elapsed between such prepayment date and such scheduled
payment.
WHOLLY-OWNED - When applied to a Subsidiary, any Subsidiary 100% of the
Voting Stock of which is owned by the Company and/or its Wholly-Owned
Subsidiaries, other than directors' qualifying shares or, in the case of
Subsidiaries organized under the laws of a
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jurisdiction other than the United States or a state thereof, nominal shares
held by foreign nationals in accordance with local law.
Terms which are defined in other Sections of this Agreement shall have the
meanings specified therein.
5.2. ACCOUNTING PRINICPLES. Where the character or amount of any asset
or liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with United
States generally accepted accounting principles as in effect from time to time
(and the term "generally accepted accounting principles" shall have such
meaning), except where such principles are inconsistent with any accounting
treatment or computation required by this Agreement and except for the
application of non-United States accounting principles and practices to the
books and transactions of non-United States Subsidiaries to the extent not
prohibited by United States generally accepted accounting principles.
5.3. VALUATION PRINCIPLES. Except where indicated expressly to the
contrary by the use of terms such as "fair value," "fair market value" or
"market value," each asset, each liability and each capital item of any Person,
and any quantity derivable by a computation involving any of such assets,
liabilities or capital items, shall be taken at the net book value thereof for
all purposes of this Agreement. "Net book value" with respect to any asset,
liability or capital item of any Person shall mean the amount at which the same
is recorded or should have been recorded in the books of account of such Person,
as reduced by any reserves which have been or, in accordance with generally
accepted accounting principles, should have been set aside with respect thereto,
but in every case (whether or not permitted in accordance with generally
accepted accounting principles) without giving effect to any write-up, write-
down or write-off (other than any write-down or write-off the entire amount of
which was charged to Consolidated Net Earnings or to a reserve which was a
charge to Consolidated Net Earnings or a write-up permitted by generally
accepted accounting principles in connection with business acquisitions)
relating thereto which was made after the date of this Agreement.
5.4. DIRECT OR INDIRECT ACTIONS. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether the action in question
is taken directly or indirectly by such Person.
SECTION 6. AFFIRMATIVE COVENANTS
The Company agrees that, for so long as any amount remains unpaid on any
Note:
6.1. CORPORATE EXISTENCE. The Company will maintain and preserve, and
will cause each Subsidiary to maintain and preserve, its corporate existence and
right to carry on its business and maintain, preserve, renew and extend all of
its rights, powers, privileges and franchises necessary to the proper conduct of
its business; provided, however, that the foregoing shall not prevent any
transaction permitted by Section 7.5 or Section 7.6.
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6.2. INSURANCE. The Company will, and will cause each Subsidiary to,
maintain insurance coverage with financially sound and reputable insurers in
such amounts, with such deductibles and against such risks as are required by
law or sound business practice and are customary for corporations engaged in the
same or similar businesses and owning and operating similar properties as the
Company and its Subsidiaries.
6.3. TAXES, CLAIMS FOR LABOR AND MATERIALS. The Company will pay and
discharge, and will cause each Subsidiary to pay and discharge, all taxes,
assessments and governmental charges or levies imposed upon it or its property
or assets, or upon properties leased by it (but only to the extent required to
do so by the applicable lease), and all lawful claims which, if unpaid, might
become a Lien upon its property or assets, provided that neither the Company nor
any Subsidiary shall be required to pay any such tax, assessment, charge, levy
or claim, the payment of which is being contested in good faith and by proper
proceedings that will stay the forfeiture or sale of any property and with
respect to which adequate reserves are maintained in accordance with generally
accepted accounting principles.
6.4. MAINTENANCE OF PROPERTIES. The Company will maintain, preserve and
keep, and will cause each Subsidiary to maintain, preserve and keep, its
properties (whether owned in fee or a leasehold interest), other than those
determined in good faith by the Company to be no longer necessary to the conduct
of its or their businesses, in good repair and working order, ordinary wear and
tear excepted, and from time to time will make all necessary repairs,
replacements, renewals and additions.
6.5. MAINTENANCE OF RECORDS. The Company will keep, and will cause each
Subsidiary to keep, at all times proper books of record and account in which
full, true and correct entries will be made of all dealings or transactions of
or in relation to the business and affairs of the Company or such Subsidiary, in
accordance with generally accepted accounting principles, and the Company will,
and will cause each Subsidiary to, provide reasonable protection against loss or
damage to such books of record and account.
6.6. FINANCIAL INFORMATION AND REPORTS. The Company will furnish to you
and to any other Institutional Holder (in duplicate if you or such other holder
so request) the following:
(a) As soon as available and in any event within 60 days after the end
of each of the first three quarterly accounting periods of each fiscal year of
the Company, a consolidated balance sheet of Industries, the Company and its
Subsidiaries as of the end of such period and consolidated statements of
earnings and cash flows of Industries, the Company and its Subsidiaries for the
periods beginning on the first day of such fiscal year and the first day of such
quarterly accounting period and ending on the date of such balance sheet,
setting forth in comparative form the corresponding consolidated figures for the
corresponding periods of the preceding fiscal year, all in reasonable detail,
prepared in accordance with generally accepted accounting principles
consistently applied throughout the period involved (except for changes
disclosed in such financial statements or in the notes thereto and concurred in
by Industries' independent certified public accountants) and certified by the
chief financial officer or chief accounting officer of Industries (i) outlining
the basis of presentation, and (ii) stating that the
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unaudited financial information presented in such financial statements reflects
all adjustments consisting only of normal recurring accruals necessary for a
fair presentation of the consolidated financial condition of Industries, the
Company and its Subsidiaries as of such dates and the consolidated results of
their operations and changes in their cash flows for the periods then ended,
except that such financial statements omit certain footnotes and are subject to
normal year-end audit adjustments;
(b) As soon as available and in any event within 90 days after the last
day of each fiscal year, a consolidated balance sheet of Industries, the Company
and its Subsidiaries as of the end of such fiscal year and the related
consolidated statements of earnings and stockholders' equity and cash flows for
such fiscal year, in each case setting forth in comparative form figures for the
preceding fiscal year, all in reasonable detail, prepared in accordance with
generally accepted accounting principles consistently applied throughout the
period involved (except for changes disclosed in such financial statements or in
the notes thereto and concurred in by independent certified public accountants)
and accompanied by a report unqualified as to scope of audit and unqualified as
to going concern as to the consolidated balance sheet and the related
consolidated statements of earnings and stockholders' equity and cash flows by
Coopers & Lybrand, or any other firm of independent public accountants of
recognized national standing selected by Industries, to the effect that such
financial statements present fairly, in all material respects, the consolidated
financial condition of Industries, the Company and its Subsidiaries in
conformity with generally accepted accounting principles and that the
examination of such financial statements by such accounting firm has been made
in accordance with generally accepted auditing standards;
(c) Together with the financial statements delivered pursuant to
paragraphs (a) and (b) of this Section 6.6, a certificate of the chief financial
officer, chief accounting officer or Treasurer of Industries, (i) to the effect
that such officer has re-examined the terms and provisions of this Agreement and
that at the date of such certificate, no Default or Event of Default is
occurring or has occurred as of the date of such certificate, during the periods
covered by such financial statements and as of the end of such periods, or if
such officer is aware of any Default or Event of Default, such officer shall
disclose in such statement the nature thereof, its period of existence and what
action, if any, the Company has taken or proposes to take with respect thereto,
and (ii) stating whether the Company is in compliance with Sections 7.1 through
7.10 and setting forth, in sufficient detail, the information and computations
required to establish whether or not the Company was in compliance with the
requirements of Sections 7.1 through 7.7 during the periods covered by the
financial reports then being furnished and as of the end of such periods.
(d) Together with the financial reports delivered pursuant to paragraph
(b) of this Section 6.6, a letter of Industries' independent certified public
accountants stating that in making the examination necessary for expressing an
opinion on such financial statements, nothing came to their attention that
caused them to believe that there is in existence or has occurred any Default or
Event of Default hereunder (the occurrence of which is ascertainable by
accountants in the course of normal audit procedures) or, if such accountants
shall have obtained knowledge of any
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such Default or Event of Default, describing the nature thereof and the length
of time it has existed;
(e) Promptly after the Company obtains knowledge thereof, notice of any
litigation or any governmental proceeding pending against the Company or any
Subsidiary in which the damages sought exceed $10,000,000, individually or in
the aggregate, or which could reasonably be expected to have a Material Adverse
Effect;
(f) Promptly, copies of each financial statement, notice, report and
proxy statement which Industries furnishes to its stockholders; copies of each
registration statement and periodic report (without exhibits and other than
registration statements relating to employee benefit plans) which Industries or
the Company files with the Securities and Exchange Commission, and any similar
or successor agency of the Federal government administering the Securities Act,
the Exchange Act or the Trust Indenture Act of 1939, as amended; without
duplication, copies of each report (other than reports relating solely to the
issuance of, or transactions by others involving, its securities) relating to
Industries or the Company or its securities which Industries or the Company
files with any securities exchange on which any of securities of Industries or
the Company may be registered;
(g) As soon as available, a copy of each other report submitted to
Industries, the Company or any Subsidiary by independent accountants retained by
Industries, the Company or any Subsidiary in connection with any special
financial or systems audit made by them of the books of Industries, the Company
or any Subsidiary; and
(h) Such additional information as you or such other Institutional
Holder of the Notes may reasonably request concerning Industries, the Company
and its Subsidiaries.
At such time as the Company and its Subsidiaries, on a consolidated basis,
shall constitute less than 97% of the total assets, revenues or pretax earnings
of Industries, the Company shall promptly notify each holder of Notes and the
financial statements required to be delivered by the Company pursuant to
paragraphs (a) and (b) above shall be consolidated financial statements of the
Company and its Subsidiaries.
6.7. INSPECTION OF PROPERTIES AND RECORDS. The Company will allow, and
will cause each Subsidiary to allow, any representative of you or any other
Institutional Holder, so long as you or such other Institutional Holder holds
any Note, to visit and inspect any of its properties, to examine its books of
record and account and to discuss its affairs, finances and accounts with its
officers and its public accountants (and by this provision the Company
authorizes such accountants to discuss with you or such Institutional Holder its
affairs, finances and accounts), in the presence of an officer of the Company if
no Default or Event of Default has occurred and is continuing, all at such
reasonable times upon reasonable notice and as often as you or such
Institutional Holder may reasonably request and, if at the time thereof any
Default or Event of Default has occurred and is continuing, at the Company's
expense.
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6.8. ERISA.
(a) All assumptions and methods used to determine the actuarial
valuation of employee benefits, both vested and unvested, under any defined
benefit Plan of the Company or any Subsidiary in the United States, and each
such Plan, whether now existing or adopted after the date hereof, will comply in
all material respects with ERISA and other applicable laws.
(b) The Company will not at any time permit any qualified Plan
established, maintained or contributed to by it, any Subsidiary or any ERISA
Affiliate to:
(i) engage in any "prohibited transaction" as such term is
defined in Section 4975 of the Code or in Section 406 of ERISA;
(ii) incur any "accumulated funding deficiency" as such term
is defined in Section 302 of ERISA, whether or not waived; or
(iii) be terminated under circumstances which are likely to
result in the imposition of a lien on the property of the Company or any
such Subsidiary pursuant to Section 4068 of ERISA, if and to the extent
such termination is within the control of the Company;
if the event or condition described in clauses (i), (ii) or (iii) above is
likely to subject the Company or any Subsidiary or ERISA Affiliate to
liabilities which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
(c) Upon request, the Company will furnish you or any other
Institutional Holder a copy of the annual report (Form 5500) of each Plan of the
Company or any Subsidiary required to be filed with the Internal Revenue Service
no later than 45 days after the date such report has been filed with the
Internal Revenue Service.
(d) Promptly upon obtaining knowledge of the occurrence thereof, the
Company will give you and each other Institutional Holder notice of (i) a
reportable event with respect to any Plan under Section 4043 of ERISA as to
which a notice would be required to be filed with the PBGC; (ii) the institution
of any formal steps by the Company, any Subsidiary, any ERISA Affiliate, the
PBGC or any other Person to terminate any Plan; (iii) the institution of any
formal steps by the Company, any Subsidiary, or any ERISA Affiliate to withdraw
from any multiemployer Plan as defined in Section 4001(a)(3) of ERISA; (iv) a
prohibited transaction in connection with any Plan; (v) any material increase in
the contingent liability of the Company or any Subsidiary with respect to any
post-retirement welfare liability; or (vi) the taking of any action by the
Internal Revenue Service, the Department of Labor or the PBGC with respect to
any of the foregoing which, in any of the events specified in clauses (i)
through (vi) above, could reasonably be expected to result in a Material Adverse
Effect.
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6.9. COMPLIANCE WITH LAWS.
(a) The Company will comply, and will cause each Subsidiary to comply,
with all laws, rules and regulations, including Environmental Laws, applicable
to it or its or their respective business or property, other than laws, rules
and regulations the failure to comply with which or the sanctions and penalties
resulting therefrom, individually or in the aggregate, would not have a Material
Adverse Effect; provided, however, that the Company and its Subsidiaries shall
not be required to comply with laws, rules and regulations the validity or
applicability of which are being contested in good faith and by appropriate
proceedings and as to which the Company or such Subsidiary has established
adequate reserves on its books in accordance with generally accepted accounting
principles.
(b) Promptly upon the occurrence thereof, the Company will give you and
each other Institutional Holder notice of the institution of any proceedings
against, or the receipt of written notice of potential liability or
responsibility of, the Company or any Subsidiary for violation, or the alleged
violation, of any Environmental Law which violation could reasonably be expected
to give rise to a Material Adverse Effect.
6.10. ACQUISITION OF NOTES. Neither the Company nor any Subsidiary nor
any Affiliate acting on behalf of the Company, directly or indirectly, will
repurchase or offer to repurchase any Notes unless the offer is made to
repurchase Notes pro rata from all holders at the same time and on the same
terms. The Company will forthwith cancel any Notes in any manner or at any time
acquired by the Company or any Subsidiary or Affiliate and such Notes shall not
be deemed to be outstanding for any of the purposes of this Agreement or the
Notes.
6.11. PRIVATE PLACEMENT NUMBER. The Company consents to the filing of
copies of this Agreement with Standard & Poor's Corporation to obtain a private
placement number.
SECTION 7. NEGATIVE COVENANTS
The Company agrees that, for so long as any amount remains unpaid on any
Note:
7.1. INTEREST COVERAGE. The Company will not permit, as of the end of
any fiscal quarter, the ratio of (i) Consolidated Earnings before Interest and
Taxes for the preceding four fiscal quarters ending on such date to (ii) the sum
of Interest Expense and Rental expense under Non-Cancellable Operating Leases
for such fiscal quarters to be less than 1.50 to 1.0.
7.2. INDEBTEDNESS.
(a) The Company will not, and will not permit any Subsidiary to,
create, assume, incur or otherwise become liable for, directly or indirectly,
any Indebtedness if, after giving effect thereto and to the application of the
proceeds thereof, Consolidated Indebtedness would exceed 60% of Consolidated
Total Capitalization.
(b) The Company will not permit any Subsidiary to create, assume, incur
or otherwise become liable for, directly or indirectly, any Indebtedness (other
than Indebtedness to the
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Company or another Wholly-Owned Subsidiary) if, after giving effect thereto and
to the application of the proceeds thereof, (i) outstanding Indebtedness of
Subsidiaries would exceed 20% of Consolidated Net Worth and (ii) outstanding
Indebtedness of Subsidiaries organized under the laws of the United States or
any state thereof would exceed 15% of Consolidated Net Worth.
