UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) October 31, 1995
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PLAYTEX PRODUCTS, INC.
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(Exact Name of Registrant as Specified in Charter)
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Delaware 33-25485-01 51-0312772
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(Date or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
300 Nyala Farms Road, Westport, Connecticut 06880
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (203) 341-4000
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_____________________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
The summary of the agreement described below does not
purport to be complete and is qualified in its entirety by
reference to the agreement, a copy of which has been filed as an
exhibit to this report.
On October 31, 1995 Playtex Products, Inc., a Delaware
corporation ("Playtex"), and BBA Acquisition, Inc., a Delaware
corporation and wholly owned subsidiary of Playtex, purchased all
issued and outstanding common shares, not previously owned by
Playtex, of Banana Boat Holding Corporation ("BBH"), a Delaware
corporation and manufacturer of Banana Boat sun and skin care
products (the "Transaction"). The Transaction was pursuant to an
agreement, and plan of merger dated October 17, 1995.
Playtex has historically realized 42.5% of the operating
profits from the sale of Banana Boat products, in accordance with
the terms of a distribution agreement between BBH and Playtex.
Following the Transaction, Playtex's equity ownership of BBH
increased from 22% to 100% and its interest in the operating
profits from the sale of Banana Boat products increased to 100%.
The net funds expended associated with the Transaction,
included the purchase price of approximately $40.4 million, the
retirement of $27.1 million of BBH's long-term debt, the
assumption of BBH's working capital facility and the payment of
accrued interest and transaction fees of approximately $4.5
million. The Transaction was financed with approximately $34.5
million of existing cash balances and advances on its acquisition
credit facility of $37.5 million.
Thomas H. Lee, a director and material shareholder of
Playtex, was a director of BBH and directly and indirectly
controlled 66.7% of BBH's outstanding common stock.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) (b) The audited financial statements are filed as Exhibit
99.1 to this report.
It is impractical to provide the required unaudited
Banana Boat Holding Corporation financial statements
as of and for the nine month period ended September 30, 1995 and
the required pro forma financial information as of the date of
this filing. The required unaudited financial statements and
the pro forma financial information will be filed as soon as
is practical, but no later than sixty (60) days after
the date of this report.
(c) Exhibits
Exhibit
Number Description
------ -----------
10.1 Agreement and plan of merger by and
among Playtex Products, Inc., BBA
Acquisition, Inc. and Banana Boat Holding
Corporation, dated October 17, 1995.
99.1 Banana Boat Holding Corporation, audited
financial statements, as of and for the
years ended December 31, 1994 and December 25,
1993 (with Independent Auditor's Report thereon)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
PLAYTEX PRODUCTS, INC.
Date: November 14, 1995 By: /s/ Michael F. Goss
--------------------- ---------------
Michael F. Goss
Executive Vice President and
Chief Financial Officer
EXHIBIT 10.1
<PAGE>
============================================================
AGREEMENT AND PLAN OF MERGER
by and among
PLAYTEX PRODUCTS, INC.,
BBA Acquisition, Inc.
and
BANANA BOAT HOLDING CORPORATION
__________________
October 17, 1995
__________________
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<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 THE MERGER . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . 2
1.2 Closing; Effective Time . . . . . . . . . . . 3
1.3 Certificate of Incorporation . . . . . . . . 3
1.4 By-laws . . . . . . . . . . . . . . . . . . . 3
1.5 Directors and Officers . . . . . . . . . . . 3
ARTICLE 2 CONVERSION OF SECURITIES . . . . . . . . . . . 4
2.1 Common Stock . . . . . . . . . . . . . . . . 5
2.2 Treasury Stock and Parent-Owned Stock . . . . 5
2.3 Warrants . . . . . . . . . . . . . . . . . . 5
2.4 Dissenting Shares . . . . . . . . . . . . . . 6
2.5 Merger Sub Common Stock . . . . . . . . . . . 6
2.6 Exchange of Common Stock and Warrants . . . . 6
ARTICLE 3 REPRESENTATIONS AND WARRANTIESOF THE COMPANY . 10
3.1 Corporate Existence and Power . . . . . . . . 10
3.2 Corporate Authorization . . . . . . . . . . . 11
3.3 Governmental Authorization . . . . . . . . . 12
3.4 Non-Contravention . . . . . . . . . . . . . . 13
3.5 Capitalization . . . . . . . . . . . . . . . 13
3.6 Approval of Stockholders . . . . . . . . . . 15
3.7 Brokers or Finders . . . . . . . . . . . . . 15
3.8 Collateral Agreements . . . . . . . . . . . . 15
3.9 Indebtedness . . . . . . . . . . . . . . . . 17
3.10 Resignations of Certain Officers . . . . . . 17
ARTICLE 4 REPRESENTATIONS AND WARRANTIESOF PARENT AND MERGER
SUB . . . . . . . . . . . . . . . . . . . . . . . . 17
4.1 Corporate Existence and Power . . . . . . . . 17
4.2 Corporate Authorization . . . . . . . . . . . 18
4.3 Governmental Authorization . . . . . . . . . 19
4.4 Non-Contravention . . . . . . . . . . . . . . 20
4.5 Available Funds . . . . . . . . . . . . . . . 21
ARTICLE 5 COVENANTS OF THE COMPANY . . . . . . . . . . . 21
5.1 Conduct of the Company . . . . . . . . . . . 21
5.2 Access to Information . . . . . . . . . . . . 22
ARTICLE 6 COVENANTS OF PARENT AND MERGER SUB . . . . . . 23
6.1 Parent Vote of Common Stock . . . . . . . . . 23
6.2 Conduct of Parent and Merger Sub . . . . . . 24
6.3 Repayment of Indebtedness . . . . . . . . . . 24
i
<PAGE>
ARTICLE 7 COVENANTS OF THE COMPANYAND PARENT AND MERGER
SUB . . . . . . . . . . . . . . . . . . . . . . . 24
7.1 Reasonable Efforts . . . . . . . . . . . . . 24
7.2 Public Announcements; Confidentiality . . . . 25
7.3 Expenses . . . . . . . . . . . . . . . . . . 27
7.4 Filing Under HSR Act . . . . . . . . . . . . 28
7.5 Notices of Certain Events . . . . . . . . . . 28
ARTICLE 8 CONDITIONS TO THE CLOSING . . . . . . . . . . 29
8.1 Conditions to the Obligations of Each Party . 29
8.2 Conditions to the Obligations of Parent and
Merger Sub . . . . . . . . . . . . . . . . . 30
8.3 Conditions to the Obligations of the
Company . . . . . . . . . . . . . . . . . . . 34
ARTICLE 9 TERMINATION . . . . . . . . . . . . . . . . . . 36
9.1 Termination . . . . . . . . . . . . . . . . . 36
9.2 Effect of Termination . . . . . . . . . . . . 38
ARTICLE 10 MISCELLANEOUS . . . . . . . . . . . . . . . . 38
10.1 Notices . . . . . . . . . . . . . . . . . . . 38
10.2 Survival of Representations, Warranties and
Covenants . . . . . . . . . . . . . . . . . . 39
10.3 Amendments; No Waivers . . . . . . . . . . . . 39
10.4 Successors and Assigns . . . . . . . . . . . . 40
10.5 Governing Law . . . . . . . . . . . . . . . . 41
10.6 Counterparts . . . . . . . . . . . . . . . . . 41
10.7 Certain Definitions . . . . . . . . . . . . . 41
10.8 Interpretation . . . . . . . . . . . . . . . . 42
10.9 Entire Agreement . . . . . . . . . . . . . . . 42
10.10 No Third Party Beneficiaries . . . . . . . . . 43
ii
<PAGE>
EXHIBITS
Exhibit A(1) - Letter of Transmittal (Shareholder)
Exhibit A(2) - Letter of Transmittal (Warrantholder)
Exhibit B - Shareholder Letter of Consent and
Undertakings
Exhibit C - Warrantholder Letter of Consent and
Undertakings
SCHEDULES
Schedule 1.5 - Directors and Officers of Merger Sub
Schedule 2.1 - Expenses
Schedule 3.1 - Jurisdictions
Schedule 3.5 - Options
Schedule 3.8 - Affiliate Contracts
Schedule 3.9 - Indebtedness
Schedule 3.10 - Officers
Schedule 5.1(c) - Permitted Affiliate Payments
Schedule 5.1(e) - Playtex Directors
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER dated as of
October 17, 1995 (the "Agreement") by and among Playtex
---------
Products, Inc., a Delaware corporation ("Parent"), BBA
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Acquisition, Inc., a Delaware corporation and a wholly-
owned subsidiary of the Parent ("Merger Sub"), and Banana
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Boat Holding Corporation, a Delaware corporation (the
"Company").
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WHEREAS, the respective boards of directors of
Parent, Merger Sub and the Company have approved this
Agreement pursuant to which, among other things, Merger Sub
will be merged with and into the Company (the "Merger") on
------
the terms and subject to the conditions contained herein and
in accordance with the General Corporation Law of the State
of Delaware (the "DGCL"); and
----
WHEREAS, Parent, Merger Sub and the Company desire
to make certain agreements in connection with the Merger and
to prescribe various conditions to the Merger.
NOW THEREFORE, in consideration of the agreements
contained herein, and intending to be legally bound hereby,
the parties hereto agree as follows:
<PAGE>
2
ARTICLE 1
THE MERGER
1.1 The Merger. Upon the terms and subject to
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the conditions of this Agreement, at the Effective Time (as
defined below) and in accordance with the DGCL, Merger Sub
shall be merged with and into the Company, which shall be
the surviving corporation in the Merger (the "Surviving
---------
Corporation"). At the Effective Time, the separate
-----------
existence of the Merger Sub shall cease and the other
effects of the Merger shall be as set forth in the DGCL.
1.2 Closing; Effective Time. The closing of the
-----------------------
Merger (the "Closing") shall take place in New York City at
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the offices of Paul, Weiss, Rifkind, Wharton & Garrison, at
10:00 a.m. New York City time on the first business day
after the date on which each of the conditions set forth in
Article 8 have been satisfied or waived by the party or
parties entitled to the benefit of such conditions, or at
such other place, at such other time or on such other date
as Parent, Merger Sub and the Company may mutually agree.
