Securities and Exchange Commission
Washington, D.C. 20549
____________
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 30, 1995
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from _______ to _______.
Commission File No. 33-25485-01
PLAYTEX PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0312772
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
300 Nyala Farms Road 06880
Westport, Connecticut (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (203) 341-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ------------------------
Common Stock, par value $.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
<PAGE>
FORM 10-K
(Facing Sheet Continuation)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K [X].
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 18, 1996 was $197,908,035. (For this computation,
the registrant has excluded the market value of all shares of its Common Stock
reported as beneficially owned by officers and directors of the registrant; such
exclusion shall not be deemed to constitute an admission that any such person is
an "affiliate" of the registrant.)
At March 18, 1996, 50,879,701 shares of Playtex Products, Inc. common
stock, par value $.01 per share, were outstanding.
Documents incorporated by reference:
<TABLE><CAPTION>
Document Part of Form 10-K
-------- -----------------
<S> <C>
Portions of the registrant's Annual Report to Stockholders II, IV
for the fiscal year ended December 30, 1995 (the "Annual
Report") (inside front cover and pages 8 through 24).
Registrant's definitive Proxy Statement (the "Proxy Statement") III
for the Annual Meeting of Stockholders to be held on May 22, 1996,
which will be filed with the Securities and Exchange Commission
within 120 days after the end of the registrant's fiscal year ended
December 30, 1995 pursuant to Regulation 14A.
- - - - - - - - - -
</TABLE>
2
<PAGE>
TABLE OF CONTENTS
Page
----
PART I
------
Item 1. Business 4
Item 2. Properties 15
Item 3. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of Security Holders 18
PART II
-------
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 19
Item 6. Selected Financial Data 19
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 19
Item 8. Financial Statements and Supplementary Data 19
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 19
PART III
--------
Item 10. Directors and Executive Officers of the Registrant 20
Item 11. Executive Compensation 20
Item 12. Security Ownership of Certain Beneficial Owners and
Management 20
Item 13. Certain Relationships and Related Transactions 20
PART IV
-------
Item 14. Exhibits, Financial Statement Schedule and Reports on
Form 8-K 21
Signatures 25
3
<PAGE>
PART I
------
Item 1. Business
A. History
The Playtex businesses were founded in 1932 under the name
International Latex Company and operated for many years prior to 1986 under
the name International Playtex, Inc. ("IPI"). In the mid-1950's, using the
latex technology developed for the manufacture of girdles, Playtex began to
market household gloves, the first of many products to constitute its
Family Products division. Through the marketing of gloves, the addition of
disposable nursers in the mid-1960's, and the acquisition in 1967 and
subsequent expansion of its tampon manufacturing business, Playtex
established a major presence in the drug store, supermarket and mass
merchandise classes of trade. In 1979, Playtex acquired the Jhirmack
--------
(registered trademark) line of salon quality hair care products. In
May 1989, Playtex acquired the Cherubs(registered trademark) Collection,
-------
providing an established entry into the hard baby bottle market. In
July 1994, Playtex acquired the SmileTote(registered trademark) line of
---------
infant/toddler cups and bottles. In February 1995, Playtex purchased
the assets of the Woolite(registered trademark) Rug and Upholstery
cleaning business ("Woolite"). In October 1995, Playtex acquired the
remaining 78% of common stock, not previously owned by Playtex, of Banana
Boat Holding Corporation, the manufacturer of Banana Boat sun and skin
care products.
In late 1986, Playtex Holdings, Inc. ("Holdings") and certain of its
subsidiaries were organized by an investor group to effect a management
leveraged buyout of the businesses of IPI. Playtex Products, Inc.
(including, as the context requires, its subsidiaries, the "Company") was
organized in 1988 by an investor group consisting of certain senior
executives of Holdings, the ML-Lee Acquisition Fund, L.P., a Delaware
limited partnership, the Thomas H. Lee Company and certain senior
executives of the Thomas H. Lee Company and certain other investors, to
effect the acquisition of the Playtex Family Products and Jhirmack
--------
businesses from Holdings (the "1988 Acquisition").
On December 28, 1988, the Company consummated the 1988 Acquisition.
Concurrently, Playtex Apparel, Inc. ("Apparel"), an indirect wholly owned
subsidiary of Holdings, after the repayment of $340 million of intercompany
indebtedness, was divested to Playtex Apparel Partners, L.P. (the "Apparel
Partnership"), a limited partnership owned by Joel E. Smilow and the
operating management of Apparel, for a $40 million subordinated debenture.
On November 19, 1991, Apparel was sold by the Apparel Partnership to
and became a wholly owned subsidiary of Sara Lee Corporation ("Sara Lee").
On December 20, 1991, the Company and its stockholders (the "Playtex
Stockholders") completed a transaction with Sara Lee (the "Sara Lee
Transaction") which included, among other things, (i) the acquisition by
Sara Lee of convertible preferred stock of the Company (the "Series C
Preferred Stock"), that together with shares of the Company's common stock
(the "Common Stock") purchased from the Playtex Stockholders, gave Sara Lee
25% of the voting and dividend rights in the Company; and (ii) the sale of
an option in favor of Sara Lee to acquire all of the remaining outstanding
shares of Common Stock (the "Sara Lee Option"). In connection with the
1994 Recapitalization (as defined and discussed below), the Sara Lee Option
was terminated and the Series C Preferred Stock was redeemed.
4
<PAGE>
In December 1992, the Company acquired, for $5 million, a 22% common
equity interest (17.5% on a fully diluted basis) in Banana Boat Holding
Corporation ("BBH") in conjunction with the acquisition by BBH's wholly-
owned subsidiary, Sun Pharmaceuticals Corp. ("Sun"), of the assets and
certain liabilities of Sun Pharmaceuticals, Ltd. BBH was controlled by
Thomas H. Lee Equity Partners, L.P. and other employees and affiliates of
Thomas H. Lee Company. Sun manufactured and marketed a line of sun and
skin care products in the United States and abroad under the
Banana Boat(registered trademark) and other trademarks. Concurrent with
-----------
its acquisition of the equity interest in BBH, the Company entered into a
distribution agreement with Sun under which it began to distribute
Banana Boat sun and skin care products for Sun from November 1993 to
-----------
October 1995 (see "the BBH Acquisition"). Sun also has distribution
agreements with unrelated third parties.
The 1994 Recapitalization
During the first quarter of fiscal 1994, the Company issued 20 million
shares of Common Stock, par value $.01 per share (the "Common Stock"), at a
price of $13.00 per share as part of a recapitalization plan (the "1994
Recapitalization") designed to reduce indebtedness, interest expense and
preferred stock dividend requirements and to improve Playtex's cash flow
and operating and financial flexibility. The 1994 Recapitalization
included transactions effected by the Company and its subsidiary Playtex
Family Products Corporation ("Family Products"), which was merged into the
Company on March 8, 1994. Therefore, all references to the Company include
the activities of the merged companies. In addition to the issuance of
shares of Common Stock, the principal elements of the Recapitalization
included: (a) borrowings from banks of $500.0 million under a new term
loan facility (the "1994 Term Loan") and of approximately $40.0 million
under a $75.0 million new working capital facility (the "1994 Revolving
Credit Facility" and, together with the 1994 Term Loan, the "1994 Credit
Agreement") and (b) the issuance of $360.0 million aggregate principal
amount of 9% Senior Subordinated Notes due 2003 (the "Senior Subordinated
Notes").
The net proceeds from the 1994 Recapitalization were used to retire
substantially all of the Company's outstanding indebtedness (including
premiums and accrued interest) and preferred stocks (including accrued
dividends). In addition, the Company paid a consent fee to Sara Lee in
consideration for the early termination of the Sara Lee Option.
The Woolite (registered trademark) Rug and Upholstery Cleaning
Business Acquisition
On February 24, 1995, the Company acquired the assets of Woolite from
-------
Reckitt & Colman PLC for sale under an exclusive, royalty-free trademark
license in perpetuity in the United States and Canada. The purchase price
was approximately $21.7 million, which was financed by borrowings under
existing working capital facilities.
The 1995 Transaction
On June 6, 1995, the Company consummated the sale, for an aggregate
purchase price of $180.0 million, of 20 million shares of Common Stock at a
price of $9.00 per share (the "Investment") to HWH Capital Partners, L.P.,
HWH Valentine Partners, L.P., and HWH Surplus Valentine Partners, L.P.
(collectively, the "Investors"), each a Delaware limited partnership
managed by Haas Wheat & Partners Incorporated, pursuant to a Stock Purchase
Agreement, dated as of March 17, 1995, between the Company and the
Investors (the "Stock Purchase Agreement"). The Investors' shares
constitute approximately 40% of the Company's outstanding Common Stock.
The Investment and related matters were approved by the stockholders of the
Company at the Annual Meeting of Stockholders on June 6, 1995 (the "Annual
Meeting"). At the Annual Meeting, designees of the Investors were elected
by the Company's stockholders as a simple majority of the Board of
Directors.
5
<PAGE>
Contemporaneously with the Investment, the Company entered into a new
bank credit agreement with Chemical Bank, as agent (the "1995 Credit
Agreement"and, together with the Investment, the "1995 Transaction").
Borrowings under the 1995 Credit Agreement, together with the net proceeds
of the Investment, were used by the Company to refinance all outstanding
borrowings under the Company's 1994 Credit Agreement. The 1995 Credit
Agreement provides for a new credit facility in the aggregate amount of
$500.0 million, consisting of (i) $387.5 million in term loans (the "1995
Term Loan Facility"), all of which was borrowed at closing and of which
$37.5 million was cash collateralized in order to reduce interest rates on
the 1995 Term Loan Facility, (ii) a $75.0 million revolving credit facility
for general corporate purposes and (iii) a $37.5 million acquisition
revolving credit facility which is available to make permitted business
acquisitions and investments and for general corporate purposes.
The BBH Acquisition
On October 31, 1995, the Company and BBA Acquisition, Inc., a Delaware
corporation and wholly owned subsidiary of the Company, acquired all issued
and outstanding common shares, not previously owned by the Company, of BBH
(the "BBH Acquisition"). The BBH Acquisition was pursuant to an agreement
and plan of merger dated October 17, 1995.
Since November 1993, the Company had recognized 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 the Company. Following the BBH
Acquisition, the Company's equity ownership of BBH increased from 22% to
100% and the Company's interest in the operating profits from the sale of
Banana Boat products increased to 100%. Concurrent with the BBH
-----------
Acquisition, the distribution agreement between the Company and BBH was
terminated.
The net consideration expended in connection with the BBH Acquisition
included cash 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 $4.3 million. The BBH Acquisition was financed with
approximately $34.3 million of existing cash balances and advances under
the Company's acquisition revolving credit facility of $37.5 million.
On March 22, 1996, BBH was merged with and into Sun, with Sun being
the surviving corporation.
B. Management Changes
In June 1995, concurrent with the completion of the 1995 Transaction,
Robert B. Haas was named Chairman of the Board of the Company. In July
1995, Michael R. Gallagher was named Chief Executive Officer.
C. Executive Officers of Registrant
Listed below are the executive officers of the Company as of March 18,
1996. There are no family relationships between any of the executive
officers, and there is no arrangement or understanding between any
executive officer and any other person pursuant to which the executive
officer was selected. At the annual meeting of the Board of Directors
which follows the Annual Meeting of Stockholders, executive officers are
elected by the Board to hold office for one year and until their respective
successors are elected and qualified, or until earlier resignation or
removal.
6
<PAGE>
Name Age Position
---- --- --------
Michael R. Gallagher 50 Chief Executive Officer and
Director
Michael F. Goss 36 Executive Vice President, Chief
Financial Officer and Director
James S. Cook 44 Senior Vice President, Operations
Max R. Recone 40 President, Consumer Products
Division
Paul E. Yestrumskas 44 Vice President, General Counsel and
Secretary
Michael R. Gallagher has been the Chief Executive Officer and a
Director of the Company since June 1995. Prior to joining the Company, Mr.
Gallagher was Chief Executive Officer of North America for Reckitt & Colman
PLC (1994-1995). Mr. Gallagher was President and Executive Officer of
Eastman Kodak's L&F Products subsidiary from 1988 until the subsidiary was
sold to Reckitt & Colman PLC in 1994. Mr. Gallagher was President of the
Lehn & Fink Consumer Products Division at Sterling Drug from 1984 until the
Division was sold to Eastman Kodak in 1988.
Michael F. Goss has been Executive Vice President and Chief Financial
Officer of the Company since December 1994. He has served as a Director of
the Company since September 1995. From 1992 to 1994, Mr. Goss was
Treasurer and Vice President - Corporate Development of Oak Industries,
Inc. ("Oak"). From 1990 to 1992, he was Director of Financial Planning for
Oak.
James S. Cook has been Senior Vice President, Operations of the
Company since August 1991. From August 1990 to August 1991, he was Vice
President, Dover Operations of the Company. From December 1988 to August
1990, he was Vice President of Distribution, Logistics & MIS of the
Company.
Max R. Recone has been the President of the Consumer Products Division
of the Company since March 1996. From June 1995 to March 1996, he was Vice
President and Business Manager for Sun Care, Hair Care and Household
Products. From August 1993 to June 1995, he served as Vice President -
Banana Boat. From February 1992 to July 1993, he was Vice President -
Sales of the Company. From January 1990 to February 1992, Mr. Recone
served as Vice President/General Manager of Playtex Limited, the Company's
Canadian subsidiary.
Paul E. Yestrumskas has been the Vice President, General Counsel and
Secretary of the Company since December 1995. Prior to joining the
Company, Mr. Yestrumskas was Senior Counsel of Rhone-Poulenc, Inc. from
1991 to 1995. Mr. Yestrumskas was Assistant General Counsel of Hubbell,
Inc. from 1988 to 1991 and Senior Counsel and Manager of Government
Relations at Timex Corporation from 1981 to 1988.
7
<PAGE>
D. General
The Company is a leading manufacturer and distributor of an extensive
line of personal care products marketed under such brand names as
Playtex Gentle Glide(registered trademark), Soft Comfort(trademark) and
------- ------------ ---- -------
Silk Glide (registered trademark) feminine care products, Playtex nursery
---- ----- ------- -------
disposable feeding systems for infants, Playtex Spill-Proof(registered
------- -----------
trademark) cups, Cherubs(registered trademark) baby products, Banana Boat
------- -----------
sun and skin care products, Playtex Living(registered trademark),
------- ------
Handsaver(registered trademark) and Wearshield (registered trademark)
--------- ----------
household and industrial gloves, Woolite(registered trademark) rug and
-------
upholstery cleaning products, Jhirmack(registered trademark) hair care
--------
products, and Tek(registered trademark) toothbrushes.
---
Playtex feminine care products have the second largest market share in the
United States tampon market and the leading position in the plastic
applicator segment of the market. Playtex nurser is the market leader in
-------
the United States in disposable feeding systems for infants. Additionally,
the success of the Spill-Proof cup, introduced in the fourth quarter of
-----------
1993, has increased the Company's leading market share for infant cups in
1995. Playtex gloves are the market leader in the branded domestic
-------
household rubber gloves market. Woolite rug and upholstery cleaning
-------
products are the number two brand in its domestic market. Banana Boat has
-----------
the number two market position in the United States sun care market.
Net sales by classes of similar products to unaffiliated customers for
the five most recent fiscal years are as follows (in millions):
Twelve Months Ended December
------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ----- -----
Feminine Care $243.6 $257.1 $244.5 $214.0 $213.3
Infant Care 87.6 77.9 74.7 74.1 74.8
Household Products 57.3 32.5 28.8 27.6 28.6
Sun Care 50.3 48.9 1.9 -- --
Hair Care 39.7 51.4 54.5 61.9 71.0
Toothbrushes 5.1 5.5 5.5 6.9 6.2
------ ------ ------ ------ ------
Total $483.6 $473.3 $409.9 $384.5 $393.9
====== ====== ====== ====== ======
U.S. $445.9 $436.1 $369.2 $343.8 $351.5
Canada 37.7 37.2 40.7 40.7 42.4
------ ------ ------ ------ ------
Total $483.6 $473.3 $409.9 $384.5 $393.9
====== ====== ====== ====== ======
In 1995, the composition of net sales by product category ranked in
order by sales volume was approximately 50.4% Feminine Care Products,
18.1% Infant Care Products, 11.8% Household Products (Gloves and Woolite),
-------
10.4% Sun and Skin Care Products, 8.2% Hair Care Products, and 1.1%
Toothbrushes. The United States operations accounted for 92.2% of the
Company's net sales in 1995.
8
<PAGE>
E. Products
Feminine Care Products. The Company's largest brand is Playtex
-------
tampons. In 1995, the brand accounted for 50.4% of the Company's total
net sales. Playtex tampons is the second largest selling tampon brand in
-------
the United States. The Company's market share of tampon sales (by dollar
volume) for the five most recent fiscal years, as reported by Nielsen
Marketing Research, was as follows:
Twelve Months Ended December
--------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
27% 29% 30% 30% 29%
Total United States retail sales of tampons in 1995 were approximately
$780 million. Sales have increased at a compound annual growth rate of
approximately 3.3% (in dollar volume) from 1991 through 1995. During
fiscal 1995, the market decreased approximately 1.0% (in dollar volume)
versus 1994. This decrease was primarily due to a significant increase in
promotional price discounting during the year.
In June 1991, the Company introduced Ultimates(registered trademark),
---------
a line of cardboard applicator tampons. The product features a rounded
tip cardboard applicator with a rolled pledget design that provides the
consumer with a quality product in the cardboard segment of the tampon
market. In 1994, the Company introduced Ultimates Silk Glide tampons into
--------- ----------
the cardboard applicator segment. Silk Glide, which replaced the original
----------
Ultimates tampons, has a rounded-tip applicator with a new surface coating.
---------
Silk Glide was also introduced in a Super Plus absorbency. In 1995, Playtex
---- -----
renamed the product Playtex Silk Glide to position the product under the
------------------
Playtex product umbrella. Also in 1995, Playtex introduced Soft Comfort
------------
tampons, a soft, new plastic material designed to improve comfort.
In October 1994, the Company entered into an agreement with a
subsidiary of Johnson & Johnson ("J&J") to manufacture plastic applicator
tampons for J&J to sell under its trademarks in many international markets
outside of North America.
Infant Care. The Company's second largest product category is infant
care, which is comprised of the Playtex disposable nurser system, the
-------
Cherubs collection of reusable, hard bottles, Playtex infant/toddler cups
-------
and pacifiers. The Playtex disposable nurser system includes disposable
-------
bottles (the largest segment of the business), nurser kits, rubber nipples
and component parts. In 1995, Infant Care products accounted for
approximately 18.1% of the Company's total net sales; the disposable nurser
system represented approximately 60.0% of this category.
The Company is the market leader in disposable feeding systems for
infants. The Cherubs Collection was acquired in May 1989. Cherubs
------- -------
provided the Company with an established entry into the reusable bottle
category featuring a number of different designs. In addition, the Company
offers other baby-related products such as trainer cups, juice cups and
pacifiers.
9
<PAGE>
In July 1994, the Company completed the purchase of SmileTote, Inc.
("SmileTote"), a manufacturer and marketer of infant/toddler cups and
bottles, which use a patented snap top closure. Due in part to the success
of Playtex Spill-Proof cups, SmileTote(registered trademark) has not
----------- ---------
yielded the results anticipated. During the fourth quarter of 1995 and in
connection with certain strategic decisions regarding the SmileTote
---------
product, the Company wrote off the remaining $6.4 million of intangible
assets associated with SmileTote.
---------
Household Products. Household products consist of Playtex gloves and
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the Woolite(registered trademark) rug and upholstery cleaning products.
-------
Since the Company introduced the first household latex glove in 1954,
Playtex gloves have continued to be the leader in this category. In 1995,
-------
this product line accounted for approximately 6.9% of the Company's total
net sales. The Company competes primarily with manufacturers of various
lower priced, latex gloves which are generally manufactured overseas and
marketed as private label gloves. Private label gloves, in the aggregate,
have the second largest market share behind Playtex.
As noted previously, the Company acquired certain assets of the
Woolite rug and upholstery cleaning business ("Woolite") in February 1995.
-------
Woolite is the second leading brand in this domestic business.
-------
Banana Boat. Since their introduction in the 1980's, sales of Banana
------
Boat products have grown steadily. In 1995, these products accounted for
----
approximately 10.4% of the Company's total net sales.
Banana Boat has achieved the second largest share of the sun care
-----------
market (by unit volume). For the 1995 selling season, Banana Boat had
-----------
approximately a 16% share of the market, compared to approximately a 14%
share in 1994 and a 13% share in 1993. For the 1995 selling season, the
sun care market grew approximately 8% (in unit volume) versus the same
period in 1994.
Banana Boat offers an extensive line of sun care products designed for
-----------
specific uses, such as sun protection in SPFs from 4 to 50, waterproof and
sweatproof formulas and infant and children's products. Banana Boat also
-----------
sells a variety of skin care products, including sunless tanning
lotion, after-sun products, moisturizers and skin treatment formulas
containing additives such as Vitamin E and Aloe Vera.
For further discussion of Banana Boat, see "History - BBH
-----------
Acquisition".
Hair Care Products. In 1995, hair care products contributed
approximately 8.2% of the Company's total net sales.
In the fourth quarter of 1995, the Company terminated its license
arrangement for the manufacturing and sale of LaCoupe(registered trademark)
-------
hair care products. This product line contributed $0.7 million in net
sales during 1995.
10
<PAGE>
As a result of management's evaluation of the erosion of Jhirmack's
----------
market share and net sales, the Company effected a write-off of all of the
goodwill associated with the Jhirmack business in the third quarter of
--------
1993. The decline in net sales continued in 1995 and the Company is
evaluating strategic alternatives for this business. Hair Care is not
considered one of the Company's core businesses.
Toothbrushes. The Company manufactures and distributes regular,
angled and child toothbrushes under the Tek brand name and produces private
---
label toothbrushes. In 1995, this line contributed approximately $5.1
million in total net sales. Tek's share in the total toothbrush market in
---
1995 was approximately 1.0%. In 1994, the Company introduced an improved,
contemporary-styled toothbrush under the name
Tek Excel(registered trademark).
---------
F. Marketing
The Company allocates a significant portion of its revenues to the
advertising and promotion of its products. Expenditures for these purposes
were 24.3%, 20.9%, and 21.4%, respectively, as a percentage of net sales
during each of the last three fiscal years. These expenditures are an
integral component of the overall marketing effort for the Company's direct
customers and the ultimate consumer.
G. Competition
The markets for the Company's products are highly competitive. They
are characterized by the frequent introduction of new products, often
accompanied by major advertising and promotional programs. The Company
competes primarily on the basis of product quality, product differentiation
and brand name recognition supported by advertising and promotion.
Tambrands, Inc. has the leading market share and is the Company's principal
competitor in the tampon market. In its remaining businesses, the
Company's competitors consist of a large number of domestic and foreign
companies, a number of which have significantly greater financial resources
and less leverage than the Company.
The Company believes that the market for consumer products will
continue to be highly competitive. In fact, the level of competitiveness
may intensify in the future, including higher spending for advertising and
promotion, new product initiatives and continued activity in the private
label sector.
H. Regulation
Government regulation has not materially restricted or impeded the
Company's operations. Certain of the Company's products are subject to
regulation under the Federal Food, Drug and Cosmetic Act and the Fair
Packaging and Labeling Act. The Company is also subject to regulation by
the Federal Trade Commission with respect to the content of its
advertising, its trade practices and other matters. The Company is subject
to regulation by the United States Food and Drug Administration in
connection with its manufacture and sale of tampons.
11
<PAGE>
I. Distribution
The Company's sales are generated by its sales organization of
approximately 245 people and by exclusive distributors. Unlike many of its
competitors, substantially all members of the Company's sales force are
employees of the Company. In 1995, products were sold through supermarkets
(40.0%), drug stores (20.0%) and mass merchandising and other outlets
(40.0%). In recent years, sales through mass merchandisers and price
clubs, as a percentage of total sales, have experienced gains at the
expense of drug stores, while sales through supermarkets have remained
generally constant.
The field sales force makes sales presentations at the headquarters or
home offices of its customers, where applicable, as well as to individual
retail outlets. The sales representatives focus their efforts on selling
the Company's products, providing services to its direct customers and
executing programs to ensure sales to the ultimate consumer. Consumer-
directed programs include arranging for on-shelf and separate displays,
obtaining feature price reductions, and coordinating cooperative
advertising participation.
J. Research and Development
The Company maintains ongoing research and development programs in
Paramus, New Jersey. Approximately 50 employees are engaged in these
programs, for which expenditures were $6.5 million, $5.8 million, and $5.5
million, respectively, during each of the last three fiscal years. For
those same periods, Feminine Care research and development accounted for
approximately 51%, 52%, and 52% of the total expenditures, respectively;
and Infant Care research and development accounted for approximately 26%,
25%, and 22%, respectively. The balance of such expenditures supported
research and development in the Company's other product lines. The
acquisition in 1995 of a 100% ownership interest in BBH will increase
research and development costs for sun care products in the future.
K. Trademarks and Patents
The Company has proprietary rights to a number of trademarks important
to its businesses, such as Playtex, Gentle Glide, Silk Glide, Soft Comfort,
------- ------------ ---------- ------------
Living, HandSaver, Spill-Proof, Most Like Mother, Natural Actions, Cherubs,
------ --------- ----------- ---------------- --------------- -------
Look & Learn, Jhirmack, Banana Boat, and Tek. The Playtex and Living
------------ -------- ----------- --- ------- ------
trademarks in the United States and Canada are owned by Playtex Marketing
Corporation ("Marketing Corporation"), a corporation owned equally by the
Company and Apparel. Marketing Corporation is responsible for protecting,
exercising quality control over and enforcing the trademarks. The Company
and Apparel each have licenses from Marketing Corporation for the use
of such trademarks in the United States and Canada on a perpetual, royalty-
free basis; Apparel's license is for apparel and apparel-related products,
and the Company's license is for all other products. In all other
countries, Apparel retains title to the Playtex and Living trademarks,
------- ------
subject to a perpetual, royalty-free license to the Company to use such
trademarks for all products other than apparel products.
12
<PAGE>
The Company also owns various patents related to certain products and
their method of manufacture, including patents for the tampon wrap
material, the assembly of the compact tampon, the tampon inserter, the baby
nurser holder, the configuration of certain baby pacifiers, nipples, caps,
and formulations for certain hair care products. The patents expire at
varying times, ranging from 1997 to 2012. The Company also has pending
patent applications for various products and methods of manufacture
relating to its tampon, nurser and toothbrush businesses. While the
Company considers its patents to be important to its business, it believes
that the success of its products is more dependent upon the quality of
these products and the effectiveness of its marketing programs. No single
patent is material to the business of the Company.
L. Raw Materials and Suppliers
The principal raw materials used by the Company in the manufacture of
its products are synthetic fibers, resin-based plastics and other chemicals
and certain natural materials, all of which are normally readily available.
While all raw materials are purchased from outside sources, the Company is
not dependent upon a single supplier in any of its operations for any
material essential to its business or not otherwise commercially available
to the Company. The Company has been able to obtain an adequate supply of
raw materials, and no shortage of such materials is currently anticipated.
M. Customers and Backlog
No single customer or affiliated group of customers represents 10% or
more of the Company's sales, except for Wal-Mart Stores, Inc., including
Sam's Club ("Wal-Mart") (approximately 17% in 1995, 15% in 1994, and 13% in
1993). For each of such periods, net sales to the Company's next three
largest customers represented in the aggregate approximately 12% in 1995,
11% in 1994 and 10% in 1993 of the total net sales of the Company. The
loss of sales to Wal-Mart could have a material adverse effect on the
business and operations of the Company. In accordance with industry
practice, the Company grants credit to its customers at the time of
purchase. In addition, the Company grants extended payment terms to new
customers and for the initial sales of introductory products and product
line extensions, and it grants extended terms on its Banana Boat products
-----------
due to the seasonal nature of this business. While the extension of credit
carries risk, the bad debt experience of the Company has not been material
in recent years.
The Company's policy is not to accept returned goods, except for
certain Sun Care products, which are seasonal in nature. Exceptions to
this policy are authorized by management of the sales organization.
Returns result primarily from Sun Care seasonal products, damage and
shipping discrepancies and generally are not material to the total net
sales of the Company.
Because of the short period between order and shipment dates
(generally less than one month) for most of the Company's sales (more than
80% in 1995), the dollar amount of current backlog is not considered to be
a reliable indication of future sales volume.
13
<PAGE>
N. Employees and Labor Relations
The Company's worldwide workforce consisted of approximately 1,600
employees as of December 30, 1995, of whom 184 were located outside the
United States, primarily in Canada. Of the United States facilities, only
the Tek operation at Watervliet, New York, has union representation; it is
organized by The Brush Workers Union Local No. 20466 I.U.E. A.F.L.-C.I.O.
The collective bargaining agreement covered 159 workers at December 30,
1995 and expires on June 28, 1997. The Company believes that its labor
relations are satisfactory and no material labor cost increases, other than
those in the ordinary course of business, are anticipated.
O. Environmental
The Company believes that it is in substantial compliance with
federal, state and local provisions enacted or adopted regulating the
discharge of materials hazardous to the environment. There are no
significant capital expenditures for environmental control in the current
year or expected in the near future. See "Legal Proceedings."
P. Internal Restructuring
On May 23, 1995, the Company formed as wholly-owned subsidiaries
Playtex Sales & Service, Inc. ("PSSI") and Playtex Manufacturing, Inc.
("PMI").
PSSI was formed to provide sales solicitation services to the Company
and Playtex Beauty Care, Inc., a wholly-owned subsidiary. In addition,
PSSI will provide corporate administration services to the Company and all
of its U.S. subsidiaries. On December 30, 1995, the Company transferred its
sales and certain corporate administration related office facilities,
furniture, fixtures and equipment, and vehicles to PSSI as a capital
contribution. The Company also transferred all related personnel to PSSI
as of the first day of fiscal 1996. PSSI had no operations prior to
December 31, 1995, and will bear all direct and indirect costs related to
sales representation and corporate administration effective the beginning
of fiscal 1996. The Company and PSSI have entered into inter-company
agreements for the provision of U.S. administrative services and sales
solicitation services. Prior to December 30, 1995, there was no
predecessor business to PSSI as there was no comparable sales
representation or corporate administrative agreement in effect.
PMI was formed to provide purchasing, manufacturing and assembly
services to meet the inventory requirements of the Company. In addition,
PMI will also provide the Company with distribution and research and
development ("R&D") services. On December 30, 1995, the Company
transferred all of its purchasing, manufacturing, assembly, distribution
and R&D facilities, and machinery and equipment to PMI as a capital
contribution. The Company also transferred all related personnel to PMI as
of the first day of fiscal 1996. PMI had no operations prior to December
31, 1995, and it will bear all direct and indirect costs of purchasing,
manufacturing, assembly, distribution and R&D operations effective the
beginning of 1996 fiscal year. The Company and PMI have entered into
inter-company agreements for the provision of manufacturing and R&D
services to the Company by PMI. Prior to December 30, 1995, there was no
predecessor business of PMI as there was no comparable manufacturing and
R&D agreements in effect.
BBH was acquired by the Company on October 31, 1995 pursuant to an
agreement and plan of merger dated October 17, 1995. (See discussion of
the BBH Acquisition on page 6 of this report.)
14
<PAGE>
As of December 30, 1995, all of Sun's operating assets were
transferred to the Company. Sun's only assets at December 30, 1995 are
identifiable intangible assets, excess of cost over net assets of acquired
businesses, and tax benefits. Substantially all of Sun's income will come
from royalty income from the license of its intangible assets to the
Company. Sun also has royalty arrangements with third parties that are
unrelated to the Company or its subsidiaries.
PMI, PSSI, and BBH and its wholly-owned subsidiary Sun are guarantors
of the Company's Senior Subordinated Notes and the Company's 1995 Credit
Agreement. On March 22, 1996, BBH was merged with and into Sun, with Sun
being the surviving corporation. See audited financial statements for
these subsidiaries included in the Annual Report as exhibits 13(b), 13(c),
and 13(d), respectively.
Q. Board of Directors Set Record Date and Date, Time and Place of Annual
Meeting of Stockholders
At its meeting on March 5, 1996, the Board of Directors set the close
of business on April 3, 1996 as the record date for determining
stockholders entitled to notice of and to vote at the 1996 Annual Meeting
of Stockholders. This meeting will be held at Chemical Bank, 270 Park
Avenue, New York, New York on Wednesday, May 22, 1996 at 11:00 a.m. local
time.
R. Special Factors Regarding Forward-Looking Statements
Certain statements in this Annual Report on Form 10-K or others made
hereafter (including orally) may constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from
any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, but are not limited
to: intensified competition, higher spending for advertising and promotion,
new product initiatives, and continued activity in the private label sector
(See "Business-Competition"); the loss of a significant customer (See
"Business-Customers and Backlog"); product liability litigation and changes
in governmental regulation (See "Legal Proceedings").
Item 2. Properties
The Company operates manufacturing and distribution facilities in
Dover, Delaware; Watervliet, New York; and Arnprior and Malton, Canada.
Currently, the Company's plastic tampon manufacturing facility is leased
from Apparel. The Company is building a new 175,000 square feet facility
adjacent to one of its current manufacturing locations in Dover, Delaware,
which, when completed, will be the new plastic tampon manufacturing site.
Construction and occupation of this new facility is expected to be
completed by mid-1996. At that time, the month-to-month lease with Apparel
will be terminated. The Company maintains a research and development
facility in Paramus, New Jersey, which is leased from Apparel on a month-
to-month basis. The principal executive offices of the Company are located
at 300 Nyala Farms Road, Westport, Connecticut 06880 and are occupied
pursuant to a lease which expires in 2004. The Company operates two
facilities in Canada.
15
<PAGE>
The Arnprior facility, primarily a warehouse and assembly operation, is
owned by the Company. The Malton facility, a warehouse and office site, is
leased from Apparel. This lease extends to 2004. For 1995, the Company's
average utilization rate of manufacturing capacity was an estimated 85%.
Except for the completion of the new tampon manufacturing facility, the
Company does not anticipate any material acquisition of plant or any
significant increase in the capacity thereof in the near future.
The following table sets forth the principal properties of the
Company, which are located in four states and Canada:
# of Estimated
Facilities Square Footage
---------- --------------
Facilities Owned
----------------
Manufacturing
-------------
Dover, DE 3 701,000
Watervliet, NY 1 159,600
Office/Distribution/Warehouse
-----------------------------
Arnprior, Canada 1 91,800
Facilities Leased
-----------------
Manufacturing
-------------
Dover, DE 1 169,800
Office/Distribution/Warehouse
-----------------------------
Dover, DE 4 276,000
Westport, CT 1 41,700
Paramus, NJ 1 33,000
Malton, Canada 1 72,800
Item 3. Legal Proceedings
Beginning in 1980, studies were published leading to the hypothesis
that tampons are associated with Toxic Shock Syndrome ("TSS"). Since 1980,
numerous claims have been filed against manufacturers of tampons, a small
percentage of which have been litigated to conclusion. Nine cases relating
to Playtex tampons have been tried to date, the most recent in 1991; in
five of them the Company prevailed, and in four the plaintiffs prevailed,
with compensatory and punitive damages being awarded in three of such
cases. The largest damages award the Company experienced in connection
with TSS litigation occurred in 1985, in which the compensatory award
against the Company was approximately $1.2 million and the punitive damages
award was $10.0 million.