7.3. LIENS. The Company will not, and will not permit any Subsidiary
to, permit to exist, create, assume or incur, directly or indirectly, any Lien
on its properties or assets, whether now owned or hereafter acquired, except:
(a) Liens for taxes, assessments or other governmental charges or
levies if the same shall not at the time be delinquent or thereafter can be paid
without penalty or are being contested in good faith and by appropriate
proceedings;
(b) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary course of
business, which secure payment of obligations not more than 60 days past due;
(c) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, other social
security or retirement benefits, or similar legislation;
(d) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to Properties of a similar character and which do not in
any material way affect the marketability of the same or interfere with the use
thereof in the business of the Company or such Subsidiary;
(e) Liens arising out of judgments or awards against the Company or any
Subsidiary, or in connection with surety or appeal bonds in connection with
bonding such judgments or awards, the time for appeal from which or petition for
rehearing of which shall not have expired or with respect to which the Company
or such Subsidiary shall be prosecuting an appeal or proceeding for review and
in all cases with respect to which a stay of execution is in effect; provided,
however, that the aggregate amount of liabilities (including interest and
penalties, if any) of the Company and its Subsidiaries secured by such Liens do
not at any time exceed $5,000,000;
(f) Liens existing on the date of this Agreement and described in the
attached Annex II and any extension, renewal or replacement of any such Liens,
provided that such Lien does not extend to any additional property and the
aggregate principal amount of Indebtedness secured by such Lien is not increased
from the amount outstanding on the date of this Agreement;
(g) Liens pursuant to leases by Subsidiaries of store locations;
(h) Liens granted by any Subsidiary in favor of the Company or another
Subsidiary;
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(i) any Lien in property or in rights relating thereto to secure
any rights granted with respect to such property in connection with the
provision of all or a part of the purchase price or cost of the construction of
such property created contemporaneously with, or within 180 days after, such
acquisition or the completion of such construction, (B) any Lien in property
existing at the time of acquisition thereof, whether or not the Indebtedness
secured thereby is assumed by the Company or such Subsidiary, or (C) any Lien
existing on the Property of a corporation at the time of a sale, lease or other
disposition of the Properties of such corporation as an entirety or
substantially as an entirety to the Company or a Subsidiary; provided that the
Indebtedness secured by any such Lien described in this paragraph (i) does not
exceed 100% of the fair market value of the property subject to such Lien; and
(j) Liens not otherwise permitted by this Section incurred subsequent
to the Closing Date to secure Indebtedness provided that such Indebtedness is
permitted under Section 7.2 and that the aggregate outstanding principal amount
of such Indebtedness does not at any time exceed 10% of Consolidated Net Worth.
7.4. RESTRICTED PAYMENTS. The Company will not, except as hereinafter
provided:
(a) declare or pay any dividends, either in cash or property, on any
shares of its capital stock of any class (except dividends or other
distributions payable solely in shares of common stock of Industries);
(b) directly or indirectly, or through any Subsidiary, purchase,
redeem, retire or otherwise acquire any shares of its capital stock of any class
or that of Industries or any warrants, rights or options to purchase or acquire
any shares of such capital stock;
(c) make any other payment or distribution, either directly or
indirectly, or through any Subsidiary, in respect of its or Industries' capital
stock; or
(d) make, or permit any Subsidiary to make, any Restricted Investment;
(all such non-permitted declarations, payments, purchases, redemptions,
retirements, acquisitions, distributions or Investments being hereinafter
referred to as "Restricted Payments") unless no Default or Event of Default has
occurred and is continuing and, after giving effect thereto, (i) the aggregate
amount of Restricted Payments made after February 28, 1993 to and including the
date of making the Restricted Payment in question would not exceed the sum of:
(w) $55,000,000; plus (x) 50% of Consolidated Net Earnings subsequent to
February 28, 1993 (less 100% thereof in case of a deficit); plus (z) the net
cash proceeds received by the Company from the sale of common stock subsequent
to the Closing Date or the amount of any capital contribution received by the
Company subsequent to the Closing Date; and (ii) no Default or Event of Default
would exist. Any Restricted Payment by Industries shall be subject to, and
shall be deemed to have been made by the Company for purposes of, this Section
7.4.
The Company will not declare any dividend payable more than 90 days after
the date of declaration.
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7.5. MERGER OR CONSOLIDATION. The Company will not, and will not
permit any Subsidiary to, merge or consolidate with or into any Person, except
that:
(a) The Company may merge or consolidate with any Person (including a
Subsidiary) or permit any Person (including a Subsidiary) to merge into it,
provided that no Default or Event of Default has occurred and is continuing and
that immediately after giving effect thereto,
(i) The Company is the successor corporation and expressly
assumes its obligations under the Notes and this Agreement without the
benefit of any write-up of assets in connection with such merger or
consolidation;
(ii) There shall exist no Default or Event of Default; and
(b) Any Subsidiary may merge into (i) the Company (subject to paragraph
(a)(i) above) or (ii) a Subsidiary provided that immediately before or after
giving effect thereto there shall exist no Default or Event of Default.
7.6. SALE OF ASSETS.
(a) The Company will not, and will not permit any Subsidiary to, (other
than in the ordinary course of business, including inventory) sell, lease,
transfer or otherwise (including by way of merger) dispose of (collectively a
"Disposition") any assets, including receivables and capital stock of
Subsidiaries, in one or a series of transactions, to any Person (other than the
sale of assets by a Subsidiary to another Subsidiary or the Company), (i) if in
any fiscal year, after giving effect to such Disposition, the aggregate net book
value of assets subject to Dispositions during such fiscal year would exceed 15%
of Consolidated Total Assets as of the end of the immediately preceding fiscal
year or (ii) if, after giving effect to such Disposition and all prior
Dispositions since the Closing Date, the aggregate net book value of assets
subject to Dispositions would exceed, on a cumulative basis, 20% of Consolidated
Total Assets as of the end of the immediately preceding fiscal year or (iii) if
a Default or Event of Default exists.
(b) Notwithstanding the foregoing limitations in paragraph (a) of this
Section 7.6, the Company or a Subsidiary may make a Disposition and the net book
value of the assets subject to such Disposition shall not be subject to or
included in the foregoing limitations and computations (i) if the assets subject
to such Disposition are not receivables and the proceeds (net of taxes and
related expenses) from such Disposition are either (A) reinvested, within twelve
months after such Disposition, in productive assets of the Company or its
Subsidiaries or (B) applied by the Company to the pro rata prepayment of Senior
Consolidated Indebtedness, including the Notes pursuant to Section 2.1(a), or
(ii) the assets subject to such Disposition are receivables, are sold for a
consideration not less than 90% of the net book value thereof pursuant to a
receivable securitization program and the face amount of such receivables so
sold do not exceed in any fiscal year 10% of the consolidated net sales of the
Company and its Subsidiaries for the preceding fiscal year.
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7.7. DISPOSITION OF STOCK OR INDEBTEDNESS OF SUBSIDIARIES. The Company
will not:
(a) directly or indirectly sell, assign, pledge or otherwise dispose of
any Indebtedness of or any shares of stock of (or warrants, rights or options to
acquire stock of) any Subsidiary, except to a Wholly-Owned Subsidiary or to
qualify directors under applicable law;
(b) permit any Subsidiary directly or indirectly to sell, assign,
pledge or otherwise dispose of any Indebtedness of the Company or any other
Subsidiary, or any shares of stock of (or warrants, rights or options to acquire
shares of stock of) any other Subsidiary, except to the Company or a Wholly-
Owned Subsidiary or to qualify directors under applicable law;
(c) permit any Subsidiary to have outstanding any shares of preferred
stock other than shares of preferred stock which are owned by the Company or a
Wholly-Owned Subsidiary; or
(d) permit any Subsidiary directly or indirectly to issue or sell any
shares of its stock (or warrants, rights or options to acquire its stock) except
to the Company or a Wholly-Owned Subsidiary or to qualify directors under
applicable law;
PROVIDED that, subject to compliance with Section 7.6(a) all Indebtedness and
shares of stock of any Subsidiary owned by the Company and the other
Subsidiaries may be simultaneously sold as an entirety for a cash consideration
at least equal to the fair value thereof (as determined in good faith by the
Board of Directors of the Company) at the time of such sale if such Subsidiary
does not at the time own (x) any Indebtedness of the Company or (y) any
Indebtedness or shares of stock of any other Subsidiary which is not also being
simultaneously sold as an entirety in compliance with this proviso, and provided
further that, not more than twice during the term of this Agreement, the Company
may sell, or may permit any Subsidiary to sell, shares of stock of a Subsidiary
organized under a jurisdiction other than the United States or a state thereof
and subtantially all of the assets of which are located outside of the United
States so long as after giving effect thereto, the Company or a Wholly-Owned
Subsidiary owns not less than 80% of the stock of such Subsidiary on a fully-
diluted basis.
7.8. TRANSACTIONS WITH AFFILIATES The Company will not, and will not
permit any Subsidiary to, enter into any transaction (including the furnishing
of goods or services) with an Affiliate, except on terms and conditions no less
favorable to the Company or such Subsidiary than would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate.
7.9. CONSOLIDATED TAX RETURNS. The Company will not file, or consent to
the filing of, any consolidated Federal income tax return with any Person other
than Industries and a Subsidiary, except to the extent that the Company is
required under the Code to do otherwise.
7.10. NATURE OF BUSINESS. The Company will not, and will not permit any
Subsidiary to, engage in any business if, as a result thereof, the business then
to be conducted by the Company and its Subsidiaries taken as a whole, would
cease to be that described in the Confidential Offering Memorandum.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES THEREFOR
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8.1. NATURE OF EVENTS. An "Event of Default" shall exist if any one or
more of the following occurs:
(a) Any default in the payment of interest when due on any of the
Notes;
(b) Any default in the payment of the principal of any of the Notes or
the Make-Whole Amount thereon, if any, at maturity, upon acceleration of
maturity or at any date fixed for prepayment;
(c) Any default in the payment of the principal of, or interest or
premium on, any other Indebtedness of the Company and its Subsidiaries
aggregating in excess of $15,000,000 as and when due and payable (whether by
lapse of time, declaration, call for redemption or otherwise) and the
continuation of such default beyond the period of grace, if any, allowed with
respect thereto, or (ii) any default (other than a payment default) under any
agreements of the Company and its Subsidiaries under or pursuant to which
Indebtedness aggregating in excess of $20,000,000 is outstanding which results
in the acceleration of such Indebtedness;
(d) Any default in the observance of any covenant or agreement
contained in Sections 7.1 through 7.10 or in Section 8.7;
(e) Any default in the observance or performance of any other covenant
or provision of this Agreement which is not remedied within 30 days;
(f) Any representation or warranty made by the Company in this
Agreement, or made by the Company in any written statement or certificate
furnished by the Company in connection with the issuance and sale of the Notes
or furnished by the Company pursuant to this Agreement, proves incorrect in any
material respect as of the date of the making thereof;
(g) Any judgment, writ or warrant of attachment or any similar process
in an aggregate amount in excess of $10,000,000 shall be entered or filed
against the Company or any Subsidiary or against any property or assets of
either and remain unpaid, unvacated, unbonded or unstayed (through appeal or
otherwise) for a period of 45 days;
(h) The Company or any Subsidiary shall incur a "Distress Termination"
(as defined in Title IV of ERISA) of any Plan or any trust created thereunder
which results in material liability to the PBGC, the PBGC shall institute
proceedings to terminate any Plan or any trust created thereunder, or a trustee
shall be appointed by a United States District Court pursuant to Section 4042(b)
of ERISA to administer any Plan or any trust created thereunder; or
(i) Industries, the Company or any Subsidiary shall
(i) generally not pay its debts as they become due or admit
in writing its inability to pay its debts generally as they become due;
(ii) file a petition in bankruptcy or for reorganization or
for the adoption of an arrangement under the Federal Bankruptcy Code, or
any similar applicable
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bankruptcy or insolvency law, as now or in the future amended (herein
collectively called "Bankruptcy Laws"); file an answer or other pleading
admitting or failing to deny the material allegations of such a petition;
fail to file, within the time allowed for such purpose, an answer or other
pleading denying or otherwise controverting the material allegations of
such a petition; or file an answer or other pleading seeking, consenting
to or acquiescing in relief provided for under the Bankruptcy Laws;
(iii) make an assignment of all or a substantial part of its
property for the benefit of its creditors;
(iv) seek or consent to or acquiesce in the appointment of a
receiver, liquidator, custodian or trustee of it or for all or a
substantial part of its property;
(v) be finally adjudicated bankrupt or insolvent;
(vi) be subject to the entry of a court order,
(A) appointing a receiver, liquidator, custodian or trustee of it or for
all or a substantial part of its property, or (B) for relief pursuant to
an involuntary case brought under, or effecting an arrangement in,
bankruptcy or (C) for a reorganization pursuant to the Bankruptcy Laws or
(D) for any other judicial modification or alteration of the rights of
creditors; or
(vii) be subject to the assumption of custody or
sequestration by a court of competent jurisdiction of all or a substantial
part of its property, which custody or sequestration shall not be
suspended or terminated within 60 days from its inception.
8.2. REMEDIES ON DEFAULT. When any Event of Default described in
paragraphs (a) through (h) of Section 8.1 has occurred and is continuing, the
holders of at least 25% in aggregate principal amount of the Notes then
outstanding may, by notice to the Company, declare the entire principal,
together with the Make-Whole Amount (to the extent permitted by law) and all
interest accrued on all Notes to be, and such Notes shall thereupon become,
forthwith due and payable, without any presentment, demand, protest or other
notice of any kind, all of which are expressly waived. Notwithstanding the
foregoing, (i) when any Event of Default described in paragraph (a) or (b) of
Section 8.1 has occurred and is continuing, any holder may by notice to the
Company declare the entire principal, together with the Make-Whole Amount (to
the extent permitted by law) and all interest accrued on the Notes then held by
such holder to be, and such Notes shall thereupon become, forthwith due and
payable, without any presentment, demand, protest or other notice of any kind,
all of which are expressly waived, and (ii) when any Event of Default described
in paragraph (i) of Section 8.1 has occurred, then the entire principal,
together with the Make-Whole Amount (to the extent permitted by law) and all
interest accrued on all outstanding Notes shall immediately become due and
payable without presentment, demand or notice of any kind. Upon the Notes or
any of them becoming due and payable as aforesaid, the Company will forthwith
pay to the holders of such Notes the entire principal of and interest accrued on
such Notes, plus the Make-Whole Amount (to the extent permitted by law) which
shall be calculated on the Determination Date.
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8.3. ANNULMENT OF ACCELERATION OF NOTES. The provisions of Section 8.2
are subject to the condition that if the principal of, the Make-Whole Amount and
accrued interest on the Notes have been declared immediately due and payable by
reason of the occurrence of any Event of Default described in paragraphs (a)
through (h), inclusive, of Section 8.1, the holder or holders of at least 51%
in aggregate principal amount of the Notes then outstanding may, by written
instrument filed with the Company, rescind and annul such declaration and the
consequences thereof, provided that (i) at the time such declaration is annulled
and rescinded no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement, (ii) all arrears of interest
upon all the Notes and all other sums payable under the Notes and under this
Agreement (except any principal, Make-Whole Amount or interest on the Notes
which has become due and payable solely by reason of such declaration under
Section 8.2) shall have been duly paid and (iii) each and every Default or Event
of Default shall have been cured or waived; and provided further, that no such
rescission and annulment shall extend to or affect any subsequent Default or
Event of Default or impair any right consequent thereto.
8.4. OTHER REMEDIES. If any Event of Default shall be continuing, any
holder of Notes may enforce its rights by suit in equity, by action at law, or
by any other appropriate proceedings, whether for the specific performance (to
the extent permitted by law) of any covenant or agreement contained in this
Agreement or in the Notes or in aid of the exercise of any power granted in this
Agreement, and may enforce the payment of any Note held by such holder and any
of its other legal or equitable rights.