The date on which the Closing actually occurs is hereinafter
referred to as the "Closing Date." At the Closing, Parent,
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Merger Sub and the Company shall cause a certificate of
merger (the "Certificate of Merger") to be executed and
---------------------
filed with the Secretary of State of the State of Delaware
<PAGE>
3
in accordance with the DGCL. The Merger shall become
effective as of the date and time (the "Effective Time") of
--------------
such filing.
1.3 Certificate of Incorporation. The
----------------------------
certificate of incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall become, from
and after the Effective Time, the certificate of incorpora-
tion of the Surviving Corporation, until thereafter altered,
amended or repealed as provided therein and in accordance
with applicable law.
1.4 By-laws. The by-laws of Merger Sub, as in
-------
effect immediately prior to the Effective Time, shall
become, from and after the Effective Time, the by-laws of
the Surviving Corporation, until thereafter altered, amended
or repealed as provided therein and in accordance with
applicable law.
1.5 Directors and Officers. The directors and
----------------------
officers set forth on Schedule 1.5 hereto shall become, from
and after the Effective Time, the directors and officers of
the Surviving Corporation, until their respective successors
are duly elected or appointed and qualify or their earlier
resignation or removal.
<PAGE>
4
ARTICLE 2
CONVERSION OF SECURITIES
2.1 Common Stock. Each share of common stock,
------------
par value $.01 per share, of the Company (the "Common
------
Stock") issued and outstanding immediately prior to the
-----
Effective Time (other than Dissenting Shares (as defined
below) and Parent Shares (as defined below)) shall, by
virtue of the Merger and without any action on the part of
the holder thereof, be converted into the right to receive
an amount in cash equal to $400.00 less the "Per Share
Expense Amount" (as defined below) (the "Per Share Merger
----------------
Consideration"), payable to the holder thereof, without
-------------
interest thereon, upon surrender of the certificate
representing such share of Common Stock in accordance with
Section 2.6. The "Per Share Expense Amount" shall mean the
quotient of (i) the aggregate amount of the fees and other
charges of the firms listed on Schedule 2.1, which are
incurred in connection with the Merger and which are
submitted to the Parent at least one day prior to the
Effective Time, divided by (ii) the aggregate number of
shares of Common Stock outstanding (other than shares held
by the Parent) and shares issuable upon exercise of the
Warrants and Options (both as hereinafter defined)).
<PAGE>
5
2.2 Treasury Stock and Parent-Owned Stock. Each
-------------------------------------
share of Common Stock held in the Company's treasury
immediately prior to the Effective Time, if any, and each
share of Common Stock then owned by Parent, Merger Sub or
any other Subsidiary (as defined below) of Parent
(collectively, "Parent Shares"), if any, shall, by virtue of
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the Merger, automatically be canceled and retired and cease
to exist and no consideration shall be delivered in exchange
therefor.
2.3 Warrants. Each warrant to purchase Common
--------
Stock (a "Warrant") issued by the Company and outstanding
immediately prior to the Effective Time shall by virtue of
the Merger and without any action on the part of the holder
thereof, be canceled and be converted into the right to
receive an amount in cash equal to $175.00 less the
Per Share Expense Amount for each share of Common Stock for
which such Warrant is exercisable (a "Warrant Share"), (the
"Per Warrant Share Merger Consideration"), payable to the
holder thereof, without interest thereon, upon surrender of
the such Warrant in accordance with Section 2.6.
2.4 Dissenting Shares. Notwithstanding anything
-----------------
in this Agreement to the contrary, each share of Common
Stock that is issued and outstanding immediately prior to
the Effective Time and that is held by a stockholder who has
<PAGE>
6
properly exercised and perfected appraisal rights under
Section 262 of the DGCL (the "Dissenting Shares"), shall not
-----------------
be converted into or exchangeable for the right to receive
the Per Share Merger Consideration, but shall be entitled to
receive such consideration as shall be determined pursuant
to Section 262 of the DGCL; provided, however, that if such
-------- -------
holder shall have failed to perfect or shall have withdrawn
effectively or lost its right to appraisal and payment under
the DGCL, each share of Common Stock of such holder shall
thereupon be deemed to have been converted into and to have
become exchangeable for, as of the Effective Time, the right
to receive the Per Share Merger Consideration, without any
interest thereon, in accordance with Section 2.6, and such
shares shall no longer be Dissenting Shares.
2.5 Merger Sub Common Stock. Each share of
-----------------------
common stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall, by virtue of
the Merger and without any action on the part of the holder
thereof, be converted into one share of common stock of the
Surviving Corporation.
2.6 Exchange of Common Stock and Warrants.
-------------------------------------
2.6.1 On or before the Effective Time, the
Parent shall cause to be deposited in trust with a bank or
trust company designated by Parent (the "Exchange Agent")
--------------
<PAGE>
7
cash in an aggregate amount equal to the sum of (i) the
product of (a) the number of shares of Common Stock issued
and outstanding at the Effective Time (other than Dissenting
Shares and Parent Shares), multiplied by (b) the Per Share
Merger Consideration and, (ii) the product of (a) the number
of Warrant Shares into which Warrants issued and outstanding
at the Effective Time are exercisable, multiplied by (b) the
Per Warrant Share Merger Consideration (such sum of the
amounts described in clauses (i) and (ii) being hereinafter
referred to as the "Exchange Fund"). If any cash deposited
-------------
with the Exchange Agent for purposes of paying the Per Share
Merger Consideration for the Common Stock and the
Per Warrant Share Merger Consideration for the Warrants
pursuant to this Article 2 remains unclaimed following the
expiration of nine months after the Effective Time, such
cash (together with accrued interest) shall be delivered to
the Surviving Corporation by the Exchange Agent and, there-
after, holders of certificates that immediately prior to the
Effective Time represented shares of Common Stock and
holders of the Warrants shall be entitled to look only to
the Surviving Corporation (subject to abandoned property,
escheat or similar laws) as general creditors thereof with
respect to the surrender and exchange of such certificates
and Warrants.
<PAGE>
8
2.6.2 Upon or promptly after the Effective
Time, the Exchange Agent shall deliver to (i) each holder of
record of a certificate or certificates that immediately
prior to the Effective Time represented outstanding shares
of Common Stock that were converted into the right to
receive the Per Share Merger Consideration pursuant to
Section 2.1 (the "Certificates"), and (ii) each holder of a
------------
Warrant, a letter of transmittal in the form of Exhibit A(1)
or Exhibit A(2), respectively and instructions for its use
in effecting the surrender of the Certificates or Warrants
for payment therefor. Upon surrender by a holder of a
Certificate to the Exchange Agent of such Certificate,
together with such letter of transmittal duly executed, the
holder of such Certificate shall be entitled to receive in
exchange therefor, cash in an amount equal to the product of
the number of shares of Common Stock theretofore represented
by such Certificate multiplied by the Per Share Merger
Consideration, which amount shall be paid by the Exchange
Agent out of the Exchange Fund, and such Certificate shall
forthwith be canceled. Upon surrender by a holder of a
Warrant to the Exchange Agent of such Warrant, together with
such letter of transmittal duly executed, the holder of such
Warrant shall be entitled to receive in exchange therefor,
cash in an amount equal to the product of the number of
<PAGE>
9
Warrant Shares into which such Warrant is exercisable
multiplied by the Per Warrant Share Merger Consideration,
which amount shall be paid by the Exchange Agent out of the
Exchange Fund, and such Warrant shall forthwith be canceled.
No interest will be paid or accrued on the cash payable upon
the surrender of the Certificates or Warrants.
If the payment is to be made to an individual, a
partnership, a joint venture, a limited liability company, a
corporation, a trust, an unincorporated organization or any
other entity (each, a "Person") other than the Person in
------
whose name a Certificate or Warrant surrendered is
registered, it shall be a condition of payment that (a) the
Certificate or Warrant so surrendered shall be properly
endorsed or otherwise in proper form for transfer and
(b) the Person requesting such payment or issuance shall pay
any transfer or other taxes required by reason of the
payment or issuance to a Person other than the registered
holder of the Certificate surrendered or establish to the
satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered in
accordance with the provisions of this Section 2.6, each
Certificate and Warrant shall represent for all purposes
whatsoever the right to receive the amount provided by this
Section 2.6.2 without any interest thereon.
<PAGE>
10
2.6.3 After the Effective Time, there shall
be no transfers (i) on the stock transfer books of the
Surviving Corporation of the shares of Common Stock that
were outstanding immediately prior to the Effective Time or
(ii) of the Warrants. If, after the Effective Time,
Certificates or Warrants are presented to the Surviving
Corporation for transfer or for any other reason, they shall
be canceled and exchanged for the amount provided in this
Article 2.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Parent and
Merger Sub that:
3.1 Corporate Existence and Power. Each of the
-----------------------------
Company and Sun Pharmaceuticals Corp., a Delaware
corporation ("Sun"), is a corporation duly incorporated,
---
validly existing and in good standing under the laws of the
State of Delaware, and has all requisite corporate power to
carry on its business as now or currently proposed to be
conducted. Each of the Company and Sun is duly qualified to
do business as a foreign corporation in each jurisdiction
listed on Schedule 3.1, except for those jurisdictions where
the failure to be so qualified would not, individually or in
<PAGE>
11
the aggregate, have a material adverse effect on the
financial condition, business, assets or prospects of the
Company and Sun, taken as a whole (a "Material Adverse
----------------
Effect"). The Company has heretofore delivered to Parent
------
and Merger Sub true and complete copies of the Company's and
Sun's certificate of incorporation (the "Company Charter"
---------------
and the "Sun Charter," respectively) and by-laws (the
-----------
"Company By-laws" and the "Sun By-laws," respectively), each
--------------- -----------
as in effect on the date hereof.
3.2 Corporate Authorization. The Company has all
-----------------------
requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations here-
under and to consummate the Merger and the other trans-
actions contemplated hereby. The execution and delivery of
this Agreement, and the consummation of the transactions
contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of the Company,
and no further corporate action on the part of the Company
or the Company's stockholders (all of whom have executed as
of the date hereof a consent to the Merger and this
Agreement, as required by the DGCL) is necessary to
authorize the execution, delivery and performance by the
Company of this Agreement or the consummation by the Company
of the Merger and the other transactions contemplated
<PAGE>
12
hereby. The Merger and the other transactions contemplated
hereby are not subject to Section 203 of the DGCL. This
Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of
the Company enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insol-
vency, reorganization or similar laws now or hereafter in
effect affecting the enforcement of creditors' rights
generally and to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in
equity).