The number of TSS claims relating to Playtex tampons has declined
substantially over the years. During the mid-1980s, there were
approximately 200 pending claims at any one time relating to Playtex
tampons. As of the end of February 1996, there were approximately 15
pending claims, although additional claims may be asserted in the future.
For claims filed from October 1, 1985, until November 30, 1995, the Company
is self-insured for TSS claims, and bears the costs of defending those
claims, including settlements and trials. Effective December 1, 1995, the
Company obtained insurance coverage with certain limits in excess of the
self-insured retention of $1.0 million per occurrence/$4.0 million in the
aggregate, on claims occurring on or after December 1, 1995.
In 1985, a voluntary exchange program was initiated by the Company for
its tampons containing polyacrylate, a chemical substance which increases
absorbency. The Company currently makes no products with polyacrylate.
16
<PAGE>
Various studies about TSS and tampons are reported from time to time.
A 1986-87 study reported an increased risk of TSS with Playtex tampons
compared with some other tampons. Since then, the Company has reduced the
absorbency of its regular and super tampons. The Company has also referred
to the 1986-87 study in the warning insert contained in each package of its
tampons. The 1986-87 study was published in early 1989.
The incidence rate of menstrually associated TSS among tampon users
has declined significantly over the years. In 1982, the rate was reported
to be between six and seventeen occurrences per 100,000 menstruating women
per year. The most recent reported information as of 1989 is that the rate
is approximately one occurrence per 100,000.
In mid-July 1994, the Company was served with a complaint in a product
liability action in the United States District Court for the District of
Kansas, captioned "Harding, Hayes et. al. v. Tambrands, Inc. and Playtex
Family Products Corp." Plaintiffs in the case purport to represent and
seek to certify a nationwide class of tampon users who allegedly contracted
TSS from the use of rayon fiber tampons manufactured by Playtex.
Tambrands, Inc. was named as a co-defendant in the case with respect to its
tampons. The plaintiffs seek to suspend the statute of limitations on
behalf of purported class members whose suits would otherwise be time
barred. The complaint seeks, among other things, unspecified damages,
equitable relief, creation of a medical monitoring fund for the benefit of
the purported class members, and punitive damages. The Company opposed
class certification. In March 1996, the Court denied class certification.
The plaintiff's time to appeal this ruling has not expired. As noted
above, the Company has been virtually self-insured for TSS claims since
1985 and therefore carries no third party insurance for the claims alleged
in the complaint. The Company believes that this case will not have a
materially adverse effect on its consolidated financial position, results
of operations or cash flows.
Based on the Company's experience with TSS cases, its evaluation of
the currently pending claims, the reported decline in the incidence of
menstrually associated TSS, the federally-mandated warning about TSS on and
in its tampon packages and the development of case law upholding the
adequacy of tampon warnings which comply with federally-mandated warnings,
the Company believes that there are no claims or litigation pending,
including the TSS cases, which would have a materially adverse effect on
the consolidated financial position, results of operations or cash flows of
the Company. The Company's belief with respect to the TSS cases is not
based on an opinion of counsel, however, and litigation is inherently
uncertain.
Several states, particularly in the Northeast, have in recent years
proposed legislation that would ban nondegradable plastic tampon
applicators as a means of reducing some portion of beach litter stemming
from inadequate sewage treatment facilities for reducing solid waste. No
such legislation has been passed to date. The United States Environmental
Protection Agency ("EPA") has also been studying national waste disposal in
general, which includes plastic tampon applicators. The Company now
produces a cardboard applicator tampon (Silk Glide) and is investigating
----------
other alternatives to its current plastic applicator should such
legislation be passed.
17
<PAGE>
The Company, as successor to the Family Products businesses of IPI, is
presently participating as part of a group of several potentially
responsible corporate parties ("PRP Group") in the remediation of the
Wildcat Landfill in Dover, Delaware, which has been designated as a
"Superfund" site by the EPA. In June 1989, the PRP Group entered into a
settlement pursuant to which the Company (together with Apparel) assumed a
share of the remediation costs, which share, based on reasonable
engineering estimates, was $565,000 for both companies. The Company and
Apparel have each paid $257,000 (or a total of $514,000) to an escrow fund
under an agreement with other settling parties and site remediation has
been completed. Associated monitoring costs are not expected to be
material.
The Company has joined the PRP Group with respect to the Kent County
Landfill Site in Houston, Delaware, which has been designated a "Superfund"
site by the State of Delaware. A study of the site is being conducted to
formulate a remediation plan. The Company's allocated share of the costs
of the remediation study is not expected to exceed $70,000, which amount
will be shared equally with Apparel. Although the remedial costs
associated with the site will be difficult to assess until the study is
completed, based on the information currently available to the Company, the
nature and quantity of material deposited by the Company and the number of
other entities in the PRP group who are expected to share in the costs and
expenses, the Company does not believe that the costs to the Company will
be material. The Company and Apparel will share equally all expenses and
costs associated with IPI's involvement with this site.
The Company does not believe that its potential costs with respect to
environmental matters will, in the aggregate, have a materially adverse
effect on the consolidated financial position, results of operations or
cash flows of the Company.
The Company is subject to regulation by the United States Food and
Drug Administration in connection with its manufacture and sale of tampons.
Item 4. Submissions of Matters to Vote of Security Holders
Not applicable
18
<PAGE>
PART II
-------
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters
The Company has two classes of authorized stock: (a) Common Stock and
(b) up to 50,000,000 shares of preferred stock, par value $.01 per share.
Of 100,000,000 shares of Common Stock authorized, 50,879,701 shares were
issued and outstanding as of March 18, 1996. There were 516 holders of
record of the Company's Common Stock on that date. The Common Stock is
traded on the New York Stock Exchange ("NYSE") under the symbol "PYX." As
of March 18, 1996, the Company had not issued any shares of preferred
stock. No cash dividends have ever been paid on the Common Stock, and the
Company is restricted from paying dividends on the Common Stock by the
terms of the 1995 Credit Agreement and the indenture governing the Senior
Subordinated Notes.
The following table sets forth the high and low sales price per share
of the Common Stock during the fiscal year ended December 30, 1995 as
reported by the NYSE:
Fiscal 1995 High Low
----------- ---- ---
First Quarter 8 5/8 6 3/4
Second Quarter 10 1/4 7 1/2
Third Quarter 12 1/2 8 3/8
Fourth Quarter 9 6 1/2
Item 6. Selected Financial Data
Information in the section entitled "Selected Financial Data" in the
Company's 1995 Annual Report to Stockholders (included as Exhibit 13(a) to
this Annual Report on Form 10-K) is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Information in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's
1995 Annual Report to Stockholders (included as Exhibit 13(a) to this
Annual Report on Form 10-K) is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The financial statements and related documents of the Company that are
incorporated by reference in this Annual Report on Form 10-K, and the
financial statement schedule of the Company and related documents that are
filed with this Annual Report, are listed in Part IV, Item 14, of this
Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
19
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The information with respect to the Company's Directors and nominees
for Director under the heading "Election of Directors" in the Proxy
Statement, is incorporated herein by reference.
Item 11. Executive Compensation
The information under the heading "Executive Compensation" in the
Proxy Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information under the heading "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions
The information under headings "Certain Transactions" and "Executive
Compensation - Arrangements with Former Executive Officers" in the Proxy
Statement is incorporated herein by reference.
20
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
(a) Financial Statements
(a)(1)(i) The following Consolidated Financial Statements and
related Notes of the Company are incorporated herein by reference to the
Company's 1995 Annual Report to Stockholders (included as Exhibit 13(a) to
this Annual Report on Form 10-K):
Independent Auditors' Report
Consolidated Balance Sheets as of December 30, 1995 and December 31,
1994
Consolidated Statements of Operations for the twelve months ended
December 30, 1995, December 31, 1994 and December 25, 1993
Consolidated Statements of Redeemable Preferred Stocks, Common Stock
and Other Stockholders' Equity for the twelve months ended
December 30, 1995, December 31, 1994 and December 25, 1993
Consolidated Statements of Cash Flows for the twelve months ended
December 30, 1995, December 31, 1994 and December 25, 1993
Notes to Consolidated Financial Statements
(a)(1)(ii) The following Balance Sheet and Related Notes of Playtex
Manufacturing, Inc. (a wholly owned subsidiary of the Company) (included
as Exhibit 13(b) to this Annual Report on Form 10-K) are incorporated
herein by reference:
Independent Auditors' Report
Balance Sheet as of December 30, 1995
Notes to Balance Sheet
(a)(1)(iii) The following Balance Sheet and Related Notes of Playtex
Sales & Services, Inc. (a wholly owned subsidiary of the Company) (included
as Exhibit 13(c) to this Annual Report on Form 10-K) are incorporated
herein by reference:
Independent Auditors' Report
Balance Sheet as of December 30, 1995
Notes to Balance Sheet
21
<PAGE>
(a)(1)(iv) Consolidated Financial Statements and Related Notes of
Banana Boat Holding Corporation (a wholly owned subsidiary of the Company)
(included as Exhibit 13(d) to this Annual Report on Form 10-K) are
incorporated herein by reference:
Independent Auditors' Report
Consolidated Balance Sheet as of December 30, 1995
Consolidated Statement of Operations for the Two Month Period Ended
December 30, 1995
Consolidated Statement of Common Stock and Other Stockholder's Equity
for the Two Month Period Ended December 30, 1995
Consolidated Statement of Cash Flows for the Two Month Period Ended
December 30, 1995
Notes to Consolidated Financial Statements
(a) (2) Financial Statement Schedule
The following financial statement schedule of the Company as set forth
below is filed with this Annual Report on Form 10-K:
Page
----
Independent Auditors' Report on Schedule 23
Schedule VIII - Valuation and Qualifying Accounts 24
All other schedules are omitted as the required information is not
applicable or the information is presented in the consolidated financial
statements or related notes.
(a) (3) Exhibits
See Exhibit Index on Pages X-1 to X-9 for exhibits filed with this
Annual Report on Form 10-K.
(b) Reports on Form 8-K
On November 14, 1995, the Company filed with the Commission a Current
Report on Form 8-K dated November 14, 1995, pursuant to Items 2 and 7 of
Form 8-K, with respect to the BBH Acquisition, and amended such Current
Report on Form 8-K/A on January 11, 1996.
22
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
The Board of Directors and Stockholders
Playtex Products, Inc.
Under date of February 6, 1996, we reported on the consolidated
balance sheets of Playtex Products, Inc. and subsidiaries as of December
30, 1995 and December 31, 1994, and the related consolidated statements of
operations, redeemable preferred stocks, common stock and other
stockholders' equity, and cash flows for the twelve months ended December
30, 1995, December 31, 1994, and December 25, 1993, as contained in the
1995 Annual Report to Stockholders. Our report refers to a change in
accounting for income taxes and post-retirement benefits other than
pensions in 1993. These consolidated financial statements and our report
thereon are incorporated by reference in the Annual Report on Form 10-K for
the fiscal year 1995. In connection with our audits of the aforementioned
consolidated financial statements, we also have audited the related
financial statement schedule for the twelve months ended December 30, 1995,
December 31, 1994, and December 25, 1993, as listed in Item 14(a)(2) of the
Annual Report on Form 10-K for the fiscal year 1995. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement
schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
February 6, 1996
23
<PAGE>
PLAYTEX PRODUCTS, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Periods Ended December 30, 1995, December 31, 1994, and December 25, 1993
(In Thousands)
<TABLE><CAPTION>
Balance at Additions Balance
Beginning Charged to at End
of Period Income Deductions(1) of Period
----------- ----------- ------------- ---------
Receivables:
Allowance for doubtful
accounts
<S> <C> <C> <C> <C>
December 25, 1993 $(2,256) $ (120) $227 $(2,149)
December 31, 1994 $(2,149) $ (650) $453 $(2,346)
December 30, 1995 $(2,346) $ (449) $153 $(2,042)
---------------
</TABLE>
(1) - Represents accounts written off.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PLAYTEX PRODUCTS, INC.
By: /s/Michael R. Gallagher
--------------------------------------
Michael R. Gallagher
Chief Executive Officer
March 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated this 28th day of March 1996.
Signatures Title
---------- -----
/s/Robert B. Haas Chairman of the Board
-------------------------- and
Robert B. Haas Director
/s/Michael R. Gallagher Chief Executive Officer and
--------------------------
Michael R. Gallagher Director
/s/Michael F. Goss Executive Vice President
-------------------------- and Director
Michael F. Goss (Principal Financial and
Accounting Officer)
/s/Joel E. Smilow
-------------------------- Director
Joel E. Smilow
-------------------------- Director
Thomas H. Lee
/s/Douglas D. Wheat
--------------------------
Douglas D. Wheat Director
--------------------------
Nancy S. Amer Director
--------------------------
Thomas Herskovits Director
--------------------------
Kenneth F. Yontz Director
25
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit No. Description
----------- -----------
3(a) Restated Certificate of Incorporation of Playtex
Products, Inc. (hereafter, "Playtex" or the "Company")
dated as of May 5, 1994. (Incorporated herein by
reference to Exhibit 4(a) of Playtex's Registration
Statement on Form S-8, No. 33-88806.)
3(a)(1) Restated Certificate of Incorporation, as amended
through June 6, 1995. (Incorporated herein by
reference to Exhibit 3.2 of Playtex's Form 8-K, dated
June 6, 1995, File No. 33-25485-01.)
3(b) Bylaws of Playtex. (Incorporated herein by reference
to Exhibit 3(b) of Playtex's Registration Statement on
Form S-1, No. 33-25485.)
3(c) Amendment to Bylaws of Playtex. (Incorporated herein
by reference to Exhibit 3(g) of Playtex's Registration
Statement on Form S-1, No. 33-43771.)
3(d) Amendment to Bylaws of Playtex. (Incorporated herein
by reference to Exhibit 3(g) of Playtex's Annual Report
on Form 10-K for the fiscal year ended December 25,
1993, File No. 33-25485-01.)
3(e) Amendment to Bylaws of Playtex. (Incorporated herein
by reference to Exhibit 4(e) of Playtex's Registration
Statement on Form S-8, No. 33-88806.)
3(f) By-laws of the Company, as amended through June 6,
1995. (Incorporated herein by reference to Exhibit 3.1
of Playtex's Form 8-K, dated June 6, 1995, File No. 33-
25485-01.)
3(g) Merger Certificate dated March 8, 1994 between Playtex
Family Products Corporation ("Family Products") and
Playtex. (Incorporated herein by reference to Exhibit
3(h) of Playtex's Annual Report on Form 10-K for the
fiscal year ended December 25, 1993, File No. 33-25485-
01.)
4(a) Specimen Common Stock Certificate. (Incorporated
herein by reference to Exhibit 4(a) of Playtex's
Registration Statement on Form S-1, No. 33-71512.)
4(b) Indenture dated as of February 2, 1994 relating to the
9% Senior Subordinated Notes due 2003 (the "Senior
Subordinated Notes") among Family Products, Playtex and
IBJ Schroder Bank & Trust Company, as trustee,
including form of Note. (Incorporated herein by
reference to Exhibit 4(b) of Playtex's Annual Report on
Form 10-K for the fiscal year ended December 25, 1993,
File No. 33-25485-01.)
X-1
<PAGE>
Exhibit No. Description
----------- -----------
4(b)(1) First Supplemental Indenture dated as of March 8, 1994.
(Incorporated herein by reference to Exhibit 4(b)(1) of
Playtex's Annual Report on Form 10-K for the fiscal
year ended December 25, 1993, File No. 33-25485-01.)
4(b)(2) Second Supplemental Indenture, dated as of June 6, 1995
among the Company, Playtex Sales & Service, Inc. and
IBJ Schroder Bank and Trust Company, as Trustee.
(Incorporated herein by reference to Exhibit 4.1 of
Playtex's Form 8-K, dated June 6, 1995, File No. 33-
25485-01.)
4(b)(3) Third Supplemental Indenture, dated as of June 6, 1995
among the Company, Playtex Manufacturing Inc. and IBJ
Schroder Bank and Trust Company, as Trustee.
(Incorporated herein by reference to Exhibit 4.2 of
Playtex's Form 8-K, dated June 6, 1995, File No. 33-
25485-01.)
*4(b)(4) Fourth Supplemental Indenture among Playtex Products,
Inc., as Issuer, BBA Acquisition, Inc., as Guarantor
and IBJ Schroder Bank & Trust Company, as Trustee,
dated as of October 31, 1995.
*4(b)(5) Fifth Supplemental Indenture among Playtex Products,
Inc., as Issuer, BBA Acquisition, Inc., as Guarantor
and IBJ Schroder Bank & Trust Company, as Trustee,
dated as of October 31, 1995.
*4(b)(6) Sixth Supplemental Indenture among Playtex Products,
Inc., as Issuer, BBA Acquisition, Inc., as Guarantor
and IBJ Schroder Bank & Trust Company, as Trustee,
dated as of October 31, 1995.
*4(b)(7) Seventh Supplemental Indenture among Playtex Products,
Inc., as Issuer, BBA Acquisition, Inc., as Guarantor
and IBJ Schroder Bank & Trust Company, as Trustee,
dated as of October 31, 1995.
4(c)(1) Amended and Restated Stockholders Agreement.
(Incorporated herein by reference to Exhibit 4 to
Playtex's Current Report on Form 8-K dated November 5,
1991.)
*4(c)(2) Amendment No. 1, dated as of March 17, 1995, to Amended
and Restated Stockholders Agreement.
4(d) Form of Junior Subordinated Note of Playtex.
(Incorporated herein by reference to Exhibit 4(i) of
Playtex's Registration Statement on Form S-1, No. 33-
25485.)
4(d)(1) Form of Junior Subordinated Note of Playtex dated
December 15, 1989. (Incorporated herein by reference
to Exhibit 4(f)(1) to Playtex's Annual Report on Form
10-K for the year ended December 30, 1989, No. 33-
25485.)
X-2
<PAGE>
Exhibit No. Description
----------- -----------
4(d)(2) Junior Subordinated Note of Playtex dated December 15,
1990. (Incorporated herein by reference to Exhibit
4(f) (2) to Playtex's Annual Report on Form 10-K for
the year ended December 29, 1990, No. 33-25485.)
4(d)(3) Junior Subordinated Note of Playtex dated December 15,
1991. (Incorporated herein by reference to Exhibit
4(h)(3) of Playtex's Registration Statement on Form S-
1, No. 33-43771.)
4(d)(4) Junior Subordinated Note of Playtex dated December 15,
1992. (Incorporated herein by reference to Exhibit
4(h)(4) of Playtex's Annual Report on Form 10-K for the
year ended December 26, 1992.)
4(d)(5) Junior Subordinated Note of Playtex dated December 15,
1993. (Incorporated herein by reference to Exhibit
4(j)(5) of Playtex's Registration Statement on Form S-
1, No. 33-71512.)
4(d)(6) Agreement between Playtex and Playtex Apparel Partners,
L.P. dated November 30, 1994 relating to Junior
Subordinated Notes. (Incorporated herein by reference
to Exhibit 4(d)(6) of Playtex's Annual Report on Form
10-K for the fiscal year ended December 31, 1994, File
No. 33-25485-01.)
10(a) Bank Credit Agreement, dated as of February 2, 1994,
among Playtex, Family Products, Chemical Bank, as
Agent, and the lenders party thereto (the "Bank Credit
Agreement") and the forms of notes, security documents
and guarantees attached as exhibits thereto.
(Incorporated herein by reference to Exhibit 10(a) of
Playtex's Annual Report on Form 10-K for the fiscal
year ended December 25, 1993, File No. 33-25485-01.)
10(a)(1) First Amendment to the Bank Credit Agreement dated
December 14, 1994. (Incorporated herein by reference to
Exhibit 10(a)(1) of Playtex's Annual Report on Form 10-
K for the fiscal year ended December 31, 1994, File No.
33-25485-01.)
10(a)(2) Credit Agreement, dated as of June 6, 1995, among the
Company, Chemical Bank, as Agent, and the Lenders
thereto and forms of notes, security documents and
guarantees attached as exhibits thereto. (Incorporated
herein by reference to Exhibit 10.1 of Playtex's Form
8-K, dated June 6, 1995, File No. 33-25485-01.)
*10(a)(3) First Amendment, dated October 5, 1995, to the Credit
Agreement, dated as of June 6, 1995, among the Company,
Chemical Bank, as Agent, and the Lenders thereto.
X-3
<PAGE>
Exhibit No. Description
----------- -----------
*10(a)(4) Supplement No. 1, dated as of October 31, 1995, to the
Subsidiaries Guarantee dated June 6, 1995, made by the
Subsidiaries of Playtex signatories thereto in favor of
Chemical Bank as Agent.
*10(a)(5) Supplement No. 1, dated October 31, 1995, to Borrower
Pledge Agreement dated as of June 6, 1995, made by
Playtex in favor of Chemical Bank as Agent.
*10(a)(6) Supplement No. 2, dated October 31, 1995, to Borrower
Pledge Agreement dated as of June 6, 1995, made by
Playtex in favor of Chemical Bank as Agent.
10(b) Agreement between Playtex and Chemical Bank for
currency swap and interest rate hedging. (Incorporated
herein by reference to Exhibit 10(b) of Playtex's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, File No. 33-25485-01.)
10(b)(1) Interest Protection Agreement effective July 6, 1995
between Playtex and Chemical Bank. (Incorporated
herein by reference to Exhibit 10(b)(1) of Playtex's
Form 10-Q for the quarter ended July 1, 1995, No. 33-
25485-01.)
10(b)(2) Interest Protection Agreement effective July 25, 1995
between Playtex and Chemical Bank. (Incorporated
herein by reference to Exhibit 10(b)(1) of Playtex's
Form 10-Q for the quarter ended July 1, 1995, No. 33-
25485-01.)
10(c) Stock Purchase Agreement, dated as of December 28,
1988, among Playtex Holdings, Inc., Playtex Investment
Corp., Playtex Apparel, Inc. and Playtex Apparel
Partners, L.P. (Incorporated herein by reference to
Exhibit 10(b) of Playtex's Annual Report on Form 10-K
for the year ended December 31, 1988, No. 33-25485.)
10(d) Stock Purchase Agreement, dated as of November 26,
1986, among Playtex Holdings, Inc., Playtex, Inc., and
BCI Consumer Products Corporation. (Incorporated
herein by reference to Exhibit 10(c) of Playtex's
Annual Report on Form 10-K for the year ended December
31, 1988, No. 33-25485.)
X-4
<PAGE>
Exhibit No. Description
----------- -----------
10(e) Stock Purchase Agreement, dated November 13, 1986,
between Playtex Holdings, Inc. and Revlon Group
Incorporated. (Incorporated herein by reference to
Exhibit 10(d) of Playtex's Annual Report on Form 10-K
for the year ended December 31, 1988, No. 33-25485.)
10(f) Playtex Park Profit-Sharing Retirement Plan and Savings
Plan dated December 12, 1986, as amended January 1,
1989. (Incorporated herein by reference to Exhibit
10(e) of Playtex's Annual Report on Form 10-K for the
year ended December 30, 1989, No. 33-25485.)
10(g) Deferred Benefit Equalization Plan dated August 15,
1977, as amended April 15, 1987. (Incorporated herein
by reference to Exhibit 10(e) of Playtex Holding's
Annual Report on Form 10-K for the year ended December
28, 1987, File No. 33-15607.)
10(h) Revised Special Severance Plan dated August 27, 1990.
(Incorporated herein by reference to Exhibit 10(g)(2)
of Playtex's Annual Report on Form 10-K for the year
ended December 29, 1990, File No. 33-25485.)
10(i) Termination Policy for Management Compensation Plan
Participants. (Incorporated herein by reference to
Exhibit 10(h)(1) of Playtex's Annual Report on Form 10-
K for the year ended December 30, 1989, File No. 33-
25485.)
10(j) Playtex Pension Plan effective January 1, 1989.
(Incorporated herein by reference to Exhibit 10(j) of
Playtex's Registration Statement on Form S-1, No. 33-
71512.)
10(k) Retirement Plan for Hourly Employees of Tek effective
January 1, 1989. (Incorporated herein by reference to
Exhibit 10(k) of Playtex's Registration Statement on
Form S-1, No. 33-71512.)
10(l) Playtex Management Incentive Plan for 1995.
(Incorporated herein by reference to Exhibit 10(l)(1)
of Playtex's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, File No. 33-25485-01.)
*10(l)(1) Playtex Management Incentive Plan for 1996.
10(m) Consulting Agreement between Family Products and Joel
E. Smilow dated January 30, 1993. (Incorporated herein
by reference to Exhibit 10(m) of Playtex's Registration
Statement on Form S-1, No. 33-71512.)
X-5
<PAGE>
Exhibit No. Description
----------- -----------
10(n) Form of Management Contribution and Subscription
Agreement. (Incorporated herein by reference to
Exhibit 4(d) of Playtex's Registration Statement on
Form S-1, No. 33-25485.)
10(n)(1) First Amendment to the Management Contribution and
Subscription Agreement dated February 23, 1989.
(Incorporated herein by reference to Exhibit 10(c)(1)
of Playtex's Annual Report on Form 10-K for the year
ended December 30, 1989, No. 33-25485.)
10(n)(2) Second Amendment to the Management Contribution and
Subscription Agreement dated November 15, 1989.
(Incorporated herein by reference to Exhibit 10(c)(2)
of Playtex's Annual Report on Form 10-K for the year
ended December 30, 1989, No. 33-25485.)
10(n)(3) Third Amendment to the Management Contribution and
Subscription Agreement dated August 1, 1990.
(Incorporated herein by reference to Exhibit 10(c)(3)
of Playtex's Annual Report on Form 10-K for the year
ended December 29, 1990, No. 33-25485.)
10(n)(4) Fourth Amendment to the Management and Contribution
Subscription Agreement dated January 1, 1992.
(Incorporated herein by reference to Exhibit 10(q)(4)
of Playtex's Registration Statement on Form S-1, No.
33-71512.)
10(o) Form of Playtex Stock Subscription Agreement.
(Incorporated herein by reference to Exhibit 10(o) of
Playtex's Registration Statement on Form S-1, No. 33-
25485.)
10(p) Amended Trademark License Agreement dated November 19,
1991 among Marketing Corporation, Apparel and Family
Products. (Incorporated herein by reference to Exhibit
10(r) of Playtex's Registration Statement on Form S-1,
No. 33-43771.)
10(q) Amended Trademark License Agreement dated November 19,
1991 by and between Apparel and Family Products.
(Incorporated herein by reference to Exhibit 10(s) of
Playtex's Registration Statement on Form S-1, No. 33-
43771.)
X-6
<PAGE>
Exhibit No. Description
----------- -----------
10(r) Shareholders' Agreement, dated as of November 16, 1992,
among Sun Pharmaceuticals Corp. (formerly Banana Boat
Holding Corporation), those persons listed as the Lee
Investors on the signature pages thereof and Family
Products. (Incorporated herein by reference to Exhibit
10(ee) of Playtex's Registration Statement on Form S-1,
No. 33-71512.)
10(s) Distribution Agreement dated as of November 16, 1992,
between Banana Boat Acquisition Corp. and Family
Products. (Incorporated herein by reference to Exhibit
10(ff) of Playtex's Registration Statement on Form S-1,
No. 33-71512.)
10(t) Release Agreement, dated November 5, 1991, between
Playtex Investment Corp. and Playtex Apparel Partners,
L.P. (Incorporated herein by reference to Exhibit
10(gg) of Playtex's Registration Statement on Form S-1,
No. 33-71512.)
10(u) Playtex 1994 Stock Option Plan for Directors and
Executive and Key Employees. (Incorporated herein by
reference to Exhibit 10(hh) of Playtex's Registration
Statement on Form S-1, No. 33-71512.)
10(u)(1) Amendment No. 1 to the 1994 Stock Option Plan.
(Incorporated herein by reference to Exhibit 10.2 of
Playtex's Form 8-K, dated June 6, 1995, File No. 33-
25485-01.)
10(v) Agreement with the Personal Products Division of
McNeil-PPC, Inc., a subsidiary of Johnson & Johnson
dated as of October 17, 1994. (Incorporated herein by
reference to Exhibit 10(ii) of Playtex's Form 10-Q for
the quarter ended September 24, 1994, No. 33-25485-01.)
10(v)(1) Agreement between Playtex and the Personal Products
Division of McNeil-PPC, Inc., a subsidiary of Johnson &
Johnson dated as of November 15, 1994. (Incorporated
herein by reference to Exhibit 10(v)(1) of Playtex's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, File No. 33-25485-01.)
10(w) Agreement between Playtex and Reckitt & Colman, Inc.,
dated December 22, 1994. (Incorporated herein by
reference to Exhibit 10.1 of Playtex's Form 8-K dated
January 4, 1995, No. 33-25485-01.)
10(w)(1) Amendment dated February 16, 1995 to Agreement with
Reckitt & Colman, Inc. (Incorporated herein by
reference to Exhibit 10.2 of Playtex's Form 8-K/A,
dated March 6, 1995, No. 33-25485-1.)
X-7
<PAGE>
Exhibit No. Description
----------- -----------
10(w)(2) Trademark License Agreements (U.S.) dated as of
February 24, 1995 between Playtex and Reckitt & Colman,
Inc. (Incorporated herein by reference to Exhibit 10.3
of Playtex's Form 8-K as amended, dated January 4,
1995, No. 33-25485-1.)
10(w)(3) Trademark License Agreements (Canada) dated as of
February 24, 1995 between Playtex and Reckitt & Colman,
Inc. (Incorporated herein by reference to Exhibit 10.4
of Playtex's Form 8-K as amended, dated January 4,
1995, No. 33-25485-1.)
10(x) Agreement between Playtex and Richard Green to acquire
SmileTote, Incorporated, dated as of July 15, 1994.
(Incorporated herein by reference to Exhibit 10(x) of
Playtex's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, File No. 33-25485-01.)
10(y) Lease Agreement between Playtex and Stauffer Management
Company dated as of June 3, 1994. (Incorporated herein
by reference to Exhibit 10(y) of Playtex's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994, File No. 33-25485-01.)
10(z) Stock Purchase Agreement dated as of March 17, 1995
between Playtex and HWH Capital Partners, L.P., HWH
Valentine Partners, L.P. and HWH Surplus Valentine
Partners, L.P. (Incorporated herein by reference to
Exhibit 10.1 of Playtex's Form 8-K dated March 17,
1995.)
10(aa) Agreement and Plan of Merger between and among Playtex,
BBA Acquisition, Inc. and Banana Boat Holding
Corporation, dated as of October 17, 1995.
(Incorporated herein by reference to Exhibit 10.1 of
Playtex's Form 8-K dated October 31, 1995, File No. 33-
25485-01.)
*10(ab) Memorandum of Understanding, dated June 21, 1995 with
Michael R. Gallagher, Chief Executive Officer.
*12(a) Statement re-computation of ratios.
*13(a) Playtex's 1995 Annual Report to Stockholders
*13(b) Balance Sheet and Related Notes of Playtex
Manufacturing, Inc. (a wholly owned subsidiary of the
Company)
*13(c) Balance Sheet and Related Notes of Playtex Sales &
Services, Inc. (a wholly owned subsidiary of the
Company)
*13(d) Consolidated Financial Statements and Related Notes of
Banana Boat Holding Corporation (a wholly owned
subsidiary of the Company)
X-8
<PAGE>
Exhibit No. Description
----------- -----------
*22(a) Subsidiaries of Playtex
*23 Consent of KPMG Peat Marwick LLP.
*27 Financial Data Schedule.
---------------
* Filed herewith
X-9
EXHIBIT 4.(b)(4)
____________________
FOURTH
SUPPLEMENTAL INDENTURE
AMONG
PLAYTEX PRODUCTS, INC., as Issuer,
BBA ACQUISITION, INC., as Guarantor
and IBJ SCHRODER BANK & TRUST COMPANY, as Trustee
____________________
$360,000,000
9% Senior Subordinated Notes due 2003
Dated as of October 31, 1995
<PAGE>
THIS FOURTH SUPPLEMENTAL INDENTURE, dated as of October 31, 1995,
among Playtex Products, Inc., a Delaware corporation (the "Company"), BBA
Acquisition, Inc., a Delaware corporation (the "Guarantor"), and IBJ Schroder
Bank & Trust Company (the "Trustee").
WHEREAS, Playtex Family Products Corporation ("Family Products"), the
Company and the Trustee entered into an Indenture dated as of February 2, 1994
(the "Initial Indenture") to provide for the issuance of Family Products' 9%
Senior Subordinated Notes due 2003 (the "Securities");
WHEREAS, on March 8, 1994, Family Products was merged with and into
the Company, and pursuant to a First Supplemental Indenture of even date
therewith the Company assumed all of the obligations of Family Products under
the Securities and the Initial Indenture (the Initial Indenture, as amended,
being referred to herein as the "Indenture");
WHEREAS, Playtex Sales & Services, Inc., a Delaware corporation, has
guaranteed the obligations of the Company under the Credit Agreement and, by
reason of such guarantee, entered into a Second Supplemental Indenture dated as
of June 6, 1995;
WHEREAS, Playtex Manufacturing, Inc., a Delaware corporation, has
guaranteed the obligations of the Company under the Credit Agreement and, by
reason of such guarantee, entered into a Third Supplemental Indenture dated as
of June 6, 1995;
<PAGE>
2
WHEREAS, the Guarantor has also guaranteed the obligations of the
Company under the Credit Agreement;
WHEREAS, pursuant to Section 1013(b) of the Indenture, by reason of
such guarantee the Guarantor is required to execute this Fourth Supplemental
Indenture (this "Supplemental Indenture");
WHEREAS, the Company, the Guarantor and the Trustee are authorized to
enter into this Supplemental Indenture;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants contained herein and in this Supplemental Indenture and for
other good and valuable consideration, the receipt and sufficiency of which are
herein acknowledged, the Company, the Trustee and the Guarantor hereby agree for
the equal and the ratable benefit of all holders of the Securities as follows:
ARTICLE ONE
Definitions
-----------
1.1 Definitions. For purposes of this Supplemental Indenture, the
-----------
terms defined in the recitals shall have the meanings therein specified; any
terms defined in the Indenture and not defined herein shall have the same
meanings herein as therein defined; and references to Articles or Sections
shall, unless the context indicates otherwise, be references to Articles or
Sections of the Indenture.