8.5. CONDUCT NO WAIVER; COLLECTION EXPENSES. No course of dealing on
the part of any holder of Notes, nor any delay or failure on the part of any
holder of Notes to exercise any of its rights, shall operate as a waiver of such
rights or otherwise prejudice such holder's rights, powers and remedies. If the
Company fails to pay, when due, the principal of, the Make-Whole Amount, or the
interest on, any Note, or fails to comply with any other provision of this
Agreement, the Company will pay to each holder, to the extent permitted by law,
on demand, such further amounts as shall be sufficient to cover the cost and
expenses, including but not limited to reasonable attorneys' fees, incurred by
such holders of the Notes in collecting any sums due on the Notes or in
otherwise enforcing any of their rights.
8.6. REMEDIES CUMULATIVE. No right or remedy conferred upon or reserved
to any holder of Notes under this Agreement is intended to be exclusive of any
other right or remedy, and every right and remedy shall be cumulative and in
addition to every other right or remedy given under this Agreement or now or
hereafter existing under any applicable law. Every right and remedy given by
this Agreement or by applicable law to any holder of Notes may be exercised from
time to time and as often as may be deemed expedient by such holder, as the case
may be.
8.7. NOTICE OF DEFAULT. With respect to Defaults, Events of Default or
claimed defaults, the Company will give the following notices:
(a) The Company promptly, but in any event within the earlier of (i) 3
days after an executive officer of the Company has knowledge thereof or (ii) the
date on which similar notice
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is given to any other creditor of the Company, will furnish to each holder of a
Note written notice of the occurrence of a Default or an Event of Default. Such
notice shall specify the nature of such default, the period of existence thereof
and what action the Company has taken or is taking or proposes to take with
respect thereto.
(b) If the holder of any Note or of any other evidence of Indebtedness
of the Company or any Subsidiary gives any notice or takes any other action with
respect to a claimed default, the Company will forthwith give written notice
thereof to each holder of the then outstanding Notes, describing the notice or
action and the nature of the claimed default.
SECTION 9. AMENDMENTS, WAIVERS AND CONSENTS
9.1. MATTERS SUBJECT TO MODIFICATION. Any term, covenant, agreement or
condition of this Agreement may, with the written consent of the Company, be
amended, or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively), if the Company
shall have obtained the consent in writing of the holder or holders of at least
51% in aggregate principal amount of outstanding Notes; provided, however, that,
without the written consent of the holder or holders of all of the Notes then
outstanding, no such waiver, modification, alteration or amendment shall be
effective which will (i) change the time of payment (including any required
prepayment or optional prepayment) of the principal of or the interest on any
Note, (ii) reduce the principal amount thereof or the Make-Whole Amount, if any,
or change the rate of interest thereon, (iii) change any provision of any
instrument affecting the preferences between holders of the Notes or between
holders of the Notes and other creditors of the Company, or (iv) change any of
the provisions of Section 8.2, Section 8.3 or this Section 9.
For the purpose of determining whether holders of the requisite principal
amount of Notes have made or concurred in any waiver, consent, approval, notice
or other communication under this Agreement, Notes held in the name of, or owned
beneficially by, the Company, any Subsidiary or any Affiliate thereof, shall not
be deemed outstanding.
9.2. SOLICITATION OF HOLDERS OF NOTES. The Company will not solicit,
request or negotiate for or with respect to any proposed waiver or amendment of
any of the provisions of this Agreement or the Notes unless each holder of the
Notes (irrespective of the amount of Notes then owned by it) shall concurrently
be informed thereof by the Company and shall be afforded the opportunity of
considering the same and shall be supplied by the Company with sufficient
information to enable it to make an informed decision with respect thereto.
Executed or true and correct copies of any waiver or consent effected pursuant
to the provisions of this Section 9 shall be delivered by the Company to each
holder of outstanding Notes forthwith following the date on which the same shall
have been executed and delivered by the holder or holders of the requisite
percentage of outstanding Notes. The Company will not, directly or indirectly,
pay or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, to any holder of the Notes as
consideration for or as an inducement to the entering into by any holder of the
Notes of any waiver or amendment of any of the terms and provisions of this
Agreement unless such remuneration is concurrently paid, on the same terms,
ratably to each holder of the then outstanding Notes.
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9.3. BINDING EFFECT. Any such amendment or waiver shall apply equally
to all the holders of the Notes and shall be binding upon them, upon each future
holder of any Note and upon the Company whether or not such Note shall have been
marked to indicate such amendment or waiver. No such amendment or waiver shall
extend to or affect any obligation not expressly amended or waived or impair any
right related thereto.
SECTION 10. FORM OF NOTES, REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT
10.1. FORM OF NOTES. Each Note initially delivered under this Agreement
will be in the form of one fully registered Note in the form attached as
Exhibit A. The Notes are issuable only in fully registered form and in
denominations of at least $1,000,000 (or the remaining outstanding balance
thereof, if less than $1,000,000).
10.2. NOTE REGISTER. The Company shall cause to be kept at its principal
office a register (the "Note Register") for the registration and transfer of the
Notes. The names and addresses of the holders of Notes, the transfer thereof
and the names and addresses of the transferees of the Notes shall be registered
in the Note Register. The Company may deem and treat the person in whose name a
Note is so registered as the holder and owner thereof for all purposes and shall
not be affected by any notice to the contrary, until due presentment of such
Note for registration of transfer as provided in this Section 10.
10.3. ISSUANCE OF NEW NOTES UPON EXCHANGE OR TRANSFER. Upon surrender
for exchange or registration of transfer of any Note at the office of the
Company designated for notices in accordance with Section 11.2, the Company
shall execute and deliver, at its expense, one or more new Notes of any
authorized denominations requested by the holder of the surrendered Note, each
dated the date to which interest has been paid on the Notes so surrendered (or,
if no interest has been paid, the date of such surrendered Note), but in the
same aggregate unpaid principal amount as such surrendered Note, and registered
in the name of such person or persons as shall be designated in writing by such
holder. Every Note surrendered for registration of transfer shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed,
by the holder of such Note or by his attorney duly authorized in writing. The
Company may condition its issuance of any new Note in connection with a transfer
by any Person on compliance with Section 3.2, by Institutional Holders on
compliance with Section 2.4 and on the payment to the Company of a sum
sufficient to cover any stamp tax or other governmental charge imposed in
respect of such transfer.
10.4. REPLACEMENT OF NOTES. Upon receipt of evidence satisfactory to the
Company of the loss, theft, mutilation or destruction of any Note, and in the
case of any such loss, theft or destruction upon delivery of a bond of indemnity
in such form and amount as shall be reasonably satisfactory to the Company or in
the event of such mutilation upon surrender and cancellation of the Note, the
Company, without charge to the holder thereof, will make and deliver a new Note,
of like tenor in lieu of such lost, stolen, destroyed or mutilated Note. If any
such lost, stolen or destroyed Note is owned by you or any other Institutional
Holder, then the affidavit of an authorized officer of such owner setting forth
the fact of such loss, theft or destruction and of its
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ownership of the Note at the time of such loss, theft or destruction shall be
accepted as satisfactory evidence thereof, and no further indemnity shall be
required as a condition to the execution and delivery of a new Note, other than
a written agreement of such owner (in form reasonably satisfactory to the
Company) to indemnify the Company.
10.5. SALE OF NOTES. No holder of a Note may sell a Note to any Person
other than a Person who satisfies the definition of Institutional Holder.
SECTION 11. MISCELLANEOUS
11.1. EXPENSES. Whether or not the purchase of Notes herein contemplated
shall be consummated, the Company agrees to pay directly all expenses in
connection with the preparation, execution and delivery of this Agreement and
the transactions contemplated by this Agreement, including, but not limited to,
out-of-pocket expenses, filing fees of Standard & Poor's Corporation in
connection with obtaining a private placement number, charges and disbursements
of special counsel, photocopying and printing costs and charges for shipping the
Notes, adequately insured, to you at your home office or at such other address
as you may designate, and all similar expenses (including the fees and expenses
of special counsel or the allocated costs and expenses of inside counsel)
relating to any amendments, waivers or consents in connection with this
Agreement or the Notes, including, but not limited to, any such amendments,
waivers or consents resulting from any work-out, renegotiation or restructuring
relating to the performance by the Company of its obligations under this
Agreement and the Notes. The Company also agrees that it will pay and save you
harmless against any and all liability with respect to stamp and other
documentary taxes, if any, which may be payable, or which may be determined to
be payable in connection with the execution and delivery of this Agreement or
the Notes (but not in connection with a transfer or replacement of any Notes),
whether or not any Notes are then outstanding. The obligations of the Company
under this Section 11.1 shall survive the retirement of the Notes.
11.2. NOTICES. Except as otherwise expressly provided herein, all
communications provided for in this Agreement shall be in writing and delivered
or sent by registered or certified mail, return receipt requested, or by
overnight courier (i) if to you, to the address set forth below your name in
Schedule I, or to such other address as you may in writing designate, (ii) if to
any other holder of the Notes, to such address as the holder may designate in
writing to the Company, and (iii) if to the Company, to Helene Curtis, Inc., 325
North Wells Street, Chicago, Illinois 60610-4791, Attention: Treasurer, or to
such other address as the Company may in writing designate. A copy of any
notice to the Company shall also be sent to the attention of the General
Counsel, but failure to deliver such copy shall not impair the validity of
notice given pursuant to the preceding sentence.
11.3. REPRODUCTION OF DOCUMENTS. This Agreement and all documents
relating hereto, including, without limitation, (i) consents, waivers and
modifications which may hereafter be executed, (ii) documents received by you at
the closing of the purchase of the Notes (except the Notes themselves), and
(iii) financial statements, certificates and other information previously or
hereafter furnished to you, may be reproduced by you by any photographic,
photostatic,
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microfilm, micro-card, miniature photographic or other similar process, and you
may destroy any original document so reproduced. The Company agrees and
stipulates that any such reproduction which is legible shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by you in the regular course of business) and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence; provided that nothing herein contained shall
preclude the Company from objecting to the admission of any reproduction on the
basis that such reproduction is not accurate, has been altered or is otherwise
incomplete.
11.4. SUCCESSORS AND ASSIGNS. This Agreement will inure to the benefit
of and be binding upon the parties hereto and their respective successors and
assigns.
11.5. LAW GOVERNING. This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois.
11.6. HEADINGS. The headings of the sections and subsections of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
11.7. COUNTERPARTS. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument, and it shall
not be necessary in making proof of this Agreement to produce or account for
more than one such counterpart or reproduction thereof permitted by
Section 11.3.
11.8. RELIANCE ON AND SURVIVAL OF PROVISIONS. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant to this Agreement, whether or not in connection
with a closing, (i) shall be deemed to have been relied upon by you,
notwithstanding any investigation heretofore or hereafter made by you or on your
behalf and (ii) shall survive the delivery of this Agreement and the Notes.
11.9. INTEGRATION AND SEVERABILITY. This Agreement embodies the entire
agreement and understanding between you and the Company, and supersedes all
prior agreements and understandings relating to the subject matter hereof. In
case any one or more of the provisions contained in this Agreement or in any
Note, or application thereof, shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained in this Agreement and in any Note, and any other application thereof,
shall not in any way be affected or impaired thereby.
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IN WITNESS WHEREOF, the Company and the Purchasers have caused this
Agreement to be executed and delivered by their respective officer or officers
thereunto duly authorized.
HELENE CURTIS, INC.
By: /s/ Mary J. Oyer
----------------------------------------
Title: Vice President and Corporate
Controller
CONNECTICUT MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Lawrence D. Stillman
----------------------------------------
Title: Senior Investment Officer
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
By CIGNA Investments, Inc.
By: /s/ Linda W. Schumann
----------------------------------------
Title: Managing Director
LIFE INSURANCE COMPANY OF NORTH
AMERICA
By CIGNA Investments, Inc.
By: /s/ Linda W. Schumann
----------------------------------------
Title: Managing Director
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
By: /s/ Wayne T. Hoffman
----------------------------------------
Title: V.P., Private Placement Investments
By: /s/ James G. Lowery
----------------------------------------
Title: Assist. V/P., Private Placement
Investments
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ Jeffrey G. Milburn
----------------------------------------
Title: V.P., Corporate Fixed-Income
Securities
-37-
<PAGE>
FINANCIAL HORIZONS LIFE INSURANCE
COMPANY
By: /s/ Jeffrey G. Milburn
----------------------------------------
Title: V.P., Corporate Fixed-Income
Securities
EMPLOYERS LIFE INSURANCE COMPANY OF
WAUSAU
By: /s/ Jeffrey G. Milburn
----------------------------------------
Title: Attorney-In-Fact
-38-
<PAGE>
SCHEDULE I
PRINCIPAL AMOUNT OF NOTES TO BE PURCHASED
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Connecticut Mutual Life Insurance Company Series A Series B
Capital Markets Group -------- --------
10 State House, 12th Floor $5,000,000 $10,000,000
Hartford, Connecticut 06103
Attention: Securities Accounting/Carol Vojtila
Address for all notices of payment and written
confirmations of wire or inter-bank transfers, is
as set forth above, with a copy to:
Connecticut Mutual Life Ins. Co.
c/o The Bank of New York
P.O. Box 19266
Attn: P & I Department
Newark, NJ 07195
All payments are to be by bank wire transfer
of immediately available Federal funds to:
The Bank of New York
ABA# 021000018 BNF: IOC566
Attn: P & I Department
For credit to:
Connecticut Mutual Life Insurance Company
Each wire transfer shall identify such
payment as "Helene Curtis, Inc., 6.11%
Senior Notes due March 15, 2001" or
"Helene Curtis, Inc., 6.50% Senior Notes
due March 15, 2004;" include the private placement
number and provide sufficient information (including
whether payment is of principal, interest and/or
premium) to identify the application of funds.
All other communications (such as annual reports,
statements, waivers, amendments) should be mailed to:
-39-
<PAGE>
Connecticut Mutual Life Insurance Company
140 Garden Street
Hartford, CT 06154
Attn: Private Placements, MS 272
with a copy to:
Connecticut Mutual Life Ins. Co.
c/o The Bank of New York
P.O. Box 19266
Attn: P & I Department
Newark, NJ 07195
Tax ID# 06-0304620
-40-
<PAGE>
SCHEDULE I
PRINCIPAL AMOUNT OF NOTES TO BE PURCHASED
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Nationwide Life Insurance Company Series A Series B
One Nationwide Plaza -------- --------
Columbus, Ohio 43216 $4,000,000 $2,000,000
Attention: Corporate Fixed-Income Securities
Address for all communications, including
notices of payment and written confirmations
of wire or inter-bank transfers, is as set
forth above (notices of payment addressed
"Attention: Corporate Money Management").
All payments are to be by bank wire transfer
of immediately available Federal funds to:
Society National Bank/Cleveland
ABA# 041001039
For credit to:
Nationwide Life Insurance Company
Account Number: 1000-52-9588
Each wire transfer shall identify such
payment as "Helene Curtis, Inc., 6.11%
Senior Notes due March 15, 2001" or
"Helene Curtis, Inc., 6.50% Senior Notes
due March 15, 2004."
Tax ID # 31-4156830
-41-
<PAGE>
SCHEDULE I
PRINCIPAL AMOUNT OF NOTES TO BE PURCHASED
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Financial Horizons Life Insurance Company Series A Series B
One Nationwide Plaza -------- --------
Columbus, Ohio 43215-2220 $1,000,000
Attention: Corporate Fixed-Income Securities
Address for all communications, including
notices of payment and written confirmations
of wire or inter-bank transfers, is as set
forth above (notices of payment addressed
"Attention: Corporate Money Management").
All payments are to be by bank wire transfer
of immediately available Federal funds to:
Society National Bank/Cleveland
ABA# 041001039
For the account of Financial Horizons
Life Insurance Company
DDA Account # 1000-59-6555
Each wire transfer shall identify such
payment as "Helene Curtis, Inc., 6.11%
Senior Notes due March 15, 2001."