3.3 Governmental Authorization. The execution,
--------------------------
delivery and performance by the Company of this Agreement
and the consummation by the Company of the Merger and the
other transactions contemplated hereby require no action by
or in respect of, or filing by the Company with, any United
States federal, state or local governmental body, agency,
official or authority ("Governmental Authority") other than:
----------------------
(i) the filing of the Certificate of Merger in accordance
with the DGCL, (ii) compliance with any applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), (iii) compliance
-------
with any other applicable federal or state securities laws
and (iv) such filings or registrations with, or
<PAGE>
13
authorizations, consents or approvals of, Governmental
Authorities, the absence of which would not result in the
divestiture of any assets which are material to the Company
or Sun, materially impair the performance by the Company of
this Agreement or the transactions contemplated hereby or be
reasonably likely to have a Material Adverse Effect.
3.4 Non-Contravention. The execution, delivery
-----------------
and performance by the Company of this Agreement and the
consummation by the Company of the Merger and the other
transactions contemplated hereby do not and will not:
(i) contravene or conflict with the Company Charter or the
Company By-laws, or (ii) violate any order, judgment,
injunction, award or decree of any United States federal or
state court, domestic arbitrator or other Governmental
Authority against, or binding upon, the Company or Sun or
upon the properties or business of the Company or Sun.
3.5 Capitalization. As of the date hereof, the
--------------
authorized capital stock of the Company and Sun consists of
250,000 shares of Common Stock and 3,000 shares of common
stock, par value $.01 per share (the "Sun Common Stock"), of
----------------
Sun, respectively. As of the date hereof, there are
outstanding 100,000 shares of Common Stock and 100 shares of
Sun Common Stock. As of the date hereof, 20,482 shares of
Common Stock were reserved for issuance pursuant to the
<PAGE>
14
Warrants. All outstanding shares of capital stock of the
Company and Sun have been duly authorized and validly issued
and are fully paid, nonassessable and free of preemptive
rights. Except as set forth in the shareholders agreement
referenced on Schedule 3.8 and this Section 3.5 and except
for the options (the "Options") to purchase shares of Common
Stock granted to employees and a distributor all as set
forth on Schedule 3.5 (which shall be cancelled upon the
Merger for the Per Warrant Share Consideration for each such
share to be paid by Parent or Merger Sub), there are no
outstanding (i) shares of capital stock or other securities
of the Company or Sun, (ii) securities of the Company or Sun
convertible into or exchangeable for shares of capital stock
or other securities of the Company or Sun or (iii) options,
rights, subscriptions, warrants, calls, unsatisfied pre-
emptive rights, or other agreements to acquire or otherwise
receive from the Company or Sun, and no obligation, commit-
ment or arrangement of the Company or Sun to issue, transfer
or sell, any capital stock or other securities of, or
securities convertible into or exchangeable for capital
stock or other securities of the Company or Sun (the items
in clauses (i), (ii) and (iii) being referred to collec-
tively as the "Company Securities" or the "Sun Securities,"
------------------ --------------
as the case may be). As of the date hereof and as of the
<PAGE>
15
Closing Date, no Warrants or Options have been exercised.
All outstanding shares of Sun capital stock are owned by the
Company, free and clear of any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind (a
"Lien"), except for the Lien in favor of the indebtedness
listed on Schedule 3.9.
3.6 Approval of Stockholders. The affirmative
------------------------
vote of a majority of the votes that the holders of the
outstanding shares of Common Stock are entitled to cast, in
each case with respect to the adoption and approval of this
Agreement, are the only vote of the holders of any class or
series of the capital stock necessary to approve this Agree-
ment, the Merger and the other transactions contemplated
hereby, and such vote (by means of written consents) has
been cast in favor of this Agreement, the Merger and the
other transactions contemplated hereby.
3.7 Brokers or Finders. No agent, broker,
------------------
investment banker, financial advisor or other Person
retained by or on behalf of the Company or Sun is or will be
entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the
transactions contemplated by this Agreement.
3.8 Collateral Agreements. Holders of at least
---------------------
51% of the Common Stock have duly executed and delivered to
<PAGE>
16
Parent and Merger Sub a letter of consent and undertakings,
dated as of the date hereof, substantially in the form of
Exhibit B hereto (the "Shareholder Letters of Consent and
Undertakings"). Each holder of Warrants has duly executed
and delivered to Parent and Merger Sub a letter of consent
and undertakings, dated as of the date hereof, substantially
in the form of Exhibit C hereto (the "Warrantholder Letter
of Consent and Undertaking"), in which such Warrantholder
and the Company agree to the cancellation of the Warrants on
the terms set forth in this Agreement and to the payment in
full of the principal and accrued interest on all indebted-
ness of the Company and Sun held by such Warrantholder upon
the Merger, without premium or penalty. Schedule 3.8 lists
all contracts or other agreements between the Company or Sun
and any person or entity which is either a holder of Common
Stock (other than the Parent) or an affiliate thereof (the
"3.8 Contracts"); and each of any such person, entity or
affiliate, as the case may be, has duly executed and
delivered to Parent and Merger Sub a letter of cancellation,
dated as of the date hereof, canceling such 3.8 Contracts
upon the Merger; provided, however, that any indemnity
-------- -------
provisions contained in such 3.8 Contracts shall survive
according to the terms of each such 3.8 Contract.
<PAGE>
17
3.9 Indebtedness. The indebtedness listed on
------------
Schedule 3.9 (The "Indebtedness") constitutes all of the
funded indebtedness for borrowed money of the Company and
Sun with principal amounts in excess of $500,000. All such
indebtedness is payable in full upon the occurrence of the
Merger without any premium, make whole payment or penalty of
any kind.
3.10 Resignations of Certain Officers. After
--------------------------------
giving effect to the resignations received as of the date
hereof, there are no officers of the Company or Sun other
than those listed on Schedule 3.10. The officers of the
Company or Sun resigning as of the date hereof have not
entered into any contracts or agreements on behalf of the
Company or Sun, except as have been approved by the Board of
Directors of the respective corporation and are reflected in
the minute books of such Boards.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally
represent and warrant to the Company that:
4.1 Corporate Existence and Power. Each of
-----------------------------
Parent and Merger Sub is a corporation duly incorporated,
validly existing and in good standing under the laws of the
<PAGE>
18
state of its incorporation, and has all requisite corporate
power to carry on its business as now or currently proposed
to be conducted. Each of Parent and Merger Sub is duly
qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified
would not, individually or in the aggregate, have a material
adverse effect on the financial condition, business or
assets of Parent and Merger Sub, taken as a whole (a "Parent
------
Material Adverse Effect").
-----------------------
4.2 Corporate Authorization. Each of Parent and
-----------------------
Merger Sub has all requisite corporate power and authority
to execute and deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contem-
plated hereby have been duly and validly authorized by all
necessary corporate action on the part of each of Parent and
Merger Sub, and no further corporate action on the part of
Parent or Merger Sub is necessary to authorize the
execution, delivery and performance by Parent and Merger Sub
of this Agreement or the consummation by Parent and Merger
<PAGE>
19
Sub of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by each of Parent and
Merger Sub and constitutes the valid and binding obligation
of each of Parent and Merger Sub enforceable against each of
Parent and Merger Sub in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization or
similar laws now or hereafter in effect affecting the
enforcement of creditors' rights generally and to general
principles of equity (regardless of whether enforcement is
sought in a proceeding at law or in equity).
4.3 Governmental Authorization. The execution,
--------------------------
delivery and performance by Parent and Merger Sub of this
Agreement and the consummation by Parent and Merger Sub of
the transactions contemplated hereby require no action by or
in respect of, or filing by the Parent or Merger Sub with,
any Governmental Authority other than: (i) the filing of the
Certificate of Merger in accordance with the DGCL,
(ii) compliance with any applicable requirements of the HSR
Act, (iii) compliance with any applicable federal or state
securities laws and (iv) such filings or registrations with,
or authorizations, consents or approvals of, Governmental
Authorities, the absence of which would not (A) result in
the divestiture of any assets which are material to Parent,
(B) materially impair the performance by Parent or Merger
<PAGE>
20
Sub of this Agreement or the transactions contemplated
hereby or (C) be reasonably likely to have a Parent Material
Adverse Effect.
4.4 Non-Contravention. The execution, delivery
-----------------
and performance by Parent and Merger Sub of this Agreement
and the consummation by Parent and Merger Sub of the
transactions contemplated hereby do not and will not:
(i) contravene or conflict with the certificate of
incorporation (the "Parent Charter") or the by-laws (the
--------------
"Parent By-laws") of Parent or the certificate of
--------------
incorporation or by-laws of Merger Sub, (ii) violate,
conflict with or result in the breach of any of the terms
of, otherwise give any other contracting party the right to
terminate, or constitute (or with notice or lapse of time or
both constitute) a default (by way of substitution, novation
or otherwise) under, any contract or other agreement to
which Parent or Merger Sub is a party or by which any of
their respective assets or properties may be bound or
affected, or (iii) violate any order, judgment, injunction,
award or decree of any United States federal or state court,
domestic arbitrator or other Governmental Authority against,
or binding upon, Parent or Merger Sub or upon the properties
or business of Parent or Merger Sub, except with respect to
clauses (ii) or (iii) of this Section 4.4, for violations,
<PAGE>
21
conflicts, breaches, modifications, termination rights,
defaults or Liens, which, individually or in the aggregate,
would not have a Parent Material Adverse Effect.
4.5 Available Funds. As of the date hereof, the
---------------
Parent has sufficient available borrowing capacity under its
credit facilities to make the Exchange Fund payment and to
repay the Indebtedness, all in accordance with the terms and
conditions of this Agreement.