<PAGE>
3
ARTICLE TWO
GUARANTEE
---------
2.1 Guarantee. For value received, Guarantor, in accordance with this
---------
Article Two, hereby absolutely, unconditionally and irrevocably guarantees to
the Trustee and the Holders, as if Guarantor was the principal debtor, the
punctual payment and performance when due of all Indenture Obligations (which
for purposes of this Guarantee shall also be deemed to include all commissions,
fees, charges, costs and other expenses (including reasonable legal fees and
disbursements of one counsel) arising out of, or incurred by the Trustee or the
Holders in connection with, the enforcement of this Guarantee) on a senior
subordinated basis.
2.2 Continuing Guarantee; No Right of Set-Off; Independent
------------------------------------------------------
Obligation.
- ----------
(a) This Guarantee shall be a continuing guarantee of the payment
and performance of all Indenture Obligations and shall remain in full force and
effect until the payment in full of all of the Indenture Obligations and shall
apply to and secure any ultimate balance due or remaining unpaid to the Trustee
or the Holders; and this Guarantee shall not be considered as wholly or
partially satisfied by the payment or liquidation at any time or from time to
time of any sum of money for the time being due or remaining unpaid to the
Trustee or the Holders. Guarantor
<PAGE>
4
covenants and agrees to comply with all obligations, covenants, agreements and
provisions applicable to it in the Indenture including those set forth in
Article Eight. Without limiting the generality of the foregoing, Guarantor's
liability shall extend to all amounts which constitute part of the Indenture
Obligations and would be owed by the Company under the Indenture and the
Securities but for the fact that they are unenforceable, reduced, limited,
impaired, suspended or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Company.
(b) Guarantor hereby guarantees that the Indenture Obligations
will be paid to the Trustee without set-off or counterclaim or other reduction
whatsoever (whether for taxes, withholding or otherwise) in lawful currency of
the United States of America.
(c) Guarantor's liability to pay or perform or cause the
performance of the Indenture Obligations under this Guarantee shall arise
forthwith after demand for payment or performance by the Trustee has been given
to Guarantor in the manner prescribed in Section 106 of the Indenture.
(d) Except as provided herein, the provisions of this
Article Two cover all agreements between the parties hereto relative to the
Guarantee and none of the parties shall be bound by any representation, warranty
or promise made by any Person relative thereto which is not
<PAGE>
5
embodied herein; and it is specifically acknowledged and agreed that this
Guarantee has been delivered by Guarantor free of any conditions whatsoever and
that no representations, warranties or promises have been made to Guarantor
affecting its liabilities hereunder, and that the Trustee shall not be bound by
any representations, warranties or promises now or at any time hereafter made by
the Company to Guarantor.
(e) This Guarantee is a guarantee of payment,
performance and compliance and not of collectibility and is in no way
conditioned or contingent upon any attempt to collect from or enforce
performance or compliance by the Company or upon any other event or condition
whatsoever.
(f) The obligations of Guarantor set forth herein
constitute the full recourse obligations of Guarantor enforceable against it to
the full extent of all its assets and properties.
2.3 Guarantee Absolute and Unconditional. The obligations of
------------------------------------
Guarantor hereunder are independent of the obligations of the Company under the
Securities and the Indenture and a separate action or actions may be brought and
prosecuted against Guarantor whether or not an action or proceeding is brought
against the Company and whether or not the Company is joined in any such action
or proceeding. The liability of Guarantor hereunder is irrevocable, absolute
and unconditional and (to the extent permitted by law) the
<PAGE>
6
liability and obligations of Guarantor hereunder shall not be released,
discharged, mitigated, waived, impaired or affected in whole or in part by:
(a) any defect or lack of validity or enforceability
in respect of any indebtedness or other obligation of the Company or any other
Person under the Indenture or the Securities, or any agreement or instrument
relating to any of the foregoing;
(b) any grants of time, renewals, extensions,
indulgences, releases, discharges or modifications which the Trustee or the
Holders may extend to, or make with, the Company, Guarantor or any other Person,
or any change in the time, manner or place of payment of, or in any other term
of, all or any of the Indenture Obligations, or any other amendment or waiver
of, or any consent to or departure from, the Indenture or the Securities,
including any increase or decrease in the Indenture Obligations;
(c) the taking of security from the Company, Guarantor
or any other Person, and the release, discharge or alteration of, or other
dealing with such security;
(d) the abstention from taking security from the
Company, Guarantor or any other Person or from perfecting, continuing to keep
perfected or taking advantage of any security;
(e) any loss, diminution of value or lack of
enforceability of any security received from the Company,
<PAGE>
7
Guarantor or any other Person and including any other guarantees received by the
Trustee;
(f) any other dealings by the Company or Guarantor
with any other Person, or with any security;
(g) the Trustee's or the Holders' acceptance of
compositions from the Company or Guarantor;
(h) the application by the Holders or the Trustee of
all monies at any time and from time to time received from the Company,
Guarantor or any other Person on account of any indebtedness and liabilities
owing by the Company or Guarantor to the Trustee or the Holders, in such manner
as the Trustee or the Holders deems best and the changing of such application in
whole or in part and at any time or from time to time, or any manner of
application of collateral or proceeds thereof, to all or any of the Indenture
Obligations, or the manner of sale of any collateral;
(i) the release or discharge of the Company or
Guarantor or of any other guarantor of the Securities or of any Person liable
directly as surety or otherwise by operation of law or otherwise for the
Securities other than an express release in writing given by the Trustee, on
behalf of the Holders, of the liability and obligations of Guarantor hereunder;
(j) any change in the name, business, capital
structure or governing instrument of the Company or
<PAGE>
8
Guarantor or any refinancing or restructuring of any of the Indenture
Obligations;
(k) the sale of the Company's or Guarantor's business
or any part thereof;
(l) any merger or consolidation, arrangement or
reorganization of the Company, Guarantor, any Person resulting from the merger
or consolidation of the Company or Guarantor with any other Person or any other
successor to such Person or merged or consolidated Person or any other change in
the corporate existence, structure or ownership of the Company or Guarantor or
any change in the corporate relationship between the Company and Guarantor, or
any termination of such relationship;
(m) the insolvency, bankruptcy, liquidation, winding
up, dissolution, receivership, arrangement, readjustment, assignment for the
benefit of creditors or distribution of the assets of the Company or its assets
or any resulting discharge of any obligations of the Company (whether voluntary
or involuntary) or of Guarantor (whether voluntary or involuntary) or the loss
of corporate existence;
(n) any arrangement or plan of reorganization
affecting the Company or Guarantor;
(o) any failure, omission or delay on the part of the
Company to conform or comply with any term of the Indenture;
<PAGE>
9
(p) any limitation on the liability or obligations of
the Company or any other person under the Indenture, or any discharge,
termination, cancellation, distribution, irregularity, invalidity or
unenforceability, in whole or in part, of the Indenture;
(q) any other circumstance that might otherwise
constitute a defense available to, or discharge of, the Company or Guarantor; or
(r) any modification, compromise, settlement or
release by the Trustee, or by operation law or otherwise, of the Indenture
Obligations or the liability of the Company or any other obligor under the
Securities or of any collateral, in whole or in part, and any refusal of payment
by the Trustee, in whole or in part, from any other obligor or other guarantor
in connection with any of the Indenture Obligations, whether or not with notice
to or further assent by, or any reservation of rights against, Guarantor.
2.4 Right to Demand Full Performance. In the event of any demand for
--------------------------------
payment or performance by the Trustee from Guarantor hereunder, the Trustee or
the Holders shall have the right to demand its full claim and to receive all
dividends or other payments in respect thereof until the Indenture Obligations
have been paid in full and Guarantor shall continue to be liable hereunder for
any balance which may be owing to the Trustee or the Holders by the Company
under the Indenture and the Securities. The retention by the Trustee or the
Holders of any security, prior to the
<PAGE>
10
realization by the Trustee or the Holders of its rights to such security upon
foreclosure thereon, shall not, as between the Trustee and Guarantor, be
considered as a purchase of such security, or as payment, satisfaction or
reduction of the Indenture Obligations due to the Trustee or the Holders by the
Company or any part thereof. Guarantor, promptly after demand, will reimburse
the Trustee and the Holders for all costs and expenses of collecting such amount
under, or enforcing this Guarantee, including, without limitation, the
reasonable fees and expenses of counsel.
2.5 Waivers.
-------
(a) Guarantor hereby expressly waives (to the extent
permitted by law) notice of the acceptance of this Guarantee and notice of the
incurrence, existence, renewal, extension or the non-performance, non-payment,
or non-observance on the part of the Company of any of the terms, covenants,
conditions and provisions of the Indenture or the Securities or any other notice
whatsoever to or upon the Company or Guarantor with respect to the Indenture
Obligations, whether by statute, rule of law or otherwise. Guarantor hereby
acknowledges communication to it of the terms of the Indenture and the
Securities and all of the provisions therein contained and consents to and
approves the same. Guarantor hereby expressly waives (to the extent permitted
by law) diligence, presentment, protest and demand for payment with respect to
(i) any notice of any sale, transfer or other disposition of any right, title to
or
<PAGE>
11
interest in the Securities by the Holders or in the Indenture, (ii) any release
of Guarantor from its obligations hereunder resulting from any loss by it of its
rights of subrogation hereunder and (iii) any other circumstance whatsoever that
might otherwise constitute a legal or equitable discharge, release or defense of
a guarantor or surety or that might otherwise limit recourse against Guarantor.
(b) Without prejudice to any of the rights or
resources which the Trustee or the Holders may have against the Company,
Guarantor hereby expressly waives (to the extent permitted by law) any right to
require the Trustee or the Holders to:
(i) enforce, assert, exercise, initiate or
exhaust any rights, remedies or recourse against the Company, Guarantor or
any other Person under the Indenture or otherwise;
(ii) value, realize upon or dispose of any
security of the Company or any other Person held by the Trustee or the
Holders;
(iii) initiate or exhaust any other remedy which
the Trustee or the Holders may have in law or equity; or
(iv) mitigate the damages resulting from any
default under the Indenture;
before requiring or becoming entitled to demand payment from Guarantor under
this Guarantee.
<PAGE>
12
2.6 Guarantor Remains Obligated in the Event the Company Is No Longer
-----------------------------------------------------------------
Obligated to Discharge Indenture Obligations. It is the express intention of
- --------------------------------------------
the Trustee and Guarantor that if for any reason the Company has no legal
existence, is or becomes under no legal obligation to discharge the Indenture
Obligations owing to the Trustee or the Holders by the Company or if any of the
Indenture Obligations owing by the Company to the Trustee or the Holders becomes
irrecoverable from the Company by operation of law or for any reason whatsoever,
this Guarantee and the covenants, agreements and obligations of Guarantor
contained in this Article Two shall nevertheless be binding upon Guarantor, as a
principal debtor, until such time as all such Indenture Obligations have been
paid in full to the Trustee and all Indenture Obligations owing to the Trustee
or the Holders by the Company have been discharged, or such earlier time as
Section 402 shall apply to the Securities and Guarantor shall be responsible for
the payment thereof to the Trustee or the Holders upon demand.
2.7 Waiver of Rights. Guarantor agrees (to the extent permitted by
----------------
law) that it hereby waives and will not in any manner whatsoever claim or take
the benefit or advantage of, any rights of reimbursement, exoneration,
contribution, indemnity or subrogation (whether contractual, under Section 509
of Title Eleven of the United States Code, under common law or otherwise) or any
similar rights or "claims" (as such term is defined under Title Eleven of the
<PAGE>
13
United States Code), against the Company or any Subsidiary arising from the
existence of, or performance by, Guarantor under this Guarantee.
2.8 Guarantee Is In Addition to Other Security.
------------------------------------------
This Guarantee shall be in addition to and not in substitution for any other
guarantees or other security which the Trustee may now or hereafter hold in
respect of the Indenture Obligations owing to the Trustee or the Holders by the
Company, and (except as may be required by law) the Trustee shall be under no
obligation to marshal in favor of Guarantor any other guarantees or other
security or any moneys or other assets which the Trustee may be entitled to
receive or upon which the Trustee or the Holders may have a claim.
2.9 Release of Security Interests. Without limiting the generality
-----------------------------
of the foregoing and except as otherwise provided in the Indenture, Guarantor
hereby consents and agrees, to the fullest extent permitted by applicable law,
that the rights of the Trustee hereunder, and the liability of Guarantor
hereunder, shall not be affected by any and all releases for any purpose of any
collateral, if any, from the Liens and security interests created by any
collateral document and that this Guarantee shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Indenture Obligations is rescinded or must otherwise be returned by the Trustee
upon the insolvency, bankruptcy or reorganization
<PAGE>
14
of the Company or otherwise, all as though such payment had not been made.
2.10 No Bar to Further Actions. Except as provided by law, no action
-------------------------
or proceeding brought or instituted under this Article Two and this Guarantee
and no recovery or judgment in pursuance thereof shall be a bar or defense to
any further action or proceeding which may be brought under this Article Two and
this Guarantee by reason of any further default or defaults under this Article
Two and this Guarantee or in the payment of any of the Indenture Obligations
owing by the Company.
2.11 Failure to Exercise Rights Shall Not Operate As a Waiver; No
------------------------------------------------------------
Suspension of Remedies.
- ----------------------
(a) No failure to exercise and no delay in exercising, on
the part of the Trustee or the Holders, any right, power, privilege or remedy
under this Article Two and this Guarantee shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power, privilege or remedy
preclude any other or further exercise thereof, or the exercise of any other
rights, powers, privileges or remedies. The rights and remedies herein provided
for are cumulative and not exclusive of any rights or remedies provided in law
or equity.
(b) Nothing contained in this Article Two shall limit the
right of the Trustee or the Holders to take any action to accelerate the
maturity of the Securities
<PAGE>
15
pursuant to Article Five or to pursue any rights or remedies hereunder or under
applicable law.
2.12 Trustee's Duties; Notice to Trustee.
-----------------------------------
(a) Any provision in this Article Two or elsewhere in
the Indenture allowing the Trustee to request any information or to take any
action authorized by, or on behalf of, Guarantor shall be permissive and shall
not be obligatory on the Trustee except as the Holders may direct in accordance
with the provisions of the Indenture or where the failure of the Trustee to
request any such information or to take any such action arises from the
Trustee's negligence, bad faith or willful misconduct.
(b) The Trustee shall not be required to inquire into
the existence, powers or capacities of the Company, Guarantor or the officers,
directors or agents acting or purporting to act on their respective behalf.
(c) Notwithstanding the provisions of this Article Two
or any other provision of the Indenture, the Trustee shall not be charged with
knowledge of the existence of any facts which would prohibit the making of any
payment to or by the Trustee in respect of the Securities, unless and until the
Trustee shall have received written notice thereof from the Company; and, prior
to the receipt of any such written notice, the Trustee, subject to the
provisions of Section 601, shall be entitled in all respects to assume that no
such facts exist, provided however, that if a Responsible Officer of the Trustee
-------- -------
shall not have received
<PAGE>
16
any such notice from the Company at least three Business Days prior to the date
upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of, premium, if
any, or interest on, any Security), then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such money and to apply the same to the purpose for which such money was
received and shall not be affected by any notice to the contrary which may be
received by it within two Business Days prior to such date; nor shall the
Trustee be charged with knowledge of the curing of any such default or the
elimination of the act or condition preventing any such payment unless and until
the Responsible Officer of the Trustee shall have received an Officers'
Certificate to such effect.
(d) In case that at any time any Paying Agent other
than the Trustee shall have been appointed by the Company and be then acting
hereunder, the term "Trustee" as used in this Article Two shall in such case
(unless the context otherwise requires) be construed as extending to and
including such Paying Agent within its meaning as fully for all intents and
purposes as if such Paying Agent were named in this Article Two in addition to
or in place of the Trustee.
<PAGE>
17
2.13 Successors and Assigns. All terms, agreements and conditions of
----------------------
this Article Two shall extend to and be binding upon Guarantor and its
successors and permitted assigns and shall enure to the benefit of and may be
enforced by the Trustee and its successors and assigns; provided, however, that
-------- -------
Guarantor may not assign any of its rights or obligations hereunder other than
in accordance with Article Eight.
2.14 Release of Guarantee. Concurrently with the payment in full of
--------------------
all of the Indenture Obligations, Guarantor shall be released from and relieved
of its obligations under this Article Two. Upon the delivery by the Company to
the Trustee of an Officers' Certificate and, if requested by the Trustee, an
Opinion of Counsel to the effect that the transaction giving rise to the release
of this Guarantee was made by the Company in accordance with the provisions of
the Indenture and the Securities, the Trustee shall execute any documents
reasonably required in order to evidence the release of Guarantor from its
obligations under this Guarantee. If any of the Indenture Obligations are
revived and reinstated after the termination of this Guarantee, then all of the
obligations of Guarantor under this Guarantee shall be revived and reinstated as
if this Guarantee had not been terminated until such time as the Indenture
Obligations are paid in full, and Guarantor shall enter into an amendment to
this Guarantee, reasonably
<PAGE>
18
satisfactory to the Trustee, evidencing such revival and reinstatement.
This Guarantee shall terminate upon a merger or consolidation of
Guarantor with the Company, in accordance with Article Eight.
This Guarantee shall be automatically and unconditionally released and
discharged upon the occurrence of any of the conditions set forth in
Section 1013(d) of the Indenture.
2.15 Execution of Guarantee. To evidence the Guarantee, Guarantor
----------------------
hereby agrees upon request of the Trustee to execute a guarantee substantially
in the form set forth in Section 205, with appropriate name and reference
changes, to be endorsed on each Security authenticated and delivered by the
Trustee and that this Supplemental Indenture shall be executed on behalf of
Guarantor by its Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
If an officer whose signature is on this Supplemental Indenture no
longer holds that office at the time the Trustee authenticates a Security on
which this Guarantee is endorsed, such Guarantee shall be valid nevertheless.
<PAGE>
19
2.16 Guarantee Subordinate to Senior Guarantor Indebtedness.
------------------------------------------------------
Guarantor covenants and agrees and each Holder of a Security, by his acceptance
thereof, likewise covenants and agrees, that, to the extent and in the manner
hereinafter set forth in this Article Two, this Guarantee is hereby subordinate
and subject in right of payment as provided in this Article to the prior payment
in full, in cash or Cash Equivalents or in any other manner acceptable to the
requisite holders of Designated Senior Guarantor Indebtedness, of all Senior
Guarantor Indebtedness; provided, however, that the Indebtedness represented by
-------- -------
this Guarantee in all respects shall rank equally with, or prior to, all
existing and future unsecured Indebtedness of Guarantor that is subordinated to
Senior Guarantor Indebtedness.
This Article Two shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of, or continue to hold,
Senior Guarantor Indebtedness, and such provisions are made for the benefit of
the holders of Senior Guarantor Indebtedness; and such holders are made obligees
hereunder and they or each of them may enforce such provisions.
2.17 Payment Over of Proceeds Upon Dissolution of the Guarantor, etc.
----------------------------------------------------------------
In the event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to Guarantor or
<PAGE>
20
to its creditors, as such, or to its assets, or (b) any liquidation, dissolution
or other winding up of Guarantor, whether voluntary or involuntary and whether
or not involving insolvency or bankruptcy, or (c) any assignment for the benefit
of creditors or any other marshaling of assets or liabilities of Guarantor, then
and in any such event:
(1) the holders of Senior Guarantor Indebtedness shall be
entitled to receive payment in full in cash or Cash Equivalents or in any other
manner acceptable to the requisite holders of Designated Senior Guarantor
Indebtedness, of all amounts due on or in respect of all Senior Guarantor
Indebtedness, before the Holders of the Securities are entitled to receive any
payment or distribution of any kind or character (excluding Permitted Guarantor
Junior Securities) on account of the principal of, premium, if any, or interest
on the Securities or on account of the purchase, redemption, defeasance or other
acquisition of or in respect of the Securities (including any payment or other
distribution which may be received from the holders of Subordinated Indebtedness
as a result of any payment on such Subordinated Indebtedness); and
(2) any payment or distribution of assets of Guarantor of
any kind or character, whether in cash, property or securities (excluding
Permitted Guarantor Junior Securities), by set-off or otherwise, to which
Holders or the Trustee would be entitled but for the
<PAGE>
21
provisions of this Article shall be paid by the liquidating trustee or agent or
other Person making such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or otherwise, directly to the
holders of Senior Guarantor Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture under which
any instruments evidencing any such Senior Guarantor Indebtedness may have been
issued, ratably according to the aggregate amounts remaining unpaid on account
of the Senior Guarantor Indebtedness held or represented by each, to the extent
necessary to make payment in full in cash or Cash Equivalents or in any other
manner acceptable to the requisite holders of Designated Senior Guarantor
Indebtedness, of all Senior Guarantor Indebtedness remaining unpaid, after
giving effect to any concurrent payment or distribution to the holders of such
Senior Guarantor Indebtedness; and
(3) in the event that, notwithstanding the foregoing
provisions of this Section, the Trustee or the Holder of any Security shall have
received any payment or distribution of assets of Guarantor of any kind or
character, whether in cash, property or securities, in respect of principal,
premium, if any, and interest on he Securities or on account of the purchase,
redemption, defeasance or other acquisition of or in respect of the Securities
before all Senior Guarantor Indebtedness is paid in full, then and in such event
such payment or distribution
<PAGE>
22
(excluding Permitted Guarantor Junior Securities) (including any payment or
other distribution which may be received from the holders of Subordinated
Indebtedness as a result of any payment on such Subordinated Indebtedness) shall
be paid over or delivered forthwith to the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee, agent or other person making payment
or distribution of assets of Guarantor for application to the payment of all
Senior Guarantor Indebtedness remaining unpaid, to the extent necessary to pay
all Senior Guarantor Indebtedness in full in cash or Cash Equivalents or in any
other manner acceptable to the requisite holders of Designated Senior Guarantor
Indebtedness, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Guarantor Indebtedness and until so paid shall be
held in trust for the benefit of the holders of Senior Guarantor Indebtedness.
The consolidation of Guarantor with, or the merger of Guarantor with
or into, another Person or the liquidation or dissolution of Guarantor following
the sale, assignment, conveyance, transfer, lease or other disposal of all or
substantially all of its properties or assets to another Person upon the terms
and conditions set forth in Article Eight of the Indenture shall not be deemed a
dissolution, winding up, liquidation, reorganization, assignment for the benefit
of creditors or marshaling of assets and liabilities of Guarantor for the
purposes of this Section 2.17 if the
<PAGE>
23
Person formed by such consolidation or the surviving entity of such merger or
the Person which acquires by sale, assignment, conveyance, transfer, lease or
other disposal such properties or assets, as the case may be, shall as a part of
such consolidation, merger, sale, assignment, conveyance, transfer, lease, or
other disposal comply with the conditions set forth in Article Eight.
2.18 Default on Senior Guarantor Indebtedness.
----------------------------------------
(a) Upon the maturity of any Senior Guarantor
Indebtedness by lapse of time, acceleration or otherwise, all principal thereof
and interest thereon and other amounts due in connection therewith shall first
be paid in full in cash or Cash Equivalents or in any other manner acceptable to
the requisite holders of such Designated Senior Guarantor Indebtedness before
any payment is made by Guarantor or any Person acting on behalf of Guarantor in
respect of the Securities.
(b) No payment (excluding Payments in the form of
Permitted Guarantor Junior Securities) shall be made by Guarantor in respect of
the Securities during the period in which Section 2.17 of this Supplemental
Indenture shall be applicable, during any suspension of payments in effect under
Section 1203(a) or during any Payment Blockage Period in effect under Section
1203(b).
(c) In the event that, notwithstanding the foregoing,
Guarantor shall make any payment to the Trustee or the Holder of any Security
pursuant to this Guarantee
<PAGE>
24
prohibited by the foregoing provisions of this Section, then and in such event
such payment shall be paid over and delivered forthwith to the representatives
of Senior Guarantor Indebtedness or as a court of competent jurisdiction shall
direct and until so paid shall be held in trust for the benefit of the holders
of Senior Guarantor Indebtedness.
2.19 Payment Permitted by Guarantor if No Default.
--------------------------------------------
Nothing contained in this Article Two, elsewhere in the Indenture or in any of
the Securities shall prevent Guarantor, at any time except during the pendency
of any case, proceeding, dissolution, liquidation or other winding up,
assignment for the benefit of creditors or other marshaling of assets and
liabilities of Guarantor referred to in Section 2.17 of this Supplemental
Indenture or under the conditions described in Section 2.18 of this Supplemental
Indenture from making payments at any time of principal of, premium, if any, or
interest on the Securities.
2.20 Subrogation to Rights of Holders of Senior Guarantor
----------------------------------------------------
Indebtedness. Subject to the payment in full of all Senior Guarantor
- ------------
Indebtedness in cash or Cash Equivalents or in any other manner acceptable to
the requisite holders of Senior Guarantor Indebtedness, the Holders of the
Securities shall be subrogated to the rights of the holders of such Senior
Guarantor Indebtedness to receive payments and distributions of cash, property
and
<PAGE>
25
securities applicable to Senior Guarantor Indebtedness until the principal of,
premium, if any, and interest on the Securities shall be paid in full. For
purposes of such subrogation, no payments or distributions to the holders of
Senior Guarantor Indebtedness of any cash, property or securities to which the
holders of the Securities or the Trustee would be entitled except for the
provisions of this Article Two, and no payments over pursuant to the provisions
of this Article Two to the holders of Senior Guarantor Indebtedness by Holders
of the Securities or the Trustee, shall, as among Guarantor, its creditors other
than holders of Senior Guarantor Indebtedness, and the Holders of the
Securities, be deemed to be a payment or distribution by Guarantor to or on
account of the Senior Guarantor Indebtedness.
2.21 Provisions Solely to Define Relative Rights.
-------------------------------------------
The provisions of Section 2.16 through 2.30 of this Supplemental Indenture are
intended solely for the purpose of defining the relative rights of the Holders
of the Securities on the one hand and the holders of Senior Guarantor
Indebtedness on the other hand. Nothing contained in this Article or elsewhere
in the Indenture or in the Securities is intended to or shall (a) impair as
among Guarantor, its creditors other than holders of Senior Guarantor
Indebtedness and the Holders of the Securities, the obligation of Guarantor,
which is absolute and unconditional, to pay to the Holders of the Securities the
<PAGE>
26
principal of, premium, if any, and interest on the Securities as and when the
same shall become due and payable in accordance with their terms; or (b) affect
the relative rights against Guarantor of the Holders of the Securities and
creditors of Guarantor other than the holders of Senior Guarantor Indebtedness;
or (c) prevent the Trustee or the Holder of any Security from exercising all
remedies otherwise permitted by applicable law upon default under the Indenture,
subject to the rights, if any, under this Article of the holders of Senior
Guarantor Indebtedness (1) in any case, proceeding, dissolution, liquidation or
other winding up, assignment for the benefit of creditors or other marshaling of
assets and liabilities of Guarantor referred to in Section 2.17 of this
Supplemental Indenture to receive, pursuant to and in accordance with such
Section, cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder, or (2) under the conditions specified in Section 2.18 of
this Supplemental Indenture, to prevent any payment prohibited by such Section
or enforce their rights pursuant to Section 2.18(c) of this Supplemental
Indenture.
2.22 Trustee to Effectuate Subordination. Each Holder of a Security
-----------------------------------
by his acceptance thereof authorizes and directs the Trustee on his behalf to
take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article Two and appoints the Trustee his
attorney-in-fact for any and all such purposes,
<PAGE>
27
including, in the event of any dissolution, winding up, liquidation or
reorganization of Guarantor whether in bankruptcy, insolvency, receivership
proceedings, or otherwise, the timely filing of a claim for the unpaid balance
of the indebtedness of Guarantor owing to such Holder in the form required in
such proceedings and the causing of such claim to be approved. If the Trustee
does not file a proper claim at least 30 days before the expiration of the time
to file such claim, then the holders of Senior Guarantor Indebtedness, and their
agents, trustees or other representatives are authorized to do so on behalf of
the Holders.
2.23 No Waiver of Subordination Provisions.
-------------------------------------
(a) No right of any present or future holder of any
Senior Guarantor Indebtedness to enforce subordination as herein provided shall
at any time in any way be prejudiced or impaired by any act or failure to act on
the part of Guarantor or by any act or failure to act by any such holder, or by
any non-compliance by Guarantor with the terms, provisions and covenants of the
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
(b) Without limiting the generality of Subsection (a)
of this Section, the holders of Senior Guarantor Indebtedness may, at any time
and from time to time, without the consent of or notice to the Trustee or the
Holders of the Securities, without incurring responsibility
<PAGE>
28
to the Holders of the Securities and without impairing or releasing the
subordination provided in this Article Two or the obligations hereunder of the
Holders of the Securities to the holders of Senior Guarantor Indebtedness, do
any one or more of the following: (1) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, Senior Guarantor
Indebtedness (or the Senior Indebtedness guaranteed thereby) or any instrument
evidencing the same or any agreement under which Senior Guarantor Indebtedness
(or the Senior Indebtedness guaranteed thereby) is outstanding; (2) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Guarantor Indebtedness (or the Senior Indebtedness
guaranteed thereby); (3) release any Person liable in any manner for the
collection or payment of Senior Guarantor Indebtedness (or the Senior
Indebtedness guaranteed thereby); and (4) exercise or refrain from exercising
any rights against Guarantor and any other Person; provided, however, that in no
-------- -------
event shall any such actions limit the right of the Holders of the Securities to
take any action to accelerate the maturity of the Securities in accordance with
provisions described under Article Five or to pursue any rights or remedies
hereunder or under applicable laws if the taking of such action does not
otherwise violate the terms of this Article Two.
<PAGE>
29
2.24 Notice to Trustee by Guarantor.
------------------------------
(a) Guarantor shall give prompt written notice to the
Trustee of any fact known to Guarantor which would prohibit the making of any
payment to or by the Trustee in respect of any Guarantee. Notwithstanding the
provisions of this Article Two or any provision of the Indenture, the Trustee
shall not be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or by the Trustee in respect of
Securities, unless and until the Trustee shall have received written notice
thereof from Guarantor or a holder of Senior Guarantor Indebtedness or from a
representative of Senior Guarantor Indebtedness or any trustee, fiduciary or
agent therefor; and, prior to the receipt of any such written notice, the
Trustee shall be entitled in all respects to assume that no such facts exist;
provided, however, that if the Trustee shall not have received the notice
- -------- -------
provided for in this Section at least two Business Days prior to the date upon
which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of, premium, if
any, or interest on the Security), then, anything herein contained to the
contrary notwithstanding but without limiting the rights and remedies of the
holders of Senior Guarantor Indebtedness or any trustee, fiduciary or agent
thereof, the Trustee shall have full power and authority to receive such money
and to apply the same to the purpose for which such money was received
<PAGE>
30
and shall not be affected by any notice to the contrary which may be received by
it within two Business Days prior to such date; nor shall the Trustee be charged
with knowledge of the curing of any such default or the elimination of the act
or condition preventing any such payment unless and until the Trustee shall have
received an Officers' Certificate to such effect.
(b) The Trustee shall be entitled to rely on the
delivery to it of a written notice to the Trustee and Guarantor by a Person
representing himself to be a representative of a holder or a holder of Senior
Guarantor Indebtedness (or a trustee, fiduciary or agent therefor) to establish
that such notice has been given by a representative or a holder of Senior
Guarantor Indebtedness (or a trustee, fiduciary or agent therefor); provided,
--------
however, that failure to give such notice to Guarantor shall not affect in any
- -------
way the ability of the Trustee to rely on such notice. In the event that the
Trustee determines in good faith that further evidence is required with respect
to the right of any Person as a holder of Senior Guarantor Indebtedness to
participate in any payment or distribution pursuant to this Article Two, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Guarantor Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under
<PAGE>
31
this Article Two, and if such evidence is not furnished, the Trustee may defer
any payment to such Person pending judicial determination as to the right of
such Person to receive such payment.
2.25 Reliance on Judicial Order or Certificate of Liquidating Agent.
--------------------------------------------------------------
Upon any payment or distribution of assets of Guarantor referred to in this
Article Two, the Trustee and the Holders of the Securities shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other person making
such payment or distribution, delivered to the Trustee or to the Holders of
Securities, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of Senior Guarantor Indebtedness
and other indebtedness of Guarantor, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Two, provided that the foregoing shall apply only if
--------
such court has been fully apprised of the provisions of this Article Two.
<PAGE>
32
2.26 Rights of Trustee as a Holder of Senior Guarantor Indebtedness;
---------------------------------------------------------------
Preservation of Trustee's Rights.
- --------------------------------
The Trustee in its individual capacity shall be entitled to all the rights set
forth in this Article Two with respect to any Senior Guarantor Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Senior Guarantor Indebtedness, and nothing in the Indenture shall deprive the
Trustee of any of its rights as such holder. Nothing in this Article Two shall
apply to claims of, or payments to, the Trustee under or pursuant to the
provisions in the Indenture regarding compensation and indemnification of the
Trustee.
2.27 Article Applicable to Paying Agents. In case at any time any
-----------------------------------
Paying Agent other than the Trustee shall have been appointed by the Company and
be then acting under the Indenture, the term "Trustee" as used in this Article
Two shall in such case (unless the context otherwise requires) be construed as
extending to and including such Paying Agent within its meaning as fully for all
intents and purposes as if such Paying Agent were named in this Article Two in
addition to or in place of the Trustee; provided, however, that Section 2.26 of
-------- -------
this Supplemental Indenture shall not apply to Guarantor or any Affiliate of
Guarantor if it or such Affiliate acts as Paying Agent.
2.28 No Suspension of Remedies. Nothing contained in this Article Two
-------------------------
shall limit the right of the Trustee or the Holders of Securities to take any
action to accelerate
<PAGE>
33
the maturity of the Securities pursuant to the provisions described in Article
Five and as set forth in the Indenture or to pursue any rights or remedies
hereunder or under applicable law, subject to the rights, if any, under this
Article Two of the holders, from time to time, of Senior Guarantor Indebtedness
to receive the cash, property or securities receivable upon the exercise of such
rights or remedies.
2.29 Trustee's Relation to Senior Guarantor Indebtedness. With
---------------------------------------------------
respect to the holders of Senior Guarantor Indebtedness, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article Two, and no implied covenants or
obligations with respect to the holders of Senior Guarantor Indebtedness shall
be read into this Article Two against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Guarantor Indebtedness
and the Trustee shall not be liable to any holder of Senior Guarantor
Indebtedness if it shall mistakenly in the absence of gross negligence or
willful misconduct pay over or deliver to Holders of the Securities, Guarantor
or any other Person moneys or assets to which any holder of Senior Guarantor
Indebtedness shall be entitled by virtue of this Article Two or otherwise.
<PAGE>
34
2.30 Limitation of Guarantor's Guarantee. Notwithstanding any other
-----------------------------------
provision of this Article Two or of the Indenture to the contrary, in the event
that the Guarantee provided pursuant to this Article Two would constitute or
result in a violation of any applicable fraudulent conveyance or similar law of
any relevant jurisdiction, the liability of the Guarantor under this Guarantee
shall be reduced to the maximum amount permissible under such applicable
fraudulent conveyance or similar law after taking into account and giving effect
to all Senior Guarantor Indebtedness.