Tax ID# 31-1000740
-42-
<PAGE>
SCHEDULE I
PRINCIPAL AMOUNT OF NOTES TO BE PURCHASED
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Employers Life Insurance Company of Wausau Series A Series B
2000 Westwood Avenue -------- --------
Wausau, Wisconsin 54401 $3,000,000
Name of nominee in which Notes are to be issued: Empl & Co.
All payments are to be by bank wire transfer
of immediately available Federal funds to:
Firstar Bank Milwaukee, N.A.
Account of Firstar Trust Company
ABA# 075000022
For Credit to Account 112 950 027
For Further Credit to Account 0557511
Attention: Accounting Department
With notice of each such payment to:
Employers Life Insurance Company of Wausau
2000 Westwood Avenue
Wausau, Wisconsin 54401
Attention: Ms. Lorraine Moran
Each wire transfer shall identify such
payment as "Helene Curtis, Inc., 6.50%
Senior Notes due March 15, 2004."
All other communications (such as annual reports,
statements, waivers, amendments) should be mailed to:
Employers Life Insurance Company of Wausau
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention: Corporate Fixed-Income Securities
Tax ID# 39-1049873
-43-
<PAGE>
SCHEDULE I
PRINCIPAL AMOUNT OF NOTES TO BE PURCHASED
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Connecticut General Life Insurance Company Series A Series B
900 Cottage Grove Road -------- --------
Bloomfield, Connecticut 06002 $4,500,000 $3,200,000
Attention: Private Securities Division S-307
Name of nominee in which Notes are to be issued: CIG & CO.
All payments are to be by bank wire transfer
of immediately available Federal funds to:
FED ABA# 021000021 CHASE
NYC/CTR/BNF=CIGNA PRIVATE
PLACEMENTS/AC=9009001802
OBI=Helene Curtis, Inc. [Private Placement
Number], 6.11% Senior Notes due
March 15, 2001, [the amount
of interest and/or Principal, the
amount of any Prepayment, the
Payable Date, the Originator's
Contact Name and Telephone Number]
or Helene Curtis, Inc. [Private Placement
Number], 6.50% Senior Notes due
March 15, 2004, [the amount of
interest and/or Principal, the
amount of any Prepayment, the
Payable Date, the Originator's
Contact Name and Telephone Number]
Together with a Notice of each Payment to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P.O. Box 1508, Bowling Green Station
New York, NY 10081
ATTN: CIGNA Private Placements
FAX: 212-552-3107/1005
All notices of payment and written confirmations of
-44-
<PAGE>
wire or inter-bank transfers shall be sent to:
CIG & CO.
c/o CIGNA Investmens, Inc.
Hartford, CT 06152*
Attn: Securities Accounting Department S-206
All other communications:
CIG & CO.
c/o CIGNA Investments, Inc.
Hartfort, CT 06152*
Attn: Private Securities Division (S-307)
Tax ID # 13-3574027
* For notices sent by overnight courier, express mail or messenger,
substitute "900 Cottage Grove Road, Bloomfield, CT 06002" in place of
"Hartford, CT 06152."
-45-
<PAGE>
SCHEDULE I
PRINCIPAL AMOUNT OF NOTES TO BE PURCHASED
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Life Insurance Company of North America Series A Series B
900 Cottage Grove Road -------- --------
Bloomfield, Connecticut 06002 $3,000,000 $4,300,000
Attention: Private Securities Division S-307
Name of nominee in which Notes are to be issued: ZANDE & CO.
All payments are to be by bank wire transfer of immediately
available Federal funds to:
Morgan Guaranty Trust Company of New York
ABA# 0210-0023-8
BTR/BNF=CUSTZ/AC-99999024/Z
ATTN; CUST.SVC.
a/c ACCT# 35001
Each wire transfer shall identify such
payment as "Helene Curtis, Inc., 6.11%
Senior Notes due March 15, 2001" or
"Helene Curtis, Inc., 6.50% Senior Notes
due March 15, 2004," providing sufficient
information to identify the source of the
transfer and the amount of interest and/or
principal.
All notices of payment and written confirmations of wire
or inter-bank transfers shall be sent to:
ZANDE & CO.
c/o CIGNA Investments, Inc.
Hartford, CT 06152*
ATTN: Securities Accounting Department (S-206)
-46-
<PAGE>
All other communications:
ZANDE & CO.
c/o CIGNA Investments, Inc.
Hartford, CT 06152*
ATTN: Private Securities Division (S-307)
Tax ID# 13-6020804
-47-
<PAGE>
SCHEDULE I
PRINCIPAL AMOUNT OF NOTES TO BE PURCHASED
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Great-West Life & Annuity Insurance Company Series A Series B
8515 East Orchard Road -------- --------
3rd Floor, Tower 2 $10,000,000
Englewood, Colorado 80111
Attention: U.S. Private Placements
All payments are to be by bank wire transfer
of immediately available Federal funds to:
Norwest Bank Minnesota, N.A.
733 Marquette Avenue
Minneapolis, Minnesota 55479-0047
For credit to:
ABA #091-000-019
NW MPLS/TRUST CLEARING
Account Number 08-40-245
Attn: Sue Skonnard
GWL Account Number 12468800
Each wire transfer shall identify such
payment as "Helene Curtis, Inc., 6.11%
Senior Notes due March 15, 2001" and provide
sufficient information (including allocation of
payment between principal and interest and confirmation
of principal balance) to identify source and application
of funds.
All notices of payment and written confirmations
of wire or inter-bank transfers shall be sent to:
Norwest Bank Minnesota, N.A.
733 Marquette Avenue
Investor's Building, 5th Floor
Minneapolis, Minnesota 55479-0047
Attn: Income Collections
All other communications (such as annual reports,
-48-
<PAGE>
statements, waivers, amendments) should be mailed to:
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
3rd Floor, Tower 2
Englewood, Colorado 80111
Attn: U.S. Private Placements
Tax ID # 84-0467907
-49-
<PAGE>
ANNEX I
Subsidiaries
<TABLE>
<CAPTION>
COUNTRY/STATE *
DOMESTIC SUBSIDIARIES OF INCORPORATION EQUITY OWNED**
<S> <C> <C> <C>
Acme Cosmetic Corporation Illinois 100%
Aristocrat Products Illinois 100%
Attractions, Inc. Delaware 100%
Aura, Inc. Illinois 100%
The Beauty Distribution Company Illinois 100%
California Beauty Supply California 100%
Curtis Chemical Company Illinois 100%
Curtis Laboratories, Inc. A Illinois 100%
Economy Beauty Supply Company A California 100%
FDC, Inc. A California 100%
Finesse, Inc. Illinois 100%
Helene Curtis International, Inc. Delaware 100%
Helene Curtis USA, Inc. Illinois 100%
Henriette Cordler, Inc. Illinois 100%
Innovative Products, Inc. Illinois 100%
Innovative Styling Options, Inc. Illinois 100%
Judy Lee, Inc. Illinois 100%
Loma Holdings Incorporated A Nevada 100%
Naturelle, Inc. Illinois 100%
Prodigy International, Inc. Illinois 100%
Product Insights, Inc. A Illinois 100%
Product Insights of Indiana, Inc. A Indiana 100%
Sequel Products, Inc. Illinois 100%
Specialty Beauty Products, Inc. Illinois 100%
Sue Cory, Inc. Illinois 100%
Viking Products, Inc. Illinois 100%
FOREIGN/CORPORATE
SUBSIDIARIES
Canocorp Pty. Ltd Australia 100%
Hair Care Partners AB Sweden 50%
Helene Curtis Scandinavia AB A Sweden 100%
Helene Curtis Argentina, S.A. Argentina 100%
Helene Curtis Australia Pty. Ltd. A Australia 100%
Helene Curtis Do Brazil S/C Limitada Brazil 100%
Helene Curtis (Europa) B.V. A Holland 100%
Helene Curtis Enterprises, Inc. Japan 100%
Helene Curtis Japan A Japan 100%
Helene Curtis Limited United Kingdom 100%
Helene Curtis International Italia, S.p.A. A Italy 100%
Helene Curtis Ltd/Lte A Canada 100%
Helene Curtis Verwaitungs GmbH Germany 100%
Helene Curtis (New Zealand) Limited A New Zealand 100%
Helene Curtis Mexico S.A. de C.V. A Mexico 100%(1)
King's Men Yugen Kaisha Japan 100%
Woodglow Pty. Ltd. Australia 100%
<FN>
____________________
* Percentage owned by Helene Curtis, Inc. and/or wholly-owned subsidiaries
of Helene Curtis, Inc.
** Shares held by local nationals to comply with foreign corporate law
provisions are ignored.
(1) Currently finalizing incorporation.
A = Active Subsidiary
</TABLE>
-50-
<PAGE>
ANNEX II
Liens
(Dollars in Thousands Except Where Noted)
<TABLE>
<CAPTION>
PROPERTY MATURITY
INDEBTEDNESS INDEBTEDNESS ENCUMBERED AND AMOUNT
INCURRED BY OWED TO (IF ANY) INDEBTEDNESS
- ------------ ------------ ---------- ------------
SECURED DEBT
<S> <C> <C> <C>
Helene Curtis Ltd/ London Life Canadian C$1,664
Ltee Warehouse 7/15/97
Helene Curtis, Inc. City of Chicago 1401 N. Cicero $2,643
Dept. of Economic Distribution 1/30/00
Development Center
(UDAG) (racks and
conveyors)
CAPITAL LEASES
Helene Curtis, Inc. Fidelity Mutual 4501 W. North $ 943
Insurance Co. (portions of 1/1/21
factory)
H..C. Japan, Inc. Sumishoh Lease Computer Y31.7 Million
Company Hardware 4/30/96
H.C. Japan, Inc. Digital Computer Computer Y88.7 Million
Lease Co. Hardware & 2/28/97
Software
H.C. Australia Pty. Portfolio Leasing Computer A$ 267
Ltd. Company Hardware 1/31/97
</TABLE>
NOTE: Fiscal year end at 2/28/94, except for H.C. Japan, Inc. at
12/15/93; H.C. Australia Pty. Ltd. at 12/31/93; and Helene Curtis (New
Zealand) Ltd. at 12/31/93.
-51-
<PAGE>
ANNEX III
Indebtedness
(Dollars in Thousands Except Where Noted)
<TABLE>
<CAPTION>
INDEBTEDNESS INDEBTEDNESS PRINCIPAL INTEREST MATURITY TYPE OF
INCURRED BY OWED TO AMOUNT RATE DATE LOAN
<S> <C> <C> <C> <C> <C>
Helene Curtis Mellon Bank $ 3,000 3.85% 3/1/94 Short Term
Inc.
Helene Curtis Westpac Banking NZ$ 33 9.4% N/A Short Term/
(New Zealand) Corp. Overdraft
Ltd.
Helene Curtis ANZ Bank NZ$ 2,400 6.89% 1/25/94- Short Term
(New Zealand) 2/21/94
Ltd.
Helene Curtis NBD Australia A$ 3,450 5.78% 1/1/94- Short Term
Australia Pty. 3/16/94
Ltd.
Helene Curtis, Bank Group $ 124,000 3.47%- 3/1/94- Bid Notes/
Inc. (Revolver) 5.75% 8/22/94 Libor
Helene Curtis, Nationwide $ 25,000 6.68% 1/31/96 Senior Note
Inc.
Helene Curtis, City of Ind. $ 6,000 2.50% 10/1/06 Industrial
Inc. California Revenue Bond
Helene Curtis, Cgo. Dept. $ 2,643 6.00% 1/30/00 Secured Debt
Inc. Eco. Devel.
Helene Curtis London Life C$ 1,664 11.00% 7/15/97 Secured Debt
Ltd/Ltee.
Helene Curtis, Fidelity $ 943 N/A 1/1/21 Capital Lease
Inc. Mutual Ins. Co.
Helene Curtis Sumishoh Lease Y31.7 N/A 4/30/96 Capital Lease
Japan, Inc. Company Million
Helene Curtis Digital Computer Y88.7 N/A 2/28/97 Capital Lease
Japan, Inc. Lease Co. Million
Helene Curtis Portfolio A$ 267 N.A 1/31/97 Capital Lease
Australia Pty. Leasing Co.
Ltd.
</TABLE>
NOTE: Consolidated Indebtedness Fiscal Year End at 2/28/94, except for H.C.
Japan, Inc. at 12/15/93; H.c. Australia Pty, Ltd. at 12/31/93; and
Helene Curtis (New Zealand) Ltd. at 12/31/93.
-52-
<PAGE>
EXHIBIT A
HELENE CURTIS, INC.
6.11% SENIOR NOTE
Due March 15, 2001
----------------
THIS NOTE MAY BE SUBJECT TO A HOME OFFICE PAYMENT AGREEMENT AND ACCORDINGLY
ANY PROSPECTIVE PURCHASER SHOULD FIRST VERIFY THE UNPAID PRINCIPAL AMOUNT WITH
THE COMPANY.
----------------
Registered Note No. R- March 15, 1994
---
$
----------
HELENE CURTIS, INC., an Illinois corporation (the "Company"), for value
received, promises to pay to ________________________ or registered assigns, on
March 15, 2001, the principal amount of $__________ and to pay interest
(computed on the basis of a 360-day year of twelve 30-day months) on the
principal amount from time to time remaining unpaid hereon at the rate of 6.11%
per annum from the date hereof until maturity, payable on September 15 and
March 15 in each year, commencing September 15, 1994, and at maturity, and to
pay interest on any overdue principal, on any overdue Make-Whole Amount and (to
the extent legally enforceable) on any overdue installment of interest at a per
annum rate equal to the greater of (a) 8.11% or (b) the sum of the prime rate
announced by The First National Bank of Chicago from time to time for United
States domestic loans in United States dollars plus 2%, until paid. Payments of
the principal of, the Make-Whole Amount, if any, and the interest on this Note
shall be made in lawful money of the United States of America in the manner and
at the place provided in Section 2.4 of the Note Agreement hereinafter defined.
This Note is issued under and pursuant to the terms and provisions of the
Note Agreement, dated as of March 1, 1994, entered into by the Company with the
Purchasers named in Schedule I thereto (the "Note Agreement"), and this Note and
any holder hereof are entitled to all of the benefits provided for by such Note
Agreement or referred to therein. Reference is made to the Note Agreement for a
statement of such benefits. As provided in the Note Agreement, upon surrender
of this Note for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder hereof or
its attorney duly authorized in writing, a new Note for a like unpaid principal
amount will be issued to, and registered in the name of, the transferee upon the
payment of the taxes or other governmental charges, if any, that may be imposed
in connection therewith. The Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company shall not be affected by any notice to
the contrary.
-53-
<PAGE>
This Note may be declared due prior to its expressed maturity date and
voluntary prepayments may be made hereon all in the events, on the terms and in
the manner as provided in the Note Agreement. Such prepayments include certain
optional prepayments with a Make-Whole Amount.
Should the indebtedness represented by this Note or any part thereof be
collected in any proceeding provided for in the Note Agreement or be placed in
the hands of attorneys for collection, the Company agrees to pay, in addition to
the principal, Make-Whole Amount, if any, and interest due and payable hereon,
all costs of collecting this Note, including reasonable attorneys' fees and
expenses.
This Note and the Note Agreement are governed by and construed in
accordance with the laws of the State of Illinois.
HELENE CURTIS, INC.
By:
-------------------------------------
Its:
------------------------------------
-54-
<PAGE>
EXHIBIT B
HELENE CURTIS, INC.
6.50% SENIOR NOTE
Due March 15, 2004
----------------
THIS NOTE MAY BE SUBJECT TO A HOME OFFICE PAYMENT AGREEMENT AND ACCORDINGLY
ANY PROSPECTIVE PURCHASER SHOULD FIRST VERIFY THE UNPAID PRINCIPAL AMOUNT WITH
THE COMPANY.