ARTICLE 5
COVENANTS OF THE COMPANY
The Company agrees that:
5.1 Conduct of the Company. From the date hereof
----------------------
until the Closing, without the written consent of Parent:
(a) the Company shall not, and shall cause
Sun not to, adopt or propose any change in the Company
Charter or the Company By-laws or the Sun Charter or the Sun
By-laws;
(b) the Company shall not, and shall cause Sun
not to, grant or issue any Company Securities or Sun
Securities;
(c) the Company shall not, and shall cause Sun
not to make any payments to or for the benefit of any holder
of Common Stock, any director, officer, partner or share-
<PAGE>
22
holder of any holder of Common Stock, any Affiliate of any
of the foregoing or any Affiliate of the Company or Sun
(except, in all cases, the Parent), except as provided on
Schedule 5.1(c);
(d) without limiting clause (c) above, the
Company shall not declare or grant any dividends or make any
other distributions of any kind to the holders of Common
Stock;
(e) the Company shall not, and shall cause Sun
not to, take any action approved by the Board of Directors
of either the Company or Sun but not approved by the
Directors listed on Schedule 5.1(e);
(f) the Company shall not, and shall cause Sun
not to, take or agree or commit to take any action that
would make any representation and warranty of the Company
hereunder required to be true at and as of the Closing as a
condition to the obligations of Parent or Merger Sub to
consummate the Merger and the other transactions contem-
plated hereby inaccurate in any material respect at the
Closing; and
(g) the Company shall not, and shall cause Sun
not to, agree or commit to do any of the foregoing.
5.2 Access to Information. From the date hereof
---------------------
until the Closing, the Company shall give Parent and Merger
<PAGE>
23
Sub, their respective counsel, financial advisors, auditors
and other authorized representatives reasonable access
during normal business hours to the offices, properties,
books and records of the Company and Sun, shall furnish to
Parent and Merger Sub, their respective counsel, financial
advisors, auditors and other authorized representatives such
financial and operating data and other information as such
Persons may reasonably request to the extent available to
the Company and shall instruct the Company's employees,
counsel and financial advisors to cooperate with Parent and
Merger Sub in their investigation of the businesses of the
Company and Sun; provided, that no investigation pursuant to
--------
this Section 5.2 shall affect any representation or warranty
given by the Company to Parent and Merger Sub hereunder.
All requests for information made pursuant to this Sec-
tion 5.2 shall be directed to the Chief Financial Officer of
the Company or such other persons as may be designated by
him.
ARTICLE 6
COVENANTS OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally agree that:
6.1 Parent Vote of Common Stock. Parent, in its
---------------------------
capacity as a stockholder of the Company, shall vote all
<PAGE>
24
shares of Common Stock held by Parent in favor of this
Agreement, the Merger and the other transactions
contemplated hereby.
6.2 Conduct of Parent and Merger Sub. From the
--------------------------------
date hereof until the Effective Time, Parent and Merger Sub
shall not take or agree or commit to take any action that
would make any representation and warranty of Parent or
Merger Sub hereunder required to be true at and as of the
Closing as a condition to the obligations of Company to
consummate the Merger and the other transactions contem-
plated hereby to be inaccurate in any material respect at
the Closing.
6.3 Repayment of Indebtedness. Concurrent
-------------------------
with the Merger and upon the Effective Time, Parent or
Merger Sub shall make the payment in full of the
Indebtedness, without premium, make whole payment or
penalty.
ARTICLE 7
COVENANTS OF THE COMPANY
AND PARENT AND MERGER SUB
The parties hereto agree that:
7.1 Reasonable Efforts. Subject to the terms and
------------------
conditions of this Agreement, each party will use all
reasonable efforts to take, or cause to be taken, all
<PAGE>
25
actions and to do, or cause to be done, all things neces-
sary, proper or advisable under applicable laws and regula-
tions to consummate the Merger, including, without limita-
tion, all reasonable efforts to oppose any judgments,
decrees or orders of the type referred to in Section 8.1(c).
7.2 Public Announcements; Confidentiality.
-------------------------------------
7.2.1 The Company and Parent and Merger Sub
will consult with each other before issuing any press
release or making any public statement with respect to this
Agreement and the transactions contemplated hereby and will
not issue any such press release or make any such public
statement prior to such consultation unless required by law
and a party has not responded to reasonable efforts to
effect such consultation.
7.2.2 From and after the date hereof, each
of the Company, on the one hand, and Parent and Merger Sub,
on the other hand, shall, and shall use its best efforts to
cause its Affiliates and its and their respective officers,
directors, advisors and agents to keep secret and hold in
strictest confidence any and all documents and information
relating to Parent or Merger Sub and the Company or Sun,
respectively, or such Person's Affiliates, furnished to such
first party (whether before or after the date hereof) in
<PAGE>
26
connection with the transactions contemplated hereunder,
other than the following: (a) information that has become
generally available to the public other than as a result of
a disclosure by such party, its Affiliates or its officers,
directors, advisors and agents, (b) information that becomes
available to such party or officers, directors, advisors or
agents of such party on a nonconfidential basis from a third
party having no obligation of confidentiality to a party to
this Agreement and which has not itself received such
information directly or indirectly in breach of any such
obligation of confidentiality, (c) information that is
required to be disclosed by applicable law, judicial order
or pursuant to any listing agreement with, or the rules or
regulations of, any securities exchange on which securities
of such party of any such Affiliate are listed or traded;
provided, that the party making such disclosure or whose
--------
Affiliates or officers, directors, advisors or agents are
making such disclosure shall notify the other parties hereto
as promptly as practicable (and, if possible, prior to
making such disclosure) and shall use its reasonable efforts
to limit the scope of such disclosure and seek confidential
treatment of the information to be disclosed and (iv)
disclosures made by any party as shall be reasonably
necessary in connection with obtaining any consents required
<PAGE>
27
hereunder.
7.3 Expenses. Whether or not the transactions
--------
contemplated hereby are consummated, (i) the Parent and
Merger Sub shall bear their respective expenses incurred in
connection with the preparation, execution and performance
of this Agreement and the transactions contemplated hereby,
including, without limitation, all fees and expenses of
their respective agents, representatives, counsel and
accountants, (ii) the Company and Sun shall bear their
respective expenses incurred in connection with the
preparation, execution and performance of this Agreement and
the transactions contemplated hereby, including, without
limitation, all fees and expenses of their respective
agents, representatives, counsel and accountants, (iii) upon
consummation of the Merger or in the event that the Merger
is not consummated by reason of the Parent's unavailability
of sufficient funds, the Company shall bear the expenses
included in the computation of the Per Share Expense Amount,
and (iv) each holder of the Common Stock (other than the
Parent), the Warrants or the Options shall bear the expenses
of such holder incurred in connection with the preparation,
execution and performance of this Agreement and the
transactions contemplated hereby, including, without
limitation, all fees and expenses of such holder's agents,
<PAGE>
28
representatives, counsel and accountants.
7.4 Filing Under HSR Act. As soon as
--------------------
practicable, each of Parent and Merger Sub, on the one hand,
and the Company, on the other hand, shall file with the
Federal Trade Commission (the "FTC") and the Antitrust
Division of the Department of Justice (the "Antitrust
Division") a premerger notification form and any supple-
mental information (other than privileged information) which
may be requested in connection therewith pursuant to the HSR
Act, which filings and supplemental information will comply
in all material respects with the requirements of the HSR
Act. Each of Parent and Merger Sub, on the one hand, and
the Company, on the other hand, shall cooperate fully with
the other in connection with the preparation of such
filings.
7.5 Notices of Certain Events. The parties
-------------------------
hereto will notify one another of:
(a) any notice or other communication from any
third party alleging that the consent of such third party is
or may be required in connection with the transactions
contemplated by this Agreement;
(b) any notice or other communication from any
Governmental Authority in connection with the transactions
contemplated by this Agreement; and
<PAGE>
29
(c) any actions, suits, claims, investigations or
proceedings commenced of which such party has received
notice or, to its knowledge, threatened, against the Company
which relate to the consummation of the transactions
contemplated by this Agreement.
ARTICLE 8
CONDITIONS TO THE CLOSING
8.1 Conditions to the Obligations of Each Party.
-------------------------------------------
The obligations of each of the Company, Parent and Merger
Sub to consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the
following conditions (which may be waived in whole or in
part by the party against whom the waiver is to be
effective, unless such a waiver is prohibited by law):
(a) any applicable waiting period under the HSR
Act relating to the transactions contemplated hereby shall
have expired or been terminated;
(b) no provision of any applicable law or
regulation and no judgment, injunction, order or decree of
any court or other Governmental Authority of competent
jurisdiction shall be in effect which prohibits or makes
illegal the consummation of the Merger or the other
transactions contemplated hereby; and
<PAGE>
30
(c) all consents or actions by or in respect of
or filings with any Governmental Authority required to
permit the consummation of the Merger and the other
transactions contemplated hereby shall have been obtained,
taken or made (other than those consents, actions or filings
which, if not obtained, taken or made prior to the Effective
Time would not have a Material Adverse Effect or a Parent
Material Adverse Effect).