ARTICLE THREE4
Miscellaneous
-------------
3.1 Effect of the Supplemental Indenture. This Supplemental Indenture
------------------------------------
supplements the Indenture and shall be a part and subject to all the terms
thereof. Except as supplemented hereby, the Indenture and the Securities issued
thereunder shall continue in full force and effect.
3.2 Counterparts. This Supplemental Indenture may be executed in
------------
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
3.3 GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
-------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF).
<PAGE>
35
3.4 Recitals. The Trustee shall not be responsible for any recital
--------
herein (other than the seventh recital as it applies to the Trustee) as such
recitals shall be taken as statements of the Company, or the validity of the
execution by the Guarantor of this Supplemental Indenture. The Trustee makes no
representations as to the validity or sufficiency of this Supplemental
Indenture.
<PAGE>
36
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the date first written above.
PLAYTEX PRODUCTS, INC.
By: /s/ Michael F. Goss
---------------------------
Name: Michael F. Goss
Title: Executive Vice President &
Chief Financial Officer
Attest:____________________
Name:
Title:
BBA Acquisition, INC.
By: /s/ Michael F. Goss
---------------------------
Name: /s/ Michael F. Goss
Title: Vice President
Attest:____________________
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY, as Trustee
By: /s/ Thomas J. Bogert
---------------------------
Name: Thomas J. Bogert
Title: Assistant Vice President
Attest:____________________
Name:
Title:
____________________
FIFTH
SUPPLEMENTAL INDENTURE
AMONG
PLAYTEX PRODUCTS, INC., as Issuer,
SUN ACQUISITION, INC., as Guarantor
and IBJ SCHRODER BANK & TRUST COMPANY, as Trustee
____________________
$360,000,000
9% Senior Subordinated Notes due 2003
Dated as of October 31, 1995
<PAGE>
THIS FIFTH SUPPLEMENTAL INDENTURE, dated as of October 31, 1995, among
Playtex Products, Inc., a Delaware corporation (the "Company"), Sun Acquisition,
Inc., a Delaware corporation (the "Guarantor"), and IBJ Schroder Bank & Trust
Company (the "Trustee").
WHEREAS, Playtex Family Products Corporation ("Family Products"), the
Company and the Trustee entered into an Indenture dated as of February 2, 1994
(the "Initial Indenture") to provide for the issuance of Family Products' 9%
Senior Subordinated Notes due 2003 (the "Securities");
WHEREAS, on March 8, 1994, Family Products was merged with and into
the Company, and pursuant to a First Supplemental Indenture of even date
therewith the Company assumed all of the obligations of Family Products under
the Securities and the Initial Indenture (the Initial Indenture, as amended,
being referred to herein as the "Indenture");
WHEREAS, Playtex Sales & Services, Inc., a Delaware corporation, has
guaranteed the obligations of the Company under the Credit Agreement and, by
reason of such guarantee, entered into a Second Supplemental Indenture dated as
of June 6, 1995;
WHEREAS, Playtex Manufacturing, Inc., a Delaware corporation, has
guaranteed the obligations of the Company under the Credit Agreement and, by
reason of such guarantee, entered into a Third Supplemental Indenture dated as
of June 6, 1995;
<PAGE>
2
WHEREAS, BBA Acquisition, Inc., a Delaware Corporation, has guaranteed
the obligations of the Company under the Credit Agreement and, by reason of such
guarantee, entered into a Fourth Supplemental Indenture dated as of October 31,
1995;
WHEREAS, the Guarantor has also guaranteed the obligations of the
Company under the Credit Agreement;
WHEREAS, pursuant to Section 1013(b) of the Indenture, by reason of
such guarantee the Guarantor is required to execute this Fifth Supplemental
Indenture (this "Supplemental Indenture");
WHEREAS, the Company, the Guarantor and the Trustee are authorized to
enter into this Supplemental Indenture;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants contained herein and in this Supplemental Indenture and for
other good and valuable consideration, the receipt and sufficiency of which are
herein acknowledged, the Company, the Trustee and the Guarantor hereby agree for
the equal and the ratable benefit of all holders of the Securities as follows:
ARTICLE ONE
Definitions
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1.1 Definitions. For purposes of this Supplemental Indenture, the
-----------
terms defined in the recitals shall have the meanings therein specified; any
terms defined
<PAGE>
3
in the Indenture and not defined herein shall have the same meanings herein as
therein defined; and references to Articles or Sections shall, unless the
context indicates otherwise, be references to Articles or Sections of the
Indenture.
ARTICLE TWO
GUARANTEE
---------
2.1 Guarantee. For value received, Guarantor, in accordance with this
---------
Article Two, hereby absolutely, unconditionally and irrevocably guarantees to
the Trustee and the Holders, as if Guarantor was the principal debtor, the
punctual payment and performance when due of all Indenture Obligations (which
for purposes of this Guarantee shall also be deemed to include all commissions,
fees, charges, costs and other expenses (including reasonable legal fees and
disbursements of one counsel) arising out of, or incurred by the Trustee or the
Holders in connection with, the enforcement of this Guarantee) on a senior
subordinated basis.
2.2 Continuing Guarantee; No Right of Set-Off; Independent
------------------------------------------------------
Obligation.
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(a) This Guarantee shall be a continuing guarantee of the
payment and performance of all Indenture Obligations and shall remain in full
force and effect until the payment in full of all of the Indenture Obligations
and shall apply to and secure any ultimate balance due or
<PAGE>
4
remaining unpaid to the Trustee or the Holders; and this Guarantee shall not be
considered as wholly or partially satisfied by the payment or liquidation at any
time or from time to time of any sum of money for the time being due or
remaining unpaid to the Trustee or the Holders. Guarantor covenants and agrees
to comply with all obligations, covenants, agreements and provisions applicable
to it in the Indenture including those set forth in Article Eight. Without
limiting the generality of the foregoing, Guarantor's liability shall extend to
all amounts which constitute part of the Indenture Obligations and would be owed
by the Company under the Indenture and the Securities but for the fact that they
are unenforceable, reduced, limited, impaired, suspended or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
the Company.
(b) Guarantor hereby guarantees that the Indenture Obligations
will be paid to the Trustee without set-off or counterclaim or other reduction
whatsoever (whether for taxes, withholding or otherwise) in lawful currency of
the United States of America.
(c) Guarantor's liability to pay or perform or cause the
performance of the Indenture Obligations under this Guarantee shall arise
forthwith after demand for payment or performance by the Trustee has been given
to Guarantor in the manner prescribed in Section 106 of the Indenture.
<PAGE>
5
(d) Except as provided herein, the provisions of this
Article Two cover all agreements between the parties hereto relative to the
Guarantee and none of the parties shall be bound by any representation, warranty
or promise made by any Person relative thereto which is not embodied herein; and
it is specifically acknowledged and agreed that this Guarantee has been
delivered by Guarantor free of any conditions whatsoever and that no
representations, warranties or promises have been made to Guarantor affecting
its liabilities hereunder, and that the Trustee shall not be bound by any
representations, warranties or promises now or at any time hereafter made by the
Company to Guarantor.
(e) This Guarantee is a guarantee of payment, performance and
compliance and not of collectibility and is in no way conditioned or contingent
upon any attempt to collect from or enforce performance or compliance by the
Company or upon any other event or condition whatsoever.
(f) The obligations of Guarantor set forth herein constitute the
full recourse obligations of Guarantor enforceable against it to the full extent
of all its assets and properties.
2.3 Guarantee Absolute and Unconditional. The obligations of
------------------------------------
Guarantor hereunder are independent of the obligations of the Company under the
Securities and the Indenture and a separate action or actions may be brought
<PAGE>
6
and prosecuted against Guarantor whether or not an action or proceeding is
brought against the Company and whether or not the Company is joined in any such
action or proceeding. The liability of Guarantor hereunder is irrevocable,
absolute and unconditional and (to the extent permitted by law) the liability
and obligations of Guarantor hereunder shall not be released, discharged,
mitigated, waived, impaired or affected in whole or in part by:
(a) any defect or lack of validity or enforceability in respect
of any indebtedness or other obligation of the Company or any other Person under
the Indenture or the Securities, or any agreement or instrument relating to any
of the foregoing;
(b) any grants of time, renewals, extensions, indulgences,
releases, discharges or modifications which the Trustee or the Holders may
extend to, or make with, the Company, Guarantor or any other Person, or any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Indenture Obligations, or any other amendment or waiver of, or any
consent to or departure from, the Indenture or the Securities, including any
increase or decrease in the Indenture Obligations;
(c) the taking of security from the Company, Guarantor or any
other Person, and the release, discharge or alteration of, or other dealing with
such security;
<PAGE>
7
(d) the abstention from taking security from the Company,
Guarantor or any other Person or from perfecting, continuing to keep perfected
or taking advantage of any security;
(e) any loss, diminution of value or lack of enforceability of
any security received from the Company, Guarantor or any other Person and
including any other guarantees received by the Trustee;
(f) any other dealings by the Company or Guarantor with any
other Person, or with any security;
(g) the Trustee's or the Holders' acceptance of compositions
from the Company or Guarantor;
(h) the application by the Holders or the Trustee of all monies
at any time and from time to time received from the Company, Guarantor or any
other Person on account of any indebtedness and liabilities owing by the Company
or Guarantor to the Trustee or the Holders, in such manner as the Trustee or the
Holders deems best and the changing of such application in whole or in part and
at any time or from time to time, or any manner of application of collateral or
proceeds thereof, to all or any of the Indenture Obligations, or the manner of
sale of any collateral;
(i) the release or discharge of the Company or Guarantor or of
any other guarantor of the Securities or of any Person liable directly as surety
or otherwise by operation of law or otherwise for the Securities other than
<PAGE>
8
an express release in writing given by the Trustee, on behalf of the
Holders, of the liability and obligations of Guarantor hereunder;
(j) any change in the name, business, capital structure or
governing instrument of the Company or Guarantor or any refinancing or
restructuring of any of the Indenture Obligations;
(k) the sale of the Company's or Guarantor's business or any
part thereof;
(l) any merger or consolidation, arrangement or reorganization
of the Company, Guarantor, any Person resulting from the merger or consolidation
of the Company or Guarantor with any other Person or any other successor to such
Person or merged or consolidated Person or any other change in the corporate
existence, structure or ownership of the Company or Guarantor or any change in
the corporate relationship between the Company and Guarantor, or any termination
of such relationship;
(m) the insolvency, bankruptcy, liquidation, winding up,
dissolution, receivership, arrangement, readjustment, assignment for the benefit
of creditors or distribution of the assets of the Company or its assets or any
resulting discharge of any obligations of the Company (whether voluntary or
involuntary) or of Guarantor (whether voluntary or involuntary) or the loss of
corporate existence;
<PAGE>
9
(n) any arrangement or plan of reorganization affecting the
Company or Guarantor;
(o) any failure, omission or delay on the part of the Company to
conform or comply with any term of the Indenture;
(p) any limitation on the liability or obligations of the
Company or any other person under the Indenture, or any discharge, termination,
cancellation, distribution, irregularity, invalidity or unenforceability, in
whole or in part, of the Indenture;
(q) any other circumstance that might otherwise constitute a
defense available to, or discharge of, the Company or Guarantor; or
(r) any modification, compromise, settlement or release by the
Trustee, or by operation law or otherwise, of the Indenture Obligations or the
liability of the Company or any other obligor under the Securities or of any
collateral, in whole or in part, and any refusal of payment by the Trustee, in
whole or in part, from any other obligor or other guarantor in connection with
any of the Indenture Obligations, whether or not with notice to or further
assent by, or any reservation of rights against, Guarantor.
2.4 Right to Demand Full Performance. In the event of any demand for
--------------------------------
payment or performance by the Trustee from Guarantor hereunder, the Trustee or
the Holders shall have the right to demand its full claim and to receive all
dividends or other payments in respect thereof until the
<PAGE>
10
Indenture Obligations have been paid in full and Guarantor shall continue to be
liable hereunder for any balance which may be owing to the Trustee or the
Holders by the Company under the Indenture and the Securities. The retention by
the Trustee or the Holders of any security, prior to the realization by the
Trustee or the Holders of its rights to such security upon foreclosure thereon,
shall not, as between the Trustee and Guarantor, be considered as a purchase of
such security, or as payment, satisfaction or reduction of the Indenture
Obligations due to the Trustee or the Holders by the Company or any part
thereof. Guarantor, promptly after demand, will reimburse the Trustee and the
Holders for all costs and expenses of collecting such amount under, or enforcing
this Guarantee, including, without limitation, the reasonable fees and expenses
of counsel.
2.5 Waivers.
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(a) Guarantor hereby expressly waives (to the extent permitted
by law) notice of the acceptance of this Guarantee and notice of the incurrence,
existence, renewal, extension or the non-performance, non-payment, or non-
observance on the part of the Company of any of the terms, covenants, conditions
and provisions of the Indenture or the Securities or any other notice whatsoever
to or upon the Company or Guarantor with respect to the Indenture Obligations,
whether by statute, rule of law or otherwise. Guarantor hereby acknowledges
communication to it of the terms of the Indenture and the Securities and all of
the
<PAGE>
11
provisions therein contained and consents to and approves the same. Guarantor
hereby expressly waives (to the extent permitted by law) diligence, presentment,
protest and demand for payment with respect to (i) any notice of any sale,
transfer or other disposition of any right, title to or interest in the
Securities by the Holders or in the Indenture, (ii) any release of Guarantor
from its obligations hereunder resulting from any loss by it of its rights of
subrogation hereunder and (iii) any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge, release or defense of a
guarantor or surety or that might otherwise limit recourse against Guarantor.
(b) Without prejudice to any of the rights or resources which
the Trustee or the Holders may have against the Company, Guarantor hereby
expressly waives (to the extent permitted by law) any right to require the
Trustee or the Holders to:
(i) enforce, assert, exercise, initiate or exhaust any
rights, remedies or recourse against the Company, Guarantor or any other
Person under the Indenture or otherwise;
(ii) value, realize upon or dispose of any security of the
Company or any other Person held by the Trustee or the Holders;
<PAGE>
12
(iii) initiate or exhaust any other remedy which the Trustee
or the Holders may have in law or equity; or
(iv) mitigate the damages resulting from any default under
the Indenture;
before requiring or becoming entitled to demand payment from Guarantor under
this Guarantee.
2.6 Guarantor Remains Obligated in the Event the Company Is No Longer
-----------------------------------------------------------------
Obligated to Discharge Indenture Obligations. It is the express intention of
- --------------------------------------------
the Trustee and Guarantor that if for any reason the Company has no legal
existence, is or becomes under no legal obligation to discharge the Indenture
Obligations owing to the Trustee or the Holders by the Company or if any of the
Indenture Obligations owing by the Company to the Trustee or the Holders becomes
irrecoverable from the Company by operation of law or for any reason whatsoever,
this Guarantee and the covenants, agreements and obligations of Guarantor
contained in this Article Two shall nevertheless be binding upon Guarantor, as a
principal debtor, until such time as all such Indenture Obligations have been
paid in full to the Trustee and all Indenture Obligations owing to the Trustee
or the Holders by the Company have been discharged, or such earlier time as
Section 402 shall apply to the Securities and Guarantor shall be responsible for
the payment thereof to the Trustee or the Holders upon demand.
<PAGE>
13
2.7 Waiver of Rights. Guarantor agrees (to the extent permitted by
----------------
law) that it hereby waives and will not in any manner whatsoever claim or take
the benefit or advantage of, any rights of reimbursement, exoneration,
contribution, indemnity or subrogation (whether contractual, under Section 509
of Title Eleven of the United States Code, under common law or otherwise) or any
similar rights or "claims" (as such term is defined under Title Eleven of the
United States Code), against the Company or any Subsidiary arising from the
existence of, or performance by, Guarantor under this Guarantee.
2.8 Guarantee Is In Addition to Other Security.
------------------------------------------
This Guarantee shall be in addition to and not in substitution for any other
guarantees or other security which the Trustee may now or hereafter hold in
respect of the Indenture Obligations owing to the Trustee or the Holders by the
Company, and (except as may be required by law) the Trustee shall be under no
obligation to marshal in favor of Guarantor any other guarantees or other
security or any moneys or other assets which the Trustee may be entitled to
receive or upon which the Trustee or the Holders may have a claim.
2.9 Release of Security Interests. Without limiting the generality
-----------------------------
of the foregoing and except as otherwise provided in the Indenture, Guarantor
hereby consents and agrees, to the fullest extent permitted by applicable law,
that the rights of the Trustee hereunder,
<PAGE>
14
and the liability of Guarantor hereunder, shall not be affected by any and all
releases for any purpose of any collateral, if any, from the Liens and security
interests created by any collateral document and that this Guarantee shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment of any of the Indenture Obligations is rescinded or must otherwise
be returned by the Trustee upon the insolvency, bankruptcy or reorganization of
the Company or otherwise, all as though such payment had not been made.
2.10 No Bar to Further Actions. Except as provided by law, no action
-------------------------
or proceeding brought or instituted under this Article Two and this Guarantee
and no recovery or judgment in pursuance thereof shall be a bar or defense to
any further action or proceeding which may be brought under this Article Two and
this Guarantee by reason of any further default or defaults under this Article
Two and this Guarantee or in the payment of any of the Indenture Obligations
owing by the Company.
2.11 Failure to Exercise Rights Shall Not Operate As a Waiver; No
------------------------------------------------------------
Suspension of Remedies.
- ----------------------
(a) No failure to exercise and no delay in exercising, on the
part of the Trustee or the Holders, any right, power, privilege or remedy under
this Article Two and this Guarantee shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power, privilege or remedy preclude
any other or further exercise
<PAGE>
15
thereof, or the exercise of any other rights, powers, privileges or remedies.
The rights and remedies herein provided for are cumulative and not exclusive of
any rights or remedies provided in law or equity.
(b) Nothing contained in this Article Two shall limit the right
of the Trustee or the Holders to take any action to accelerate the maturity of
the Securities pursuant to Article Five or to pursue any rights or remedies
hereunder or under applicable law.
2.12 Trustee's Duties; Notice to Trustee.
-----------------------------------
(a) Any provision in this Article Two or elsewhere in the
Indenture allowing the Trustee to request any information or to take any action
authorized by, or on behalf of, Guarantor shall be permissive and shall not be
obligatory on the Trustee except as the Holders may direct in accordance with
the provisions of the Indenture or where the failure of the Trustee to request
any such information or to take any such action arises from the Trustee's
negligence, bad faith or willful misconduct.
(b) The Trustee shall not be required to inquire into the
existence, powers or capacities of the Company, Guarantor or the officers,
directors or agents acting or purporting to act on their respective behalf.
(c) Notwithstanding the provisions of this Article Two or any
other provision of the Indenture, the Trustee shall not be charged with
knowledge of the existence of any facts which would prohibit the making of any
payment
<PAGE>
16
to or by the Trustee in respect of the Securities, unless and until the Trustee
shall have received written notice thereof from the Company; and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
Section 601, shall be entitled in all respects to assume that no such facts
exist, provided however, that if a Responsible Officer of the Trustee shall not
-------- -------
have received any such notice from the Company at least three Business Days
prior to the date upon which by the terms hereof any money may become payable
for any purpose (including, without limitation, the payment of the principal of,
premium, if any, or interest on, any Security), then, anything herein contained
to the contrary notwithstanding, the Trustee shall have full power and authority
to receive such money and to apply the same to the purpose for which such money
was received and shall not be affected by any notice to the contrary which may
be received by it within two Business Days prior to such date; nor shall the
Trustee be charged with knowledge of the curing of any such default or the
elimination of the act or condition preventing any such payment unless and until
the Responsible Officer of the Trustee shall have received an Officers'
Certificate to such effect.
(d) In case that at any time any Paying Agent other than the
Trustee shall have been appointed by the Company and be then acting hereunder,
the term "Trustee" as used in this Article Two shall in such case (unless the
<PAGE>
17
context otherwise requires) be construed as extending to and including such
Paying Agent within its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article Two in addition to or in place of the
Trustee.
2.13 Successors and Assigns. All terms, agreements and conditions of
----------------------
this Article Two shall extend to and be binding upon Guarantor and its
successors and permitted assigns and shall enure to the benefit of and may be
enforced by the Trustee and its successors and assigns; provided, however, that
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Guarantor may not assign any of its rights or obligations hereunder other than
in accordance with Article Eight.
2.14 Release of Guarantee. Concurrently with the payment in full of
--------------------
all of the Indenture Obligations, Guarantor shall be released from and relieved
of its obligations under this Article Two. Upon the delivery by the Company to
the Trustee of an Officers' Certificate and, if requested by the Trustee, an
Opinion of Counsel to the effect that the transaction giving rise to the release
of this Guarantee was made by the Company in accordance with the provisions of
the Indenture and the Securities, the Trustee shall execute any documents
reasonably required in order to evidence the release of Guarantor from its
obligations under this Guarantee. If any of the Indenture Obligations are
revived and reinstated after the termination of this Guarantee, then all of the
obligations of Guarantor
<PAGE>
18
under this Guarantee shall be revived and reinstated as if this Guarantee had
not been terminated until such time as the Indenture Obligations are paid in
full, and Guarantor shall enter into an amendment to this Guarantee, reasonably
satisfactory to the Trustee, evidencing such revival and reinstatement.
This Guarantee shall terminate upon a merger or consolidation of
Guarantor with the Company, in accordance with Article Eight.
This Guarantee shall be automatically and unconditionally released and
discharged upon the occurrence of any of the conditions set forth in
Section 1013(d) of the Indenture.
2.15 Execution of Guarantee. To evidence the Guarantee, Guarantor
----------------------
hereby agrees upon request of the Trustee to execute a guarantee substantially
in the form set forth in Section 205, with appropriate name and reference
changes, to be endorsed on each Security authenticated and delivered by the
Trustee and that this Supplemental Indenture shall be executed on behalf of
Guarantor by its Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
If an officer whose signature is on this Supplemental Indenture no
longer holds that office at the
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19
time the Trustee authenticates a Security on which this Guarantee is endorsed,
such Guarantee shall be valid nevertheless.
2.16 Guarantee Subordinate to Senior Guarantor Indebtedness.
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Guarantor covenants and agrees and each Holder of a Security, by his acceptance
thereof, likewise covenants and agrees, that, to the extent and in the manner
hereinafter set forth in this Article Two, this Guarantee is hereby subordinate
and subject in right of payment as provided in this Article to the prior payment
in full, in cash or Cash Equivalents or in any other manner acceptable to the
requisite holders of Designated Senior Guarantor Indebtedness, of all Senior
Guarantor Indebtedness; provided, however, that the Indebtedness represented by
-------- -------
this Guarantee in all respects shall rank equally with, or prior to, all
existing and future unsecured Indebtedness of Guarantor that is subordinated to
Senior Guarantor Indebtedness.
This Article Two shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of, or continue to hold,
Senior Guarantor Indebtedness, and such provisions are made for the benefit of
the holders of Senior Guarantor Indebtedness; and such holders are made obligees
hereunder and they or each of them may enforce such provisions.
<PAGE>
20
2.17 Payment Over of Proceeds Upon Dissolution of the Guarantor, etc.
----------------------------------------------------------------
In the event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to Guarantor or to its creditors, as such, or to
its assets, or (b) any liquidation, dissolution or other winding up of
Guarantor, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshaling of assets or liabilities of Guarantor, then and in any such
event:
(1) the holders of Senior Guarantor Indebtedness shall be
entitled to receive payment in full in cash or Cash Equivalents or in any other
manner acceptable to the requisite holders of Designated Senior Guarantor
Indebtedness, of all amounts due on or in respect of all Senior Guarantor
Indebtedness, before the Holders of the Securities are entitled to receive any
payment or distribution of any kind or character (excluding Permitted Guarantor
Junior Securities) on account of the principal of, premium, if any, or interest
on the Securities or on account of the purchase, redemption, defeasance or other
acquisition of or in respect of the Securities (including any payment or other
distribution which may be received from the holders of Subordinated Indebtedness
as a result of any payment on such Subordinated Indebtedness); and
<PAGE>
21
(2) any payment or distribution of assets of Guarantor of
any kind or character, whether in cash, property or securities (excluding
Permitted Guarantor Junior Securities), by set-off or otherwise, to which
Holders or the Trustee would be entitled but for the provisions of this Article
shall be paid by the liquidating trustee or agent or other Person making such
payment or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of Senior Guarantor
Indebtedness or their representative or representatives or to the trustee or
trustees under any indenture under which any instruments evidencing any such
Senior Guarantor Indebtedness may have been issued, ratably according to the
aggregate amounts remaining unpaid on account of the Senior Guarantor
Indebtedness held or represented by each, to the extent necessary to make
payment in full in cash or Cash Equivalents or in any other manner acceptable to
the requisite holders of Designated Senior Guarantor Indebtedness, of all Senior
Guarantor Indebtedness remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of such Senior Guarantor Indebtedness;
and
(3) in the event that, notwithstanding the foregoing
provisions of this Section, the Trustee or the Holder of any Security shall have
received any payment or distribution of assets of Guarantor of any kind or
character, whether in cash, property or securities, in
<PAGE>
22
respect of principal, premium, if any, and interest on he Securities or on
account of the purchase, redemption, defeasance or other acquisition of or in
respect of the Securities before all Senior Guarantor Indebtedness is paid in
full, then and in such event such payment or distribution (excluding Permitted
Guarantor Junior Securities) (including any payment or other distribution which
may be received from the holders of Subordinated Indebtedness as a result of any
payment on such Subordinated Indebtedness) shall be paid over or delivered
forthwith to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other person making payment or distribution of
assets of Guarantor for application to the payment of all Senior Guarantor
Indebtedness remaining unpaid, to the extent necessary to pay all Senior
Guarantor Indebtedness in full in cash or Cash Equivalents or in any other
manner acceptable to the requisite holders of Designated Senior Guarantor
Indebtedness, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Guarantor Indebtedness and until so paid shall be
held in trust for the benefit of the holders of Senior Guarantor Indebtedness.
The consolidation of Guarantor with, or the merger of Guarantor with
or into, another Person or the liquidation or dissolution of Guarantor following
the sale, assignment, conveyance, transfer, lease or other disposal of all or
substantially all of its properties or assets to another
<PAGE>
23
Person upon the terms and conditions set forth in Article Eight of the Indenture
shall not be deemed a dissolution, winding up, liquidation, reorganization,
assignment for the benefit of creditors or marshaling of assets and liabilities
of Guarantor for the purposes of this Section 2.17 if the Person formed by such
consolidation or the surviving entity of such merger or the Person which
acquires by sale, assignment, conveyance, transfer, lease or other disposal such
properties or assets, as the case may be, shall as a part of such consolidation,
merger, sale, assignment, conveyance, transfer, lease, or other disposal comply
with the conditions set forth in Article Eight.
2.18 Default on Senior Guarantor Indebtedness.
----------------------------------------
(a) Upon the maturity of any Senior Guarantor Indebtedness by
lapse of time, acceleration or otherwise, all principal thereof and interest
thereon and other amounts due in connection therewith shall first be paid in
full in cash or Cash Equivalents or in any other manner acceptable to the
requisite holders of such Designated Senior Guarantor Indebtedness before any
payment is made by Guarantor or any Person acting on behalf of Guarantor in
respect of the Securities.
(b) No payment (excluding Payments in the form of Permitted
Guarantor Junior Securities) shall be made by Guarantor in respect of the
Securities during the period in which Section 2.17 of this Supplemental
Indenture shall be applicable, during any suspension of payments in effect
<PAGE>
24
under Section 1203(a) or during any Payment Blockage Period in effect under
Section 1203(b).
(c) In the event that, notwithstanding the foregoing, Guarantor
shall make any payment to the Trustee or the Holder of any Security pursuant to
this Guarantee prohibited by the foregoing provisions of this Section, then and
in such event such payment shall be paid over and delivered forthwith to the
representatives of Senior Guarantor Indebtedness or as a court of competent
jurisdiction shall direct and until so paid shall be held in trust for the
benefit of the holders of Senior Guarantor Indebtedness.
2.19 Payment Permitted by Guarantor if No Default.
--------------------------------------------
Nothing contained in this Article Two, elsewhere in the Indenture or in any of
the Securities shall prevent Guarantor, at any time except during the pendency
of any case, proceeding, dissolution, liquidation or other winding up,
assignment for the benefit of creditors or other marshaling of assets and
liabilities of Guarantor referred to in Section 2.17 of this Supplemental
Indenture or under the conditions described in Section 2.18 of this Supplemental
Indenture from making payments at any time of principal of, premium, if any, or
interest on the Securities.
<PAGE>
25
2.20 Subrogation to Rights of Holders of Senior Guarantor
----------------------------------------------------
Indebtedness. Subject to the payment in full of all Senior Guarantor
- ------------
Indebtedness in cash or Cash Equivalents or in any other manner acceptable to
the requisite holders of Senior Guarantor Indebtedness, the Holders of the
Securities shall be subrogated to the rights of the holders of such Senior
Guarantor Indebtedness to receive payments and distributions of cash, property
and securities applicable to Senior Guarantor Indebtedness until the principal
of, premium, if any, and interest on the Securities shall be paid in full. For
purposes of such subrogation, no payments or distributions to the holders of
Senior Guarantor Indebtedness of any cash, property or securities to which the
holders of the Securities or the Trustee would be entitled except for the
provisions of this Article Two, and no payments over pursuant to the provisions
of this Article Two to the holders of Senior Guarantor Indebtedness by Holders
of the Securities or the Trustee, shall, as among Guarantor, its creditors other
than holders of Senior Guarantor Indebtedness, and the Holders of the
Securities, be deemed to be a payment or distribution by Guarantor to or on
account of the Senior Guarantor Indebtedness.
2.21 Provisions Solely to Define Relative Rights.
-------------------------------------------
The provisions of Section 2.16 through 2.30 of this Supplemental Indenture are
intended solely for the purpose of defining the relative rights of the Holders
of the
<PAGE>
26
Securities on the one hand and the holders of Senior Guarantor Indebtedness on
the other hand. Nothing contained in this Article or elsewhere in the Indenture
or in the Securities is intended to or shall (a) impair as among Guarantor, its
creditors other than holders of Senior Guarantor Indebtedness and the Holders of
the Securities, the obligation of Guarantor, which is absolute and
unconditional, to pay to the Holders of the Securities the principal of,
premium, if any, and interest on the Securities as and when the same shall
become due and payable in accordance with their terms; or (b) affect the
relative rights against Guarantor of the Holders of the Securities and creditors
of Guarantor other than the holders of Senior Guarantor Indebtedness; or
(c) prevent the Trustee or the Holder of any Security from exercising all
remedies otherwise permitted by applicable law upon default under the Indenture,
subject to the rights, if any, under this Article of the holders of Senior
Guarantor Indebtedness (1) in any case, proceeding, dissolution, liquidation or
other winding up, assignment for the benefit of creditors or other marshaling of
assets and liabilities of Guarantor referred to in Section 2.17 of this
Supplemental Indenture to receive, pursuant to and in accordance with such
Section, cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder, or (2) under the conditions specified in Section 2.18 of
this Supplemental Indenture, to prevent any payment prohibited by such Section
<PAGE>
27
or enforce their rights pursuant to Section 2.18(c) of this Supplemental
Indenture.
2.22 Trustee to Effectuate Subordination. Each Holder of a Security
-----------------------------------
by his acceptance thereof authorizes and directs the Trustee on his behalf to
take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article Two and appoints the Trustee his
attorney-in-fact for any and all such purposes, including, in the event of any
dissolution, winding up, liquidation or reorganization of Guarantor whether in
bankruptcy, insolvency, receivership proceedings, or otherwise, the timely
filing of a claim for the unpaid balance of the indebtedness of Guarantor owing
to such Holder in the form required in such proceedings and the causing of such
claim to be approved. If the Trustee does not file a proper claim at least 30
days before the expiration of the time to file such claim, then the holders of
Senior Guarantor Indebtedness, and their agents, trustees or other
representatives are authorized to do so on behalf of the Holders.
2.23 No Waiver of Subordination Provisions.
-------------------------------------
(a) No right of any present or future holder of any Senior
Guarantor Indebtedness to enforce subordination as herein provided shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of Guarantor or by any act or failure to act by any such holder, or by any
non-compliance by Guarantor with
<PAGE>
28
the terms, provisions and covenants of the Indenture, regardless of any
knowledge thereof any such holder may have or be otherwise charged with.
(b) Without limiting the generality of Subsection (a) of this
Section, the holders of Senior Guarantor Indebtedness may, at any time and from
time to time, without the consent of or notice to the Trustee or the Holders of
the Securities, without incurring responsibility to the Holders of the
Securities and without impairing or releasing the subordination provided in this
Article Two or the obligations hereunder of the Holders of the Securities to the
holders of Senior Guarantor Indebtedness, do any one or more of the following:
(1) change the manner, place or terms of payment or extend the time of payment
of, or renew or alter, Senior Guarantor Indebtedness (or the Senior Indebtedness
guaranteed thereby) or any instrument evidencing the same or any agreement under
which Senior Guarantor Indebtedness (or the Senior Indebtedness guaranteed
thereby) is outstanding; (2) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Guarantor Indebtedness
(or the Senior Indebtedness guaranteed thereby); (3) release any Person liable
in any manner for the collection or payment of Senior Guarantor Indebtedness (or
the Senior Indebtedness guaranteed thereby); and (4) exercise or refrain from
exercising any rights against Guarantor and any other Person; provided, however,
-------- -------
that in
<PAGE>
29
no event shall any such actions limit the right of the Holders of the Securities
to take any action to accelerate the maturity of the Securities in accordance
with provisions described under Article Five or to pursue any rights or remedies
hereunder or under applicable laws if the taking of such action does not
otherwise violate the terms of this Article Two.
2.24 Notice to Trustee by Guarantor.
------------------------------
(a) Guarantor shall give prompt written notice to the Trustee of
any fact known to Guarantor which would prohibit the making of any payment to or
by the Trustee in respect of any Guarantee. Notwithstanding the provisions of
this Article Two or any provision of the Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of Securities, unless and
until the Trustee shall have received written notice thereof from Guarantor or a
holder of Senior Guarantor Indebtedness or from a representative of Senior
Guarantor Indebtedness or any trustee, fiduciary or agent therefor; and, prior
to the receipt of any such written notice, the Trustee shall be entitled in all
respects to assume that no such facts exist; provided, however, that if the
-------- -------
Trustee shall not have received the notice provided for in this Section at least
two Business Days prior to the date upon which by the terms hereof any money may
become payable for any purpose (including, without limitation, the payment
<PAGE>
30
of the principal of, premium, if any, or interest on the Security), then,
anything herein contained to the contrary notwithstanding but without limiting
the rights and remedies of the holders of Senior Guarantor Indebtedness or any
trustee, fiduciary or agent thereof, the Trustee shall have full power and
authority to receive such money and to apply the same to the purpose for which
such money was received and shall not be affected by any notice to the contrary
which may be received by it within two Business Days prior to such date; nor
shall the Trustee be charged with knowledge of the curing of any such default or
the elimination of the act or condition preventing any such payment unless and
until the Trustee shall have received an Officers' Certificate to such effect.