----------------
Registered Note No. R- March 15, 1994
---
$
----------
HELENE CURTIS, INC., an Illinois corporation (the "Company"), for value
received, promises to pay to ___________________________ or registered assigns,
on March 15, 2004, the principal amount of $____________ and to pay interest
(computed on the basis of a 360-day year of twelve 30-day months) on the
principal amount from time to time remaining unpaid hereon at the rate of 6.50%
per annum from the date hereof until maturity, payable on September 15 and
March 15 in each year, commencing September 15, 1994, and at maturity, and to
pay interest on any overdue principal, on any overdue Make-Whole Amount and (to
the extent legally enforceable) on any overdue installment of interest at a per
annum rate equal to the greater of (a) 8.50% or (b) the sum of the prime rate
announced by The First National Bank of Chicago from time to time for United
States domestic loans in United States dollars plus 2%, until paid. Payments of
the principal of, the Make-Whole Amount, if any, and the interest on this Note
shall be made in lawful money of the United States of America in the manner and
at the place provided in Section 2.4 of the Note Agreement hereinafter defined.
This Note is issued under and pursuant to the terms and provisions of the
Note Agreement, dated as of March 1, 1994, entered into by the Company with the
Purchasers named in Schedule I thereto (the "Note Agreement"), and this Note and
any holder hereof are entitled to all of the benefits provided for by such Note
Agreement or referred to therein. Reference is made to the Note Agreement for a
statement of such benefits. As provided in the Note Agreement, upon surrender
of this Note for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder hereof or
its attorney duly authorized in writing, a new Note for a like unpaid principal
amount will be issued to, and registered in the name of, the transferee upon the
payment of the taxes or other governmental charges, if any, that may be imposed
in connection therewith. The Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company shall not be affected by any notice to
the contrary.
-55-
<PAGE>
This Note may be declared due prior to its expressed maturity date and
voluntary prepayments may be made hereon all in the events, on the terms and in
the manner as provided in the Note Agreement. Such prepayments include certain
optional prepayments with a Make-Whole Amount.
Should the indebtedness represented by this Note or any part thereof be
collected in any proceeding provided for in the Note Agreement or be placed in
the hands of attorneys for collection, the Company agrees to pay, in addition to
the principal, Make-Whole Amount, if any, and interest due and payable hereon,
all costs of collecting this Note, including reasonable attorneys' fees and
expenses.
This Note and the Note Agreement are governed by and construed in
accordance with the laws of the State of Illinois.
HELENE CURTIS, INC.
By:
-------------------------------------
Its:
-----------------------------------
-56-
<PAGE>
EXHIBIT C
LEGAL OPINIONS
The opinion of Gardner, Carton & Douglas, special counsel for the
Purchasers, shall be to the effect that:
1. The Company is a corporation organized and validly existing in good
standing under the laws of the State of Illinois, with all requisite corporate
power and authority to enter into the Agreement and to issue and sell the Notes.
2. The Agreement and the Notes have been duly authorized by proper
corporate action on the part of the Company, have been duly executed and
delivered by an authorized officer of the Company, and constitute the legal,
valid and binding agreements of the Company, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application relating to or affecting the enforcement of the rights of
creditors or by equitable principles, regardless of whether enforcement is
sought in a proceeding in equity or at law.
3. Based upon the representations set forth in the Agreement, the
offering, sale and delivery of the Notes do not require the registration of the
Notes under the Securities Act of 1933, as amended, nor the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.
4. The issuance and sale of the Notes and compliance by the Company with
the terms and provisions of the Notes and the Agreement will not conflict with
or result in any breach of any of the provisions of the Certificate of
Incorporation or By-Laws of the Company.
5. No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any governmental body, Federal or
state, is necessary in connection with the execution and delivery of the Note
Agreement or the Notes.
The opinion of Gardner, Carton & Douglas also shall state that the legal opinion
of Roy A. Wentz, Esq., Secretary and General Counsel of Industries and the
Company, delivered to you pursuant to the Agreement, is satisfactory in form and
scope to Gardner, Carton & Douglas, and, in its opinion, the Purchasers and it
are justified in relying thereon and shall cover such other matters relating to
the sale of the Notes as the Purchasers may reasonably request.
-57-
<PAGE>
EXHIBIT D
Helene Curtis, Inc.
325 N. Wells Street
Chicago, Illinois
60610 Roy A. Wentz
Telephone 312-661-0222 Vice President
Facsimile 312-527-5103 Secretary and General Counsel
March 15, 1994
To each of the Purchasers
named in the hereinafter
defined Agreement
Ladies and Gentlemen:
I have acted as counsel to Helene Curtis, Inc., an Illinois
corporation (the "Company"), in connection with the authorization, execution and
delivery of the Note Agreement dated as of March 1, 1994 between the Company and
each of you (the "Agreement") and the issuance and sale to you of the Notes
pursuant to the Agreement. All capitalized terms used and not defined herein
shall have the meanings assigned to them in the Agreement.
In my capacity as counsel, I have made such investigations of fact
and have considered such questions of law as I have deemed necessary for the
purposes of this opinion, which is being delivered to you pursuant to Section
4.2 of the Agreement. Based on the foregoing, it is my opinion that:
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Illinois, and
has all requisite corporate power and authority to own and operate
its properties, to carry on its business as now conducted, and to
enter into and perform the Agreement and to issue and sell the
Notes.
2. The Company is duly qualified or licensed and in good standing
as a foreign corporation authorized to do business in each
jurisdiction where the nature of its business or the character of
its properties makes such qualification or licensing necessary,
except where such failure to be so qualified or licensed,
individually or in the aggregate, would not have a Material Adverse
Effect.
3. Each active Subsidiary listed in Annex I to the Agreement is
duly organized and validly existing under the laws of its
jurisdiction of incorporation or organization, except for certain
Subsidiaries which may not be in good standing in such
jurisdictions, which failures, individually or in the aggregate,
would not have a Material Adverse Effect.
<PAGE>
March 15, 1994
Page 2
4. The Agreement and the Notes have been duly authorized by proper
corporate action on the part of the Company, have been duly
executed and delivered by an authorized officer of the Company and
constitute the legal, valid and binding agreements of the Company,
enforceable in accordance with their terms, except to the extent
that enforcement thereof may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or
similar laws of general application relating to or affecting the
enforcement of the rights of creditors or by equitable principles,
regardless of whether enforcement is sought in a proceeding in
equity or at law.
5. The offering, sale and delivery of the Notes do not require the
registration of the Notes under the Securities Act of 1933, as
amended, or the qualification of an indenture under the Trust
Indenture Act of 1939, as amended.
6. No authorization, approval or consent of any governmental or
regulatory body is necessary or required in connection with the
lawful execution, delivery and performance by the Company of the
Agreement or the lawful offering, issuance and sale by the Company
of the Notes, and no designation, filing, declaration, registration
and/or qualification with any governmental authority is required in
connection with the offer, issuance and sale of the Notes by the
Company.
7. The issuance and sale of the Notes by the Company and
compliance with the terms and provisions of the Notes and the
Agreement by the Company will not conflict with, or result in any
breach or violation of any of the provisions of, or constitute a
default under, or result in the creation or imposition of any Lien
upon the property of Industries, the Company or any Subsidiary
pursuant to the provisions of (i) the Certificate of Incorporation
(or other Charter document) or by-laws of Industries, the Company
or any Subsidiary or any loan agreement under which Industries, the
Company or any Subsidiary is bound, or other agreement or
instrument under which Industries, the Company or any Subsidiary is
a party or by which any of them or their property is bound or may
be affected or (ii) any law (including usury laws) or regulation,
order, writ, injunction or decree of any court, governmental
authority or arbitration board applicable to Industries, the
Company or any Subsidiary.
8. There are no actions, suits or proceedings pending or, to the
best of such counsel's knowledge after due inquiry, threatened
against, or affecting Industries, the Company or any Subsidiary, at
law or in equity or before or by any Federal, state, municipal or
other governmental department, arbitration board, commission,
board, bureau, agency or instrumentality, domestic or foreign,
which are likely to have a Material Adverse Effect.
<PAGE>
March 15, 1994
Page 3
9. Neither the Company nor any Subsidiary is: (i) a "public
utility company" or a "holding company," or an "affiliate" or a
"subsidiary company" of a "holding company," or an "affiliate" of
such a "subsidiary company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended, or (ii) a
"public utility" as defined in the Federal Power Act, as amended,
or (iii) an "investment company" or an "affiliated person" thereof
or an "affiliated person" of any such "affiliated person," as such
terms are defined in the Investment Company Act of 1940, as
amended.
10. The issuance of the Notes and the use of the proceeds of the
sale of the Notes do not violate or conflict with Regulation G, T,
U or X of the Board of Governors of the Federal Reserve System (12
C.F.R., Chapter II).
In rendering the opinion expressed above, I have examined
originals, or copies of originals certified to my satisfaction, of such
agreements, documents, certificates and other statements of government officials
and corporate officers and such other papers and evidence as I have deemed
relevant and necessary as a basis for this opinion. I have assumed the
authenticity of all documents submitted to me as originals, the genuineness of
all signatures (other than of officers of the Company), the legal capacity of
natural persons and the conformity with the original documents of any copies
thereof submitted to me for my examination. This opinion is limited to the laws
of the State of Illinois, The General Corporation Law of the State of Delaware
and the federal laws of the United States.
Very truly yours,
/s/ Roy A. Wentz
Roy A. Wentz
<PAGE>
EXHIBIT 11
HELENE CURTIS INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
for the years ended February 28 or 29, 1994, 1993 and 1992
(Dollar Amounts in Thousands, Except Per-Share Data)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Primary Earnings Per Share:
Net earnings $ 12,942 $ 22,109 $ 19,236
---------- ---------- ----------
Weighted Average Shares
Outstanding:
Common and Class B Shares 9,423,817 9,341,709 9,269,418
Common Stock Equivalents 52,667 164,832 170,075
---------- ---------- ----------
Total 9,476,484 9,506,541 9,439,493
---------- ---------- ----------
Primary Earnings Per Share $ 1.37 $ 2.33 $ 2.04
---------- ---------- ----------
---------- ---------- ----------
Fully Diluted Earnings Per Share:
Net earnings $ 12,942 $ 22,109 $ 19,236
---------- ---------- ----------
Weighted Average Shares
Outstanding:
Common and Class B Shares 9,423,817 9,341,709 9,269,418
Common Stock Equivalents 24,941 232,972 206,268
---------- ---------- ----------
Total 9,448,758 9,574,681 9,475,686
---------- ---------- ----------
Fully Diluted Earnings Per Share $ 1.37 $ 2.31 $ 2.03
---------- ---------- ----------
---------- ---------- ----------
<FN>
Note:
- ----
Fully diluted amounts are not included on the face of the Consolidated Statement
of Earnings because they differ from primary earnings per share by less than 3%.
</TABLE>
<PAGE>
EXHIBIT 13
FINANCIAL TABLE OF CONTENTS
Management's Report 17
Ten-Year Summary 18
Common Stock Data 18
Management's Discussion and Analysis 20
Consolidated Financial Statements 22
Notes to Consolidated Financial Statements 26
Independent Accountants' Report 33
Management Information 34
Corporate and Stockholder Information 35
- -------------------------------------------------------------------------------
<PAGE>
MANAGEMENT'S REPORT Helene Curtis Industries, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
The consolidated financial statements presented in this annual report have been
prepared by the Company in conformity with generally accepted accounting
principles. The management of Helene Curtis Industries, Inc. is responsible for
all information and representations made in this report and for the integrity
and objectivity of the financial statements. The statements include informed
judgements and estimates necessary for their preparation.
Systems of internal accounting controls are designed to be cost-effective
while providing reasonable assurance that assets are safeguarded from
unauthorized use or disposition, that transactions are properly recorded and
that financial statements conform in all material respects with generally
accepted accounting principles. Internal accounting control systems and related
financial policies and procedures are communicated to employees responsible for
accounting and reporting activities. The systems are continually reviewed and
modified, where appropriate.
Internal auditors, using audit programs designed to determine compliance
with financial policies and procedures and the systems of internal accounting
controls, independently monitor the effectiveness of the Company's application
of these control systems. Their findings are reported to operating management
for resolution as needed.
The selection of the Company's independent accountants, Coopers & Lybrand,
has been approved by the Board of Directors. The audit of the Company's
consolidated financial statements by the independent accountants is made in
accordance with generally accepted auditing standards and is coordinated with
the Company's internal audit program.
The Audit Committee, comprised solely of outside directors who are not
employees of the Company, meets regularly with the independent accountants and
with management to review the results and findings of the audit work, the
evaluation of the adequacy of internal controls and the quality of financial
reporting. The internal auditors, as well as all financial and other personnel
of the Company, are available to the Audit Committee and to the independent
accountants. Reports of the internal auditors are, as a matter of regular
procedure, available to the independent accountants and to the Audit Committee.
/s/ Ronald J. Gidwitz /s/ Mary J. Oyer
Ronald J. Gidwitz Mary J. Oyer
President and Chief Executive Officer Vice President and Corporate Controller
17
<PAGE>
TEN-YEAR SUMMARY
- -------------------------------------------------------------------------------
Dollar amounts in thousands, except per-share data
<TABLE>
<CAPTION>
Years ended February 28 or 29, 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONTINUING OPERATIONS
Net sales . . . . . . . . . . . . . . . . $1,187,081 $1,167,819 $1,019,911 $ 867,708 $ 690,863
Gross profit. . . . . . . . . . . . . . . $ 657,414 $ 653,372 $ 565,931 $ 493,293 $ 403,380
Gross profit percent. . . . . . . . . . . 55.4% 55.9% 55.5% 56.9% 58.4%
Earnings before income taxes. . . . . . . $ 27,486 $ 40,492 $ 35,622 $ 16,272 $ 30,196
Earnings. . . . . . . . . . . . . . . . . $ 14,293 $ 22,109 $ 19,236 $ 6,502 $ 17,446
Earnings per share. . . . . . . . . . . . $ 1.51 $ 2.33 $ 2.04 $ .70 $ 1.87
Average number of
shares outstanding . . . . . . . . . . 9,476,484 9,506,541 9,439,493 9,323,897 9,320,787
Dividends paid per share:
Common Stock . . . . . . . . . . . . . $ .24 $ .24 $ .20 $ .20 $ .175
Class B Common Stock . . . . . . . . . $ .19 $ .19 $ .15 $ .15 $ .125
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Total assets. . . . . . . . . . . . . . . $ 612,483 $ 600,085 $ 542,380 $ 479,981 $ 403,476
Working capital . . . . . . . . . . . . . $ 151,195 $ 151,484 $ 146,931 $ 121,189 $ 124,467
Current ratio . . . . . . . . . . . . . . 1.7 1.7 1.7 1.7 2.0
Long-term debt. . . . . . . . . . . . . . $ 160,990 $ 154,438 $ 146,412 $ 126,298 $ 108,545
Stockholders' equity. . . . . . . . . . . $ 199,444 $ 186,200 $ 168,455 $ 150,971 $ 148,826
Stockholders' equity per share. . . . . . $ 21.12 $ 19.85 $ 18.07 $ 16.36 $ 16.21
Return on stockholders' equity. . . . . . 6.7% 12.5% 12.0% 1.1% 12.0%
Capital expenditures. . . . . . . . . . . $ 44,991 $ 35,381 $ 35,583 $ 32,307 $ 49,319
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Per-share data reflects a two-for-one stock split in 1990.
Gross profit and gross profit percent amounts for all years prior to 1994
were restated to reflect the reclassification of certain amounts to conform
to the current year's presentation.
COMMON STOCK DATA
- -------------------------------------------------------------------------------
Helene Curtis Industries, Inc. shares are traded on the New York Stock
Exchange (ticker symbol: HC).