8.2 Conditions to the Obligations of Parent and
-------------------------------------------
Merger Sub. The obligation of Parent and Merger Sub to
----------
consummate the Merger and the other transactions
contemplated hereby is subject to the satisfaction of the
following further conditions (which may be waived in whole
or in part by Parent and Merger Sub, unless such a waiver is
prohibited by law):
(a) (i) each of the representations and warranties
of the Company contained in this Agreement shall be true and
correct in all material respects as of the Effective Time as
though made on and as of the Effective Time, except (A) for
changes specifically permitted by this Agreement and
(B) that those representations and warranties which address
matters only as of a particular date shall remain true and
correct as of such date, (ii) the Company shall have
performed or complied in all material respects with all
<PAGE>
31
agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the
Effective Time and (iii) Parent and Merger Sub shall have
received a certificate of the Chief Executive Officer and
Chief Financial Officer of the Company to such effect;
(b) there shall not be in effect any judgment,
decree or order of any court or other Governmental Authority
of competent jurisdiction prohibiting Parent or Merger Sub
at any time after the Closing from exercising all material
rights and privileges pertaining to the Merger or this
Agreement or from conducting the business of the Company or
Sun without material restrictions;
(c) The Company shall have furnished Parent and
Merger Sub with a favorable opinion of Hutchins, Wheeler &
Dittmar, special counsel for the Company, dated the Closing
Date, to the effect that:
(i) Each of the Company and Sun is a
corporation organized, subsisting and in good standing
under the laws of the State of Delaware and has the
requisite corporate power to own its properties and
assets and to carry on its business as now or currently
proposed to be conducted;
(ii) The Company has the requisite
corporate power to execute, deliver and perform its
<PAGE>
32
obligations under this Agreement, and the execution and
delivery by the Company of this Agreement did not, and
the performance by the Company of its obligations
hereunder will not, violate any provision of the
Company Charter or Company By-laws;
(iii) The execution, delivery and
performance by the Company of this Agreement have been
duly authorized by requisite corporate action on the
part of the Company and this Agreement has been duly
executed and delivered by the Company;
(iv) Assuming this Agreement is a valid
and binding agreement of the parties hereto other than
the Company, this Agreement is a valid and binding
agreement of the Company enforceable against the
Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization or
similar laws now or hereafter in effect affecting the
enforcement of creditors' rights generally and to
general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in
equity); and
(v) As of the date hereof, the
authorized capital stock of the Company and Sun
consists of 250,000 shares of Common Stock and
<PAGE>
33
3,000 shares of common stock, par value $.01 per share
(the "Sun Common Stock"), of Sun, respectively. As of
----------------
the date hereof, to the knowledge of such counsel,
there are outstanding 100,000 shares of Common Stock
and 100 shares of Sun Common Stock. As of the date
hereof, 20,482 shares of Common Stock were reserved for
issuance pursuant to the Warrants. All outstanding
shares of capital stock of the Company and Sun have
been duly authorized and validly issued and are
nonassessable. Except as provided under the
Shareholders' Agreement referenced in Schedule 3.8 or
------------
as set forth in Section 3.5 and for the Options to
purchase Common Stock granted as set forth on
Schedule 3.5(A), there are, to the knowledge of such
counsel, no outstanding (i) shares of capital stock of
the Company or Sun, (ii) securities of the Company or
Sun convertible into or exchangeable for shares of
capital stock of the Company or Sun or (iii) options,
rights, subscriptions, warrants, calls, preemptive
rights, or other agreements to acquire or otherwise
receive from the Company or Sun, and no obligation,
commitment or arrangement of the Company or Sun to
issue, transfer or sell, any capital stock of, or
securities convertible into or exchangeable for capital
<PAGE>
34
stock of, the Company or Sun; and
(d) Holders of less than 2% of the outstanding
shares of Common Stock shall have elected to demand
appraisal in accordance with Section 262 of the DGCL with
respect to shares of Common Stock held by such Persons.
8.3 Conditions to the Obligations of the Company.
--------------------------------------------
The obligation of the Company to consummate the Merger and
the other transactions contemplated hereby is subject to the
satisfaction of the following further conditions (which may
be waived in whole or in part by the Company, unless such
waiver is prohibited by law):
(a) (i) Each of the representations and
warranties of each of Parent and Merger Sub contained in
this Agreement shall be true and correct in all material
respects as of the Effective Time as though made on and as
of the Effective Time, except (A) for changes specifically
permitted by this Agreement and (B) that those
representations and warranties which address matters only as
of a particular date shall remain true and correct as of
such date, except in any case described in this clause (i)
for such failures to be true and correct which would not,
individually or in the aggregate, have a Parent Material
Adverse Effect, (ii) Parent shall have performed or complied
in all material respects with all agreements and covenants
<PAGE>
35
required by this Agreement to be performed or complied with
by it on or prior to the Effective Time and (iii) the
Company shall have received a certificate of the Chief
Executive Officer and Chief Financial Officer of Parent to
such effect; and
(b) Parent and Merger Sub shall have
furnished the Company with a favorable opinion or opinions
of Paul, Weiss, Rifkind, Wharton & Garrison, special counsel
for Company, dated the closing Date to the effect that:
(i) Each of Parent and Merger Sub is a
corporation organized, subsisting and in good standing
under the laws of the state of its incorporation;
(ii) Each of Parent and Merger Sub has
the requisite corporate power to execute, deliver and
perform its obligations under this Agreement and the
execution and delivery by Parent and Merger Sub of this
Agreement did not, and the performance by each of
Parent and Merger Sub of its obligations under this
Agreement will not, violate any provision of the Parent
Charter or Parent By-laws or the certificate of
incorporation or by-laws of Merger Sub;
(iii) The execution, delivery and
performance by each of Parent and Merger Sub of this
Agreement have been duly authorized by all requisite
<PAGE>
36
corporate action on the part of Parent and Merger Sub
and this Agreement has been duly executed and delivered
by each of Parent and Merger Sub; and
(iv) Assuming this Agreement is a valid
and binding agreement on each party hereto other than
Parent and Merger Sub, this Agreement is a valid and
binding agreement of each of Parent and Merger Sub
enforceable against each of Parent and Merger Sub in
accordance with its respective terms, subject to
applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect
affecting the enforcement of creditors' rights
generally and to general principles of equity
(regardless of whether enforcement is sought in a
proceeding at law or in equity).
ARTICLE 9
TERMINATION
9.1 Termination. This Agreement may be
-----------
terminated at any time prior to the Closing (notwithstanding
any approval of the transactions contemplated hereby by the
stockholders of the Company or Merger Sub):
(a) by mutual written consent of the
Company, Parent and Merger Sub;
<PAGE>
37
(b) by the Company, on the one hand, or
Parent and Merger Sub, on the other hand, if the Closing
shall not have occurred on or before November 30, 1995;
provided, however, that the right to terminate this
-------- -------
Agreement under this clause (b) shall not be available to
any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure
of the Closing to occur on or before such date;
(c) by Parent and Merger Sub if there has
been a material breach of any representation, warranty or
material covenant or agreement of the Company which is
incurable, or which is not cured on or prior to November 30,
1995, and which would permit Parent and Merger Sub, pursuant
to Section 8.2, not to consummate the Merger and the other
transactions contemplated hereby; and/or
(d) by the Company if there has been a
material breach of any representation, warranty, or material
covenant or agreement of Parent or Merger Sub contained in
this Agreement, which breach is incurable or has not been
cured on or prior to November 30, 1995, and which would
permit the Company, pursuant to Section 8.3, not to
consummate the Merger and the other transactions
contemplated hereby.
<PAGE>
38
9.2 Effect of Termination. Upon termination,
---------------------
this Agreement shall become void and of no effect with no
liability on the part of any party hereto, except (i) to the
extent such termination results from the breach by a party
hereto of any of its representations, warranties, covenants
or agreements set forth in this Agreement, and (ii) that the
representations, warranties, covenants and agreements
contained in Sections 7.2 and 7.3 and this Section 9.2 shall
survive the termination hereof.
ARTICLE 10
MISCELLANEOUS
10.1 Notices. All notices, requests and other
-------
communications to any party hereunder shall be in writing
and shall be given (and shall be deemed to have been given
upon receipt) if delivered in person or sent by facsimile,
telegram, telex, by registered or certified mail (postage
prepaid, return receipt requested) or by reputable overnight
courier to the respective parties at the following addresses
(or at such other address for a party as shall be specified
in a notice given in accordance with this Section 10.1):
<PAGE>
39
if to Parent or Merger Sub, to:
Playtex Products, Inc.
300 Nyala Farms Road
Westport, Connecticut 06880
Attention: Michael R. Gallagher
Michael F. Goss
Facsimile: (203) 341-4080
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Robert M. Hirsh, Esq.
Facsimile: (212) 757-3990
if to the Company, to:
Banana Boat Holding Corporation
c/of Thomas H. Lee Company
75 State Street
Boston, MA 02109
Attention: Thomas M. Hagerty
Facsimile: (617) 227-3314
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attention: Harry A. Hanson, Esq.
Facsimile: (617) 951-1295
10.2 Survival of Representations, Warranties and
-------------------------------------------
Covenants. None of the representations, warranties,
---------
covenants or agreements contained in this Agreement shall
survive the Effective Time hereunder.
10.3 Amendments; No Waivers.
----------------------
<PAGE>
40
10.3.1 Any provision of this Agreement may
be amended or waived prior to the Closing if, and only if,
such amendment or waiver is in writing and signed, in the
case of an amendment, by the Company, Parent and Merger Sub
or in the case of a waiver, by the party against whom the
waiver is to be effective; provided, that after the
--------
authorization and approval of this Agreement, the Merger and
the other transactions contemplated hereby by the
stockholders of the Company, no such amendment or waiver
shall alter or change any term of this Agreement without the
approval of the stockholders of the Company if such
alteration or change would materially adversely affect the
stockholders of the Company.
10.3.2 No failure or delay by any party in
exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies
provided by law.
10.4 Successors and Assigns. The provisions of
----------------------
this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective
<PAGE>
41
successors and permitted assigns; provided, that the
--------
Company, on the one hand, and Parent or Merger Sub, on the
other hand, may not assign, delegate or otherwise transfer
any of its rights or obligations under this Agreement
without the consent of Parent and Merger Sub or the Company,
respectively.
10.5 Governing Law. Except to the extent that
-------------
Delaware law is mandatorily applicable to the Merger and the
rights of the stockholders of the Company, Parent or Merger
Sub, this Agreement shall be construed in accordance with
and governed by the law of the State of New York applicable
to agreements made and to be performed entirely within such
State, regardless of the laws that might govern under
applicable principles of conflicts of law.
10.6 Counterparts. This Agreement may be signed
------------
in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
10.7 Certain Definitions.
-------------------
10.7.1 For purposes of this Agreement, the
term "Affiliate" shall mean, with respect to any Person, any
---------
other Person controlling, controlled by or under direct or
indirect common control with such Person (for the purposes
of this definition "control," when used with respect to any
-------
<PAGE>
42
specified Person, shall mean the power to direct the
management and policies of such Person, directly or
indirectly, whether through ownership of voting securities,
by contract or otherwise; and the terms "controlling" and
-----------
"controlled" shall have meanings correlative to the
----------
foregoing).
10.7.2 For purposes of this Agreement, the
term "Subsidiary" means, with respect to any Person, (a) any
----------
corporation or other entity of which a majority of the
capital stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors
or other persons performing similar functions are at the
time owned by such Person, or (b) any partnership or joint
venture at least a majority of the equity ownership of which
is directly or indirectly owned by such Person, whether in
the form of membership, general, special or limited
partnership interests or otherwise.