(b) The Trustee shall be entitled to rely on the delivery to it
of a written notice to the Trustee and Guarantor by a Person representing
himself to be a representative of a holder or a holder of Senior Guarantor
Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such
notice has been given by a representative or a holder of Senior Guarantor
Indebtedness (or a trustee, fiduciary or agent therefor); provided, however,
-------- -------
that failure to give such notice to Guarantor shall not affect in any way the
ability of the Trustee to rely on such notice. In the event that the Trustee
determines in good faith that further evidence is required with respect to the
right of any Person as a holder of Senior Guarantor
<PAGE>
31
Indebtedness to participate in any payment or distribution pursuant to this
Article Two, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Guarantor
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article Two, and if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
2.25 Reliance on Judicial Order or Certificate of Liquidating Agent.
--------------------------------------------------------------
Upon any payment or distribution of assets of Guarantor referred to in this
Article Two, the Trustee and the Holders of the Securities shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other person making
such payment or distribution, delivered to the Trustee or to the Holders of
Securities, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of Senior Guarantor Indebtedness
and other indebtedness of Guarantor, the amount thereof or payable
<PAGE>
32
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article Two, provided that the foregoing shall
--------
apply only if such court has been fully apprised of the provisions of this
Article Two.
2.26 Rights of Trustee as a Holder of Senior Guarantor Indebtedness;
---------------------------------------------------------------
Preservation of Trustee's Rights.
- --------------------------------
The Trustee in its individual capacity shall be entitled to all the rights set
forth in this Article Two with respect to any Senior Guarantor Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Senior Guarantor Indebtedness, and nothing in the Indenture shall deprive the
Trustee of any of its rights as such holder. Nothing in this Article Two shall
apply to claims of, or payments to, the Trustee under or pursuant to the
provisions in the Indenture regarding compensation and indemnification of the
Trustee.
2.27 Article Applicable to Paying Agents. In case at any time any
-----------------------------------
Paying Agent other than the Trustee shall have been appointed by the Company and
be then acting under the Indenture, the term "Trustee" as used in this Article
Two shall in such case (unless the context otherwise requires) be construed as
extending to and including such Paying Agent within its meaning as fully for all
intents and purposes as if such Paying Agent were named in this Article Two in
addition to or in place of the Trustee; provided, however, that Section 2.26 of
-------- -------
this Supplemental Indenture
<PAGE>
33
shall not apply to Guarantor or any Affiliate of Guarantor if it or such
Affiliate acts as Paying Agent.
2.28 No Suspension of Remedies. Nothing contained in this Article Two
-------------------------
shall limit the right of the Trustee or the Holders of Securities to take any
action to accelerate the maturity of the Securities pursuant to the provisions
described in Article Five and as set forth in the Indenture or to pursue any
rights or remedies hereunder or under applicable law, subject to the rights, if
any, under this Article Two of the holders, from time to time, of Senior
Guarantor Indebtedness to receive the cash, property or securities receivable
upon the exercise of such rights or remedies.
2.29 Trustee's Relation to Senior Guarantor Indebtedness. With
---------------------------------------------------
respect to the holders of Senior Guarantor Indebtedness, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article Two, and no implied covenants or
obligations with respect to the holders of Senior Guarantor Indebtedness shall
be read into this Article Two against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Guarantor Indebtedness
and the Trustee shall not be liable to any holder of Senior Guarantor
Indebtedness if it shall mistakenly in the absence of gross negligence or
willful misconduct pay over or deliver to Holders of the Securities, Guarantor
or any other Person moneys or assets to which any
<PAGE>
34
holder of Senior Guarantor Indebtedness shall be entitled by virtue of this
Article Two or otherwise.
2.30 Limitation of Guarantor's Guarantee. Notwithstanding any other
-----------------------------------
provision of this Article Two or of the Indenture to the contrary, in the event
that the Guarantee provided pursuant to this Article Two would constitute or
result in a violation of any applicable fraudulent conveyance or similar law of
any relevant jurisdiction, the liability of the Guarantor under this Guarantee
shall be reduced to the maximum amount permissible under such applicable
fraudulent conveyance or similar law after taking into account and giving effect
to all Senior Guarantor Indebtedness.
ARTICLE THREE
Miscellaneous
-------------
3.1 Effect of the Supplemental Indenture. This Supplemental Indenture
------------------------------------
supplements the Indenture and shall be a part and subject to all the terms
thereof. Except as supplemented hereby, the Indenture and the Securities issued
thereunder shall continue in full force and effect.
3.2 Counterparts. This Supplemental Indenture may be executed in
------------
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
<PAGE>
35
3.3 GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
-------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF).
3.4 Recitals. The Trustee shall not be responsible for any recital
--------
herein (other than the eighth recital as it applies to the Trustee) as such
recitals shall be taken as statements of the Company, or the validity of the
execution by the Guarantor of this Supplemental Indenture. The Trustee makes no
representations as to the validity or sufficiency of this Supplemental
Indenture.
<PAGE>
36
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the date first written above.
PLAYTEX PRODUCTS, INC.
By: /s/ Michael F. Goss
___________________________
Name: Michael F. Goss
Title: Executive Vice President and
Chief Financial Officer
Attest:____________________
Name:
Title:
SUN ACQUISITION, INC.
By: /s/ Michael F. Goss
___________________________
Name: Michael F. Goss
Title: Vice President
Attest:____________________
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY, as Trustee
By: /s/ Thomas J. Bogert
___________________________
Name: Thomas J. Bogert
Title: Assistant Vice President
Attest:____________________
Name:
Title:
EXHIBIT 4.(b)(6)
____________________
SIXTH
SUPPLEMENTAL INDENTURE
BETWEEN
BANANA BOAT HOLDING CORPORATION
and IBJ SCHRODER BANK & TRUST COMPANY, as Trustee
____________________
$360,000,000
9% Senior Subordinated Notes due 2003
Dated as of October 31, 1995
<PAGE>
THIS SIXTH SUPPLEMENTAL INDENTURE, dated as of October 31, 1995,
between Banana Boat Holding Corporation, a Delaware corporation ("BBH"), and IBJ
Schroder Bank & Trust Company (the "Trustee").
WHEREAS, Playtex Family Products Corporation ("Family Products"),
Playtex Products, Inc. (the "Company") and the Trustee entered into an Indenture
dated as of February 2, 1994 (the "Initial Indenture") to provide for the
issuance of Family Products' 9% Senior Subordinated Notes due 2003 (the
"Securities");
WHEREAS, on March 8, 1994, Family Products was merged with and into
the Company, and pursuant to a First Supplemental Indenture of even date
therewith the Company assumed all of the obligations of Family Products under
the Securities and the Initial Indenture (the Initial Indenture, as amended,
being referred to herein as the "Indenture");
WHEREAS, Playtex Sales & Services, Inc., a Delaware corporation, has
guaranteed the obligations of the Company under the Credit Agreement and, by
reason of such guarantee, entered into a Second Supplemental Indenture dated as
of June 6, 1995;
WHEREAS, Playtex Manufacturing, Inc., a Delaware corporation, has
guaranteed the obligations of the Company under the Credit Agreement and, by
reason of such guarantee, entered into a Third Supplemental Indenture dated as
of June 6, 1995;
<PAGE>
2
WHEREAS, BBA Acquisition, Inc., a Delaware Corporation, has guaranteed
the obligations of the Company under the Credit Agreement and, by reason of such
guarantee, entered into a Fourth Supplemental Indenture dated as of October 31,
1995;
WHEREAS, Sun Acquisition, Inc., a Delaware Corporation, has guaranteed
the obligations of the Company under the Credit Agreement and, by reason of such
guarantee, entered into a Fifth Supplemental Indenture dated as of October 31,
1995;
WHEREAS, on October 31, 1995, BBA Acquisition, Inc., merged with and
into BBH (the "Merger"), with BBH succeeding to the business of BBA Acquisition,
Inc. and assuming all the obligations of BBA Acquisition, Inc. under the
Securities and the Indenture;
WHEREAS, BBH has made a request to the Trustee that the Trustee join
with it, in accordance with Section 901 of the Indenture, in the execution of
this Supplemental Indenture to permit BBH to assume all the obligations of BBA
Acquisition, Inc. under the Indenture pursuant to Section 801 of the Indenture;
and
WHEREAS, BBH and the Trustee are authorized to enter into this
Supplemental Indenture;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants contained herein and in this Supplemental Indenture and for
other good and valuable consideration, the receipt and sufficiency of which are
<PAGE>
3
herein acknowledged, the Trustee and BBH hereby agree for the equal and the
ratable benefit of all holders of the Securities as follows:
ARTICLE ONE
Definitions
-----------
Section 1.1 Definitions.
-----------
For purposes of this Supplemental Indenture, the terms defined in the
recitals shall have the meanings therein specified; any terms defined in the
Indenture and not defined herein shall have the same meanings herein as therein
defined.
ARTICLE TWO
Assumption and Substitution
---------------------------
Section 2.1 Assumption of Certain Obligations.
---------------------------------
BBH (as the surviving corporation) of the Merger expressly acknowledges
and assumes the due and punctual payment of the principal of, premium, if any,
and interest on the Securities and the performance and observance of every
covenant of the Indenture to be performed or observed by the Company.
Section 2.2 Substitution.
------------
On the date hereof, BBH (as the surviving corporation of the Merger)
shall, by virtue of the assumption described in Section 2.1 and the execution
and delivery of this Supplemental Indenture, succeed to and be substituted for
BBA Acquisition, Inc.
<PAGE>
4
Section 2.3 Other Obligations.
-----------------
BBH (as the surviving corporation of the Merger) hereby assumes all
the agreements and obligations of BBA Acquisition, Inc. under the Securities and
the Indenture and agrees to become the successor to BBA Acquisition, Inc, with
respect to all such agreements and obligations in accordance with the terms of
such instruments.
ARTICLE THREE
Miscellaneous
-------------
Section 3.1 Effect of the Supplemental Indenture.
------------------------------------
This Supplemental Indenture supplements the Indenture and shall be a
part and subject to all the terms thereof. Except as supplemented hereby, the
Indenture and the Securities issued thereunder shall continue in full force
and effect.
Section 3.2 Counterparts.
------------
This Supplemental Indenture, may be executed in counterparts, each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
SECTION 3.3 GOVERNING LAW.
-------------
THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF).
<PAGE>
5
Section 3.4 Recitals.
--------
The Trustee shall not be responsible for any recital herein (other
than the ninth recital as it applies to the Trustee) as such recitals shall be
taken as statements of BBH, or the validity of the execution by BBH of this
Supplemental Indenture. The Trustee makes no representations as to the validity
or sufficiency of this Supplemental Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the date first written above.
BANANA BOAT HOLDING CORPORATION
By: /s/ Michael F. Goss
--------------------------
Name: Michael F. Goss
Title: Vice President
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By: /s/ Thomas J. Bogert
---------------------------
Name: Thomas J. Bogert
Title: Assistant Vice
President
Agreed to and acknowledged by:
PLAYTEX PRODUCTS, INC.
By: /s/ Michael F. Goss
-----------------------------------
Name: Michael F. Goss
Title: Executive Vice President
and Chief Financial Officer
EXHIBIT 4(b)(7)
SEVENTH
SUPPLEMENTAL INDENTURE
BETWEEN
SUN PHARMACEUTICALS CORP. and IBJ SCHRODER BANK & TRUST COMPANY, as Trustee
$360,000,000
9% Senior Subordinated Notes due 2003
Dated as of October 31, 1995
<PAGE>
THIS SEVENTH SUPPLEMENTAL INDENTURE, dated as of October 31, 1995, between
Sun Pharmaceuticals Corp., a Delaware corporation ("Sun"), and IBJ Schroder Bank
& Trust Company (the "Trustee").
WHEREAS, Playtex Family Products Corporation ("Family Products"), Playtex
Products, Inc. (the "Company") and the Trustee entered into an Indenture dated
as of February 2, 1994 (the "Initial Indenture") to provide for the issuance of
Family Products' 9% Senior Subordinated Notes due 2003 (the "Securities");
WHEREAS, on March 8, 1994, Family Products was merged with and into the
Company, and pursuant to a First Supplemental Indenture of even date therewith
the Company assumed all of the obligations of Family Products under the
Securities and the Initial Indenture (the Initial Indenture, as amended, being
referred to herein as the "Indenture");
WHEREAS, Playtex Sales & Services, Inc., a Delaware corporation, has
guaranteed the obligations of the Company under the Credit Agreement and, by
reason of such guarantee, entered into a Second Supplemental Indenture dated as
of June 6, 1995;
WHEREAS, Playtex Manufacturing, Inc., a Delaware corporation, has guaranteed
the obligations of the Company under the Credit Agreement and, by reason of such
guarantee, entered into a Third Supplemental Indenture dated as of June 6, 1995;
2
<PAGE>
WHEREAS, BBA Acquisition, Inc., a Delaware Corporation, has guaranteed the
obligations of the Company under the Credit Agreement and, by reason of such
guarantee, entered into a Fourth Supplemental Indenture dated as of October 31,
1995;
WHEREAS, Sun Acquisition, Inc., a Delaware Corporation, has guaranteed the
obligations of the Company under the Credit Agreement and, by reason of such
guarantee, entered into a Fifth Supplemental Indenture dated as of October 31,
1995;
WHEREAS, Banana Boat Holding Corporation, a Delaware Corporation, has
succeeded to the business of BBA Acquisition, Inc., and has assumed all the
obligations of BBA Acquisition, Inc. under the Securities and the Indenture and
by reason of such succession and assumption, has entered into a Sixth
Supplemental Indenture dated October 31, 1995;
WHEREAS, on October 31, 1995, Sun Acquisition, Inc., merged with and into
Sun (the "Merger"), with Sun succeeding to the business of Sun Acquisition, Inc.
and assuming all the obligations of Sun Acquisition, Inc. under the Securities
and the Indenture;
WHEREAS, Sun has made a request to the Trustee that the Trustee join with
it, in accordance with Section 901 of the Indenture, in the execution of this
Supplemental Indenture to permit Sun to assume all the obligations of Sun
Acquisition, Inc. under the Indenture pursuant to Section 801 of the Indenture;
and
3
<PAGE>
WHEREAS, Sun and the Trustee are authorized to enter into this Supplemental
Indenture;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein and in this Supplemental Indenture and for other good
and valuable consideration, the receipt and sufficiency of which are herein
acknowledged, the Trustee and Sun hereby agree for the equal and the ratable
benefit of all holders of the Securities as follows:
ARTICLE ONE
Definitions
------------
Section 1.1 Definitions.
------------
For purposes of this Supplemental Indenture, the terms defined in the
recitals shall have the meanings therein specified; any terms defined in the
Indenture and not defined herein shall have the same meanings herein as therein
defined.
ARTICLE TWO
Assumption and Substitution
----------------------------
Section 2.1 Assumption of Certain Obligations.
-----------------------------------
Sun (as the surviving corporation of the Merger) expressly
acknowledges and assumes the due and punctual payment of the principal of,
premium, if any, and interest on the Securities and the performance and
observance of every covenant of the Indenture to be performed or observed
by the Company.
4
<PAGE>
Section 2.2 Substitution.
-------------
On the date hereof, Sun (as the surviving corporation of the Merger)
shall, by virtue of the assumption described in Section 2.1 and the execution
and delivery of this Supplemental Indenture, succeed to and be substituted for
Sun Acquisition, Inc.
Section 2.3 Other Obligations.
------------------
Sun (as the surviving corporation of the Merger) hereby assumes all the
agreements and obligations of Sun Acquisition, Inc. under the Securities and the
Indenture and agrees to become the successor to Sun Acquisition, Inc, with
respect to all such agreements and obligations in accordance with the terms of
such instruments.
ARTICLE THREE
Miscellaneous
-------------
Section 3.1 Effect of the Supplemental Indenture.
--------------------------------------
This Supplemental Indenture supplements the Indenture and shall be a
part and subject to all the terms thereof. Except as supplemented hereby, the
Indenture and the Securities issued thereunder shall continue in full force and
effect.
Section 3.2 Counterparts.
-------------
This Supplemental Indenture, may be executed in counterparts, each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
5
<PAGE>
SECTION 3.3 GOVERNING LAW.
--------------
THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF).
Section 3.4 Recitals.
---------
The Trustee shall not be responsible for any recital herein (other than
the tenth recital as it applies to the Trustee) as such recitals shall be taken
as statements of Sun, or the validity of the execution by Sun of this
Supplemental Indenture. The Trustee makes no representations as to the validity
or sufficiency of this Supplemental Indenture.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the date first written above.
SUN PHARMACEUTICALS CORP.
By: /s/ Michael F. Goss
-----------------------------
Name: Michael F. Goss
Title: Vice President
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By: /s/ Thomas J. Bogert
-----------------------------
Name: /s/ Thomas J. Bogert
Title: Assistant Vice Prsident
Agreed to and acknowledged by: PLAYTEX PRODUCTS, INC.
By: /s/ Michael F. Goss
----------------------------------
Name: Michael F. Goss
Title: Executive Vice President
and Chief Financial Officer
7
Exhibit 10(a)(3)
1
FIRST AMENDMENT
FIRST AMENDMENT, dated as of October 5, 1995 (this "Amendment"), to
---------
the Credit Agreement, dated as of June 6, 1995 (as amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"), among
----------------
PLAYTEX PRODUCTS, INC., a Delaware corporation (the "Borrower"), the
--------
several banks and other financial institutions from time to time parties
thereto (the "Lenders") and CHEMICAL BANK, as agent for the Lenders (in
-------
such capacity, the "Agent").
-----
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to
make, and have made, certain loans and other extensions of credit to the
Borrower; and
WHEREAS, the Borrower has requested, and, upon this Amendment becoming
effective, the Lenders have agreed, that the Credit Agreement be amended in
the manner provided for in this Amendment.
NOW, THEREFORE, the parties hereto hereby agree as follows:
I. Defined Terms. Terms defined in the Credit Agreement and used
-------------
herein shall have the meanings given to them in the Credit Agreement.
II. Amendments to Credit Agreement.
------------------------------
1. Amendments to Subsection 1.1. Subsection 1.1 of the Credit
----------------------------
Agreement is hereby amended by amending or adding in alphabetical order the
following definitions, so that the definitions so added or amended shall be
as follows:
"Acquisition Revolving Credit Commitment": as to any Lender, the
---------------------------------------
obligation of such Lender to make Acquisition Revolving Credit Loans
to the Borrower in an aggregate principal amount at any one time
outstanding not to exceed the amount set forth opposite such Lender's
name on Schedule 1.1 under the heading "Acquisition Revolving Credit
Commitment", as such amount may be reduced from time to time in
accordance with the provisions of this Agreement. Notwithstanding the
foregoing, subject to the consummation of the ______ Acquisition, the
Borrower may request any Lender to increase its Acquisition Revolving
Credit Commitment by an amount which, together with any other such
increases by one or more other Lenders, shall not exceed
<PAGE>
2
$15,000,000, and if such Lender shall agree to such increase, in a
manner and pursuant to an agreement satisfactory to the Administrative
Agent, the Acquisition Revolving Credit Commitment of such Lender
shall be so increased, subject to the fulfillment of such conditions
precedent as may be set forth in such agreement (including the payment
by the Borrower of such fees and costs of such Lender as may be set
forth in such agreement and any appropriate exchanges of Acquisition
Revolving Credit Notes). The Administrative Agent shall notify each
of the Lenders of any such increase in the Acquisition Revolving
Credit Commitment of any Lender. The provisions of Section IV to the
First Amendment shall apply to any Acquisition Revolving Credit Loans
made under any such increase in the Acquisition Revolving Credit
Commitment of any Lender.
"Applicable Margin": for each Type of Loan, (a) during the
-----------------
period from the Closing Date to and including the First Amendment
Effective Date, the rate per annum set forth under the relevant column
heading below for such Type of Loan:
Eurodollar
ABR Loans Loans
--------- ----------
0.50% 1.50%
and (b) during the period after the First Amendment Effective Date,
the rate per annum set forth under the relevant column heading below
for such Type of Loan:
Eurodollar
ABR Loans Loans
--------- ----------
0.75% 1.75%
provided that on any day on which there is Cash Collateral, the
--------
Applicable Margin on an amount of Eurodollar Term Loans equal to the
amount of such Cash Collateral up to $37,500,000 shall be 0.75% (and,
if the amount of such Cash Collateral exceeds the outstanding amount
of Eurodollar Term Loans on such day, the Applicable Margin on an
amount of ABR Term Loans equal to such excess shall be 0.0% on such
day).
"First Amendment": the First Amendment, dated as of October 5,
---------------
1995, to this Agreement.
"First Amendment Effective Date": as defined in the First
------------------------------
Amendment.
"Margin Reduction Condition": each of the following conditions:
--------------------------
<PAGE>
3
(A) for any period of four consecutive fiscal quarters of
the Borrower ending on or after the First Amendment Effective
Date, the ratio of (i) Consolidated Funded Indebtedness of the
Borrower on the last day of such period to (ii) Consolidated
EBITDA of the Borrower for such period is equal to or less than
5.75 to 1.0 (the "First Margin Reduction Condition"); and
--------------------------------
(B) for any period of four consecutive fiscal quarters of
the Borrower ending on or after March 31, 1997, (a)(x) the ratio
of (i) Consolidated EBITDA of the Borrower for such period less
Consolidated Capital Expenditures of the Borrower for such period
to (ii) Consolidated Interest Expense of the Borrower for such
period is equal to or greater than 2.5 to 1.0 and (y) the ratio
of (i) Consolidated Funded Indebtedness of the Borrower on the
last day of such period to (ii) Consolidated EBITDA of the
Borrower for such period is equal to or less than 3.5 to 1.0 (the
"Second Margin Reduction Condition") and (b)(x) the ratio of (i)
---------------------------------
Consolidated EBITDA of the Borrower for such period less
Consolidated Capital Expenditures of the Borrower for such period
to (ii) Consolidated Interest Expense of the Borrower for such
period is equal to or greater than 3.0 to 1.0 and (y) the ratio
of (i) Consolidated Funded Indebtedness of the Borrower on the
last day of such period to (ii) Consolidated EBITDA of the
Borrower for such period is less than 3.0 to 1.0 (the "Third
-----
Margin Reduction Condition");
--------------------------
provided that if the Second Margin Reduction Condition is in effect
--------
then the First Margin Reduction Condition shall also be in effect and
if the Third Margin Reduction Condition is in effect then both the
First Margin Reduction Condition and the Second Margin Reduction
Condition shall also be in effect. If the Borrower shall fail to
deliver a Margin Reduction Condition Certificate required by
subsection 9.2 within 45 days after the end of a fiscal quarter, any
Margin Reduction Condition in effect shall be deemed to have ended,
effective upon the last day on which such Margin Reduction Condition
Certificate was to have been delivered in accordance with subsection
9.2 and shall only become effective on and from the date of delivery
of a Margin Reduction Condition Certificate demonstrating that such
Margin Reduction Condition is (or was, as the case may be) still in
effect. Notwithstanding anything herein to the contrary, no Second
Margin Reduction Condition or Third Margin Reduction Condition which
would be in effect upon delivery of a Margin Reduction Condition
Certificate for the fiscal quarter ending on or about March 31, 1997
shall be effective until June 6, 1997.
"----- Acquisition": any acquisition by the Borrower or any of
-----------------
its Subsidiaries of substantially all the intangible assets and
inventory of the ----- and ------------- and ------------------
of --------------------.
<PAGE>
4
2. "Amendment to Subsection 4.3(b) Subsection 4.3(b) of the Credit
------------------------------
Agreement is hereby amended to read as follows:
(b) The aggregate Acquisition Revolving Credit Commitments shall
be automatically and permanently reduced on the following dates in the
amounts set forth opposite such dates:
Date of Amount of Aggregate Reduction of
Reduction Acquisition Revolving Credit Commitments
--------- ----------------------------------------
March 15, 2000 $6,250,000
September 15, 2000 6,250,000
March 15, 2001 6,250,000
September 15, 2001 6,250,000
March 15, 2002 6,250,000
June 30, 2002 6,250,000
provided that, in the event of any increase in the Acquisition
--------
Revolving Credit Commitment of any Lender as contemplated in the
definition of "Acquisition Revolving Credit Commitment" in subsection
1.1, each of the amounts set forth above opposite dates remaining
after the date of such increase shall be increased by an amount equal
to the quotient of such increase divided by the number of such
remaining dates.
3. Amendments to Subsection 10.1. Subsection 10.1 of the Credit
-----------------------------
Agreement is hereby amended by (a) deleting the table appearing in
subsection 10.1(a) and substituting therefor the following new table:
<PAGE>
5
Interest Coverage
Test Date Ratio
--------- ------------------
September 30, 1995 1.40 to 1.00
December 31, 1995 1.40 to 1.00
March 31, 1996 1.50 to 1.00
June 30, 1996 1.50 to 1.00
September 30, 1996 1.50 to 1.00
December 31, 1996 1.60 to 1.00
March 31, 1997 1.60 to 1.00
June 30, 1997 1.75 to 1.00
September 30, 1997 1.75 to 1.00
December 31, 1997 1.90 to 1.00
March 31, 1998 2.00 to 1.00
June 30, 1998 2.00 to 1.00
September 30, 1998 2.00 to 1.00
December 31, 1998 2.25 to 1.00
March 31, 1999 2.25 to 1.00
June 30, 1999 2.25 to 1.00
September 30, 1999 2.25 to 1.00
December 31, 1999 2.50 to 1.00
March 31, 2000 2.50 to 1.00
June 30, 2000 2.50 to 1.00
September 30, 2000 2.50 to 1.00
December 31, 2000 3.00 to 1.00
March 31, 2001 3.00 to 1.00
June 30, 2001 3.00 to 1.00
September 30, 2001 3.00 to 1.00
December 31, 2001 3.60 to 1.00
March 31, 2002 3.60 to 1.00
June 30, 2002 3.60 to 1.00
<PAGE>
6
and (b) deleting the table in appearing in subsection 10.1(b) and
substituting therefor the following new table:
Funded Debt
Test Date Ratio
--------- -----------------
December 31, 1995 6.40 to 1.00
March 31, 1996 6.40 to 1.00
June 30, 1996 6.75 to 1.00
September 30, 1996 6.40 to 1.00
December 31, 1996 6.10 to 1.00
March 31, 1997 6.10 to 1.00
June 30, 1997 6.10 to 1.00
September 30, 1997 5.40 to 1.00
December 31, 1997 5.25 to 1.00
March 31, 1998 5.25 to 1.00
June 30, 1998 5.25 to 1.00
September 30, 1998 4.90 to 1.00
December 31, 1998 4.70 to 1.00
March 31, 1999 4.70 to 1.00
June 30, 1999 4.70 to 1.00
September 30, 1999 4.30 to 1.00
December 31, 1999 4.20 to 1.00
March 31, 2000 4.20 to 1.00
June 30, 2000 4.20 to 1.00
September 30, 2000 3.90 to 1.00
December 31, 2000 3.50 to 1.00
March 31, 2001 3.50 to 1.00
June 30, 2001 3.50 to 1.00
September 30, 2001 3.00 to 1.00
December 31, 2001 3.00 to 1.00
March 31, 2002 3.00 to 1.00
June 30, 2002 3.00 to 1.00
III. Conditions to Effectiveness. This Amendment shall become
---------------------------
effective on the date (the "First Amendment Effective Date") on which (a)
------------------------------
the Borrower, the Agent and the
<PAGE>
7
Required Lenders shall have executed and delivered to the Agent this
Amendment and (b) the Agent shall have received from the Borrower, for the
ratable account of each Lender returning an executed counterpart of this
Amendment to the Agent prior to 5:00 p.m. (New York City time) on Monday,
October 16, 1995, an amendment fee in an amount equal to 1/8% of the sum
of (i) the outstanding Term Loans of such Lenders on the First Amendment
Effective Date and (ii) the aggregate Revolving Credit Commitments of
such Lenders on the First Amendment Effective Date.
IV. Interest Periods for Additional Acquisition Revolving Credit
------------------------------------------------------------
Loans. From and after the Borrowing Date of any Acquisition Revolving
- -----
Credit Loans made under any increase in the Acquisition Revolving Credit
Commitment of any Lender as contemplated by the definition of "Acquisition
Revolving Credit Commitment" in subsection 1.1, the Borrower and the
Administrative Agent shall cooperate in making conversions of such
Acquisition Revolving Credit Loans from one interest rate basis to another
and in selecting Interest Periods to be applicable thereto in order, during
a reasonable period following such Borrowing Date, to make such Acquisition
Revolving Credit Loans ratable with the other Acquisition Revolving Credit
Loans in the various tranches of interest rate basis and Interest Period
selections. With the consent of the Lenders making such Loans, the
Borrower, during such reasonable period and with respect to such
Acquisition Revolving Credit Loans, may make conversions from one interest
rate basis to another and selections of Interest Periods without regard to
the normally required conversion amounts or the normally required number of
days or months in the definition of "Interest Period" in subsection 1.1.
V. General.
-------
1. Representation and Warranties. To induce the Agent and the
-----------------------------
Lenders to enter into this Amendment, the Borrower hereby represents and
warrants to the Agent and all of the Lenders as of the First Amendment
Effective Date that the representations and warranties made by the Borrower
in the Loan Documents are true and correct in all material respects on and
as of the First Amendment Effective Date, after giving effect to the
effectiveness of this Amendment, as if made on and as of the First
Amendment Effective Date except that (i) where such representations and
warranties expressly refer to a specific earlier date they were true and
correct of such earlier date and (ii) references in such representations
and warranties to the Credit Agreement shall be deemed to be references to
this Amendment and to the Credit Agreement as amended hereby.
2. Payment of Expenses. The Borrower agrees to pay or reimburse the
-------------------
Agent for all of its out-of-pocket costs and reasonable expenses incurred
in connection with this Amendment, any other documents prepared in
connection herewith and the transactions contemplated hereby, including,
without limitation, the reasonable fees and disbursements of counsel to the
Agent.
<PAGE>
8
3. No Other Amendments; Confirmation. Except as expressly amended,
---------------------------------
modified and supplemented hereby, the provisions of the Credit Agreement
are and shall remain in full force and effect.
4. Governing Law; Counterparts. (a) This Amendment and the rights
---------------------------
and obligations of the parties hereto shall be governed by, and construed
and interpreted in accordance with, the laws of the State of New York.
(b) This Amendment may be executed by one or more of the parties to
this Agreement on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Amendment signed by all the parties
shall be lodged with the Borrower and the Agent. This Amendment may be
delivered by facsimile transmission of the relevant signature pages hereof.
5. Guarantor Consents. Each of the Guarantors consenting to this
------------------
Amendment as provided for on the signature pages of this Amendment hereby
agree that the obligations guaranteed by it include all the obligations and
liabilities of the Borrower arising under this Amendment, the Credit
Agreement as amended hereby and any agreement providing for an increase in
the Acquisition Revolving Credit Commitment of any Lender or contemplated
by the definition of "Acquisition Revolving Credit Commitment" in
subsection 1.1 of the Credit Agreement as amended hereby, and each of the
Borrower and said Guarantors hereby agree that the security interests and
liens granted by it pursuant to and in connection with the Credit Agreement
of its guarantee secure its obligations and liabilities thereunder as
amended hereby.
<PAGE>
9
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed and delivered by their respective proper and duly
authorized officers as of the day and year first above written.
PLAYTEX PRODUCTS, INC.
By: /s/ Michael F. Goss
--------------------------------
Title: Executive Vice President and
Chief Financial Officer
CHEMICAL BANK,
as Agent, and as a Lender
By: /s/ Rober Gaynor
--------------------------------
Title: Vice President
ABN AMRO BANK N.V.
By:
--------------------------------
Title:
By:
--------------------------------
Title:
AMSOUTH BANK
By:
--------------------------------
Title:
<PAGE>
10
BANCO POPULAR DE PUERTO RICO
By:
--------------------------------
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:
--------------------------------
Title:
BANK OF IRELAND
By:
--------------------------------
Title:
BANK OF MONTREAL
By:
--------------------------------
Title:
BANK OF TOKYO TRUST COMPANY
By:
--------------------------------
Title:
<PAGE>
11
BANQUE FRANCAISE DU COMMERCE
EXTERIUER
By:
--------------------------------
Title:
BANQUE PARIBAS
By:
--------------------------------
Title:
By:
--------------------------------
Title:
CHL HIGH YIELD LOAN PORTFOLIO
(a unit of Chemical Bank)
By:
--------------------------------
Title:
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENE
By:
--------------------------------
Title:
CORESTATES BANK
By:
--------------------------------
Title:
<PAGE>
12
CAISSE NATIONALE DE CREDIT AGRICOLE
By:
--------------------------------
Title:
CREDIT LYONNAIS
By:
--------------------------------
Title:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By:
--------------------------------
Title:
GIROCREDIT BANK AG DER SPARKASEN,
GRAND CAYMAN ISLAND BRANCH
By:
--------------------------------
Title:
HELLER FINANCIAL
By:
--------------------------------
Title:
<PAGE>
13
THE HOKKAIDO TAKUSHOKU BANK, LTD.,
NEW YORK BRANCH
By:
--------------------------------
Title:
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
By:
--------------------------------
Title:
MC CAPITAL INC.
By:
--------------------------------
Title:
THE MITSUBISHI BANK, LIMITED
By:
--------------------------------
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:
--------------------------------
Title:
<PAGE>
14
THE NIPPON CREDIT BANK LTD.
By:
--------------------------------
Title:
THE SANWA BANK LIMITED
By:
--------------------------------
Title:
SOCIETE GENERALE, SOUTHWEST AGENCY
By:
--------------------------------
Title:
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH
By:
--------------------------------
Title:
TORONTO DOMINION BANK (NEW YORK)
INC.
By:
--------------------------------
Title:
<PAGE>
15
VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST
By:
--------------------------------
Title:
WELLS FARGO BANK
By:
--------------------------------
Title:
CERES FINANCE, LTD.
By:
--------------------------------
Title:
RESTRUCTURED OBLIGATIONS BACK BY
RESTRUCTURED ASSETS
By:
--------------------------------
Title:
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By:
--------------------------------
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management,
L.P.,
as Investment Adviser
By:
--------------------------------
Title: Authorized Signatory
CONSENTED TO:
PLAYTEX INVESTMENT CORP.
By: /s/ James S. Cook
--------------------------------
Title: Vice President
<PAGE>
16
PLAYTEX INTERNATIONAL CORP.
By: /s/ James S. Cook
--------------------------------
Title: Vice President
PLAYTEX BEAUTY CARE, INC.
By: /s/ Michael F. Goss
--------------------------------
Title:
PLAYTEX MANUFACTURING, INC.
By: /s/ Michael F. Goss
--------------------------------
Title:
PLAYTEX SALES & SERVICES, INC.
By: /s/ Michael F. Goss
--------------------------------
Title:
Exhibit 10(a)(4)
SUPPLEMENT NO. 1, dated as of October 31, 1995, to the
Subsidiaries' Guarantee dated as of June 6, 1995, (as amended,
supplemented or otherwise modified from time to time, the
"Guarantee Agreement"), made by the Subsidiaries of Playtex
Products, Inc. (the "Borrower") signatories thereto in favor of
CHEMICAL BANK, as Agent.
A. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Guarantee
Agreement.
B. The undersigned (together with their respective successors
and assigns, the "New Guarantors") are Subsidiaries of the Borrower and are
executing this Supplement in accordance with the requirements of section
16(a) of the Guarantee Agreement in order to become Guarantors under the
Guarantee Agreement, to induce the Lenders to make additional Loans and to
induce the Issuing Lender to issue additional Letters of Credit and as
consideration for Loans previously made and Letters of Credit previously
issued.
Accordingly, the Agent and the New Guarantors agree as follows:
SECTION 1. The New Guarantors by their signatures hereto shall
become Guarantors under the Guarantee Agreement with the same force and
effect as if originally named therein as Guarantors and the New Guarantors
hereby (i) agree to all the terms and provisions of the Guarantee Agreement
applicable to them as Guarantors thereunder and (ii) represent and warrant
that the representations and warranties made by them as Guarantors
thereunder are true and correct on and as of the date hereof. Each
reference to a "Guarantor" in the Guarantee Agreement shall be deemed to
include the New Guarantors. The Guarantee Agreement is hereby incorporated
herein by reference.
SECTION 2. This Supplement has been duly authorized, executed
and delivered by each New Guarantor and constitutes a legal, valid and
binding obligation of such New Guarantor, enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting the enforcement of creditors' rights
generally, general equitable principles (whether considered in a proceeding
in equity or at law) and an implied covenant of good faith and fair
dealing.
SECTION 3. This Supplement shall become effective when the Agent
shall have received counterparts of this Supplement which, when taken
together, bear the signatures of each New Guarantor and the Agent.
SECTION 4. Except as expressly supplemented hereby, the
Guarantee Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
2
SECTION 6. In case any one or more of the provisions contained
in this Supplement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein and in the Guarantee Agreement shall not in any
way be affected or impaired. The parties hereto shall endeavor in good
faith negotiations to replace the invalid, illegal or unenforceable
provisions herein with valid provisions, the economic effect of which comes
as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7. All communications to either New Guarantor shall be
given to it at the address set forth under its signatures hereto.
SECTION 8. This Supplement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument.
<PAGE>
3
IN WITNESS WHEREOF, the New Guarantors and the Agent have duly
executed this Supplement to the Guarantee Agreement as of the day and year
first above written.
BBA ACQUISITION, INC., (to be
merged with, and into, Banana
Boat Holding Corporation)
By: /s/ Michael F. Goss
-------------------------------
Name: Michael F. Goss
Title: Vice President
Address:
-----------------------------------
-----------------------------------
-----------------------------------
Attn:
Telecopy:
SUN ACQUISITION, INC., (to be
merged with, and into, Sun
Pharmaceuticals Corp.)
By: /s/ William Stammer
-------------------------------
Name: William Stammer
Title:
Address:
-----------------------------------
-----------------------------------
-----------------------------------
Attn:
Telecopy:
CHEMICAL BANK,
as Agent
By: /s/ Robert Gaynor
-------------------------------
Name: Robert Gaynor
Title: Vice President
Exhibit 10(a)(5)
SUPPLEMENT NO. 1 TO BORROWER PLEDGE AGREEMENT
This Supplement No.1 to the Borrower Pledge Agreement, dated as of
October 31, 1995 is delivered pursuant to Section 1.1 of the Credit
Agreement (as defined below). The undersigned hereby agrees that this
Supplement No.1 may be attached to the Borrower Pledge Agreement dated as
of June 6, 1995 made by Playtex Products, Inc. in favor of Chemical Bank,
as Agent (as amended, supplemented or otherwise modified from time to time,
the "Borrower Pledge Agreement", capitalized terms defined therein being
used herein as therein defined) and that the Pledged Stock listed on this
Supplement No.1 (the "New Pledged Stock") shall be deemed to be part of the
Pledged Stock and shall become part of the Collateral and shall secure all
Obligations. The undersigned hereby delivers to the Agent for the ratable
benefit of the Lenders, all certificates or instruments representing or
evidencing the New Pledged Stock, and hereby transfers and grants the New
Pledged Stock to the Agent for the ratable benefit of the Lenders, a first
security interest in all of the undersigned's right, title and interest in
the New Pledged Stock and all Proceeds thereof, as collateral security when
due for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the Obligations.
THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK.
PLAYTEX PRODUCTS, INC.
by /s/ Michael F. Goss
----------------------------
Title: Executive Vice President and
Chief Financial Officer
Percent of Number
Class of Stock Outstanding of
Stock Issuer Stock Certificate Nos. Shares Shares
------------ -------- ---------------- ----------- ---------
BBA Common 1 100% 1,000
Acquisition,
Inc., (to be
merged with,
and into,
Banana Boat
Holding
Corporation)
Exhibit 10(a)(6)
SUPPLEMENT NO. 2 TO BORROWER PLEDGE AGREEMENT
SUPPLEMENT No. 2, dated as of October 31, 1995, to the
Borrower Pledge Agreement dated as of June 6, 1995 (as amended,
supplemented or otherwise modified from time to time, the
"Borrower Pledge Agreement"), made by Playtex Products, Inc., a
Delaware corporation (the "Borrower"), in favor of CHEMICAL BANK,
a New York banking corporation, as agent (the "Agent").
A. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Borrower
Pledge Agreement and the Credit Agreement.
B. The Borrower entered into the Borrower Pledge Agreement in
order to induce the Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective loans to, and
issue or participate in Letters of Credit for the account of, the Borrower.
The Credit Agreement requires any New Subsidiary (as defined in the Credit
Agreement) to have all of its Capital Stock pledged to the Agent, as
collateral security for the Obligations, pursuant to the Borrower Pledge
Agreement or a supplement thereto. The undersigned (the "New Subsidiary
Pledgor") is a Subsidiary of the Borrower and owner of all the issued and
outstanding stock of Sun Acquisition, Inc., a New Subsidiary (together with
its successors and assigns "Sun") and is executing this Supplement No. 2 in
accordance with the requirements of the Credit Agreement to induce the
Lenders to make their respective loans to, and issue or participate in
letters of credit for the account of, the Borrower.
Accordingly, the Agent and the New Subsidiary Pledgor agree as
follows:
SECTION 1. In accordance with the requirements of the Credit
Agreement, the New Subsidiary Pledgor by its signature hereto shall become
a pledgor under the Borrower Pledge Agreement with the same force and
effect as if it had been the original pledgor under the Borrower Pledge
Agreement, and the New Subsidiary Pledgor hereby (i) agrees to all the
terms and provisions of the Borrower Pledge Agreement applicable to it as a
pledgor thereunder and (ii) represents and warrants that the
representations and warranties made by it as a pledgor thereunder are true
and correct on and as of the date hereof. In furtherance of the foregoing
the New Subsidiary Pledgor, as security for the payment and performance in
full of the Obligations, does hereby transfer, grant, bargain, sell,
convey, hypothecate, pledge, set over and deliver unto the Agent, and grant
to the Agent (for the benefit of the Agent and the Lenders) a security
interest in the shares of capital stock listed below on Schedule I to this
Supplement No. 2 attached hereto and any shares of stock of Sun obtained in
the future by the New Subsidiary Pledgor. Schedule I to Supplement No. 2
attached hereto supplements the Borrower Pledge Agreement and shall be
deemed a part thereof for all purposes of the Borrower Pledge Agreement.
The Borrower Pledge Agreement is hereby incorporated herein by reference.
SECTION 2. This Supplement has been duly authorized, executed
and delivered by the New Subsidiary Pledgor and constitutes a legal, valid
and binding obligation of the New Subsidiary Pledgor, enforceable against
it in accordance with its terms, except as enforceability may be limited by
bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium
and other similar laws relating to or affecting the enforcement of
creditors' rights generally,
<PAGE>
2
general equitable principles (whether considered in a proceeding in equity
or at law) and an implied covenant of good faith and fair dealing.
SECTION 3. This Supplement shall become effective when the Agent
shall have received counterparts of this Supplement which, when taken
together, bear the signatures of the New Subsidiary Pledgor and the Agent.
SECTION 4. Except as expressly supplemented hereby, the
Borrower Pledge Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained
in this Supplement No. 2 should be held invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein and in the Borrower Pledge Agreement shall not
in any way be affected or impaired. The parties hereto, together with
their successors and assigns, shall endeavor in good faith negotiations to
replace the invalid, illegal or unenforceable provisions herein with valid
provisions, the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 7. All communications to the New Subsidiary Pledgor
shall be given to it at the address set forth under its signature hereto
with a copy to the Borrower.
SECTION 8. This Supplement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument.
SECTION 9. The New Subsidiary Pledgor agrees to reimburse the
Agent for its reasonable out-of-pocket expenses in connection with this
Supplement, including the reasonable fees and expenses of counsel for the
Agent.
<PAGE>
3
IN WITNESS WHEREOF, the New Subsidiary Pledgor and the Agent have
duly executed this Supplement to the Borrower Pledge Agreement as of the
day and year first above written.
BBA ACQUISITION, INC. (to be merged
with, and into, Banana Boat Holding
Corporation)
By: /s/ Michael F. Goss
-------------------------------
Name: Michael F. Goss
Title: Vice President
Address:
---------------------------
-----------------------------------
-----------------------------------
-----------------------------------
Attention:
-------------------------
Telecopy:
--------------------------
CHEMICAL BANK, as Agent
By: /s/ Robert Gaynor
-------------------------------
Name: Robert Gaynor
Title: Vice President
<PAGE>
Schedule I to
Supplement No. 2
CAPITAL STOCK
Percent of
Class of Stock Outstanding Number of
Stock Issuer Stock Certificate Nos. Shares Shares
- ------------ -------- ---------------- ------------ -----------
Sun Common 1 100% 1,000
Acquisition,
Inc.
(to be merged
with, and
into, Sun
Pharmaceuticals
Corp.)
EXHIBIT 10-(l)(i)
1996 MANAGEMENT INCENTIVE PLAN
------------------------------
SUMMARY PLAN DESCRIPTION
I. Purpose
-------
The purpose of the Management Incentive Plan ("MIP") is to recognize and reward
exceptional performance that contributes to the overall profitability and growth
of the corporation. It provides financial rewards and recognition based on
company and individual performance.
II. Eligibility
-----------
Employees in salary grades 12 and above are eligible to participate in the plan.
An employee who is eligible, however, is not guaranteed bonus status, receipt of
an award or to continue participation. An employee's capacity for their
position to measurably impact the success of the organization is a criterium for
participation, and rates of participation in the lower eligible grade levels
can be reduced or eliminated. Senior management in each business unit can
nominate participants at any point in the year, subject to the provisions of
Article XI (C), based on the overall performance of the operating unit and the
individual's contribution during the Plan Year. Nominations are subject to
approval by the Compensation Committee of the Board of Directors.
III. Definitions
-----------
A. "Base Salary" equals the gross earnings for the portion of the Fiscal
--------------
Year during which the participant was in the particular Company salary
grade for which the computation is being made. It does not include
MIP awards, non-recurring earnings, such as moving expenses or any
allowances, or salary continuation or other payments while on an
approved Leave of Absence, and is based on salary earnings before
reductions for such items as insurance and pension plan contributions.
B. Company Profit Target means operating profit goals as determined in
-----------------------
Section VI.
C. Conversion Percentage shall be the figure set forth in Exhibit B for
----------------------
any particular MIP Component Attainment Percentage. This could range
from 0 - 100% on Individual Performance, 85% - 105+% on the others.
D. Net Sales Targets means net sales as determined in Section VI.
-----------------
E. Company Cash Flow Performance Targets means Company Profit plus
-------------------------------------------
depreciation less changes in working capital and capital expenditures,
in each case as determined in Section VI.
F. Individual Performance shall be established by objectives articulated
-----------------------
early in the plan year by each employee's supervisor. Following the
completion of the plan year, each employee's performance against these
objectives will be rated by the supervisor on a 0 - 100% completion
scale.
<PAGE>
2
G. Indexed Attainment of Plan means the weighted sum of the following
-----------------------------
conversion percentages with the following weights:
(1) For all participants other than the CEO:
Net Sales 25%
Company Profit 25%
Company Cash Flow 25%
Individual Performance 25%
(2) For the CEO:
Net Sales 25%
Company Profit 25%
Company Cash Flow 50%
H. MIP Component Attainment Percentage for each of Net Sales, Company
--------------------------------------
Profit and Company Cash Flow for any year is the actual Company
performance for such measure divided by the Target for such measure.
IV. Award Earned
------------
A participant in the Plan shall be eligible for an award based on individual and
company performance which is computed in accordance with the following formula:
Bonus level as Indexed Base Potential
a % of Base Salary X Attainment X Salary = Award
of Plan
(See Exhibit D for specific examples)
Where:
"Bonus level as a % of Base Salary" is set forth in Exhibit A.
"Indexed Attainment of Plan" has the meaning set forth in Section III,
(F).
"Base Salary" has the meaning set forth in Section III, (A).
V. Split Award Component
---------------------
The award earned is prorated for those executives who have a bonus composition
based on the performance of more than one business unit or, whose bonus level
has been changed during the MIP year, or who have been hired or promoted into a
bonus level during the MIP year.
<PAGE>
3
The formula for calculating split award earned is:
Percent of Bonus Potential
Fiscal Year Award as Indexed Base Award earned
Associated X a % of Base X Attainment X Salary = Based on
with Business Salary of Plan (during Business Unit
Unit A eligible A (or changed
(or changed period) bonus level/
bonus level/salary) salary)
The calculation is repeated for each business unit or bonus level the
award is based on.
The award earned for each business unit or bonus level are added
together to arrive at total award earned.
VI. Targets and Payout Ranges
-------------------------
The targets used for incentive purposes shall be proposed by the business unit
based on its annual business plan. Targets and payout ranges shall be
determined and approved by the CEO, or in the case of the bonus of the CEO, by
the Compensation Committee of the Board of Directors of the Company.
VII. Participant Bonus Calculation
-----------------------------
Each participant's bonus shall be calculated by the Chief Financial Officer of
the Company and in the case of the bonus of the CEO, by the Compensation
Committee of the Board of Directors of the Company.
VIII. Computation and Disbursement of Funds
-------------------------------------
Promptly after the close of the Fiscal Year, the CEO, and in the case of the
CEO, the Compensation Committee shall review and approve for each participant a
final Bonus Award. Payment of the Awards shall be made promptly thereafter by
check, unless an Irrevocable Deferred Payment Election has been filed with the
Corporate Human Resources Department in accordance with Section IX below.
U.S. Expatriate participants will receive payment in U.S. dollars.
Local Nationals and Third Country Nationals shall receive payment in the
currency of the country in which they are employed.
<PAGE>
4
IX. Deferred Payment Election
-------------------------
Participants in the MIP have the opportunity to defer the current receipt of all
or a portion of their awards and under certain options as the Company allows.
For deferral to be effective, an Irrevocable Deferred Payment Election Form must
be filed with the Corporate Human Resources Department within 30 days of the
receipt of plan deferral documents by a participant in the plan. The deferred
account for 1996 will be credited at the end of each fiscal quarter with
interest, defined as the prime interest rate in effect at the beginning of each
such fiscal quarter at the Chemical Bank (or its successor).
Other terms and conditions are expressly specified in the Irrevocable Deferral
Payment Election Form. (Exhibit C)
All payments of awards shall be reduced by amounts required to be withheld for
taxes.
X. Changes To Awards
-----------------
The CEO has sole discretion to amend MIP awards based upon an equitable
treatment of plan participants for all participants in the Plan other than the
CEO.
XI. Partial Awards
--------------
A. Promptly after the close of the Fiscal Year and at the sole discretion
of the CEO a participant may be entitled to the payment of a partial
financial award if prior to the end of the Fiscal Year, a participant:
- Dies,
- Retires (i.e., is eligible to immediately begin to receive retirement
benefits under a company sponsored retirement plan),
- Becomes permanently disabled,
- Transfers to a position not entitled to bonus participation,
- Enters military service,
- Takes an approved leave of absence,
- Is elected to public office,
However, no partial financial award will be paid if the participant
voluntarily or involuntarily leaves prior to the date of award
distribution.
B. Partial financial awards will be computed in accordance with Section V
based on the achievement of applicable targets for the entire Plan Year
and on Base Salary earned in the Plan Year during employment.
<PAGE>
5
C. Participants hired or promoted into a grade level eligible for
participation during the first, second or third quarter of a Plan Year
and who are employed through the end of the Plan Year shall be eligible
for an award based on their Base Salary earnings during the eligible
portion of the Plan Year and on the achievement of applicable financial
targets. Participants hired or promoted during the fourth quarter of
the Plan Year will not be eligible for a partial award.
D. All partial awards will be paid following the end of the Plan Year at
such time as payments under the plan are customarily made.
XII. Administration
--------------
This Plan shall be administered by the Corporate Human Resources Department,
subject to the control and supervision of the CEO of the Company. With respect
to the CEO, the Plan shall be administered by the Compensation Committee of the
Board of Directors which shall have the powers described in Section XIII to the
extent applicable.
XIII. Reservations To Management
--------------------------
The Company hereby reserves the absolute authority to select the individuals
eligible to participate in the Plan and to make exceptions, and to determine the
extent of participation of any individual or individuals in the Plan. The
establishment of this Plan, the granting of an incentive payment, or any other
action at any time taken by the Company, its Chief Executive Officer, or other
officer or officers of the Company, or by its or their authority, shall not
constitute any contract with, or confer any legal or equitable right (except as
to the rights accrued with respect to previously earned and deferred awards)
upon any employee or other person whomsoever as against the Company, or any of
its subsidiary or affiliated corporations, or against any officer, director,
stockholder, or employee of any such corporation. Any action taken hereunder
shall not be held or construed to create a contract that any employee shall be
retained in the service of the Company, or any of its subsidiary or affiliated
corporations, and the Company expressly reserves unaffected hereby, its right to
discharge, without liability other than for salary due and unpaid, any employee
whenever its interest, in its judgement, so requires.
The decision of the Chief Executive Officer of the Company as to the facts in
any case arising hereunder, and the meaning and intent of any provision hereof,
or of its application, shall be final and conclusive.
The Company expressly reserves the right and power, acting through its Board of
Directors or its Chief Executive Officer, to (a) alter, amend, or annul any of
the provisions of this Plan at any time, and from time to time, or (b) terminate
this Plan at any time, or (c) at any time (including subsequent to the end of
the fiscal year, but before awards are paid) terminate and rescind the
participation of any individual or individuals in this Plan.
This Plan and any action taken thereunder are subject to all federal and state
laws and regulations now in effect, or which may be enacted or promulgated.
<PAGE>
EXHIBIT A
PLAYTEX PRODUCTS, INC.
----------------------
FY 1996
-------
COMPUTATION OF MIP AMOUNTS
--------------------------
Composition of Bonus
- --------------------
The bonus will be composed of a financial award, based on the Indexed Attainment
of Plan of one or more business units.
Target
Grade Level Bonus %
----------- -------
12 10%
11 10%
10 15%
9 20%
8 25%
7 30%
6 35%
5 40%
4 50%
3 75%
2 100%
<PAGE>
EXHIBIT B
PLAYTEX PRODUCTS, INC.
----------------------
MANAGEMENT INCENTIVE PLAN - 1996
--------------------------------
ACHIEVEMENTS REQUIRED FOR BONUS PARTICIPATION
---------------------------------------------
(To Be Used With Company Cash Flow Performance,
Net Sales Targets, and Company Profit Target)
MIP COMPONENT
ATTAINMENT PERCENTAGE CONVERSION (%)
---------------------- --------------
105.+ 150.0
104 140.0
103 130.0
102 120.0
101 110.0
100 100.0
99 96.67
98 93.33
97 90.0
96 86.67
95 83.33
94 80.00
93 76.67
92 73.34
91 70.0
90 66.66
89 63.33
88 60.0
87 56.63
86 53.34
85 50.0
ACHIEVEMENTS REQUIRED FOR BONUS PARTICIPATION
---------------------------------------------
(To Be Used With Individual Performance)
MIP Component Conversion
Attainment Percentage Percentage
--------------------- ----------
100% 150
90% 125
80% 100
70% 75
60% 50
<60% 0
<PAGE>
EXHIBIT C
PLAYTEX PRODUCTS, INC.
-----------------------
MANAGEMENT INCENTIVE PLAN
-------------------------
1996
----
1. PARTICIPANT (PLEASE PRINT)
--------------------------
Name SS# / /
---------------------------------- --------------------
2. PAYMENT ALTERNATIVES
--------------------
As a participant in the Company's Management Incentive Plan (the "Plan"),
I may be eligible to receive a bonus award during the first quarter of 1997
for the current plan year, 1996. I wish to receive any such bonus award as
follows: (check one)
A.[] CURRENT CASH PAYMENT - 100% of such bonus award paid in a lump sum on
---------------------
a current basis in the first quarter of 1997. (Do not complete
other sections. Sign, date and return this form.)
B.[] DEFERRED PAYMENT - I hereby irrevocably agree with the
-----------------
Company that in lieu of receiving such bonus award in a
lump sum in the first quarter of 1997, I elect to defer a
portion or all of such bonus award as follows:
(Must be in increments of 10%)
% Current Cash Payment (as defined above).
--------------
% Deferred until (specify year: 1998, 1999,
-------------- 2000, 2001, 2002) and paid * as follows:
(check one)
[] (i) in a lump sum in the year specified above; or
[] (ii) over a period of years (specify number of
years 2 to 5) in equal annual payments,
starting in the year specified above.
% Deferred until retirement (must complete
--------------- Section 3 below).
100% TOTAL
====
<PAGE>
3. PAYMENT DEFERRED UNTIL RETIREMENT
---------------------------------
* (Complete this section only if you elected payment deferred until
retirement in Section 2 above.)
The election in this section will apply only if you retire and at that time
are eligible to start receiving benefits under a Company-sponsored
qualified retirement plan AND you are at least 55 years of age on your last
day of active employment AND you are not terminated by the Company for
cause.
I elect to receive any payment deferred until retirement as follows:
(check one)
A. [] In a lump sum at the time of retirement (i.e. as soon after
retirement as administratively feasible); or
B. [] In a lump sum paid* in the year following retirement; or
C. [] In equal annual installments beginning in the year following
retirement and paid* over a period of years (specify
------------
number of years 2 to 10).
4. TERMINATION (MUST BE COMPLETED BY ALL PARTICIPANTS ELECTING DEFERRED
---------------------------------------------------------------------------
PAYMENT)
-------
(a) If my employment terminates before I am eligible to receive any
payment deferred pursuant to Section 2 above, excluding a payment
deferred until retirement, I elect such deferred payment to be made as
follows: (check one)
A. [] As soon after termination as administratively feasible; or
B. [] In the year following the year of my termination*; or
* Deferred payments will be made in the first quarter of the
Company's fiscal year, at the time when bonus awards are
customarily paid.
C. [] On the dates and at the percentages selected in Section 2
above, irrespective of my termination.
(b) (Complete this subsection only if you elected payment deferred until
retirement in Section 2 above).
If my employment terminates and I have elected payment deferred until
retirement which I am ineligible to receive pursuant to Section 3
above, I elect such deferred payment to be made as follows: (check
one)
A. [] As soon after termination as administratively feasible; or
B. [] In the year following the year of my termination.*
(c) Any employee terminated for cause will be deemed to have elected to
receive all deferred payments as soon after termination as
administratively feasible.
<PAGE>
I understand that my deferred account will be credited at the end of each fiscal
quarter with interest at a rate equal to the prime interest rate at the
beginning of each such fiscal quarter announced by Chemical Bank.
I also understand that no funds will be segregated for my benefit, that I will
have no interest in such deferred amounts until I am entitled to payment of
such; and that such amounts will be subject to the claims of the Company's other
creditors until paid to me; and that if I die prior to receipt of all deferred
payments, the entire amount of my deferral account will be paid to my designated
beneficiary of my Company life insurance, or if there is no such beneficiary at
the time of my death, to my estate.
I agree that:
A. Once this form is signed and returned, my elections for deferral cannot be
altered and are irrevocable.
B. If I return this form with no choice marked, or if this election form is
not returned, the award will be paid in cash at the time payments are made
for the current plan year.
C. If I elect deferred payments, but my bonus award is less than $10,000, it
will be paid in a single current cash payment.
Income deferred is includable as earnings for the purpose of determining profit
sharing contributions only in the year it is received, provided the individual
is actively employed at the time of receipt. Therefore, such deferred income
will not be includable as earnings for profit sharing benefits in the current
year.
I may request acceleration of payment of my deferral account if I incur a heavy
financial hardship for which funds are not reasonably available from other
sources. Such request must be submitted to the Company's Chief Human Resources
officer, and supported by evidence satisfactory to the Company's Compensation
Committee or other committee designated by the Company's Board of Directors to
make such determinations. Decisions of the Committee will be final. If
approved, hardship distribution will be made only in the amount necessary to
eliminate the hardship.
The rights of the Employee under this agreement are not subject to assignment,
transfer or alienation, except as may be required by law. The payments shall,
however, be subject to any applicable payroll or other taxes required to be
withheld.
EMPLOYEE SIGNATURE:
-------------------------
DATE:
---------------------------------------
ACCEPTED BY:
PLAYTEX PRODUCTS, INC.
BY:
-------------------------------------------------
UPON COMPLETION OF THIS ELECTION FORM RETURN TO CORPORATE HUMAN RESOURCES
<PAGE>
EXHIBIT D
<TABLE><CAPTION>
MIP CALCULATIONS
----------------
Company Cash Net Company Individual
Flow Performance Sales Target Profit Target Performance
<S> <C> <C> <C> <C>
Example A 100% of Goal 90% of Goal 105% of Goal 100% of Goal
Reached Reached Reached Reached
100% x .25 = .25 66.66% x .25 = 150% x .25 = 150% x .25 =
.1667 .375 .375
Indexed Attainment of Plan = 116.67%
Example B 90% of Goal 95% of Goal 95% of Goal 100% of Goal
Reached Reached Reached Reached
66.66% x .25 = 83.33% x .25 = 83.33% x .25 = 150% x .25 =
.1667 .2083 .2083 .375
Indexed Attainment of Plan = 95.83%
Example C 80% of Goal 90% of Goal 90% of Goal 100% of Goal
Reached Reached Reached Reached
0 x .25 = 0 66.66% x .25 = 66.66% x .25 = 150% x .25 =
.1667 .1667 .375
Indexed Attainment of Plan = 70.84%
<CAPTION>
ASSUMING BASE SALARY OF $50,000 and BONUS LEVEL AS % OF BASE SALARY OF 10.00%:
Indexed
Bonus Attainment Base Potential
Level of Plan Salary Award
----- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
In Ex. A: 10.00% x 116.67% x $50,000 = $5,834
In Ex. B: 10.00% x 95.83% x $50,000 = $4,792
In Ex. C: 10.00% x 70.84% x $50,000 = $3,542
</TABLE>
Exhibit No. 10(ab)
MEMORANDUM OF UNDERSTANDING
This MEMORANDUM OF UNDERSTANDING (this "Memorandum") dated as of June 21,
1995, sets forth the mutual and binding understanding of the undersigned
regarding the material terms of employment of Michael R. Gallagher ("MRG") by
Playtex Products, Inc. (the Company").
* POSITION:
MRG shall be employed as Chief Executive Officer of the Company and will
become a member of the Company's Board of Directors (the "Board").
* TERM:
The term of MRG's employment agreement (the "Term") shall be from the date
hereof to June 30, 2000, unless earlier terminated or extended in
accordance with this Memorandum or otherwise by agreement of the parties.
* BASE SALARY:
The base salary shall be payable at the rate of $650,000 per annum through
December 31, 1996, subject to upward adjustment thereafter at the
discretion of the Board.
* INCENTIVE BONUSES:
MRG shall be afforded the opportunity to earn an Incentive Bonus with
respect to each calendar year occurring during the term of his employment
as Chief Executive Officer with the Company based upon the attainment of
financial objectives established by the Compensation and Stock Option
Committee of the Board following consideration of the recommendation of
senior management of the Company; provided that with respect to calendar
years 1995 and any other partial year at the conclusion of MRG's
employment, the amount of the Incentive Bonus otherwise payable shall be
prorated to reflect the portion of each of such years during which MRG is
employed by the Company.
The target Incentive Bonus for each calendar year shall equal 100% of
MRG's base salary as in effect as of the first day of such calendar year.
The maximum Incentive Bonus for each calendar year shall equal 150% of
MRG's base salary as in effect as of the first day of such calendar year.
<PAGE>
* SPECIAL BONUSES:
In addition to the Incentive Bonuses described above, MRG shall be
entitled to receive a special bonus ("Special Bonus") as of the last day
of each of the calendar years 1995, 1996, and 1997 (in the amounts of
$650,000, $300,000 and $300,000, respectively) subject to his continued
employment as Chief Executive Officer of the Company as of the last day of
each such calendar year.
* STOCK OPTIONS:
Effective as of the date hereof, MRG shall be granted options to acquire
an aggregate of 800,000 shares of common stock of the company under the
Company's 1994 Stock Option Plan For Directors and Executive Officers
and Key Employees of the Company.
The options shall have an exercise price equal to the greater of $9.00 per
share and the fair market value per share as of the date of grant. The
options shall vest and become exercisable annually in ratable portions of
200,000 shares each commencing with the first anniversary of the date of
grant and ending with the fourth anniversary of the date of grant, subject
to MRG's continued employment with the Company on such vesting dates.
It is not the intention of the parties that MRG shall be excluded from
consideration for additional options during the term of his employment,
and, as circumstances warrant, the Company shall give consideration to
such further grants in its discretion.
* SPECIAL PRICE-BASED INCENTIVE ARRANGEMENT
As additional incentive, MRG shall be eligible to receive Special
Price-Based Incentive Compensation based upon the trading price of the
Company's common stock in accordance with the following criteria.
For 30 consecutive trading days, closing price equals or exceeds, at
any time prior to 6/30/00 Cash Bonus
$15.00 $1,000,000
$20.00 $1,000,000
$25.00 $1,000,000
$30.00 $1,000,000
-2-
<PAGE>
MRG will be entitled to the cash bonus when and if the respective 30
consecutive trading day price targets are achieved, provided that MRG is
employed as Chief Executive Officer of the Company at such time.
* TERMINATION OF EMPLOYMENT PRIOR TO THE EXPIRATION OF
TERM:
-MRG resignation or termination by Company for "cause":
MRG entitled to payment of base salary through date of termination.
No entitlement to any other cash compensation from the Company.
-Termination by the Company without "cause":
MRG entitled to (i) continued payment of base salary for 12 months;
(ii) payment of Incentive Bonus when otherwise due in respect of year
of termination, prorated through date of termination; and (iii)
lump-sum cash payment equal to 75% of the aggregate amount of unpaid
Special Bonuses in respect of calendar years 1995, 1996 and 1997. No
entitlement to any other cash compensation from the Company.
-Death/Disability:
MRG entitled to (i) continued payment of base salary for 12 months;
(ii) payment of Incentive Bonus when otherwise due in respect of year
of termination, prorated through date of termination; and (iii)
lump-sum cash payment equal to 75% of the aggregate amount of unpaid
special Bonuses in respect of calendar years 1995, 1996 and 1997. No
entitlement to any other cash compensation from the Company.
* SHAREHOLDER APPROVAL:
In order that certain payments described in this Memorandum qualify as
performance based compensation under Section 162(m) of the Internal
Revenue Code of 1986, as amended, arrangements providing for the Incentive
Bonus and the special Price-Based Incentive Compensation will be subject
to the approval of the shareholders of the Company. Haas Wheat & Harrison
Incorporated ("HWH") has agreed with MRG to vote the shares of common
stock of the Company controlled by HWH (approximately 40% of the
outstanding shares of such stock) to approve such arrangements.
-3-
<PAGE>
* FRINGE BENEFITS:
MRG shall be eligible to receive fringe benefits customary for a position
of this nature.
* ADDITIONAL DOCUMENTATION:
The parties intend to augment this Memorandum with more extensive
documentation, but such intention does not affect the binding nature of
this Memorandum.
PLAYTEX PRODUCTS, INC.
By /s/ Robert B. Haas
------------------
Its Chairman
MICHAEL R. GALLAGHER
/s/ Michael R. Gallagher
------------------------
-4-
<TABLE><CAPTION>
EXHIBIT 12(a)
PLAYTEX PRODUCTS, INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND
RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
(DOLLARS IN THOUSANDS)
TWELVE Twelve Twelve Twelve Twelve
MONTHS Months Months Months Months
ENDED Ended Ended Ended Ended
DECEMBER 30, December 31, December 25, December 26, December 28,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings (loss) before
cumulative effect of accounting
changes and extraordinary loss $ 2,774 $ 29,547 $(124,845) $ (15,258) $ (10,492)
Income taxes 8,151 23,994 2,049 5,100 9,075
--------- --------- --------- --------- ---------
Earnings (loss) before
income taxes, cumulative
effect of accounting
changes and extraordinary loss 10,925 53,541 (122,796) (10,158) (1,417)
Fixed charges:
Interest 71,361 76,153 115,949 114,016 115,982
One-third of rental 1,697 1,413 1,180 1,261 1,273
--------- --------- --------- --------- ---------
Total fixed charges 73,058 77,566 117,129 115,277 117,255
--------- --------- --------- ---------
Earnings (loss) before fixed
charges, income taxes, cumulative
effect of accounting changes and
extraordinary loss $ 83,983 $ 131,107 $ (5,667) $ 105,119 $ 115,838
========= ========= ========= ========= =========
Ratio of earnings to fixed charges 1.15X 1.69X -- -- --
========= ========= ========= ========= =========
Pre-tax earnings required for
preferred stock dividends (1) N/A $ 2,107 $ -- $ -- $ --
========= ========= ========= ========= =========
Ratio of earnings to fixed charges
and preferred dividends 1.15X 1.65X -- -- --
========== ========= ========= ========= =========
Coverage (deficiency) of earnings
to fixed charges $ 10,925 $ 53,541 $(122,796) $ (10,158) $ (1,417)
========== ========= ========= ========= =========
Coverage (deficiency) of earnings
to fixed charges and preferred
dividends $ 10,925 $ 51,434 $ -- $ -- $ --
========== ========= ========= ========= ==========
</TABLE>
(1) Gross-up of earnings for preferred stock dividends has been computed at
the applicable effective tax rates. For periods where the historical
effective tax rates exceed 100% or are negative, gross-up of earnings
has not been computed because material distortions would have resulted
from the use of the prescribed mathematical formula. Notwithstanding
the foregoing, Playtex's earnings would have been inadequate to cover
fixed charges and preferred dividends for such periods.
EXHIBIT 13(a)
<TABLE>
PLAYTEX PRODUCTS, INC. 1995 Annual Report
<S> <C> <C> <C> <C>
.
.
.
...building new links .
.
to consumers;.
.
establishing a new .