The market price ranges and close, by quarter, for the past two fiscal
years were:
<TABLE>
<CAPTION>
1994 1993
- --------------------------------------------------------------------------------------------------------------------
HIGH LOW CLOSE High Low Close
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First quarter . . . . . . . . . . . . . . 43 3/4 32 1/4 33 3/4 42 1/8 34 1/2 36
Second quarter. . . . . . . . . . . . . . 34 1/8 25 3/4 26 3/4 36 1/8 30 1/4 33
Third quarter . . . . . . . . . . . . . . 27 3/4 25 26 1/2 43 1/2 31 7/8 43 1/2
Fourth quarter. . . . . . . . . . . . . . 29 1/8 24 7/8 25 3/4 47 3/8 41 1/4 43 1/2
</TABLE>
Number of stockholders of record at February 28, 1994: 1,687
18
<PAGE>
<TABLE>
<CAPTION>
TEN-YEAR SUMMARY Helen Curtis Industries, Inc. And Subsidiaries
- ---------------------------------------------------------------------------------------------------------------------
Dollar amounts in thousands, except per-share data
- ----------------------------------------------------------------------------------------------------------------------
Years ended February 28 or 29, 1989 1988 1987 1986 1985
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONTINUING OPERATIONS
Net sales . . . . . . . . . . . . . . . . $ 584,497 $ 458,519 $ 373,927 $ 336,185 $ 306,736
Gross profit. . . . . . . . . . . . . . . $ 352,406 $ 275,068 $ 222,729 $ 198,959 $ 179,199
Gross profit percent. . . . . . . . . . . 60.3% 60.0% 59.6% 59.2% 58.4%
Earnings before income taxes. . . . . . . $ 25,803 $ 19,483 $ 20,212 $ 17,575 $ (1,988)
Earnings. . . . . . . . . . . . . . . . . $ 15,224 $ 10,618 $ 10,157 $ 9,139 $ 1,216
Earnings per share. . . . . . . . . . . . $ 1.81 $ 1.44 $ 1.38 $ 1.25 $ .17
Average number of shares outstanding. . . 8,422,052 7,380,286 7,335,316 7,337,998 7,339,046
Dividends paid per share:
Common Stock. . . . . . . . . . . . . . . $ .15 $ .15 $ .15 -- --
Class B Common Stock. . . . . . . . . . . $ .10 $ .10 $ .10 -- --
- ----------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Total assets. . . . . . . . . . . . . . . $ 325,193 $ 236,662 $ 198,182 $ 175,483 $ 181,096
Working capital . . . . . . . . . . . . . $ 87,283 $ 53,309 $ 48,926 $ 45,972 $ 50,388
Current ratio . . . . . . . . . . . . . . 1.7 1.5 1.6 1.7 1.7
Long-term debt. . . . . . . . . . . . . . $ 50,833 $ 32,403 $ 28,882 $ 29,904 $ 46,518
Stockholders' equity. . . . . . . . . . . $ 131,795 $ 88,827 $ 77,408 $ 67,286 $ 55,490
Stockholders' equity per share. . . . . . $ 14.44 $ 11.98 $ 10.54 $ 9.17 $ 7.56
Return on stockholders' equity. . . . . . 13.1% 13.0% 14.2% 18.0% 5.0%
Capital expenditures. . . . . . . . . . . $ 35,563 $ 15,903 $ 13,182 $ 13,021 $ 14,449
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION
AND ANALYSIS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
OVERVIEW
Fiscal year 1994 was extremely challenging. The largest market in which the
Company competes, U.S. hair care, was down slightly from the prior year. Despite
the challenging conditions, the Company's consolidated net sales were a record
$1.19 billion in 1994, compared to $1.17 billion in 1993, representing an
increase of $19 million, or 2%. Higher sales in international markets and the
U.S. antiperspirant/deodorant market were offset by lower sales in the U.S. hair
care market.
While the Company does not see any dramatic change in the markets in which
it competes, it is well positioned to grow in both sales and profits for fiscal
year 1995 and beyond. While doing this, the Company will continue to build for
the long term taking the strategic initiatives necessary to remain a key
competitor. As in the past, the Company will continue to support existing brands
(through aggressive promotion/advertising programs and relaunches) and will also
create new brands using proprietary product innovations.
The Company's future results may continue to be affected by a number of
uncertainties regarding economic and market conditions; increased levels of
competitive activity; foreign currency exchange rates; and interest rates.
- -------------------------------------------------------------------------------
FISCAL 1994 COMPARED WITH FISCAL 1993
Domestic net sales decreased approximately 5%, compared with the prior year,
largely due to the decline in sales of the Company's hair care brands--
particularly Salon Selectives and Vibrance. This decline can be attributed to a
decrease in the U.S. hair care market, intense competitive activity and a
reduction in retail inventory levels. Sales of the Company's professional hair
care products also declined as a result of lower sales of perm products due to
current style trends and a decrease in salon traffic attributable to an
uncertain economy. These disappointing results were partially offset by
increases in sales of Suave skin lotion and in the antiperspirant/deodorant
category where the Company's two brands, Degree and Suave, recorded sales
increases of almost 9%--significantly higher than the market growth rate.
International net sales increased approximately 17%, compared with the prior
year, largely due to favorable currency translation in Japan where sales
increased 16%. On a local currency basis, sales increased 1% in Japan in spite
of a weak economy and changing distribution environment. Conversely,
significantly higher local currency sales in the United Kingdom and Canada were
mostly offset by the unfavorable impact of currency translation. Sales from the
Company's two newest wholly-owned subsidiaries in Scandinavia and Italy also
contributed to the increase in international sales.
Cost of sales increased $15 million, or 3%, in 1994 mainly due to higher
sales volume. As a percentage of net sales, cost of sales increased to 44.6% in
1994 from 44.1% in 1993, primarily due to changes in product mix. Domestically,
the shift was unfavorable as sales of higher gross profit margin products, such
as Salon Selectives and Vibrance, decreased. Internationally, gross profit
margins improved reflecting the introduction of higher margin products in the
Company's two new subsidiaries and Japan.
Selling, general and administrative expenses increased $17 million, or 3%,
in 1994. As a percentage of net sales, these expenses increased to 52.4% in 1994
from 51.8% in 1993. Selling and marketing expenses were higher in response to
increased competition and difficult market conditions; and support of new
product and subsidiary initiatives in international markets. These increases
were partially offset by significantly lower executive bonus and profit sharing
expenses as a result of the Company's lower than expected earnings performance.
Interest expense remained constant at $8 million in 1994 and 1993 as the
lower cost of borrowing was offset by higher levels of borrowing compared to the
prior year.
The effective tax rate increased to 48% in 1994, compared with 45% in 1993,
principally due to the increase in the statutory U.S. federal tax rate of 1% and
higher effective tax rates for the Company's international operations compared
to the prior year.
Earnings before the cumulative effect of the accounting change discussed
below decreased approximately 35% to $14 million ($1.51 per share) in 1994 from
$22 million ($2.33 per share) in 1993. The decrease was primarily due to a shift
in sales mix toward products with a lower profit margin, higher selling and
marketing expenses (as a percentage of net sales) and a higher effective tax
rate.
As part of adopting Statement of Financial Accounting Standards No. 106
"Employers' Accounting for Postretirement Benefits Other Than Pensions," the
cumulative effect resulted in a one-time, non-cash charge against earnings of
$2.2 million, or $1.4 million ($.14 per share) after taxes. This new standard
requires the accrual of postretirement benefits during the years an employee
provides service to the Company. These expenses were previously recognized on a
cash basis.
20
<PAGE>
Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
RESULTS OF OPERATIONS (continued)
- -------------------------------------------------------------------------------
FISCAL 1993 COMPARED WITH FISCAL 1992
Consolidated net sales in 1993 were $1.17 billion, representing an increase
of $148 million, or 15% over 1992. This increase reflected significant growth
in all of the Company's product categories, domestically and internationally.
Domestic net sales increased approximately 13%, compared with the prior
year. This increase was primarily attributable to the continued strength of the
Suave brand and the introduction of Vibrance - the Company's newest brand of
shampoos and conditioners - launched in December 1991. Substantial percentage
increases in both of the Company's antiperspirant/deodorant brands, Degree and
Suave, also contributed to the increase in net sales. Net sales for the
Company's professional products showed strong percentage increases from the
prior year.
International net sales increased approximately 19%, compared with the prior
year. This increase was led by a 22% (15% in local currency) growth rate in
Japan due to significant sales gains for Salon Selectives brand products. Salon
Selectives also performed well in the United Kingdom and Australia, following
its fiscal 1992 introductions in those markets.
Cost of sales increased $60 million, or 13%, in 1993 as a result of higher
sales volume. As a percentage of net sales, cost of sales decreased to 44.1% in
1993 from 44.5% in 1992, primarily due to the introduction of products with
higher gross profit margins and decreases in certain component costs.
Selling, general and administrative expenses increased $85 million, or 16%,
in 1993. As a percentage of net sales, these expenses increased to 51.8% in 1993
from 51.0% in 1992. The increase as a percentage of net sales was principally
due to the increase in promotion initiatives including the support of new
product launches, as well as both trade customer and consumer activities for
established products.
Interest expense decreased to $8 million in 1993 from $10 million in 1992,
as a result of a lower cost of borrowing due to generally declining interest
rates in the marketplace. The lower cost was partially offset by higher levels
of borrowing during 1993 to support capital spending.
Income taxes increased with earnings while the effective tax rate decreased
to 45% in 1993, compared with 46% in 1992.
Earnings increased approximately 15% to $22 million ($2.33 per share) in
1993 from $19 million ($2.04 per share) in 1992. The increase was primarily due
to higher net sales as reduced interest expense and the lower cost of sales (as
a percentage of net sales) were mostly offset by higher selling, general and
administrative expenses (as a percentage of net sales). New product launches,
such as Vibrance and Suave facial care in the U.S., and a response to increased
competition in Japan resulted in higher advertising and promotional spending in
the current year.
FINANCIAL CONDITION
- -------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents decreased to $3 million at year end, compared with $8
million the prior year. The Company continues to fund capital expenditures
through cash provided from operations and additional borrowings.
Net cash provided by operating activities increased 31% to $38 million in
1994 from $29 million in 1993, as lower earnings in 1994 compared to 1993 were
more than offset by the favorable cash flow impact of changes in operating
assets and liabilities. The decrease in receivables of $12 million was largely
due to the corresponding fourth-quarter decrease in net sales (excluding impact
of exchange rate changes) as compared with the fourth quarter of the prior year.
The decrease in payables and accrued expenses of $16 million was primarily due
to the timing of purchases and payments affecting trade payables and the
reduction of certain compensation related accruals which are based on the
Company's earnings performance. At year end, working capital of $151 million and
the current ratio of 1.7 to 1 were the same as the prior year end.
Capital spending increased to $45 million in 1994 from $35 million in 1993.
The capital expenditures in both years included a large number of moderate
investments primarily to increase the Company's manufacturing and distribution
output and efficiencies. One of the larger capital expenditures in 1994 was the
continued investment in a multi-year project to manufacture
antiperspirant/deodorant sticks in-house which will result in long-term cost
savings in this rapidly growing category. The Company expects to continue this
level of investment to support the business operations.
The total debt to capitalization ratio decreased to 46% at year end,
compared with 47% the prior year as total debt increased slightly to $168
million from $164 million. The effect of the increase in total debt was more
than offset by the increase in stockholders' equity from the current year's net
earnings. In March of 1994, the Company borrowed $50 million under a private
placement agreement whereby senior unsecured notes were issued. These notes
mature in March 2001 and 2004. The funds will be used for general corporate
purposes and to refinance existing debt.
Dividend payments remained constant at $2.2 million in 1994 and 1993. The
Company's dividend policy is to grant a quarterly dividend of six cents per
share to holders of its Common Stock, and one cent per share in the first
quarter and six cents per share in each of the final three quarters of the
fiscal year for holders of its Class B Common Stock. The Company expects to
grant the same quarterly dividends in 1995.
Management believes the funds to be provided from operations and present
credit arrangements will be sufficient to meet the Company's anticipated working
capital needs and capital expenditure requirements.