10.8 Interpretation. The article and section
--------------
headings contained in this Agreement are solely for the
purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or
interpretation of this Agreement.
10.9 Entire Agreement. This Agreement (including
----------------
the letters, exhibits, documents or instruments referred to
<PAGE>
43
herein) embodies the entire agreement and understanding of
the parties hereto in respect of the subject matter hereof
and thereof and supersede all prior agreements and
understandings, both written and oral, among the parties, or
between any of them, with respect to the subject matter
hereof.
10.10 No Third Party Beneficiaries. This
----------------------------
Agreement is not intended to, and does not, create any
rights or benefits of any party other than the parties
hereto.
<PAGE>
44
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their respective
authorized officers as of the date and year first above
written.
PLAYTEX PRODUCTS, INC.
By: /s/Michael R. Gallager
------------------------------
Name: Michael R. Gallager
Title: Chief Executive Officer
BBA ACQUISITION, INC.
By: /s/Michael F. Goss
------------------------------
Name: Michael F. Goss
Title: Vice President
BANANA BOAT HOLDING CORPORATION
By: /s/Max R. Recone
------------------------------
Name: Max R. Recone
Title: President and Chief
Executive Officer
<PAGE>
SCHEDULE 1.5
------------
DIRECTORS AND OFFICERS OF MERGER SUB
------------------------------------
DIRECTORS
---------
Michael F. Goss
Douglas D. Wheat
Max R. Recone
OFFICERS
--------
Max R. Recone President and Chief Executive Officer
Michael F. Goss Vice President
Glenn A. Forbes Treasurer and Chief Financial Officer
William B. Stammer Secretary
<PAGE>
SCHEDULE 2.1
------------
EXPENSES
--------
Hutchins, Wheeler & Dittmar
Tucker Anthony Incorporated
<PAGE>
SCHEDULE 3.1
FOREIGN QUALIFICATIONS
----------------------
Banana Boat Holding Corporation
-------------------------------
None.
Sun Pharmaceuticals Corp.
-------------------------
State of Qualification Date of Qualification
---------------------- ---------------------
Connecticut May 7, 1993
District of Columbia May 7, 1993
Florida December 15, 1992
Illinois November 23, 1993
Maryland May 7, 1993
Massachusetts May 6, 1993
New Jersey May 7, 1993
New York May 7, 1993
Oklahoma November 18, 1993
Pennsylvania May 6, 1993
Rhode Island May 24, 1993
Texas November 18, 1993
Virginia May 11, 1993
Washington November 18, 1993
6597L
<PAGE>
SCHEDULE 3.5
------------
OPTIONS
-------
Holder Number of Underlying Shares
------ ---------------------------
Leslie G. Anstey 125
Michael Buege 125
Laurence E. Green 50
Kenneth H. Meeker 500
Armand J. Loiselle 250
Robert J. Burkland 100
David D. North 500
Danny E. Rumph 250
William B. Stammer 200
Max Recone 500
Glenn A. Forbes 200
----
Total 2800
<PAGE>
SCHEDULE 3.8
------------
AFFILIATE CONTRACTS
-------------------
1. Management Agreement, dated as of November 16, 1992,
among the Thomas H. Lee Company, Banana Boat Holding
Corporation and Banana Boat Acquisition Corporation.
2. Equity Investor Stock Subscription Agreement, dated as
of November 16, 1992, by and among Banana Boat Holding
Corporation and each of the Equity Investors named
therein.*/
-
3. Shareholders' Agreement, dated as of November 16, 1992,
among Banana Boat Holding Corporation and its
shareholders named therein, as amended.*/
-
4. Letter Agreement, dated as of December 3, 1992, by and
between Banana Boat Acquisition Corp. and Thomas H. Lee
Equity Partners, L.P.
5. Credit Agreement, dated as of December 17, 1992 (and
ancillary security and other related agreements) among
Sun Pharmaceuticals Corp., Banque Nationale de Paris as
Agent, and the Banks named therein.*/
-
6. Warrant Agreement, dated as of December 17, 1992,
between Banana Boat Holding Corporation and Banque
Nationale de Paris, as amended and restated as of March
25, 1993.*/
-
7. Holdings Guaranty, dated as of December 17, 1992 made
by Banana Boat Holding Corporation in favor of the
Lenders party to the Credit Agreement and Banque
Nationale de Paris as Agent.*/
-
8. Holdings Pledge Agreement, dated as of December 17,
1992, between Banana Boat Holding Corporation and
Banque Nationale de Paris as Agent.*/
-
9. Subordinated Note Purchase Agreement, dated as of
December 3, 1992, among Banana Boat Acquisition
Corporation, ML-Lee Acquisition Fund II, L.P. and ML-
Lee Acquisition Fund (Retirement Accounts) II L.P., as
amended.*/
-
*/ Parent and Merger Sub have waived the requirement
-
contained in Section 3.8 of the Agreement that they receive
as of October 17, 1995 a letter cancelling this agreement.
<PAGE>
10. Warrant Agreement, dated as of December 3, 1992, among
Banana Boat Holding Corporation, ML-Lee Acquisition
Fund II, L.P. and ML-Lee Acquisition Fund (Retirement
Accounts) II L.P.*/
-
11. Subordinated Note Guaranty, dated as of December 3,
1992, among Banana Boat Holding Corporation, ML-Lee
Acquisition Fund II, L.P. and ML-Lee Acquisition Fund
(Retirement Accounts) II L.P., as amended.*/
-
*/ Parent and Merger Sub have waived the requirement
-
contained in Section 3.8 of the Agreement that they receive
as of October 17, 1995 a letter cancelling this agreement.
<PAGE>
SCHEDULE 3.9
INDEBTEDNESS
------------
12. All obligations outstanding under or in respect of that
certain Subordinated Note Purchase Agreement (including,
without limitation the 12.5% Senior Subordinated Notes),
dated as of December 3, 1992, among Banana Boat
Acquisition Corp., ML-Lee Acquisition Fund II, L.P. and
ML-Lee Acquisition Fund (Retirement Accounts) II L.P.,
as amended.
13. All obligations outstanding under or in respect of that
certain Subordinated Note guaranty, dated as of December
3, 1992, among Banana Boat Holding Corporation, ML-Lee
Acquisition Fund II, L.P. and ML-Lee Acquisition Fund
(Retirement Accounts) II, L.P., as amended.
14. All obligations outstanding under or in respect of that
certain Credit Agreement, dated as of December 17, 1992,
(including without limitation the Term Notes, the
Working Capital Notes and other ancillary security and
related agreements) among Banana Boat Acquisition Corp.,
Banque Nationale de Paris as Agent and the Banks named
therein, as amended.
15. All obligations outstanding under and in respect of that
certain Holdings Pledge Agreement, dated as of December
17, 1992, between Banana Boat Holding Corporation and
Banque Nationale de Paris as Agent.
16. All obligations outstanding under and in respect of that
certain Holdings Guaranty, dated as of December 17,
1992, made by Banana Boat Holding Corporation in favor
of the Lenders party to the Credit Agreement and Banque
Nationale de Paris as Agent.
6595L
<PAGE>
SCHEDULE 3.10
OFFICERS
--------
Banana Boat Holding Corporation and Sun Pharmaceuticals, Inc.
Officer Title
------- -----
Max R. Recone President and Chief Executive Officer
Glenn A. Forbes Treasurer and Chief Financial Officer
William B. Stammer Assistant Secretary
1361
<PAGE>
SCHEDULE 5.1(c)
---------------
PERMITTED AFFILIATE PAYMENTS
----------------------------
Payments accrued prior to the Closing Date in the
ordinary course of business, consistent with past practice,
under the Management Agreement (the "Management Agreement"),
dated as of November 16, 1992, among the Thomas H. Lee
Company, Banana Boat Holding Corporation and Banana Boat
Acquisition Corporation, including, payment for the pro rata
portion of fees due and owing during the month in which the
Merger is consummated and the reimbursement of expenses as
provided for in the Management Agreement.