.
[Picture] spirit for success . [Picture]
.
[PLAYTEX LOGO]
Playtex Tampons
Banana Boat Sunblock Playtex Infant Care Woolite Rug Cleaner Playtex Gloves Tek Toothbrushes Jhirmack Haircare
[Picture] [Picture]
</TABLE>
<PAGE>
Financial Summary
Playtex Products reported net sales of $483.6 million, operating earnings of
$82.3 million and earnings from continuing operations of $.07 per share in 1995.
Our results for 1995 were lower due to the unusually competitive pressures in
the Feminine Care category, where our sales were 5% below last year's levels and
advertising and promotional spending was increased in response to these
competitive conditions.
For our remaining core businesses --Infant Care, Sun Care, and Gloves --
aggregate sales were up 7.6% over the prior year, while advertising and
promotional support was up only modestly. Sales were also positively impacted by
the addition of Woolite(registered trademark) rug and upholstery cleaning
-------
products, which the Company acquired in early 1995, offset by a decline in sales
of Jhirmack(registered trademark) hair care products, which has not been
--------
considered a "core" business since 1993.
In addition to the higher advertising and promotional spending, our earnings
were driven lower by increases in the cost of goods sold and by $15.5 million of
one-time charges in the fourth quarter associated with the acquisition of Banana
------
Boat(registered trademark), certain corporate reorganization expenses, and the
- ----
write-off of intangible assets for SmileTote(registered trademark). Excluding
---------
these one-time items, the Company would have reported earnings from continuing
operations of $0.35 per share.
SELECTED FINANCIAL DATA
<TABLE><CAPTION>
Twelve Months Ended
- ------------------------------------------------------------------------------------------------------------------------------------
December 30, December 31, December 25, December 26, December 28,
(In thousands, except per share data) 1995 1994(1) 1993(1) 1992(1) 1991(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $ 483,581 $ 473,275 $ 409,858 $ 384,486 $ 393,939
Gross profit 295,452 306,674 273,136 257,937 263,559
Operating expenses excluding amortization of
intangibles 195,457 166,799 143,834 139,098 134,124
Amortization of intangibles 11,268 10,181 14,529 14,981 14,870
Write-off of intangible assets 6,441 -- 121,620 -- --
Operating earnings (loss) 82,286 129,694 (6,847) 103,858 114,565
Interest expense, net 71,361 76,153 115,949 114,016 115,982
Earnings (loss) from continuing operations 2,774 29,547 (124,845) (15,258) (10,492)
Earnings (loss) from continuing operations
available to common stockholders 2,774(2) 28,384 (137,655)(3) (26,421) (20,220)
Earnings (loss) per share from continuing
operations available to common stockholders
(primary and fully diluted) $ 0.07(4) $ .97(5) $ (12.67)(6) $ (2.44) $ (1.89)
Weighted average common shares outstanding 42,309 29,212 10,867 10,845 10,671
Balance Sheet Data :
Working capital (deficit) $ 28,637 $ 17,623 $ (24,632) $ 1,372 $ (4,606)
Total assets 682,861 599,400 588,457 716,083 717,485
Total long-term debt, including current
portion and due to related party 868,436 954,593 994,306 998,337 973,336
Redeemable preferred stocks -- -- 139,644 124,834 113,671
Common stock and other stockholders'
equity (deficit) (300,976) (465,997) (723,408) (544,917) (517,185)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certain prior year accounts have been reclassified for consistency with
1995 presentation.
(2) Earnings from continuing operations available to common stockholders for
the twelve months ended December 30, 1995 excludes the extraordinary loss
of approximately $7.9 million (net of approximately $5.2 million of income
tax benefit) related to early extinguishment of debt in connection with
the 1995 Transaction.
(3) Loss from continuing operations available to common stockholders for the
twelve months ended December 25, 1993 excludes the cumulative effect of
accounting changes of approximately $0.9 million (net of approximately
$0.7 million of income tax benefit) and extraordinary loss of
approximately $39.4 million (net of approximately $25.4 million of income
tax benefit) related to the early extinguishment of debt in connection
with the Recapitalization.
(4) Fiscal 1995 earnings per share from continuing operations available to
common stockholders, assuming the 1995 Transaction had been consummated
on January 1, 1995, would have been $0.13 per share.
(5) Fiscal 1994 earnings per share from continuing operations available to
common stockholders, assuming the 1994 Recapitalization had been
consummated on at December 26, 1993, would have been $1.01 per share.
(6) Fiscal 1993 loss per share from continuing operations available to common
stockholders of ($12.67) includes the effect of the write-off of Beauty
Care excess cost($11.19 loss per share).
<PAGE>
CHIEF EXECUTIVE OFFICER'S
REPORT TO STOCKHOLDERS
.
.
IT IS OUR INTENTION .
.
TO GROW OUR KEY .
.
BRANDS BY CONTINU- .
.
ALLY STRENGTHENING .
.
OUR RELATIONSHIP .
.
WITH OUR CONSUMERS. .
During this past year, the men and women of the Playtex team joined together,
rolled up their sleeves and began to align their efforts behind a single mission
- -- to win in the marketplace by aggressively focusing on the consumer. It was
also towards the end of 1995 that we began investing in the future growth of our
businesses. This investment in the future will continue in 1996, as we
reinvigorate product lines with product improvements, stronger advertising
messages, heavier media weights, new packaging and additional products.
NET SALES We made important
50.4% FEMININE CARE progress during the year on
18.1% INFANT CARE several fronts.
11.8% HOUSEHOLD Most significant was the fact that
[GRAPH] each
PRODUCTS of our core businesses ended
10.4% SUN CARE the year with greater market
8.2% HAIR CARE share than at the start of the year.
1.1% TOOTHBRUSHES This gave us important momentum for
1996 and
provides early confirmation that our strategic focus on the consumer will
produce results long-term.
We took steps in 1995 to further develop our tampon business through the
introduction of Soft Comfort(registered trademark) with a new, flexible
------------
applicator -- our softest applicator ever. We also relaunched the
Ultimates(registered trademark) brand as Playtex Silk Glide(registered
- --------- ------------------
trademark), with a flushable cardboard applicator. Both entries will be
separately advertised in 1996.
Other highlights of 1995 include the acquisitions of Woolite rug & upholstery
-------
cleaning products and the remaining portion of Banana Boat Holding Corporation
-----------
not already owned by Playtex. Complete ownership of Banana Boat(registered
trademark), the nation's number two brand of sun care products, will increase
our flexibility in expanding our position in this important growth category.
We also made significant progress in our capital structure. Playtex issued 20
million new shares of common stock to partnerships managed by Haas Wheat &
Partners at $9 per share. This $180 million investment, together with borrowings
under a new $500 million bank credit facility, was used to reduce and refinance
senior debt. After giving effect to our two acquisitions, total debt by year end
was reduced by more than $85 million.
As we look ahead, we are building a more consumer conscious Playtex, one that
will marry its growing marketing and sales expertise with the entrepreneurial
spirit for which Playtex has long been known. It is our intention to grow our
key brands by con-
tinually strengthening
our relationship with [Picture]
our consumers, under-
standing and supporting
the strategic goals of our customers and being quick and alert in taking
advantage of marketplace trends.
As we move forward, we plan to keep our sleeves rolled up, and to do the work
necessary to firmly position Playtex as a growth company returning ever
increasing value to our long-term stockholders.
Sincerely,
Michael R. Gallagher
Chief Executive Officer
February 6, 1996
1
<PAGE>
1995 YEAR IN REVIEW [Picture]
[LOGO]
.
.
[Picture] Playtex .
.
Feminine Care .
.
products are .
.
known by .
.
women for the .
.
comfort they .
.
provide. .
FEMININE CARE
Women know Playtex tampons for the comfort they provide. In 1967, Playtex
introduced the first plastic applicator, thereby delivering a new level of
comfort for women. Through the years we continued to build on our comfort
heritage, next by introducing the first deodorant tampon in 1972, followed by
the introduction of the Gentle Glide(registered trademark) rounded tip
------------
applicator in 1975 for even greater comfort.
In mid-1995, Playtex built upon this heritage by introducing Soft Comfort
------------
tampons. Specially designed to appeal to teenage women, these tampons address
younger women's particular desire for comfort in selecting a tampon. During
1996, we will tailor our Soft Comfort marketing programs to
------------
[Picture]
reach teenage women as we invest to build a life-long relationship with these
consumers -- an important factor in a category where brand loyalty rates are
high.
In the second half of 1995, we also relaunched our Ultimates brand as Playtex
--------- -------
Silk Glide to better position the brand under the Playtex comfort umbrella. We
- ----------
improved the applicator, making it easier to hold and use, and updated the
packaging to generate more impact on store shelves. Silk Glide provides the
----------
comfort women expect from Playtex in a smooth flushable cardboard applicator.
In late 1995, we also began new strategic advertising campaigns for Gentle
-----
Glide, Soft Comfort, and Silk Glide tampons, focusing on our comfort heritage
- ----- ------------ ----------
with the theme "Playtex is Comfort." This campaign, together with the remainder
of the Company's more aggressive consumer oriented marketing program, has
solidified our position in the category. By year
end 1995, we had increased our
[Picture]
Our most comfortable applicator ever
dollar market share versus year end 1994 by
1.5 percentage points to 27.9 percent.
Playtex will capitalize on this momentum [Picture]
for extra comfortable protection
in 1996 as we anticipate another highly com-
petitive year. We will continue to build the
Playtex brand, reinforcing our reputation for [Picture]
new Soft Comfort, because
------------
comfort throughout 1996 with increased Playtex is comfort.
advertising support and other consumer-
focused marketing efforts.
2
<PAGE>
.
Questions about .
.
the right sun care .
.
product for your . [Picture]
.
skin? Call us at .
.
1-800-SAFESUN. .
.
"For fun in the sun... .
.
get on the boat!(trademark).
.
.
SUN CARE
Since Playtex made its initial investment in Banana Boat in November 1992,
-----------
Banana Boat has experienced double digit growth in retail consumption each year,
- -----------
rising to the number two position in the category.
As of September 1995, the traditional close of our "sunny season," we held
a 16.1 percent unit share of the market, up
significantly from an 11.1
share in 1992. The Banana
------
Boat franchise is particularly
- ---
Banana Boat(registered trademark) SPF
sun screens
strong in the mass merchandise
------------------------------------------
class of trade, where
------------------------------------------
Banana Boat now holds just
- ----------- ------------------------------------------
under a 20 percent share
------------------------------------------
and is the number one brand.
At the same time, the entire market for sun care products continues to expand
at a healthy pace -- by nearly 8 percent in 1995. Driven by greater public
awareness of the need to block potentially harmful rays, the category is
expected to continue to demonstrate attractive growth for the next several
years.
Research shows that consumers want both increased levels of protection, as
well as more specialized forms of protection. Banana Boat offers an extensive
-----------
array of products offering protection for specific consumers and uses, with a
variety of Sun Protection Factors (SPF's) ranging from 4 to 50. In fact,
Banana Boat was the first to introduce SPF 50 to the market by offering four
- -----------
distinct formulations -- one for babies, one for children, one for sports use,
and a general use product.
[Picture]
The market is also growing in specialty segments such as "after sun" and
"sunless." Banana Boat is the clear leader in "after sun" with the number one
-----------
product in the segment. In addition, Banana Boat's sunless products jumped from
-----------
number four in the category to number two during 1995 -- the result of recent
product formulation enhancements, revised packaging, and aggressive marketing
initiatives focusing on consumer trials.
As part of the focused sales effort for Banana Boat, Playtex utilizes more
-----------
than three dozen colorful vans to call upon key outlets in the southern and
coastal areas of the country. This ensures product availability and selection
in the key locations during the prime sun care buying season.
Now, with full ownership of Banana Boat, Playtex is in a better position to
-----------
expand and build upon the success of the line. We will
maintain our focus on Banana Boat's unique [Picture]
-----------
combination of high quality, value pricing, and
wide product selection as well as continuing [BANANA BOAT LOGO]
our aggressive sales and marketing efforts to
strengthen our position as a leader in the sun
care industry.
3
<PAGE>
[Picture]
.
Convenience and .[PLAYTEX LOGO]
.
ease of use have .
.
been the Playtex .
[Picture] .
hallmark for 35 .
.
years. Today, our .
.
Spill-Proof(trademark).
----------- .
cups continue helping .
.
parents with easier .
.
ways to feed their .
.
young children. .
.
INFANT CARE
Providing high quality products that are better for baby and
parents has been our hallmark in the infant feeding segment
for the past 35 years. Whether it is a disposable feeding
product, cup, bottle, or any other Playtex Infant Care
product, all are designed to perform with the highest
[Picture] quality and to provide parents a safe and convenient way to
feed their infants and young children. Playtex is universally
recognized among consumers and the trade as a leader in
infant care feeding.
In 1995, Playtex Infant Care sales grew 12 percent, solidifying our
leadership role in infant feeding products with nearly 32 percent of the market.
In the disposable segment of this market, Playtex maintained its dominant
leadership position with over a 70 percent market share. The Playtex disposable
feeding system, introduced in 1960, was the first disposable system on the
market. Since that time, we have continued to provide innovative product
improvements as a healthy and convenient alternative to breast-feeding.
The infant cup category is another example of our market leadership in
Infant Care. In 1995, this segment grew by almost 20 percent, driven by the
success of the Playtex Spill-Proof
-------------------
Playtex disposables
less air here...means less gas later...
[Picture]
cup. This product, which features the patented Flo-Control(registered trademark)
-----------
valve, is actually packaged upside down to emphasize to parents this unique but
critical product feature. By the end of 1995, we held a 55 percent share of this
dynamically growing market. Our 6 ounce Spill-Proof cup -- introduced less than
-----------
two years ago -- is now one of the leading products in the entire infant feeding
category.
During 1996, we will continue our market leadership role in Infant Care by
bringing high quality, innovative products to the marketplace. Consistent with
this strategy, we will be strengthening our position in the cup, pacifier, hard
bottle, and toddler feeding segments with several new product launches. Our new
advertising campaign and merchandising efforts planned for the year ahead will
build upon the strong brand equity and trust behind the Playtex name in infant
feeding.
4
<PAGE>
.
.
A NEW ADVERTISING .
.
PROGRAM WILL .
.
FOCUS ON INDIVIDUALS .
.
WHO MAY NOT BE .
.
FAMILIAR WITH .
.
THE BENEFITS OF USING .
.
HOUSEHOLD GLOVES. .
.
HOUSEHOLD PRODUCTS
Since 1954, Playtex has been the leader in
the household glove market. Our market
leadership position continued in 1995
with a 34 percent share in this category. [Picture]
Playtex's nationally recognized
brand name, based upon our reputation
for superior quality, durability
and protection, provides us with a [Picture]
strong competitive advantage in a
market where our competition
comes primarily from private label
and regional brands.
In 1996, we will launch a major advertising and promotional program to
further build on our strong brand equity and name recognition in the
marketplace. This new national advertising program will air primarily on
daytime television, helping us reach young consumers, a growing market segment,
who may be unfamiliar with the benefits of household gloves. In addition, we
are exploring new packaging options which will enhance our
[Picture]
[WOOLITE LOGO] shelf presence and better communicate key product features.
Future initiatives in the household glove market will be
geared towards our major objectives -- gaining higher market share and
leveraging our category leadership position in the market. We plan to continue
our efforts to improve quality, develop new products and explore new avenues of
distribution.
Woolite rug and upholstery cleaning products is the other major brand in
-------
our Household Products Group. Woolite, which was acquired in February 1995, is
-------
the number two brand in the traditional rug and upholstery cleaning market with
a 22 percent share at year end. Playtex offers a variety of products in
this category tailored to the specific cleaning needs of the consumer.
During 1996, the Company plans a new television advertising campaign
highlighting the products' ability to clean carpet effectively with no harsh
chemicals. In addition, Playtex plans to introduce new, distinctive packaging
to enhance communication of the products' attributes to the consumer. Our
research and development efforts will be focused on improving and expanding
the Woolite product line to meet changing consumer needs.
-------
5
<PAGE>
A NEW FOCUS
.
OUR FIELD SALES .
.
GROUP PROVIDES . [Picture]
.
CONSTANT FEEDBACK .
.
HIGHLIGHTING .
.
CONSUMER TRENDS .
.
EMERGING AT RETAIL..
.
.
.
GETTING IN TOUCH WITH
OUR CONSUMERS
We have clearly stated our mission to aggressively focus on our consumer in
order to win in the marketplace. To be successful in the highly competitive
consumer products industry, it is essential that we understand and respond to
the changing needs of our consumers.
We believe the ultimate success of every product offered by Playtex depends
on our ability to listen to our consumers. Are we selling products they truly
want and need? Are we effectively communicating how our products meet these
needs? Are we clearly differentiating our products from the competition?
Answers to these and other pertinent questions can come only from an ongoing
commitment to truly listen to what consumers have to say. We use a variety of
means to establish and foster a close relationship with our consumers.
Our market research activities provide a number of ways for us to listen to
consumers and learn about their needs and concerns. We vigorously test new
product and packaging concepts, with particular emphasis on direct consumer
feedback. We convene focus groups to discuss product issues with our customers
face to face and to learn specifically how men and women use and feel about our
products.
Similar interactions with
[Picture] consumers help us con-
tinually identify new
product concepts and
product improvements,
and measure advertising and packaging effectiveness based upon
their input.
In the Feminine Care business, this kind of dialogue highlighted that
comfort remains a key criteria for women in determining their preferred form
of feminine protection. For Playtex, comfort has long been
a primary differentiation point and motivating factor behind product
innovation. Our current advertising campaign, initiated in late 1995, focuses
on this key point by reminding consumers that Playtex stands for comfort. We
also introduced revised packaging for Silk Glide to better highlight this
----------
message. Our latest product innovation, Soft Comfort incorporates this message
------------
quite clearly.
Our tremendously successful Playtex Spill-Proof cup is another example of
------------------
how listening to customers can translate to market success. Parents told our
Infant Care research team of their desire for a truly
leak proof cup, something not then avail- [Picture]
able on the market. The result -- our six
ounce Spill-Proof cup -- is currently one of the leading products in the infant
-----------
feeding category.
We also learned from consumers that use of sun care products, while
commonplace at the beach, is somewhat ignored during the daily routine of
backyard activities, where
6
<PAGE>
.
.
FOCUS GROUPS .
.
AND OTHER TYPES .
.
OF RESEARCH HELP . [Picture]
.
US ANTICIPATE .
.
CHANGING MARKET .
.
CONDITIONS SO WE CAN .
.
CONTINUALLY UPDATE .
.
PRODUCTS, PACKAGING .
.
AND ADVERTISING. .
.
most sun damage now occurs. Future communications will now stress the
importance of sun protection for all outdoor activities.
Providing consumers with product samples and product information are other
effective ways we communicate with our customers. In Infant Care, we communicate
to consumers through pediatricians and hospitals by providing health
professionals with information about the benefits of using our products. In
addition, product samples, coupons, and literature are also provided directly
to new mothers.
We also provide coupons to our
customers in an effort to tie in related
[Picture]
products. For example, we learned
from listening to mothers that sun pro-
tection for their infants is a pressing concern. As a result of this input, we
now place coupons for baby related Sun Care products in certain of our Infant
Care products.
Consumer inquiries are handled directly by our Consumer Affairs group. This
department, which is part of our research and development team, allows us to
track trends and consumer attitudes and to formulate product and packaging
ideas based upon this input. As an illustration, Banana Boat hears directly
-----------
from thousands of consumers each month via our toll free telephone service
(1-800-SAFESUN).
Staying in touch with the consumer requires a sales force that is in
tune with consumer driven changes in the retail market. Our field sales group
provides constant feedback highlighting consumer trends emerging at retail in
terms of response to our existing products, new products, and competitive
offerings. This organization is also extremely adept at optimizing the shelf
positioning and presence of our products in retail outlets -- an important task,
since it is at the shelf where we interact with our consumers as they make
their final buying decision.
All of these activities collectively provide valuable insight into the
needs of our consumers. We continue to build our information base and
formulate our future growth plans incorporating these on-going lessons. Our
success depends on our ability to translate this information into a winning
strategy in the marketplace.
7
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the historical audited
financial statements and notes thereto included elsewhere in this Annual Report.
A. Twelve Months Ended December 30, 1995 Versus Twelve Months Ended
December 31, 1994
Results of Operations
- ---------------------
Net Sales - Fiscal 1995 net sales increased $10.3 million, or 2%, versus fiscal
- ---------
1994 to a record high for the Company of $483.6 million. For the year, Feminine
Care net sales decreased $13.5 million, or 5%, versus fiscal 1994. Infant Care,
Sun Care and Gloves reported growth in net sales versus fiscal 1994 of 12%, 3%
and 3%, respectively. The acquisition of the Woolite rug and upholstery cleaning
-------
business ("Woolite") in the first quarter of 1995 contributed $23.7 million in
---------
additional sales. The Hair Care business continued to decline with net sales off
$11.6 million versus the previous year.
Net sales for the Feminine Care business were $243.6 million for the twelve
months ended December 30, 1995, down $13.5 million, or 5%, versus 1994. This
decline in net sales is attributed to a decline in the Company's market share
and a reduction in trade inventories. These two factors were partially offset by
market growth. Reflecting Playtex's commitment to stabilize and rebuild market
share, the fourth quarter unit market share was up from 23.0% in the fourth
quarter of 1994 to 23.5% in the fourth quarter of 1995 and dollar share
increased from 26.9% in the fourth quarter of 1994 to 27.4% in the fourth
quarter of 1995.
Infant Care net sales were $87.5 million, up $9.6 million, or 12%, versus
fiscal 1994. The increase in net sales was due primarily to increased cup volume
associated with the success of the Playtex Spill-Proof cup, which was introduced
-----------
in the fourth quarter of 1993, and a full year's impact of the SmileTote
---------
line of cups and bottles which was acquired in July of 1994. Additionally,
export sales to Canada and abroad increased by $1.8 million versus fiscal 1994.
Sun Care net sales for fiscal 1995 were $50.3 million, an increase of 3%
over fiscal 1994. Contributing to the increase in net sales was an increase in
market share for the year from 14.6% to 16.1%, category growth of 7.5% versus
1994 and $1.4 million of additional sales as a result of the acquisition, on
October 31, 1995, of the remaining portion of Banana Boat Holding Corporation
("BBH") not previously owned by Playtex. Partially offsetting these net sales
gains were higher than expected returns of sales related to the 1994 season.
Glove net sales increased 3% to $33.6 million versus fiscal 1994. This gain
was attributed primarily to an estimated 3% category growth combined with a 3%
increase in market share. Partially offsetting these increases was a $1.6
million decrease in net sales associated with the discontinuation of the
Duramitt(R) product line. Excluding Duramitt, net sales for gloves increased 9%
- --------
year to year.
Net sales in Hair Care were off $11.6 million versus fiscal 1994 declining
to $39.7 million. For the year, Jhirmack represented just 8% of total net sales.
--------
Gross Profit - Gross profit of $295.5 million for the year ended December 30,
- ------------
1995 decreased $11.2 million, or 4%, versus fiscal 1994. For the year, gross
margin was 61.1% of net sales versus 64.8% of net sales in 1994. The decrease in
margin was due to $3.4 million of one time charges incurred in the fourth
quarter associated with Banana Boat and the acquisition of BBH, a change in
-----------
product mix due primarily to lower tampon sales, and higher product costs,
including increased costs for key materials such as latex, resin, rayon, and
corrugate.
Operating Earnings - Operating earnings of $82.3 million for the year ended
- ------------------
December 30, 1995 were $47.4 million, or 37%, lower than for the prior fiscal
year. Contributing to this decline were $15.5 million of one time charges: $3.4
million (included in cost of sales) related to Banana Boat and the acquisition
-----------
of BBH, $5.7 million (included in administrative expenses) to implement certain
organizational changes arising from management's plan to streamline and
strengthen the Company, and $6.4 million to write-off intangible assets
associated with SmileTote.
---------
In line with the Company's strategy to more aggressively focus on the
consumer, advertising and promotion expenses were up $18.6 million, or 19%,
versus fiscal 1994. The vast majority of this increase in advertising and
promotion expenses occurred in the second half of fiscal 1995. Selling,
distribution and research costs increased $2.6 million versus fiscal 1994,
mainly as a result of the acquisitions of Woolite in the first quarter of 1995
-------
and BBH in the fourth quarter of 1995 and as a result of an increased focus on
new product development.
Write-off of SmileTote Intangible Assets - During the fourth quarter of 1995 and
- ----------------------------------------
<PAGE>
in connection with certain strategic decisions regarding the SmileTote product
---------
line, management determined that the unamortized intangible assets associated
with SmileTote were permanently impaired. See note 11 of notes to consolidated
---------
financial statements for further details.
8
<PAGE>
Interest Expense - The decrease in interest expense of $4.8 million for the year
ended December 30, 1995 was attributable to lower debt levels as a result of the
$180 million equity infusion from partnerships managed by Haas Wheat &
Partners and lower interest rates associated with a $500 million Credit
Agreement with Chemical Bank (the "1995 Credit Agreement"). See notes 2 and
7 of the notes to consolidated financial statements.
B. Twelve Months Ended December 31, 1994 Versus Twelve Months Ended
December 25, 1993
Net Sales - Net sales of $473.3 million for the year ended December 31, 1994
- ---------
were $63.4 million, or 15%, higher than for fiscal year 1993. Although most of
the Company's growth was attributed to the first full year of marketing the
Banana Boat line of sun and skin care products, Playtex also recorded growth in
each of its other core businesses. The Feminine Care business, the Company's
largest product line, grew 5% during the year, with its core plastic applicator
product line up 7%. The Company's Infant Care and Glove product lines grew 4%
and 13%, respectively, on the strength of new products, and in the case of
Infant Care, the inclusion of the SmileTote product line which was acquired in
---------
July 1994.
Net sales from the Feminine Care business were $257.1 million for the
twelve months ended December 31, 1994, an increase of 5% over net sales of
$244.5 million in the prior twelve month period. The higher net sales reflect
the impact of market growth and the June 1994 introduction of Multi-Pack, a new
product which provides a mix of Regular and Super absorbencies in one box. In
addition, sales were favorably impacted by the success of certain promotional
programs and by the continued expansion into wholesale clubs. The Company's
market share (by dollar volume) for the twelve months of 1994 was 29%, a slight
decline versus the prior year.
The Sun Care volume of $48.9 million for fiscal 1994 reflected the impact
of the Company's previous distribution arrangement for Banana Boat products with
-----------
a wholly owned subsidiary of BBH, which commenced during the fourth quarter of
fiscal 1993. In 1993, net sales of these products were $1.9 million.
In Infant Care, net sales for the twelve months ended December 31, 1994
were $77.9 million, an increase of 4% over the net sales of $74.7 million in the
prior twelve month period. The net sales increase resulted from the addition of
SmileTote infant/toddler cups and bottles which the Company acquired in July
1994, the continued growth in the disposable nurser system product
which includes disposable bottles (the largest portion of this business) and
the recently introduced Spill-Proof cup.
-----------
Glove net sales grew to $32.5 million for fiscal 1994, due to the inclusion
of several new products, including disposable gloves and a line of gloves
developed for the hardware/home center classes of trade, marketed under the
tradename Progloves(R).
---------
The Company's Hair Care business recorded net sales of $51.4 million, down
6% from 1993. Since the write-off of Beauty Care excess cost in 1993, the
Company does not consider this product line to be part of its core business. The
Company repositioned Jhirmack into a different price/value segment of the market
--------
in early 1994. The repositioning reflected a one-size lower price strategy and
included improved product formulations, updated packaging graphics and
supporting trade promotions. Associated with this repositioning were certain
non-recurring transitional costs of approximately $2.5 million in 1994.
Gross Profit - Gross profit of $306.7 million for the twelve months ended
- ------------
December 31, 1994 increased by $33.5 million, or 12%, over the comparable period
in 1993 due primarily to the positive effect of the higher sales. The gross
profit margin decreased to 64.8% of net sales for the 1994 fiscal year versus
66.7% of net sales for the prior fiscal year, largely as a result of product
mix.
Operating Earnings - Operating earnings of $129.7 million for the year ended
- ------------------
December 31, 1994 were $14.9 million, or 13%, higher than for the prior fiscal
year (exclusive of the write-off of Beauty Care excess cost in fiscal 1993). The
increase was due to the higher gross profit described above, somewhat offset by
higher advertising, promotional and operating expenses in support of Sun Care
products, which were not sold by the Company until late fiscal 1993.
Interest Expense - The decrease in interest expense versus the same period in
- ----------------
fiscal 1993 reflects the positive effect of the 1994 Recapitalization, which was
completed on March 4, 1994. See note 3 of notes to consolidated financial
statements.
Earnings (Loss) Before Cumulative Effect of Accounting Changes and Extraordinary
- --------------------------------------------------------------------------------
Loss ("Operating Net Earnings (Loss)") - Operating net earnings of $29.5 million
- --------------------------------------
for the twelve months ended December 31, 1994 favorably compared to a $3.2
million loss for the twelve months ended December 25, 1993 (excluding the
write-off of Beauty Care excess cost in fiscal 1993). The $32.7 million
favorable variance resulted from the combined effect of all factors described
above.
9
<PAGE>
Financial Condition and Liquidity
- ---------------------------------
At December 30, 1995, the Company's working capital increased by $11.0 million
to $28.6 million from $17.6 million at December 31, 1994. This increase was due
to an increased level of receivables and inventory resulting from the BBH and
Woolite acquisitions and lower current maturities of long-term debt due to the
1995 Credit Agreement. Long-term debt of $770.1 million at December 30, 1995
consisted of: a) $367.5 million of borrowings under the new Term Loan Facility,
exclusive of $20.0 million included in current maturities; b) $5.1 million of
borrowings under the new Working Capital Facility; c) $37.5 million of
borrowings under the Acquisition Credit Facility; and d) $360.0 million
aggregate principal amount of 9% Senior Subordinated Notes (the "9% Notes"). Of
the $75.0 million Working Capital Facility, on December 30, 1995, approximately
$68.0 million was available to be borrowed by the Company.
The Company believes that it will generate sufficient cash flow from
operations to make the scheduled interest and principal payments under the 1995
Credit Agreement and interest payments under the 9% Notes. However, the Company
does not expect to generate sufficient cash flow from operations to make the
principal payment due in 2003 on the 9% Notes. Accordingly, the Company will
need to either refinance its obligations with respect to the 9% Notes prior to
maturity, sell assets or raise equity capital to repay the principal amount of
the 9% Notes. The Company's ability to make scheduled principal payments, to
refinance its obligations with respect to its indebtedness, sell assets or raise
equity capital depends on its financial and operating performance, which, in
turn, is subject to prevailing economic conditions and to financial, business
and other factors beyond its control. Although the Company's cash flow from its
operations and borrowings have been sufficient to meet its historical debt
service obligations, there can be no assurance that the Company's operating
results will continue to be sufficient or that future borrowing facilities will
be available for the payment or refinancing of the Company's indebtedness.
The Company's outstanding obligations under the 1995 Credit Agreement bear
interest at floating rates. In June and July of 1995, the Company entered into
two interest rate protection agreements such that the interest expense with
respect to $225 million of its variable rate outstanding indebtedness is at
fixed rates. The first agreement, which is associated with $125 million of
variable rate debt, provides for quarterly payments by Playtex at a rate of
6.17% until October 6, 1995 and at a rate of 5.96% from October 7, 1995 until
July 7, 1997 (or July 6, 1998 if the counterparty exercises its option to extend
the agreement) and for quarterly receipt of payments to Playtex from the
counterparty at a 90-day LIBOR rate. The second agreement, which is associated
with $100 million of variable rate debt, provides for quarterly payments by
Playtex at a rate of 5.825% and receipt of quarterly payments to Playtex from
the counterparty at a 90-day LIBOR rate until July 25, 1997 (or July 25, 1998 if
extended by the counterparty). On June 13, 1995, the Company terminated a prior
interest rate protection agreement which hedged interest expense on $90 million
of indebtedness for a three year period from April 1, 1994 at levels higher than
the current agreement. Net receipts or payments under these interest rate
protection agreements are recognized as an adjustment to interest expense.
Capital expenditures for equipment and facility improvements were $12.4
million, $8.5 million, and $6.5 million for the twelve months ended December 30,
1995, December 31, 1994, and December 25, 1993, respectively. The increased
level of capital expenditures in 1995 was the result of the construction of a
new tampon manufacturing facility in Dover, Delaware adjacent to one of
Playtex's current plants. This operation was previously housed in a rental
property. All other expenditures were used to upgrade production equipment and
maintain facilities in the ordinary course of business. Capital expenditures for
1996 are anticipated to be $15.0 million, mostly for production related
equipment and facility improvements and for projects consistent with those of
the prior years.
Inflation in the United States and Canada has not been a significant
concern to the Company during recent periods.
The Company's businesses, with the exception of Banana Boat, have generally
-----------
not been seasonal. Banana Boat sales are highly seasonal with a range of 85 to
-----------
90 percent of sales occurring during the first six months of the year. In
addition, the seasonality requires increased working capital needs to support
inventory builds prior to the selling season and higher receivable levels
resulting from extended credit terms which are typical in the sun care industry.
10
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Twelve Months Ended
- -----------------------------------------------------------------------------------------------------------------
December 30, December 31, December 25,
(In thousands, except per share data) 1995 1994(a) 1993(a)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 483,581 $ 473,275 $ 409,858
Cost of sales 188,129 166,601 136,722
- -----------------------------------------------------------------------------------------------------------------
Gross profit 295,452 306,674 273,136
- -----------------------------------------------------------------------------------------------------------------
Operating expenses:
Advertising and sales promotion 117,581 98,999 87,446
Selling, distribution and research 54,251 51,628 41,526
Administrative 23,625 16,172 14,862
Amortization of intangibles 11,268 10,181 14,529
Write-off of SmileTote and Beauty Care
intangible assets in 1995 and 1993,
respectively 6,441 -- 121,620
- -----------------------------------------------------------------------------------------------------------------
Total operating expenses 213,166 176,980 279,983
- -----------------------------------------------------------------------------------------------------------------
Operating earnings (loss) 82,286 129,694 (6,847)
Interest expense, including related party
interest expense of $12,150, $12,150,
and $10,587, respectively, net of related
party interest income of $12,003, $12,003,
and $10,502, respectively 71,361 76,153 115,949
- -----------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes, cumulative
effect of accounting changes and extraordinary
loss 10,925 53,541 (122,796)
Income taxes 8,151 23,994 2,049
- -----------------------------------------------------------------------------------------------------------------
Earnings (loss) before cumulative effect of
accounting changes and extraordinary loss 2,774 29,547 (124,845)
Cumulative effect of accounting changes, net
of $693 income tax benefit -- -- 923
- -----------------------------------------------------------------------------------------------------------------
Earnings (loss) before extraordinary loss 2,774 29,547 (123,922)
Extraordinary loss on early extinguishment of debt,
net of $5,180 and $25,430 tax benefit for 1995
and 1993, respectively (7,935) -- (39,375)
- -----------------------------------------------------------------------------------------------------------------
Net (loss) earnings (5,161) 29,547 (163,297)
Preferred dividend requirements -- (1,163) (12,810)
- -----------------------------------------------------------------------------------------------------------------
Net (loss) earnings available to common
stockholders $ (5,161) $ 28,384 $ (176,107)
- -----------------------------------------------------------------------------------------------------------------
Earnings (loss) per share after preferred dividend
requirements(primary and fully diluted):
Before cumulative effect of accounting
changes and extraordinary loss $ .07 $ .97 $ (12.67)
Before extraordinary loss $ .07 $ .97 $ (12.58)
Net (loss) earnings $ (.12) $ .97 $ (16.21)
Average shares outstanding used to calculate EPS 42,309 29,212 10,867
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Certain prior years' accounts have been reclassified for consistency with
1995 presentation.