21
<PAGE>
CONSOLIDATED STATEMENTS
OF EARNINGS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands, except per-share data
<TABLE>
<CAPTION>
Years ended February 28 or 29, 1994 1993 1992
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES. . . . . . . . . . . . . . . . . . . . . . . $1,187,081 $1,167,819 $1,019,911
---------- ---------- ----------
Costs and expenses:
Cost of sales. . . . . . . . . . . . . . . . . . . . 529,667 514,447 453,980
Selling, general and administrative. . . . . . . . . 622,288 605,113 520,049
Interest . . . . . . . . . . . . . . . . . . . . . . 7,640 7,767 10,260
---------- ---------- ----------
1,159,595 1,127,327 984,289
---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE . . . . . 27,486 40,492 35,622
Provision for income taxes . . . . . . . . . . . . . . 13,193 18,383 16,386
---------- ---------- ----------
EARNINGS BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE . . . . . . . . . . . . . . . . 14,293 22,109 19,236
Cumulative effect of accounting change . . . . . . . . (1,351) -- --
---------- ---------- ----------
NET EARNINGS . . . . . . . . . . . . . . . . . . . . . $ 12,942 $ 2,109 $ 19,236
---------- ---------- ----------
---------- ---------- ----------
NET EARNINGS PER SHARE:
Earnings before cumulative effect
of accounting change . . . . . . . . . . . . . . . $ 1.51 $ 2.33 $ 2.04
Cumulative effect of accounting change . . . . . . . (.14) -- --
---------- ---------- ----------
Net earnings . . . . . . . . . . . . . . . . . . . . $ 1.37 $ 2.33 $ 2.04
---------- ---------- ----------
---------- ---------- ----------
Average number of shares outstanding . . . . . . . . . 9,476,484 9,506,541 9,439,493
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
22
<PAGE>
CONSOLIDATED BALANCE SHEETS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands
<TABLE>
<CAPTION>
As of February 28, 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents . . . . . . . . . . . . . . . $ 2,802 $ 7,564
Receivables--net . . . . . . . . . . . . . . . . . 242,514 245,769
Inventories. . . . . . . . . . . . . . . . . . . . 102,344 102,095
Other current assets . . . . . . . . . . . . . . . 20,059 22,406
--------- ---------
Total current assets. . . . . . . . . . . . . . 367,719 377,834
--------- ---------
Property, plant and equipment:
Land . . . . . . . . . . . . . . . . . . . . . . . 16,142 16,129
Buildings and improvements . . . . . . . . . . . . 102,271 90,852
Machinery and equipment. . . . . . . . . . . . . . 128,012 112,715
Construction in progress . . . . . . . . . . . . . 46,246 33,692
--------- ---------
292,671 253,388
Less accumulated depreciation. . . . . . . . . . . 77,402 60,986
--------- ---------
Net property, plant and equipment . . . . . . . 215,269 192,402
--------- ---------
Other assets . . . . . . . . . . . . . . . . . . . . 29,495 29,849
--------- ---------
Total assets . . . . . . . . . . . . . . . . . . . . $ 612,483 $ 600,085
--------- ---------
--------- ---------
- -------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt. . . . . . . . . . . . . . . . . . $ 7,361 $ 9,252
Accounts payable . . . . . . . . . . . . . . . . . 99,566 106,759
Income taxes . . . . . . . . . . . . . . . . . . . 8,401 9,425
Advertising and promotion. . . . . . . . . . . . . 54,843 55,029
Other accrued expenses . . . . . . . . . . . . . . 46,353 45,885
-------- --------
Total current liabilities . . . . . . . . . . . 216,524 226,350
Long-term debt . . . . . . . . . . . . . . . . . . . 160,990 154,438
Deferred income taxes. . . . . . . . . . . . . . . . 15,230 15,720
Accrued retirement and other benefits. . . . . . . . 20,295 17,377
-------- --------
Total liabilities . . . . . . . . . . . . . . . 413,039 413,885
-------- --------
Stockholders' equity:
Common Stock, issued 7,921,471 shares (1994)
and 7,913,771 (1993). . . . . . . . . . . . . . 3,961 3,957
Class B Common Stock, issued 3,072,669 shares (1994)
and 3,080,369 (1993). . . . . . . . . . . . . . 1,536 1,540
Capital in excess of par value . . . . . . . . . . 40,548 39,032
Retained earnings. . . . . . . . . . . . . . . . . 161,045 150,318
Currency translation adjustment. . . . . . . . . . 1,218 543
Treasury shares (Common), 1,114,031 (1994)
and 1,168,673 (1993), at cost . . . . . . . . . (8,864) (9,190)
--------- ---------
Total stockholders' equity. . . . . . . . . . . 199,444 186,200
--------- ---------
Total liabilities and stockholders' equity . . . . . $ 612,483 $ 600,085
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
23
<PAGE>
CONSOLIDATED STATEMENTS
OF CASH FLOWS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands
<TABLE>
<CAPTION>
Years ended February 28 or 29, 1994 1993 1992
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings . . . . . . . . . . . . . . . . . . . . $12,942 $22,109 $19,236
Adjustments to net earnings:
Depreciation and amortization. . . . . . . . . . . 25,717 22,277 18,765
Provision for deferred taxes . . . . . . . . . . . 1,656 2,733 (180)
Cumulative effect of accounting change . . . . . . 1,351 -- --
Other. . . . . . . . . . . . . . . . . . . . . . . 1,256 4,519 2,599
Changes in operating assets and liabilities:
Receivables--net . . . . . . . . . . . . . . . . 11,826 (21,961) (33,029)
Inventories. . . . . . . . . . . . . . . . . . . 1,186 (7,910) 1,731
Payables and accrued expenses. . . . . . . . . . (16,482) 19,407 17,868
Other. . . . . . . . . . . . . . . . . . . . . . (1,865) (12,191) (2,120)
------- ------- -------
Net cash provided by operating activities. . . 37,587 28,983 24,870
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . . (44,991) (35,381) (35,583)
Other . . . . . . . . . . . . . . . . . . . . . . . (815) (6,527) (360)
------- ------- -------
Net cash used by investing activities. . . . . (45,806) (41,908) (35,943)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings . . . . . . . . . . . . . . 18,852 71,343 42,427
Repayment of borrowings. . . . . . . . . . . . . . . (14,199) (57,347) (22,564)
Dividends paid . . . . . . . . . . . . . . . . . . . (2,215) (2,195) (1,790)
Other . . . . . . . . . . . . . . . . . . . . . . . 589 (471) (75)
------- ------- -------
Net cash provided by financing activities. . . 3,027 11,330 17,998
------- ------- -------
Effect of exchange rate changes on cash
and equivalents. . . . . . . . . . . . . . . . . . . 430 (382) 353
------- ------- -------
Increase (decrease) in cash and equivalents. . . . . . (4,762) (1,977) 7,278
Cash and equivalents at beginning of year. . . . . . . 7,564 9,541 2,263
------- ------- -------
Cash and equivalents at end of year. . . . . . . . . . $ 2,802 $ 7,564 $ 9,541
------- ------- -------
------- ------- ------
- ----------------------------------------------------------------------------------------------------
Supplemental cash flow data:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . $ 7,702 $ 8,117 $10,291
Income taxes . . . . . . . . . . . . . . . . . . . $13,035 $14,509 $15,200
- ----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
24
<PAGE>
CONSOLIDATED STATEMENTS
OF STOCKHOLDERS' EQUITY Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands
<TABLE>
<CAPTION>
Class B Treasury Shares
Common Stock Common Stock Capital in Currency (Common)
------------------ ------------------- Excess of Retained Translation ------------------
Shares Amount Shares Amount Par Value Earnings Adjustment Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, FEBRUARY 28, 1991 . . 7,711,766 $3,856 3,282,374 $1,641 $34,919 $112,958 $1,904 1,314,357 $(4,307)
Net earnings 1992 . . . . . . 19,236
Currency translation
adjustment . . . . . . . . 96
Issuance of treasury stock
for various plans. . . . . 1,698 (152,821) 583
Repurchase of
Common Stock . . . . . . . 65,894 (2,339)
Exchange of Class B
Common Stock for
Common Stock . . . . . . . 201,665 101 (201,665) (101)
Cash dividends paid . . . . . (1,790)
--------- ------ --------- ------ ------- -------- ------ --------- -------
BALANCE, FEBRUARY 29, 1992 . . 7,913,431 $3,957 3,080,709 $1,540 $36,617 $130,404 $2,000 1,227,430 $(6,063)
Net earnings 1993 . . . . . . 22,109
Currency translation
adjustment . . . . . . . . (1,457)
Issuance of treasury stock
for various plans. . . . . 2,415 (152,453) 906
Repurchase of
Common Stock . . . . . . . 93,696 (4,033)
Exchange of Class B
Common Stock for
Common Stock . . . . . . . 340 (340)
Cash dividends paid . . . . . (2,195)
--------- ------ --------- ------ ------- -------- ------ --------- -------
BALANCE, FEBRUARY 28, 1993 . . 7,913,771 $3,957 3,080,369 $1,540 $39,032 $150,318 $ 543 1,168,673 $(9,190)
Net earnings 1994 . . . . . . 12,942
Currency translation
adjustment . . . . . . . . 675
Issuance of treasury stock
for various plans. . . . . 1,516 (68,750) 543
Repurchase of
Common Stock . . . . . . . 14,108 (217)
Exchange of Class B
Common Stock for
Common Stock . . . . . . . 7,700 4 (7,700) (4)
Cash dividends paid . . . . . (2,215)
--------- ------ --------- ------ ------- -------- ------ --------- -------
BALANCE, FEBRUARY 28, 1994 . . 7,921,471 $3,961 3,072,669 $1,536 $40,548 $161,045 $1,218 1,114,031 $(8,864)
--------- ------ --------- ------ ------- -------- ------ --------- -------
--------- ------ --------- ------ ------- -------- ------ --------- -------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
25
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
The consolidated financial statements include the accounts of all subsidiaries.
All significant intercompany transactions and balances have been eliminated in
consolidation. Subsidiaries located outside the United States and Canada have
been included on the basis of their years ended December 15 or 31 to facilitate
timely consolidation of financial statements.
Assets and liabilities of foreign operations are translated at year-end
rates of exchange and the income statements are translated at the average rates
of exchange for the year. Gains or losses resulting from translating foreign
currency financial statements are accumulated in a separate component of
stockholders' equity. Gains or losses resulting from foreign currency
transactions are generally included in net earnings and were not material in any
of the years presented.
The Company considers securities with original maturities of three months or
less to be cash equivalents.
Property, plant and equipment is stated at cost. Provision for depreciation
is computed principally using the straight-line method over estimated useful
lives.
Income taxes are provided based on the provisions of Statement of Financial
Accounting Standard (SFAS) No. 109, "Accounting for Income Taxes." Deferred
income taxes are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which temporary differences are estimated to be recovered
or settled. The effect on deferred taxes of a change in tax rates is recognized
in income in the period of enactment.
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
Additional significant accounting policies are presented in the following
notes, as appropriate.
2. RECEIVABLES
- -------------------------------------------------------------------------------
Receivables, principally trade, consist of the following amounts at February 28:
<TABLE>
<CAPTION>
1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Accounts receivable. . . . . . . . . . . . . . . . $187,452 $198,968
Notes receivable . . . . . . . . . . . . . . . . . 60,161 51,247
-------- --------
247,613 250,215
Less allowance for doubtful accounts . . . . . . . 5,099 4,446
-------- --------
$242,514 $245,769
-------- --------
-------- --------
</TABLE>
3. INVENTORIES
- -------------------------------------------------------------------------------
Inventories consist of the following components at February 28:
<TABLE>
<CAPTION>
1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Raw materials. . . . . . . . . . . . . . . . . . . $ 16,252 $ 20,705
Work in process. . . . . . . . . . . . . . . . . . 2,037 1,912
Finished goods . . . . . . . . . . . . . . . . . . 84,055 79,478
-------- --------
$102,344 $102,095
-------- --------
-------- --------
</TABLE>
Year-end inventories, valued using the LIFO method, amounted to $70,552 and
$71,844 for 1994 and 1993, respectively, with remaining inventories valued at
the lower of FIFO cost or market. Approximate current cost exceeded LIFO cost at
year end by $2,893 and $2,562 for 1994 and 1993, respectively.
26
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands
4. LONG-TERM DEBT
- -------------------------------------------------------------------------------
Long-term debt consists of the following at February 28:
<TABLE>
<CAPTION>
1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
$180,000 Unsecured Revolving Credit Facility -
due 1998; 1994 - 4.2%, 1993 - 4.1%. . . . . . . $124,000 $117,000
6.68% Unsecured Notes - due 1996 . . . . . . . . . 25,000 25,000
Industrial Development Revenue Bonds - due 2007;
1994 - 2.5%, 1993 - 2.1%. . . . . . . . . . . . 6,000 6,000
Other. . . . . . . . . . . . . . . . . . . . . . . 6,646 6,966
-------- --------
161,646 154,966
Less current maturities included in
short-term debt . . . . . . . . . . . . . . . . 656 528
-------- --------
$160,990 $154,438
-------- --------
-------- --------
</TABLE>
The $180,000 Unsecured Revolving Credit Facility has an "evergreen"
provision allowing the Company to request a one-year extension on each
anniversary date. The various debt agreements require the Company to maintain
certain financial ratios relating to fixed charge coverage and leverage among
others. The following payments are required during the next five fiscal years:
1995 - $656; 1996 - $25,706; 1997 - $415; 1998 - $124,211 and 1999 - $51.
The Company had unused lines of credit of approximately $76,785 with various
banks at February 28, 1994. The related commitment fees are not material.
The fair values of long-term debt instruments approximate the recorded
values.
Subsequent to the fiscal year end, the Company entered into a $50,000
private placement whereby senior unsecured notes were issued in March of 1994.
The private placement was comprised of $27,500 of 6.11% unsecured notes,
maturing in March of 2001, and $22,500 of 6.50% unsecured notes, maturing in
March of 2004. The funds will provide the Company with additional debt capacity
to be used for general corporate purposes and to refinance existing debt.
5. RETIREMENT PLANS AND OTHER BENEFITS
- -------------------------------------------------------------------------------
RETIREMENT PLANS
The Company provides retirement benefits to substantially all employees
through profit sharing plans and other retirement plans. The profit sharing
plans cover employees in the U.S. and Canada; and, Company contributions are
discretionary. Retirement coverage for employees in the other foreign
subsidiaries is provided through separate plans often based on local statutes.
The provision for retirement benefit costs charged to operations was as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Profit sharing plans . . . . . . . . . . . $ 8,281 $ 9,509 $7,793
Other retirement plans . . . . . . . . . . 2,098 1,287 1,041
------- ------- ------
$10,379 $10,796 $8,834
------- ------- ------
------- ------- ------
</TABLE>
At February 28, 1994, the liability for unfunded retirement benefits for
all plans combined was $11,586.
- -------------------------------------------------------------------------------
POSTRETIREMENT BENEFITS
In fiscal 1994, the Company adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." This new standard requires that
the expected cost of retiree health benefits, such as the Company's payment of
Medicare Part B premiums for retirees, be charged to expense during the years
the employees render service rather than the Company's past practice of
recognizing this cost on a cash basis. As part of adopting the new standard in
the first quarter, the Company recorded a one-time, non-cash charge against
earnings of $2,178 before taxes and $1,351 after taxes or $.14 per share. In
addition to the cumulative effect, the Company recorded $323 in additional
postretirement benefit cost in fiscal 1994 as a result of adopting the new
standard. The unfunded accumulated postretirement benefit obligation as of
February 28, 1994 was $2,424.
- -------------------------------------------------------------------------------
POSTEMPLOYMENT BENEFITS
In November 1992, the Financial Accounting Standards Board issued SFAS No.
112, "Employers' Accounting for Postemployment Benefits." This new standard will
require the accrual of postemployment benefits during the years an employee
provides service to the Company. The current annual expense for these benefits,
presently recognized on a pay-as-you-go basis, is not material. The impact of
the adoption is not expected to have a material effect on the Company's
consolidated financial position. The Company plans to adopt SFAS No. 112 on the
fiscal 1995 required effective date.
27
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands, except per-share data
6. COMMON STOCK AND STOCK PLANS
- -------------------------------------------------------------------------------
At February 28, 1994, 10,000,000 shares of $.50 par value Preferred Stock were
authorized and unissued, and 30,000,000 shares each of $.50 par value Common
Stock and $.50 par value Class B Common Stock were authorized.
The Class B Common Stock is identical to the Common Stock, except that it
has ten-times greater voting power but lesser dividend rights per share than the
Common Stock. While transfer of the Class B Common Stock is restricted, the
Class B Common Stock is convertible at no cost into Common Stock on a
share-for-share basis; under certain conditions, all outstanding shares of the
Class B Common Stock must be converted.
Earnings per share are computed by dividing net earnings by the weighted
average number of shares outstanding during the year. Common stock equivalents,
which are shares issuable on the exercise of stock options net of shares assumed
to have been purchased with the proceeds, have been included in this
computation.
- -------------------------------------------------------------------------------
1979 NON-QUALIFIED STOCK OPTION PLAN
Under the 1979 Non-Qualified Stock Option Plan, which expired in 1989,
options were granted to officers and other key employees of the Company and its
subsidiaries to purchase shares from the Company for $1 each. Acquired shares
are non-transferable and may be resold at any time, but only to the Company, and
must be resold to the Company within 60 days after termination of employment.
The repurchase price to be paid by the Company for the shares is the exercise
price plus the increase in book value per share from the date of exercise of the
option to the date the shares are resold to the Company. The aggregate change in
book value for these shares during the year is accrued and charged to
operations. Shares repurchased under this Plan during fiscal years 1994, 1993
and 1992 were 8,000, zero and 6,000, respectively. Shares outstanding under this
Plan are restricted and excluded from the calculation of the weighted average
number of shares outstanding and stockholders' equity per share. Shares
outstanding under this Plan at February 28 or 29, 1994, 1993 and 1992, were
436,000, 444,000 and 444,000, respectively.
- -------------------------------------------------------------------------------
1992, 1991 AND 1983 STOCK OPTION PLANS
The 1992 Stock Option Plan, which expires in 2002, provides for the grant of
incentive stock options (ISOs), non-qualified stock options (NQSOs) and
restricted stock to officers and other key employees to purchase up to 1,500,000
shares of the Company's Common Stock. This plan supersedes the 1983 and 1991
Stock Option Plans which expired in fiscal 1993.
The exercise price for ISOs must be 100% of the fair market value of the
Company's Common Stock as of the date of grant. The exercise price for NQSOs may
be at a price less than the fair market value. Granted options are exercisable
in four equal annual installments commencing one year after the date of grant
and expire ten years from the date of grant except for options granted under the
1983 Stock Option Plan which expire five years from the date of grant. The
Company has the first right to purchase shares acquired by an optionee. The
following summarizes the activity of these plans for fiscal 1992, 1993 and 1994:
<TABLE>
<CAPTION>
Option Price Available
Per Share Outstanding Exercisable For Grant
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
At February 28, 1991 . . . . . . . . . . $14.00 to $34.25 442,904 250,605 455,024
------- ---------
------- ---------
Granted. . . . . . . . . . . . . . . . . $29.75 250,300
Exercised. . . . . . . . . . . . . . . . $14.00 to $34.25 (145,498)
Cancelled. . . . . . . . . . . . . . . . $18.31 to $34.25 (14,250)
-------
At February 29, 1992 . . . . . . . . . . $18.31 to $34.25 533,456 180,341 218,974
------- ---------
------- ---------
Granted. . . . . . . . . . . . . . . . . $43.63 269,550
Exercised. . . . . . . . . . . . . . . . $18.31 to $34.25 (152,453)
Cancelled. . . . . . . . . . . . . . . . $29.75 to $34.25 (10,700)
-------
At February 28, 1993 . . . . . . . . . . $18.31 to $43.63 639,853 165,690 1,230,450
------- ---------
------- ---------
Exercised. . . . . . . . . . . . . . . . $18.31 to $34.25 (38,750)
Cancelled. . . . . . . . . . . . . . . . $29.75 to $43.63 (34,600)
-------
At February 28, 1994 . . . . . . . . . . $29.75 to $43.63 566,503 273,241 1,249,150
------- ------- ---------
------- ------- ---------
</TABLE>
Under the restricted stock program, Common Stock of the Company may be
granted at no cost to officers and other key employees. Plan participants are
entitled to cash dividends and to vote their respective shares. Restrictions
limit the sale or transfer of these shares during a five-year period whereby the
restrictions lapse on 20% of these shares after each of the five years. In
fiscal 1994, the Company awarded 30,000 shares of stock which had a fair value
at the date of grant of $1,253. Compensation under the plan is charged to
earnings over the five-year restriction period and amounted to $209 in fiscal
1994.