<PAGE>
SCHEDULE 5.1(e)
---------------
PLAYTEX DIRECTORS
-----------------
Douglas D. Wheat
Michael F. Goss
EXHIBIT 99.1
<PAGE>
BANANA BOAT HOLDING CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND DECEMBER 25, 1993
(WITH INDEPENDENT AUDITOR'S REPORT THEREON)
<PAGE>
BANANA BOAT HOLDING CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Report of KPMG Peat Marwick LLP 3
Consolidated Balance Sheets as of December 31, 1994 and December 25, 1993. 4
Consolidated Statements of Operations for the twelve months ended
December 31, 1994 and December 25, 1993. 5
Consolidated Statements of Cash Flows for the twelve months ended
December 31, 1994 and December 25, 1993. 6
Notes to Consolidated Financial Statements 7
2
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
The Board of Directors
Banana Boat Holding Corporation
We have audited the accompanying consolidated balance sheets of Banana Boat
Holding Corporation and subsidiary as of December 31, 1994 and December 25,
1993, and the related consolidated statements of operations and cash flows for
the twelve months then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial positions of Banana Boat Holding
Corporation and subsidiary as of December 31, 1994 and December 25, 1993, and
the results of their operations and their cash flows for the twelve months then
ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
March 27, 1995
Stamford, CT
3
<PAGE>
BANANA BOAT HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands, except share data)
<TABLE><CAPTION>
At At
December 31, 1994 December 25, 1993
----------------- -----------------
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 1,979 $ 1,406
Receivables, less allowance for doubtful accounts 7,116 8,080
Inventories 19,487 6,901
Current deferred income taxes 2,669 1,587
Other current assets 1,105 821
-------- -------
Total current assets 32,356 18,795
Property, plant and equipment, net 1,847 2,249
Intangible assets, net:
Excess of cost over net assets of acquired businesses 18,003 18,165
Proprietary formulas, patents and other 30,312 34,284
Deferred financing costs 1,132 1,568
Deferred income taxes 2,912 3,636
Notes receivable 934 485
------- -------
Total Assets $ 87,496 $ 79,182
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 20,922 $ 11,211
Current maturities of long-term debt 6,583 5,313
-------- -------
Total current liabilities 27,505 16,524
Long-term debt 40,167 41,550
-------- -------
Total liabilities 67,672 58,074
-------- -------
Stockholders' equity:
Common stock, $.01 par value; 250,000 shares authorized,
100,000 shares issued and outstanding 1 1
Additional paid-in capital 22,499 22,499
Retained earnings (deficit) (2,676) (1,392)
-------- -------
Total stockholders' equity 19,824 21,108
-------- -------
Total Liabilities and Stockholders' Equity $ 87,496 $ 79,182
======= =======
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
BANANA BOAT HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except share data)
<TABLE><CAPTION>
Twelve Months Ended
------------------------------------------
December 31, 1994 December 25, 1993
----------------- -----------------
<S> <C> <C>
Net Sales $ 39,707 $ 44,247
Cost of Sales 25,247 23,262
-------- -------
Gross profit 14,460 20,985
Operating expenses:
Selling, marketing and advertising 3,544 8,399
Administrative and distribution 2,817 4,920
Amortization of intangibles 4,530 4,075
-------- -------
Total operating expenses 10,891 17,394
-------- -------
Operating earnings 3,569 3,591
Interest expense 5,211 5,178
-------- -------
Earnings (loss) before income taxes (1,642) (1,587)
Income tax expense (benefit) (358) (595)
-------- -------
Net earnings (loss) (1,284) (992)
Retained earnings (deficit), beginning of period (1,392) (400)
-------- -------
Retained earnings (deficit), end of period $ (2,676) $ (1,392)
-------- -------
Earnings (loss) per share $ (12.84) $ (9.92)
======== =======
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
BANANA BOAT HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE><CAPTION>
Twelve Months Ended
------------------------------------------
December 31, 1994 December 25, 1993
----------------- -----------------
<S> <C> <C>
Cash flows provided from operations:
Net loss $ (1,284) $ (992)
Non-cash items included in earnings:
Amortization of intangibles 4,530 4,075
Amortization of deferred financing costs 436 440
Depreciation/write-off of property, plant, and equipment 716 243
Deferred taxes (358) (595)
Changes in assets/liabilities, net of effect of acquisitions:
Decrease (increase) in receivables 911 (3,789)
(Increase) decrease in inventories (12,491) 3,583
(Increase) decrease in other current assets (284) 133
(Increase) decrease in other assets (479) 93
Increase (decrease) in accounts payable and accrued expenses 9,906 (2,165)
(Decrease) increase in accrued interest (195) 784
-------- -------
Net cash provided from operations 1,408 1,810
-------- -------
Cash flows provided used for investing activities:
Purchases of property, plant and equipment (314) (384)
Businesses or investments acquired (408) (7,780)
-------- -------
Net cash provided used for investing activities (722) (8,164)
-------- -------
Cash flows provided used for financing activities:
Additional borrowings of long-term debt 14,700 9,400
Payments of long-term debt (14,813) (11,194)
Other, net - (30)
-------- -------
Net cash provided used for financing activities (113) (1,824)
-------- -------
Increase (decrease) in cash 573 (8,178)
Cash at beginning of period 1,406 9,584
-------- -------
Cash at end of period $ 1,979 $ 1,406
======== =======
Supplemental disclosures of cash flow information
Cash paid during the periods for:
Interest $ 4,975 $ 3,954
======== =======
Income Taxes $ 23 $ -
======== =======
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
BANANA BOAT HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and December 25, 1993
1. The Company
In December 1992, Banana Boat Holding Corporation ("Banana Boat") and its wholly
owned subsidiary, Sun Pharmaceuticals Corp. ("Sun" and, together with Banana
Boat, the "Company") were organized by an investor group consisting of Thomas
H. Lee Equity Partners, L.P. and other employees and affiliates of the Thomas
H. Lee Company (collectively the "Lee Investors") for the sole purpose of
effecting the acquisition of the assets and the assumption of certain
liabilities of Sun Pharmaceuticals, Ltd.'s ("SPL") business (the "SPL
Acquisition").
Banana Boat is a holding company and its only asset is an investment in Sun,
the operating company. Therefore, all references to the Company refer to the
activities of the consolidated companies. The Company manufactures and markets
a line of sun and skin care products in the United States and abroad under the
tradename Banana Boat R.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Banana Boat and
its wholly owned subsidiary, Sun. All significant intercompany balances have
been eliminated.
Inventories
Inventories are stated at the lower of cost (first in, first out method) or
market. Inventory costs include material, labor and manufacturing overhead.
Property, Plant and Equipment, Net
Property, plant and equipment are stated at cost. Depreciation is computed on
the straight-line method over the estimated useful lives of the applicable
assets, ranging from 3 to 10 years. Repairs and maintenance are expensed;
renewals, and betterments are capitalized.
7
<PAGE>
BANANA BOAT HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and December 25, 1993
Intangible Assets
Amortization of proprietary formulas, patents and other intangible assets is
provided on the straight-line method over their estimated useful lives which
range from 1 to 40 years. Excess of cost over net assets of acquired
businesses ("Excess Cost") is amortized on the straight-line method over the
expected periods to be benefitted, not to exceed 40 years. The Company assesses
the recoverability of these intangible assets on a systematic basis by
determining whether the amortization of the intangible assets over their
remaining life can be recovered through projected future operating results.
Deferred Financing Costs
Fees and expenses relating to debt issuance costs are classified as deferred
financing costs and are being amortized, under the interest method, over the
average life of the related debt (ranging from 5 to 10 years).
Earnings Per Share
Earnings (loss) per share are net earnings (loss) divided by the weighted
average number of common shares (100,000 in 1994 and 1993) issued and
outstanding for the period. Per share data does not assume the exercise of the
warrants and stock options outstanding (see note 7), because the effect of
such conversions would have been antidilutive.
Reclassifications
Certain 1993 balances have been reclassified to conform with the 1994
presentation.
3. Acquisition of Distributors
In March 1995, Sun renegotiated the Distribution Agreement with the Hawaii
Distributor. The agreement extended the term for 5 years through December 31,
1999 at which time Sun would own the distribution rights.
During 1994, the Company acquired the assets of two distributors and assumed
certain liabilities. In accordance with the purchase method of accounting, the
purchase price was allocated to identifiable tangible and intangible assets
and liabilities acquired. The combined purchase price for these two
acquisitions was $0.4 million in cash.
8
<PAGE>
BANANA BOAT HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and December 25, 1993
During 1993, the Company acquired the operations and assets of eleven
distributors and assumed certain liabilities. In accordance with the purchase
method of accounting, the purchase price was allocated to identifiable tangible
and intangible assets and liabilities of the net assets acquired. The combined
purchase price for the acquisition of the eleven distributors was $8.9 million
($7.8 million in cash plus $0.6 million in short term notes and $0.5 million
in future contingent obligations) plus forgiveness of amounts due from
acquired distributors of $4.5 million and the assumption of certain
liabilities of $3.5 million for a total purchase price of $16.9 million.
The acquired assets related to the 1994 and 1993 acquisitions consisted of the
following (in thousands):
1994 1993
------ -------
Receivables/(Credits) $ (53) $ 3,192
Inventory 95 4,033
Other current assets - 1,832
Property, plant and equipment - 658
Noncompete agreements 50 1,600
Other assets - 404
----- -------
Total allocated assets 92 11,719
Excess cost over assets acquired 316 5,190
----- -------
Total acquired assets $ 408 $16,909
===== =======
Operations from the date of each acquisition are included in the consolidated
financial statements.
4. Distribution Agreement
In December 1992, Playtex Products, Inc. ("Playtex"), a company in which
certain Lee Investors are stockholders and in which certain Lee Investors are
directors, and a party to the original investor group, acquired a 22% common
equity interest (17.5% on a fully diluted basis) in Banana Boat and an option
to acquire the remaining common equity of Banana Boat at a formula price.
Concurrent with its' acquisition of the equity interest in Banana Boat,
Playtex entered into a distribution agreement (the "Distribution Agreement")
with Sun, pursuant to which Playtex became the exclusive distributor of Banana
Boat products in all areas that the Company has been able to repurchase
distribution rights from its existing distributors at the time of the SPL
Acquisition. Effective November 1993, Playtex began distributing Banana Boat
products in the territories where the distribution rights had been acquired.
At December 31, 1994, the Company had acquired distribution rights
representing approximately 80% and 100% of Banana Boat sales in the United
States and Canada, respectively.
9
<PAGE>
BANANA BOAT HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and December 25, 1993
Under the terms of the Distribution Agreement, Sun manufactures the
products, establishes marketing plans, and develops new products. Playtex
purchases and resells these products, at a distribution margin, using its
own sales and distribution facilities and also provides operational
and administrative support to Sun. Playtex is subject to minimum purchase
requirements and minimum advertising and promotion commitments.
Sale of Banana Boat products to Playtex amounted to $30.5 million for the
year ended December 31, 1994 and $6.4 million for the year ended December
25, 1993. Receivables include amounts due from Playtex of $3.9 million at
December 31, 1994 and $6.3 million at December 25, 1993. Accrued expenses
include amounts due to Playtex of $13.6 million at December 31, 1994 and
$2.9 million at December 25, 1993.
5. Balance Sheet Components
The components of certain balance sheet accounts are as follows (in
thousands):
December 31, December 25,
1994 1993
------------ ------------
Accounts Receivable
Gross $ 7,548 $ 8,357
~ Less allowance for doubtful accounts (432) (277)
------- -------
Net $ 7,116 $ 8,080
======= =======
Inventories:
Raw materials $10,593 $ 4,123
Finished goods 8,894 2,778
------- -------
Total $19,487 $ 6,901
======= =======
Property, plant and equipment, net:
Machinery, equipment, furniture and
fixtures $ 2,249 $ 2,506
Less accumulated depreciation (402) (257)
------- -------
Net $ 1,847 $2,249
======= =======
Excess cost:
Cost $18,962 $18,617
Less accumulated amortization (959) (452)
------- -------
Net $18,003 $18,165
======= =======
Proprietary formulas, patents and other:
Gross $38,269 $38,219
Less accumulated amortization (7,957) (3,935)
------- -------
Net $30,312 $34,284
======= =======
10
<PAGE>
BANANA BOAT HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and December 25, 1993
December 31, December 25,
1994 1993
------------ ------------
Deferred financing costs:
Gross $ 2,746 $ 2,746
Less accumulated amortization (1,614) (1,178)
------- -------
Net $ 1,132 $ 1,568
======= ========
Accounts payable and accrued expenses:
Accounts payable $ 5,316 $ 5,041
Due to Playtex 13,629 2,921
Interest 855 1,050
Advertising and sales promotion 73 110
Employee compensation and benefits 324 423
Other 725 1,666
------- -------
Total $20,922 $11,211
======= ========
6. Long-Term Debt
Long-term debt consists of the following
(in thousands):
December 31, December 25,
1994 1993
------------ ------------
Credit Agreement:
Working Capital Facility $ 9,500 $ 4,300
Term Loan Facility 19,750 25,063
12-1/2% Subordinated Notes due 2002 17,500 17,500
------- -------
46,750 46,863
Less current maturities (6,583) (5,313)
------- -------
Total long-term debt $40,167 $41,550
======= ========
11
<PAGE>
BANANA BOAT HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and December 25, 1993
At December 31, 1994, The Company's principal bank financing (the "Credit
Agreement") consisted of a Term Loan Facility and a Working Capital Facility
which provide for borrowings of $19,750,000 and of up to $20,000,000,
respectively, with a maturity date of December 17, 1997. The rate of interest
on borrowings under the Credit Agreement is, at the Company's option, a
function of various alternative short-term borrowing rates, as defined
in the Credit Agreement. The interest rate for the Term Loan Facility was
8.94% at December 31, 1994 and 7.75% at December 25, 1993. The interest rate
for the Working Capital Facility was 8.51% on December 31, 1994 and 7.50% at
December 25, 1993. The average rates paid on the Term Loan was 7.58% and 7.75%
for the twelve month periods ended December 31, 1994 and December 25, 1993,
respectively. The average rates paid on Working Capital borrowings was 7.20%
for the twelve months ended December 31, 1994 and 7.50% for the twelve months
ended December 25, 1993. The Term Loan Facility provides for quarterly
repayment of principal of $1,645,833.
The Credit Agreement also provides for mandatory reduction of the outstanding
commitment after the end of each fiscal year based upon an Excess Cash Flow
formula, as defined in the Credit Agreement. Based on this formula, there were
no required reductions for 1994 in the outstanding commitment. Quarterly
commitment fees of 1/2 of 1% per annum on the unused portion of the commitment
and an agency fee of $65,000 per annum are also required. At December 31, 1994,
unused lines of credit under the Working Capital Facility amounted to
$10,500,000.
Although the Company's outstanding obligations under the Credit Agreement bear
interest at floating rates, the Credit Agreement required the Company to enter
into interest rate protection agreements such that for the period through May
5, 1995, at least 40% of its outstanding indebtedness at December 17, 1992
bears interest at fixed rates. On May 4, 1993, the Company entered into an
interest cap agreement which entitles the Company to receive from the
counterparty, on a quarterly basis the product of $18.4 million times the
amount, if any, by which the 90 day LIBOR exceeds 6.0%. Net receipts or
payments under the cap agreement are recognized as an adjustment to interest
expense.
The provisions of the Credit Agreement require the Company to meet certain
financial covenants and ratios and also include limitations or restrictions
on: new indebtedness and liens; major acquisitions or mergers; capital
expenditures; disposition of assets; certain dividends and other
distributions; and prepayment and modification of all indebtedness or
equity capitalization. The Subordinated Notes contain certain similar
restrictions and requirements. Under the terms of the Credit Agreement and the
Subordinated Notes, payment of cash dividends on the common stock of the
Company is restricted. At December 31, 1994 the Company was in default of a
financial covenant required by the Credit Agreement and has subsequently
obtained a waiver from the bank.
12
<PAGE>
BANANA BOAT HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and December 25, 1993
On December 3, 1992, in connection with the SPL Acquisition, the Company
issued $17,500,000 aggregate principal amount of 12-1/2% Subordinated Notes
due 2002 (the "Subordinated Notes"). Interest on the Subordinated Notes
accrues at an annual rate of 12-1/2% and is payable on each March 31, June
30, September 30 and December 31. At December 31, 1994, the Subordinated Notes
were owned by entities advised by affiliates of the Lee Investors.
Aggregate minimum annual maturities on the long term debt, are (in thousands):
$6,583 in fiscal 1995, $6,583 in fiscal 1996, $16,084 in fiscal 1997, and
$17,500 in fiscal 2002.
7. Common Stock
In connection with the SPL Acquisition, the Company granted to the holders
of the Subordinated Notes, warrants to purchase 15,663 shares of common stock,
at a price of $225.00 per share, representing the fair market value of such
shares at the time of the grant. The warrants are exercisable at any time on
or prior to December 3, 2002.
Additionally, in connection with the execution of the Credit Agreement, the
Company granted to the participating banks, warrants to purchase 4,819 shares
of common stock, at a price of $225.00 per share, representing the fair market
value of such shares at the time of the grant. The warrants are exercisable at
any time on or prior to December 17, 2002.
Effective in 1993, the Company established a management stock option plan which
provides for the grant of options to purchase common stock of the Company by
certain key employees. The maximum number of shares to be granted under this
plan is 6,341 shares, representing 5% of the Company's common stock on a fully
diluted basis. Options vest over a five year period. The sale of the Company
before 5 years from the date of grant would accelerate the vesting to 100%.
As of December 31, 1994, the Company has issued options to purchase an
aggregate of 2,250 shares of common stock at $225.00 per share.
8. Income Taxes
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109") requires an asset and liability approach for financial
accounting and reporting for income taxes. The provision for income taxes is
the tax payable or refundable for the period plus or minus the change during
the period in deferred tax assets and liabilities. Deferred income tax assets
and liabilities are computed for differences between the financial statement and
tax basis of assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to amounts which are more likely than not to be realized.
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<PAGE>
BANANA BOAT HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and December 25, 1993
The Company's provision for income taxes for the twelve months ended December
31, 1994 and December 25, 1993 is as follows (in thousands):
Twelve Months Ended
-------------------
December 31, 1994 December 25, 1993
----------------- -----------------
Current:
Federal $ -- $ --
State and local -- --
------- -------
Deferred:
Federal $ (588) $ (461)
State and local 230 (134)
------- --------
(358) (595)
------- --------
Total $ (358) $ (595)
======= ========
Taxable and deductible temporary differences and tax operating loss
carryforwards which give rise to the Company's deferred tax assets and
liabilities at December 31, 1994 and December 25, 1993 are as follows
(in thousands):
December 31, December 25,
1994 1993
------------ ------------
ASSETS:
Net operating loss carryforward $ 4,632 3,361
Allowances and reserves not currently
deductible 563 1,768
Acquired intangible assets 618 285
------- -------
Total deferred tax assets $ 5,813 $ 5,414
======= =======
LIABILITIES
Plant, property and equipment $ 232 $ 191
------ --------
Total deferred tax liabilities $ 232 $ 191
====== ========
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<PAGE>
BANANA BOAT HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and December 25, 1993
The Company expects to have sufficient taxable income in future years to fully
realize all deferred tax assets. Accordingly, no valuation allowance account
is established.
The Company's tax provision differed from the amount computed using the
federal statutory rate of 35% as follows (in thousands):
Twelve Months Ended
-------------------
December 31, 1994 December 25, 1993
----------------- -----------------
Expected federal income tax
(benefit) at statutory rate $ (575) $ (555)
State and local income taxes 149 (87)
Amortization of non-deductible excess cost 50 34
Tax effect of graduated rates 18 13
------- -------
Total provision for income taxes $ (358) $ (595)
======= =======
At December 31, 1994, the Company has net operating losses for regular and
alternative minimum tax purposes of $12.1 million and $11.5 million,
respectively, which are available to offset future federal taxable income
through 2009.
9. Related Party Transactions
The Company and Thomas H. Lee Company (the "Consultant") have entered into a
management agreement, providing for the performance by the Consultant of
certain consulting and management services for the Company. The Company has
paid the Consultant $180,000 plus reimbursement of expenses pursuant to such
management agreement for the year ended December 31, 1994.
10. Business and Credit Concentrations
Prior to November 1993, the majority of the Company's customers consisted of
distributors located throughout the United States. Effective November 1993,
pursuant to the Distribution Agreement (See Note 5), Playtex began
distributing Banana Boat products in the territories where distribution rights
had been acquired from the then existing distributors. Sales to Playtex
as a percentage of total sales for the years ended December 31, 1994 and
December 25, 1993 were approximately 77% and 15%, respectively. Moreover, as a
result of the Distribution Agreement, the Company has become extremely
dependent upon Playtex (a highly leveraged company) for its operations in
future periods. Nonetheless, the Company, based upon Playtex's past
experiences, anticipates that the highly leveraged position of Playtex should
have no adverse effect on the financial position, results of operations or
cash flows of the Company.
15
<PAGE>
BANANA BOAT HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and December 25, 1993
11. Disclosure about the Fair Value of Financial Instruments.
Cash, Receivables, Accounts Payable, Income Taxes and Accrued Expenses
The carrying amount approximates fair value because of the short-term maturity
of these instruments.
Credit Agreement
The carrying amount approximates fair value because the rate of interest on
borrowings under the Credit Agreement fluctuates with interest rate indices as
defined in the Credit Agreement.
Long-term Debt
The fair value of the Subordinated Notes was estimated at $17.5 million at
December 31, 1994 and December 25, 1993, based upon current prices for similar
instruments. These securities are held by entities advised by affiliates of
the Lee Investors, and there is no public market information available.
Other Financial Instruments
The estimated fair value of the Company's other financial instruments are
summarized as follows (in thousands):
December 31, 1994 December 25, 1993
----------------- -----------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
Notes receivable $ 934 $ 859 $485 $446
The fair values are based on the amount of future cash flows associated with
these instruments discounted using the Company's borrowing rate for similar
instruments.
12. Commitments and Contingent Liabilities
The Company is obligated under operating leases for substantially all of its
warehouse and distribution space that expire periodically through 1995. Rent
expense for 1994 and 1993 was $535,000 and $849,000, respectively. Future
lease requirements in 1995 are $639,000.
In the opinion of management, there are no claims, commitments, guarantees or
litigation pending to which the Company is a party which would have a
materially adverse effect on it's consolidated financial position, results of
operations or cash flows.
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