28
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands, except per-share data
6. COMMON STOCK AND STOCK PLANS (continued)
- -------------------------------------------------------------------------------
DIRECTORS' STOCK OPTION PLAN
Under the Directors' Stock Option Plan, which expires in 1998, a total of
120,000 shares are authorized and each non-employee director is entitled to
receive options for 8,000 shares of the Company's Common Stock. Options are
issued at the fair market value of the Company's Common Stock on the date of
grant and have a term of ten years. Granted options vest over a five-year
period. In fiscal years 1994, 1993 and 1992, no options were granted, exercised
or cancelled.
There were 52,800, 41,600 and 30,400 options exercisable at February 28 or
29, 1994, 1993 and 1992, respectively. Options for 64,000 shares were available
for future grants at February 28 or 29, 1994, 1993 and 1992. There were 56,000
options (48,000 at $18.06 and 8,000 at $25.13) outstanding at February 28 or 29,
1994, 1993 and 1992.
- -------------------------------------------------------------------------------
ALL-EMPLOYEE STOCK OPTION PROGRAM
The All-Employee Stock Option Program provided for the one-time grant of
incentive stock options to each employee (who was on the Company's payroll on
March 30, 1992) to purchase 100 shares of the Company's Common Stock. Options
become exercisable on March 30, 1997, and expire on March 30, 2002. The Company
has the first right to purchase shares acquired by an optionee. The one-time
grant included options for 324,100 shares at $35.88. In fiscal 1994 and 1993,
options for 21,600 and 17,700 were cancelled, respectively. There were 284,800
and 306,400 options outstanding at February 28, 1994 and 1993, respectively.
- -------------------------------------------------------------------------------
EMPLOYEE STOCK PURCHASE PLAN
Under the Employee Stock Purchase Plan, which expires in 1998, a total of
400,000 shares are authorized for sale to employees. Weekly payroll deductions
are accumulated for plan participants and applied to the purchase of shares on a
quarterly basis. The price per share is 85% of the lower of the market price at
the beginning or end of the quarterly period. In fiscal 1994, 50,576 shares were
purchased by employees at $21.41 to $35.28 per share. In fiscal 1993, 33,998
shares were purchased by employees at $26.19 to $30.34 per share. In fiscal
1992, 27,569 shares were purchased by employees at $21.30 to $30.76 per share.
29
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands
7. INCOME TAXES
- -------------------------------------------------------------------------------
Earnings before income taxes and cumulative effect of accounting change is
comprised of:
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic . . . . . . . . . . . . . . . . . . $22,771 $28,961 $17,911
Foreign. . . . . . . . . . . . . . . . . . . 4,715 11,531 17,711
------- ------- -------
$27,486 $40,492 $35,622
------- ------- -------
------- ------- -------
</TABLE>
The provision for income taxes is comprised of:
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
Federal . . . . . . . . . . . . . . . . . $ 5,227 $ 6,227 $ 3,790
Foreign, including taxes withheld . . . . 5,293 8,053 11,886
State . . . . . . . . . . . . . . . . . . 1,017 1,370 890
------- ------- -------
Total currently payable . . . . . . . 11,537 15,650 16,566
Deferred . . . . . . . . . . . . . . . . . . 1,656 2,733 (180)
------- ------- -------
$13,193 $18,383 $16,386
------- ------- -------
------- ------- -------
</TABLE>
The provision for income taxes as shown in the financial statements differs
from a provision computed using the statutory rate for the following reasons:
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate . . . . . . . . . . . . . . . 35% 34% 34%
------- ------- -------
------- ------- -------
Tax expense using statutory rate . . . . . . $ 9,620 $13,767 $12,111
Increase in taxes resulting from:
State income taxes net of federal
tax benefit . . . . . . . . . . . . . . 718 767 680
Effect of foreign operations. . . . . . . 2,026 2,601 2,764
Other . . . . . . . . . . . . . . . . . . 829 1,248 831
------- ------- -------
$13,193 $18,383 $16,386
------- ------- -------
------- ------- -------
</TABLE>
Provision has not been made for taxes on $20,065 of undistributed earnings
of foreign subsidiaries as those earnings are considered to be permanently
reinvested in the operations of those subsidiaries. If these earnings were
remitted, the credit for foreign taxes paid would substantially offset the
applicable U.S. income taxes.
The components of deferred tax assets and liabilities are as follows at
February 28:
<TABLE>
<CAPTION>
1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Accrued liabilities. . . . . . . . . . . . . $21,603 $20,383
Capitalized and deferred costs . . . . . . . 6,107 3,473
Discontinued operations. . . . . . . . . . . 375 624
Other . . . . . . . . . . . . . . . . . . . 851 80
------- -------
Total deferred tax assets . . . . . . . . 28,936 24,560
------- -------
Depreciation . . . . . . . . . . . . . . . . 18,778 20,342
Capitalized and deferred costs . . . . . . . 7,803 2,993
Prepaid expenses . . . . . . . . . . . . . . 2,078 516
Other . . . . . . . . . . . . . . . . . . . 63 140
------- -------
Total deferred tax liabilities. . . . . . 28,722 23,991
------- -------
Net deferred tax assets . . . . . . . $ 214 $ 569
------- -------
------- -------
</TABLE>
Deferred tax assets and liabilities are classified in the consolidated
balance sheets as follows at February 28:
<TABLE>
<CAPTION>
1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Other current assets. . . . . . . . . . . $13,384 $14,517
Other assets. . . . . . . . . . . . . . . 2,060 1,772
Liabilities: . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . 15,230 15,720
------- -------
Net deferred tax assets . . . . . . . $ 214 $ 569
------- -------
------- -------
</TABLE>
30
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands, except per-share data
8. SUPPLEMENTAL INFORMATION
- -------------------------------------------------------------------------------
The consolidated statements of earnings include the following which are
classified as part of selling, general and administrative expenses:
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advertising. . . . . . . . . . . . . . . . . $152,309 $147,597 $132,536
Research and development . . . . . . . . . . $ 22,474 $ 21,983 $ 18,681
</TABLE>
9. LEASES
- --------------------------------------------------------------------------------
Rental expense under operating leases (principally for computer equipment,
research facility, office and warehouse space) for the fiscal years 1994, 1993
and 1992 was $15,853, $12,334 and $11,273, respectively. Renewal and purchase
options are available on certain of these leases. Future minimum lease payments
under noncancellable operating leases at February 28, 1994, are as follows:
<TABLE>
<CAPTION>
Fiscal Year
- ------------------------------------------------------------------------------------------
<S> <C>
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,618
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,723
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,081
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,908
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,504
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,491
-------
$66,325
-------
-------
</TABLE>
10. UNAUDITED QUARTERLY FINANCIAL DATA
- -------------------------------------------------------------------------------
The following table provides summarized unaudited quarterly financial data for
1994 and 1993:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
Net sales. . . . . . . . . . . . . . . . . . . . . $243,372 $338,135 $266,918 $338,656
-------- -------- -------- --------
-------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . . . . . . $136,702 $184,821 $146,858 $189,033
-------- -------- -------- --------
-------- -------- -------- --------
Net earnings (loss):
Earnings before cumulative effect
of accounting change. . . . . . . . . . . . $ 834 $ 4,236 $ 2,777 $ 6,446
Cumulative effect of accounting change. . . . . (1,351) -- -- --
-------- -------- -------- --------
$ (517) $ 4,236 $ 2,777 $ 6,446
-------- -------- -------- --------
-------- -------- -------- --------
Per share:
Net earnings (loss):
Earnings before cumulative effect
of accounting change. . . . . . . . . . . . $ .09 $ .44 $ .30 $ .68
Cumulative effect of accounting change. . . . . (.14) 0 0 0
-------- -------- -------- --------
$ (.05) $ .44 $ .30 $ .68
-------- -------- -------- --------
-------- -------- -------- --------
Dividends:
Common Stock. . . . . . . . . . . . . . . . $ .06 $ .06 $ .06 $ .06
-------- -------- -------- --------
-------- -------- -------- --------
Class B Common Stock. . . . . . . . . . . . $ .01 $ .06 $ .06 $ .06
-------- -------- -------- --------
-------- -------- -------- --------
1993
Net sales. . . . . . . . . . . . . . . . . . . . . $245,143 $322,069 $266,450 $334,157
-------- -------- -------- --------
-------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . . . . . . $134,957 $179,115 $149,250 $190,050
-------- -------- -------- --------
-------- -------- -------- --------
Net earnings . . . . . . . . . . . . . . . . . . . $ 2,489 $ 8,201 $ 4,184 $ 7,235
-------- -------- -------- --------
-------- -------- -------- --------
Per share:
Net earnings. . . . . . . . . . . . . . . . . . $ .26 $ .87 $ .44 $ .76
-------- -------- -------- --------
-------- -------- -------- --------
Dividends:
Common Stock. . . . . . . . . . . . . . . . $ .06 $ .06 $ .06 $ .06
-------- -------- -------- --------
-------- -------- -------- --------
Class B Common Stock. . . . . . . . . . . . $ .01 $ .06 $ .06 $ .06
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
31
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands
11. BUSINESS SEGMENTS
- -------------------------------------------------------------------------------
The Company is in the personal care products business, which includes the
development, manufacture and sale of brand-name hair and skin care products, and
antiperspirants and deodorants. The Company markets its products to consumers
through supermarkets, mass merchandisers and drugstores, and to beauty salons
through distributors. The following table provides information about the
Company's continuing operations in different geographic areas:
<TABLE>
<CAPTION>
1994 1993 1992
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
Domestic. . . . . . . . . . . . . . . . . . . . $ 768,870 $ 810,925 $ 719,125
---------- ---------- ----------
Foreign:
Japan. . . . . . . . . . . . . . . . . . . . 249,785 216,179 177,628
Other geographic areas . . . . . . . . . . . 168,426 140,715 123,158
---------- ---------- ----------
Total foreign. . . . . . . . . . . . . . . . 418,211 356,894 300,786
---------- ---------- ----------
Consolidated. . . . . . . . . . . . . . . $1,187,081 $1,167,819 $1,019,911
---------- ---------- ----------
---------- ---------- ----------
Operating profit (loss):
Domestic. . . . . . . . . . . . . . . . . . . . $ 36,626 $ 52,509 $ 51,717
---------- ---------- ----------
Foreign:
Japan. . . . . . . . . . . . . . . . . . . . 10,917 11,249 15,624
Other geographic areas . . . . . . . . . . . 3,708 7,184 (2,852)
---------- ---------- ----------
Total foreign. . . . . . . . . . . . . . . . 14,625 18,433 12,772
---------- ---------- ----------
Consolidated. . . . . . . . . . . . . . . 51,251 70,942 64,489
General corporate expenses . . . . . . . . . . . . (16,125) (22,683) (18,607)
Interest expense . . . . . . . . . . . . . . . . . (7,640) (7,767) (10,260)
---------- ---------- ----------
Earnings before income taxes and cumulative effect
of accounting change. . . . . . . . . . . . . . $ 27,486 $ 40,492 $ 35,622
---------- ---------- ----------
---------- ---------- ----------
Identifiable assets:
Domestic. . . . . . . . . . . . . . . . . . . . $ 391,125 $ 398,677 $ 366,024
---------- ---------- ----------
Foreign:
Japan. . . . . . . . . . . . . . . . . . . . 125,196 113,749 106,253
Other geographic areas . . . . . . . . . . . 66,840 57,960 41,411
---------- ---------- ----------
Total foreign. . . . . . . . . . . . . . . . 192,036 171,709 147,664
---------- ---------- ----------
Corporate . . . . . . . . . . . . . . . . . . . 29,322 29,699 28,692
---------- ---------- ----------
Consolidated. . . . . . . . . . . . . . . $ 612,483 $ 600,085 $ 542,380
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Operating profit represents net sales less operating expenses and is
exclusive of interest, general corporate expenses and income taxes.
Approximately 13%, 11% and 10% of net sales in fiscal 1994, 1993 and 1992,
respectively, were made to one customer. Export sales, which are included in
other geographic areas, and sales between geographic areas were not material in
any of the years presented.
32
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
- -------------------------------------------------------------------------------
To the Stockholders and Directors
Helene Curtis Industries, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Helene Curtis
Industries, Inc. and Subsidiaries as of February 28, 1994 and 1993, and the
related consolidated statements of earnings, stockholders' equity and cash flows
for each of the three years in the period ended February 28, 1994. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Helene Curtis
Industries, Inc. and Subsidiaries as of February 28, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended February 28, 1994, in conformity with generally
accepted accounting principles.
Coopers & Lybrand
Chicago, Illinois
April 4, 1994
33
<PAGE>
EXHIBIT 21
List of Subsidiaries
Company (State of
Incorporation Parent Percentage of Stock
- ------------------- ------------------ -------------------
Helene Curtis, Inc.
(Illinois) Registrant 100%
Helene Curtis, Ltd./LTEE
(Canada) Helene Curtis, Inc. 100%
Helene Curtis (Europa)
B.V. (Holland) Helene Curtis, Inc. 100%
Loma Holdings
Incorporated (Nevada) Helene Curtis, Inc. 100%
Economy Beauty Supply
Company (California) Loma Holdings Incorporated 100%
H.C. Enterprises, Inc.
(Japan) Economy Beauty Supply Company 100%
Helene Curtis Japan, Inc.
(Japan) H.C. Enterprises, Inc. 100%
Helene Curtis Australia Pty.
Ltd. (Australia) Helene Curtis, Inc. 100%
Helene Curtis New Zealand
(New Zealand) Helene Curtis, Inc. 100%
Helene Curtis Scandinavia AB
(Sweden) Helene Curtis, Inc. 100%
Helene Curtis International,
Inc. (Delaware) Helene Curtis, Inc. 100%
Helene Curtis International
Italia, S.p.A. (Italy) Helene Curtis International,
Inc. 100%
Helene Curtis U.S.A., Inc. Helene Curtis, Inc. 100%
(Illinois)
Above listing does not include subsidiaries, which considered in the
aggregate would not constitute a significant subsidiary.
Note: All subsidiaries are included in the consolidated financial statements.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Helene Curtis Industries, Inc. on Form S-8 (File Nos. 33-4837, 33-27695 and
33-26922) of our reports dated April 4, 1994, on our audits of the consolidated
financial statements and financial statement schedules of Helene Curtis
Industries, Inc., as of February 28, 1994 and 1993 and for each of the three
years in the period ended February 28, 1994, which reports are (a) incorporated
by reference in this Annual Report on Form 10-K from the 1994 Annual Report to
Stockholders of Helene Curtis Industries, Inc. on Page 33 therein and
(b) included in this Annual Report on Form 10-K.
BY (SIGNATURE) s/COOPERS & LYBRAND
(NAME AND TITLE) COOPERS & LYBRAND
Chicago, Illinois
DATE May 27, 1994