11
<PAGE>
CONSOLIDATED
BALANCE SHEET
<TABLE><CAPTION>
- -----------------------------------------------------------------------------------------------------------------
December 30, December 31,
(In thousands, except share data) 1995 1994
- -----------------------------------------------------------------------------------------------------------------
Assets
Current assets:
<S> <C> <C>
Cash $ 5,940 $ 10,373
Receivables, less allowance for doubtful accounts 58,019 49,238
Inventories 49,190 41,583
Deferred taxes 13,154 10,096
Other current assets 4,545 2,616
- -----------------------------------------------------------------------------------------------------------------
Total current assets 130,848 113,906
- -----------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 52,462 47,057
Intangible assets, net:
Excess of cost over net assets of acquired
businesses 359,629 315,276
Patents, trademarks and other 38,076 11,652
Deferred financing costs 17,426 23,392
Due from related party 80,017 80,517
Other noncurrent assets 4,403 7,600
- -----------------------------------------------------------------------------------------------------------------
Total assets $ 682,861 $ 599,400
- -----------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 20,057 $ 10,618
Accrued expenses 60,257 45,061
Income taxes payable 1,897 6,104
Current maturities of long-term debt 20,000 34,500
- -----------------------------------------------------------------------------------------------------------------
Total current liabilities 102,211 96,283
- -----------------------------------------------------------------------------------------------------------------
Long-term debt 770,050 841,200
Due to related party 78,386 78,893
Other noncurrent liabilities 16,784 23,120
Deferred taxes 16,406 25,901
- -----------------------------------------------------------------------------------------------------------------
Total liabilities 983,837 1,065,397
- -----------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $0.01 par value, authorized 100,000,000 shares,
issued 50,879,701 shares at December 30,1995; authorized
75,000,000 shares, issued 30,879,701 shares at
December 31,1994 509 309
Additional paid-in capital 424,217 254,417
Retained earnings (deficit) (723,917) (718,756)
Foreign currency translation adjustment (1,785) (1,967)
- -----------------------------------------------------------------------------------------------------------------
Total stockholders' equity (300,976) (465,997)
- -----------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 682,861 $ 599,400
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
CONSOLIDATED STATEMENT OF REDEEMABLE PREFERRED STOCKS,
COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
<TABLE><CAPTION>
Foreign
Redeemable Additional Retained Currency
Preferred Common Paid-In Earnings Translation
(In thousands) Stocks Stock Capital (Deficit) Adjustment
- ---------------------------------------------------------------------------------------------------------------------------------
Balance,
<S> <C> <C> <C> <C> <C>
December 26, 1992 $ 124,834 $ 502 $ 24,762 $(569,483) $ (698)
Net loss -- -- -- (163,297) --
Preferred stocks accretion and dividends 14,810 -- -- (14,360) --
Issuance of shares of common stock -- 2 144 -- --
Effect of reverse stock split -- (395) 395 -- --
Foreign currency translation adjustment -- -- -- -- (980)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance,
December 25, 1993 139,644 109 25,301 (747,140) (1,678)
Net earnings -- -- -- 29,547
Accrued dividend requirements 1,163 -- -- (1,163) --
Issuance of shares of common stock, net -- 200 244,116 -- --
Redemption of redeemable preferred stocks (140,807) -- -- -- --
Consent fee paid to Sara Lee Corporation -- -- (15,000) -- --
Foreign currency translation adjustment -- -- -- -- (289)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1994 -- 309 254,417 (718,756) (1,967)
Net loss -- -- -- (5,161) --
Issuance of shares of common stock, net -- 200 169,800 -- --
Foreign currency translation adjustment -- -- -- -- 182
- ---------------------------------------------------------------------------------------------------------------------------------
Balance,
December 30, 1995 $ -- $ 509 $ 424,217 $(723,917) $(1,785)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE><CAPTION>
Twelve Months Ended
- -------------------------------------------------------------------------------------------------------------------
December 30, December 31, December 25,
(In thousands) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
Cash flows from operations:
<S> <C> <C> <C>
Net (loss) earnings $ (5,161) $ 29,547 $(163,297)
Non-cash items included in earnings:
Extraordinary loss on extinguishment of debt,
net of taxes 7,935 -- 39,375
Write-off of intangible assets 6,441 -- 121,620
Cumulative effect of accounting changes -- -- (923)
Amortization of intangibles 11,268 10,181 14,529
Amortization of debt discount and deferred financing
costs 2,246 2,358 37,765
Depreciation 8,496 7,412 7,238
Deferred taxes (133) 19,849 (5,277)
Other, net (291) -- 85
Increases (decreases) in working capital items,
net of effects of acquisitions:
(Increase) decrease in receivables (4,471) (10,871) 6,716
Decrease (increase) in inventories 4,629 (8,549) (7,372)
Increase in other current assets (1,802) (560) (335)
Increase (decrease) in accounts payable 6,967 (10,959) 9,224
(Decrease) increase in accrued expenses (7,076) 729 799
Decrease in income taxes payable (4,207) (397) (3,889)
Increase (decrease) in interest accrued 2,238 (3,987) (507)
- -------------------------------------------------------------------------------------------------------------------
Net cash flows from operations 27,079 34,753 55,751
- -------------------------------------------------------------------------------------------------------------------
Cash flows (used for) from investing activities:
Purchases of property, plant and equipment (12,395) (8,503) (6,490)
Net book value of fixed assets sold -- -- 139
Businesses or investments acquired (94,429) (7,044) --
- -------------------------------------------------------------------------------------------------------------------
Net cash flows used for investing activities (106,824) (15,547) (6,351)
- -------------------------------------------------------------------------------------------------------------------
Cash flows from (used for) financing activities:
Net (payments) borrowings under working capital
facilities (42,650) 47,700 (26,994)
Long-term debt borrowings 425,000 860,000 --
Long-term debt payments (468,000) (947,413) (25,045)
Payment of recapitalization costs -- (44,155) --
Redemption of preferred stocks -- (140,807) --
Payment of financing costs (9,113) (25,750) --
Issuance of shares of common stock, net 170,000 244,316 146
Consent fee paid to Sara Lee Corporation -- (15,000) --
Other, net 75 (3,111) 265
- -------------------------------------------------------------------------------------------------------------------
Net cash flows from (used for) financing activities 75,312 (24,220) (51,628)
- -------------------------------------------------------------------------------------------------------------------
Decrease in cash (4,433) (5,014) (2,228)
Cash at beginning of period 10,373 15,387 17,615
- -------------------------------------------------------------------------------------------------------------------
Cash at end of period $ 5,940 $ 10,373 $ 15,387
- -------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information
Cash paid during the periods for:
Interest $ 66,884 $ 89,755 $ 79,385
Income taxes, net of refunds $ 10,748 $ 3,989 $ 11,413
</TABLE>
14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements include the
- ---------------------------
accounts of Playtex Products, Inc. and all of its subsidiaries ("Playtex" or the
"Company"). All significant intercompany balances have been eliminated. Certain
prior years' accounts have been reclassified for consistency with the current
year's presentation.
Inventories - Inventories are stated at the lower of cost (first-in, first-out
- -----------
basis) or market. Inventory costs include material, labor and manufacturing
overhead.
Net Property, Plant and Equipment - Depreciation is provided on the
- ---------------------------------
straight-line method over the estimated useful lives of the respective assets
(ranging from 3 to 40 years). Repair and maintenance costs ( $5.1 million in
1995 and $4.7 million in each of 1994 and 1993) are expensed; renewals and
betterments are capitalized.
Intangible Assets - Intangible assets are amortized on a straight-line basis
- -----------------
over a period not exceeding 40 years. Playtex periodically assesses the
recoverability of its intangible assets by comparing the carrying value of the
asset to the projected undiscounted future operating results before amortization
and after considering interest on indebtedness. See note 11.
Deferred Financing Costs - Fees and expenses relating to debt issuance costs are
- ------------------------
classified as deferred financing costs and are amortized, under the interest
method, over the average life of the related debt (ranging from 8 to 10 years).
Fees and expenses related to bank financing are amortized on a straight line
basis over the term of the facility.
Income Taxes - Effective in 1993, deferred tax assets and liabilities are
- ------------
provided using the asset and liability method for temporary differences between
financial and tax reporting using the enacted tax rates in effect for the period
in which the differences are expected to reverse.
Foreign Currency Translation - The functional currency of Playtex's Canadian
- ----------------------------
operations is the local currency. Net exchange gains or losses resulting from
the translation of assets and liabilities are accumulated in a separate section
of stockholders' equity titled "Foreign currency translation adjustment."
Earnings Per Share - Earnings (loss) per share are net earnings (loss) less the
- ------------------
dividend requirements on preferred stocks, divided by the weighted average
number of common shares issued and outstanding for the periods. In connection
with the recapitalization in 1994, Playtex effected a one for 4.6296 reverse
stock split. All per share information has been adjusted to reflect the reverse
stock split on a retroactive basis. Earnings per share before extraordinary
loss, assuming the 1995 Transaction (as defined below) took place at January 1,
1995, would have been $0.13 per share. Earnings per share, assuming the 1994
Recapitalization (as defined below) took place at December 26, 1993, would have
been $1.01 per share.
Use of Estimates - The preparation of financial statements in accordance with
- ----------------
generally accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements,
and the reported amounts of revenue and expenses during the reporting period.
Actual results could vary from those estimates.
Accounting Changes - In March 1995, the Financial Accounting Standards Board
- ------------------
(FASB) issued Statement of Financial Accounting Standards (SFAS) No. 121 -
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of." Commencing in 1996, SFAS No. 121 requires companies to review
assets for possible impairment and provides guidelines for recognition of
impairment losses related to long-lived assets, certain intangible assets and
assets to be disposed of. Management does not believe the impact of the adoption
of SFAS No. 121 will be material.
In October 1995, the FASB issued SFAS No. 123 - "Accounting for Stock-Based
Compensation." As allowable by SFAS No. 123, the Company will not recognize
compensation cost for stock-based employee compensation arrangements, but
rather, starting in fiscal 1996, will disclose the pro forma impact on net
income and earnings per share as if the fair value stock-based compensation had
been recognized starting in 1995.
2. The 1995 Transaction
On June 6, 1995, following the receipt of stockholder approval at the Annual
Meeting of Stockholders, the Company consummated the sale of 20.0 million shares
of common stock of the Company, par value $.01 per share at a price of $9.00
per share to HWH Capital Partners, L.P., HWH Valentine Partners, L.P., and
HWH Surplus Valentine Partners, L.P. (collectively, the "Investors"), each a
Delaware limited partnership managed by Haas Wheat &
<PAGE>
Partners Incorporated, pursuant to a Stock Purchase Agreement, dated as of March
17, 1995, between the Company and the Investors. The Investors' shares
constitute approximately 40% of the Company's outstanding common stock. At the
Annual Meeting, designees of the Investors were elected by the Company's
stockholders as a majority of the Company's Board of Directors. Costs and
expenses associated with the sale (the "Investment"), including advisory fees,
investment banking, legal and certain other expenses, amounted to approximately
$10.0 million. The net proceeds of the Investment were used by the Company,
together with borrowings under the 1995 Credit Agreement (as defined below), to
refinance all borrowings under the 1994 Credit Agreement (as defined in note 3).
Contemporaneously with the Investment, the Company entered into a new bank
credit agreement (the "1995 Credit Agreement" and, together with the Investment,
the "1995 Transaction") which provides for a new credit facility in the
aggregate amount of $500.0 million consisting of (i) $387.5 million in term
loans (the "1995 Term Loan Facility"), (ii) a $75.0 million revolving credit
facility (the "1995 Working Capital Facility") and (iii) a $37.5 million
acquisition revolving credit facility (the "1995 Acquisition Credit Facility").
Fees and expenses associated with the new credit agreement of $9.1 million will
be amortized over the term of the associated credit agreement.
15
<PAGE>
3. The 1994 Recapitalization
During the first quarter of fiscal 1994, Playtex completed a recapitalization
plan (the "1994 Recapitalization") designed to reduce indebtedness, interest
expense and preferred stock dividend requirements and to improve Playtex's cash
flow and operating and financial flexibility. The 1994 Recapitalization included
transactions effected by Playtex and its former subsidiary Playtex Family
Products Corporation, which was subsequently merged into Playtex. Therefore, all
references to Playtex include the activities of the merged companies.
The principal elements of the 1994 Recapitalization included: (a) the
issuance of 20.0 million shares of common stock at a price of $13.00 per share,
(b) borrowings from banks of $500.0 million under a term loan facility (the
"1994 Term Loan Facility") and of approximately $40.0 million under a $75.0
million working capital facility (the "1994 Revolving Credit Facility" and,
together with the 1994 Term Loan Facility, the "1994 Credit Agreement") and (c)
the issuance of $360.0 million aggregate principal amount of 9% Senior
Subordinated Notes due 2003 (the "9% Notes").
The net proceeds from the 1994 Recapitalization were used to retire
indebtedness under the Company's previous term loan and revolving credit
facilities, and its senior and subordinated debt and preferred stocks (including
premiums, accrued interest and accrued preferred dividends). In addition, the
Company paid a $15.0 million consent fee to Sara Lee Corporation in
consideration for the early termination of Sara Lee's option to acquire the
remaining common stock of the Company. The 1994 Recapitalization and related
public debt and preferred stock redemptions were completed on March 4, 1994.
4. Businesses and Investments Acquired
Banana Boat Holding Corporation ("BBH") - On October 31, 1995, the Company and
- ---------------------------------------
BBH Acquisition, Inc., a Delaware corporation and wholly owned subsidiary of
Playtex, acquired all issued and outstanding common shares, not previously owned
by Playtex, of BBH, a Delaware corporation and manufacturer of Banana Boat sun
-----------
and skin care products (the "BBH Acquisition"). The BBH Acquisition was pursuant
to an agreement and plan of merger dated October 17, 1995.
Prior to the BBH Acquisition, Playtex had recognized 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 BBH Acquisition,
Playtex's equity ownership of BBH increased from 22% to 100% and the Company's
interest in the operating profits from the sale of Banana Boat products
-----------
increased to 100%. Concurrent with the BBH Acquisition, the distribution
agreement was terminated.
The net funds expended for the BBH Acquisition included cash 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 $4.3 million. The BBH
Acquisition was financed with approximately $34.3 million of existing cash
balances and advances under the Acquisition Credit Facility of $37.5 million.
The BBH Acquisition was accounted for as a purchase and the results of
operations of BBH have been included in the consolidated statement of operations
from the date of acquisition. Accordingly, the purchase price was allocated to
the assets acquired and the liabilities assumed based on the fair values at the
date of acquisition. The excess purchase price over the fair value of net assets
acquired was $44.1 million and is being amortized on a straight line basis over
40 years.
Woolite(R) Rug and Upholstery Cleaning Products ("Woolite") - Playtex entered
- -----------------------------------------------------------
into an Asset Purchase and Sale Agreement, dated as of December 22, 1994, with
Reckitt & Coleman, Inc. ("R&C"), a Delaware corporation, pursuant to which
Playtex acquired certain assets of the Woolite business of R&C (the "Acquired
-------
Assets") under an exclusive, royalty-free trademark license in perpetuity in the
United States and Canada. The purchase price for the Acquired Assets, exclusive
of $0.1 million for legal and other costs, was $21.7 million, which was paid in
cash with borrowings under the 1994 Revolving Credit Facility.
The Woolite acquisition was accounted for as a purchase and the results of
-------
operations of Woolite have been included in the consolidated statement of
-------
operations from the date of acquisition. Accordingly, the purchase price was
allocated to the assets acquired and the liabilities assumed based on the fair
values at the date of acquisition. The excess purchase price over the fair value
of net assets acquired was $17.3 million and is being amortized on a straight
line basis over 30 years.
The following consolidated unaudited pro forma results of operations
assumes the Woolite and BBH acquisitions occurred as of December 26, 1993. The
-------
pro forma financial information is not necessarily indicative of operating
results that would have occurred had the Woolite and BBH acquisitions been
-------
consummated as of December 26, 1993, nor is it indicative of future operating
results.
Twelve Months Ended
-------------------
- --------------------------------------------------------------------------------
December 30, December 31,
(In millions, except per share data) 1995 1994
- --------------------------------------------------------------------------------
Net sales $ 495.6 $ 519.5
Earnings before extraordinary loss
available to common stockholders $ 4.0 $ 30.0
Net (loss) earnings available to common stockholders $ (4.0) $ 30.0
Earnings (loss) per share after preferred
dividend requirements:
Before extraordinary loss $ 0.09 $ 1.03
Net (loss) earnings $ (0.09) $ 1.03
- --------------------------------------------------------------------------------
16
<PAGE>
5. Balance Sheet Components
The components of certain balance sheet accounts are as follows:
December 30, December 31,
(In thousands) 1995 1994
- ---------------------------------------------------------------------------
Receivables $ 60,061 $ 51,584
Less allowance for doubtful accounts (2,042) (2,346)
- ---------------------------------------------------------------------------
Net $ 58,019 $ 49,238
- ---------------------------------------------------------------------------
Inventories:
Raw materials $ 18,187 $ 12,602
Work in process 1,267 1,371
Finished goods 29,736 27,610
- ---------------------------------------------------------------------------
Total $ 49,190 $ 41,583
- ---------------------------------------------------------------------------
Net property, plant and equipment:
Land $ 1,190 $ 1,190
Buildings 24,055 17,352
Machinery and equipment 86,955 79,805
- ---------------------------------------------------------------------------
112,200 98,347
Less accumulated depreciation (59,738) (51,290)
- ---------------------------------------------------------------------------
Net $ 52,462 $ 47,057
- ---------------------------------------------------------------------------
Excess cost $446,482 $392,040
Less accumulated amortization (86,853) (76,764)
- ---------------------------------------------------------------------------
Net $359,629 $315,276
- ---------------------------------------------------------------------------
Patents, trademarks and other $ 49,769 $ 22,769
Less accumulated amortization (11,693) (11,117)
- ---------------------------------------------------------------------------
Net $ 38,076 $ 11,652
- ---------------------------------------------------------------------------
Deferred financing costs $ 19,463 $ 25,750
Less accumulated amortization (2,037) (2,358)
- ---------------------------------------------------------------------------
Net $ 17,426 $ 23,392
- ---------------------------------------------------------------------------
Accrued expenses:
Advertising and sales promotion $ 29,401 $ 20,354
Employee compensation and benefits 10,162 10,185
Interest 6,320 4,082
Insurance 4,858 4,426
Other 9,516 6,014
- ---------------------------------------------------------------------------
Total $ 60,257 $ 45,061
- ---------------------------------------------------------------------------
6. Due from Related Party
Playtex Investment Corp., a wholly owned subsidiary of Playtex, is the holder of
a 15% debenture in aggregate principal amount of $40 million (the "Apparel
Debenture") issued by Playtex Apparel Partners, L.P. (the "Apparel Partnership")
in connection with its 1988 acquisition of Playtex Apparel, Inc. On December 15,
1995 and 1994, the Apparel Partnership paid in cash the accrued interest for the
period from December 16, 1994 to December 15, 1995 and from December 16, 1993 to
December 15, 1994. Principal and any unpaid accrued interest are due in cash on
December 15, 2003. The obligations of the Apparel Partnership are nonrecourse to
the partners of the Apparel Partnership. The assets of the Apparel Partnership
are Sara Lee Corporation common stock with a market value at December 30, 1995
of approximately $7.9 million, cash of approximately $0.3 million and Playtex's
151_2% Subordinated Notes. See notes 8 and 16 for a discussion of the
relationship between the Apparel Partnership and Playtex. Playtex believes that
the Apparel Debenture represents the only material liability of the Apparel
Partnership.
7. Long-Term Debt
Long-term debt consists of the following:
December 30, December 31,
(In thousands) 1995 1994
- ---------------------------------------------------------------------------
1995 Credit Agreement:
Working Capital Facility $ 5,050 $ --
Term Loan Facility 387,500 --
Acquisition Credit Facility 37,500 --
1994 Credit Agreement:
Revolving Credit Facility -- 47,700
Term Loan Facility -- 468,000
9% Senior Subordinated
Notes due 2003 360,000 360,000
- ---------------------------------------------------------------------------
790,050 875,700
Less current maturities (20,000) (34,500)
- ---------------------------------------------------------------------------
Total long-term debt $770,050 $841,200
- ---------------------------------------------------------------------------
<PAGE>
On June 6, 1995, as part of the 1995 Transaction (as described in note 2),
Playtex entered into the 1995 Credit Agreement, which provided for borrowings of
$387.5 million under the 1995 Term Loan Facility, and up to $75.0 million and
$37.5 million under the 1995 Working Capital Facility and the 1995 Acquisition
Credit Facility, respectively. The 1995 Term Loan Facility provides for
semi-annual repayments of principal, including payments of $10.0 million due on
March 15, 1996 and September 15, 1996. Commitments under the 1995 Acquisition
Credit Facility are automatically and permanently reduced semi-annually at a
rate of $6.25 million beginning March 15, 2000. All borrowings under the 1995
Credit Agreement have a final maturity of June 30, 2002.
The rate of interest on borrowings under the 1995 Credit Agreement is, at
Playtex's option, a function of various alternative short term borrowing rates,
as defined in the 1995 Credit Agreement. Quarterly commitment fees of
three-eighths of 1% on the unutilized portion of the 1995 Credit Agreement and
an agency fee of $0.1 million per annum are also required. At December 30, 1995,
aggregate unused lines of credit (giving effect to outstanding letters of
credit) under the 1995 Credit Agreement amounted to $68.0 million.
The provisions of the 1995 Credit Agreement require Playtex to meet certain
financial covenants and ratios and also include conditions or restrictions on:
new indebtedness and liens; major acquisitions or mergers; capital expenditures
and disposition of assets; certain dividends and other distributions; and
prepayment and modification of all indebtedness or equity capitalization. The 9%
Notes also
17
<PAGE>
contain restrictions and requirements with regard to similar matters. Under the
terms of the 1995 Credit Agreement and the 9% Notes, payment of cash dividends
on the common stock of Playtex is restricted. As of December 30, 1995, certain
wholly-owned subsidiaries of the Company were guarantors of the 9% Notes.
On June 9, 1995, the Company entered into an interest rate protection
agreement such that, for a two year period commencing July 6, 1995, interest
expense with respect to $125.0 million of its variable rate outstanding
indebtedness is at fixed rates. The agreement can be extended, at the option of
the counterparty, for an additional one year period. The agreement provides for
quarterly payments by Playtex at a rate of 6.17% through October 6, 1995 and at
a rate of 5.96% until July 7, 1997 (or July 6, 1998 if the counterparty
exercises its option to extend the agreement) and receipt of payments from the
counterparty at a 90-day LIBOR rate.
On June 13, 1995, the Company terminated a prior interest rate protection
agreement which hedged interest expense on $90.0 million of indebtedness for a
three year period from April 1, 1994 at levels higher than the current
agreement. Effective July 25, 1995, the Company entered into another interest
rate protection agreement to fix interest expense with respect to an additional
$100.0 million of its outstanding indebtedness. This agreement provides for
quarterly payments by Playtex at a rate of 5.825% and receipt of quarterly
payments from the counterparty at a 90-day LIBOR rate until July 25, 1997 (or
July 25, 1998, if extended by the counterparty).
Net receipts or payments under the swap agreements are recognized as an
adjustment to interest expense.
Aggregate annual maturities under the 1995 Credit Agreement are (in
millions): $20.0 in fiscal 1996, $25.0 in fiscal 1997, $30.0 in fiscal 1998,
$50.0 in fiscal 1999, and $85.0 in fiscal 2000.
On February 2, 1994, pursuant to the 1994 Recapitalization, Playtex entered into
the 1994 Credit Agreement consisting of a 1994 Term Loan Facility and a 1994
Revolving Credit Facility which provided for borrowings of $500.0 million and of
up to $75.0 million, respectively. The rate of interest on borrowings under the
1994 Credit Agreement was, at Playtex's option, a function of various
alternative short-term borrowing rates, as defined in the 1994 Credit Agreement.
In connection with the 1995 Transaction, all amounts outstanding under the 1994
Credit Agreement were refinanced on June 6, 1995.
At December 30, 1995, December 31, 1994 and December 25, 1993, the weighted
average interest rates for the credit agreement borrowings were 7.57%, 9.19% and
5.77% respectively. In addition, the weighted average interest rates on such
borrowings were 8.11%, 7.30% and 5.89% for the twelve month period ended
December 30, 1995, December 31, 1994 and December 25, 1993, respectively.
On February 2, 1994, Playtex issued $360.0 million aggregate principal
amount of 9% Notes. Interest on the 9% Notes is payable in cash semi-annually on
each June 15 and December 15. Principal of the Notes is due on December 15,
2003.
8. Due to Related Party
Due to related party consists of 15 1/2% Subordinated Notes held by the Apparel
Partnership. Interest on the 15 1/2% Subordinated Notes is payable annually in
cash on each December 15. However, with respect to any such interest amount
payable prior to maturity, Playtex may elect and elected for periods through
December 15, 1993 to make such payments in additional 15 1/2% Subordinated
Notes. On December 15, 1995 and 1994, Playtex paid in cash the accrued interest
for the periods from December 16, 1994 to December 15, 1995 and from December
16, 1993 to December 15, 1994. Principal and any unpaid accrued interest on the
15 1/2% Subordinated Notes are payable in cash on December 15, 2003.
9. Income Taxes
Effective December 27, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), which
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 bases 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 that are
more likely than not to be realized. The adoption of SFAS 109 resulted in a
credit to earnings of approximately $2.0 million, reported as the cumulative
effect of an accounting change in the first quarter of fiscal 1993, resulting
principally from adjusting the tax effect of prior business combinations.
<PAGE>
Earnings (loss) before income taxes, cumulative effect of accounting
changes and extraordinary loss are as follows:
Twelve Months Ended
- ---------------------------------------------------------------
December 30, December 31, December 25,
(In thousands) 1995 1994 1993
- ---------------------------------------------------------------
U.S. $ 8,579 $51,049 $(127,517)
Foreign 2,346 2,492 4,721
- ---------------------------------------------------------------
Total $10,925 $53,541 $(122,796)
- ---------------------------------------------------------------
18
<PAGE>
Playtex's provisions for income taxes for the twelve months ended
December 30, 1995, December 31, 1994, and December 25, 1993 are as follows:
Twelve Months Ended
- ----------------------------------------------------------------------
December 30, December 31, December 25,
(In thousands) 1995 1994 1993
- ----------------------------------------------------------------------
Current:
Federal $ 9,174 $ 3,750 $ 3,356
State and local (2,123) (2,075) 1,314
Foreign 1,233 2,470 2,656
- ----------------------------------------------------------------------
8,284 4,145 7,326
- ----------------------------------------------------------------------
Deferred:
Federal (82) 16,593 (3,920)
State and local (26) 4,439 (1,249)
Foreign (25) (1,183) (108)
- ----------------------------------------------------------------------
(133) 19,849 (5,277)
- ----------------------------------------------------------------------
Total $ 8,151 $23,994 $ 2,049
- ----------------------------------------------------------------------
The Internal Revenue Service ("IRS") has concluded its examinations of tax
returns filed by Playtex for tax years 1986 through 1991. As a result of certain
settlements reached with the IRS during the first and fourth quarters of 1993,
Playtex recorded a $4.3 million tax benefit in the fiscal 1993 provision for
federal and state income taxes. During 1994 and 1995, several state
jurisdictions concluded their examinations of tax returns filed by Playtex or
its subsidiaries for various years 1987 through 1992 or the statute of
limitations related to other specific situations lapsed. As a result of these
developments, Playtex recorded a $2.4 million and a $1.5 million tax benefit in
the provision for income taxes for the years ended December 30, 1995 and
December 31, 1994, respectively.
Taxable and deductible temporary differences and tax credit carryforwards
which give rise to Playtex's deferred tax assets and liabilities at December 30,
1995 and at December 31, 1994 are as follows:
December 30, December 31,
(In thousands) 1995 1994
- ----------------------------------------------------------------------------
Deferred Tax Assets:
- ----------------------------------------------------------------------------
Allowances and reserves not
currently deductible $ 17,604 $ 13,420
Net operating loss carryforwards 6,745 --
Postretirement benefits reserve 2,009 1,893
Capitalized book expenses for tax purposes 581 744
State tax credits 136 136
- ----------------------------------------------------------------------------
Total $ 27,075 $ 16,193
- ----------------------------------------------------------------------------
Deferred Tax Liabilities:
- ----------------------------------------------------------------------------
Deferred gain on sale of business $ 14,650 $ 15,801
Property, plant and equipment 8,052 8,382
Trademarks 4,222 4,473
Undistributed earnings of foreign subsidiary 2,836 2,735
Other 567 607
- ----------------------------------------------------------------------------
Total $ 30,327 $ 31,998
- ----------------------------------------------------------------------------
Undistributed earnings of the Company's Canadian subsidiary for which U.S.
income taxes have not been provided were approximately $2.7 million at December
30, 1995. Such undistributed earnings are expected to be permanently reinvested
in the Canadian subsidiary.
At the time of its acquisition, BBH had net operating loss carryforwards of
$18.4 million that expire in years 2007 through 2010. These net operating loss
carryforwards can be utilized by Playtex, with certain limitations, on its
federal, state and local tax returns in tax periods subsequent to October 31,
1995. Playtex expects to fully utilize these net operating loss carryforwards
prior to their expiration.
<PAGE>
The Company's tax provision differed from the amount computed using the
federal statutory rate of 35% as follows:
Twelve Months Ended
- -------------------------------------------------------------------------------
December 30, December 31, December 25,
(In thousands) 1995 1994 1993
-------------------------------------------------------------------------------
Expected federal income tax
(benefit) at statutory rate $ 3,824 $ 18,739 $(42,979)
Amortization and write-off of intangibles 5,647 3,436 47,013
Settlement of tax examinations (2,385) (1,498) (4,345)
State and local income taxes 786 2,993 390
Foreign tax rate differential 331 362 721
U.S. tax on unremitted foreign earnings -- -- 935
Effect on deferred taxes due
to change in U.S. tax rates -- -- 460
Other, net (52) (38) (146)
- -------------------------------------------------------------------------------
Total $ 8,151 $ 23,994 $ 2,049
- -------------------------------------------------------------------------------
10. Stock Options
During 1994, the Company established a long-term incentive plan (the "1994 Stock
Option Plan") under which awards of incentive stock options, nonqualified stock
options and stock appreciation rights ("SARs") may be granted to directors and
key employees of the Company. Stock options granted under the 1994 Stock Option
Plan may have a term not in excess of ten years. The exercise price for stock
options may not be less than the fair market value of the common stock on the
date of grant. Except with respect to formula grants to certain non-employee
directors, options vest over a period determined by the Compensation and Stock
Option Committee.
SARs may be granted in tandem with a stock option grant or at any time
following the stock option grant. Upon exercise of a SAR, the grantee will
receive cash equal to the excess of the fair market value of a share of common
stock over the exercise price. No SARs have been granted.
On June 6, 1995, at the Company's Annual Meeting, the stockholders approved
an amendment to the Playtex 1994 Stock Option Plan increasing the number of
shares of common stock available for issuance upon exercise of options and SARs
from 1,047,785 to 3,047,785 and increasing the number of shares available for
issuance upon exercise of options and SAR grants to any single executive officer
from 300,000 to 1,000,000.
19
<PAGE>
A summary of option transactions for the years ended December 30, 1995 and
December 31, 1994 follows:
December 30, December 31,
1995 1994
- -------------------------------------------------------------------------
Options outstanding, beginning of fiscal year 297,500 --
Average exercise price $ 12.21 N/A
Options granted 2,080,700 321,500
Average exercise price $ 8.82 $ 12.27
Options exercised -- --
Options canceled/forfeited (137,400) (24,000)
Average exercise price $ 10.43 $ 13.00
Options outstanding, end of fiscal year 2,240,800 297,500
Average exercise price $ 9.17 $ 12.21
Exercisable at end of fiscal year 76,333 --
Available for grant at end of fiscal year 806,985 750,285
- -------------------------------------------------------------------------
11. Write-off of SmileTote and Beauty Care Intangible Assets
---------
It has been the policy of Playtex to evaluate, on a systematic basis, the value
of its businesses for the purpose of determining the future recoverability of
any portion of the existing unamortized value of the intangible assets in its
acquired businesses. Based upon such evaluation, Playtex determines whether or
not the applicable intangible asset has been impaired. If such impairment is
deemed to be permanent, generally accepted accounting principles require the
computed value of the impaired intangible assets to be written off against
earnings in the current period.
During the fourth quarter of fiscal 1995 and in connection with certain
strategic decisions regarding the SmileTote product line, the Company prepared
financial projections to evaluate the SmileTote business in terms of projected
---------
net earnings and operating cash flows. Based upon the projections of
undiscounted operating earnings before amortization of intangible assets and
after considering interest on indebtedness, management concluded that the
unamortized value of the intangible assets associated with SmileTote had been
---------
permanently impaired. Consequently, the Company wrote off in the fourth quarter
of fiscal 1995 the remaining $6.4 million of intangible assets associated with
SmileTote.
During the third quarter of fiscal 1993 and in connection with certain
strategic decisions to reposition the product into a different price/value
segment of the market, the Company prepared financial projections to evaluate
the Hair Care business in terms of projected net earnings and operating cash
flows. Based upon the projections of undiscounted operating earnings before
amortization of intangible assets and after considering interest on
indebtedness, management concluded that the unamortized value of the excess cost
associated with Playtex Beauty Care, Inc. ("Beauty Care") had been permanently
impaired. Consequently, the Company wrote off in the third quarter of fiscal
1993 the remaining book value of excess cost in Beauty Care in the amount of
$121.6 million.
12. Cumulative Effect of Accounting Changes
In fiscal 1993, Playtex reported a net credit to earnings of approximately $0.9
million resulting from the adoption of SFAS No. 106 "Employers' Accounting for
Postretirement Benefits Other than Pensions" which resulted in an expense of
$1.1 million (net of $0.7 million tax benefit) (see note 15) and SFAS No. 109
"Accounting for Income Taxes" which resulted in a credit to earnings of $2.0
million (see note 9) as of the beginning of the year commencing December 27,
1992.
13. Extraordinary Loss
In June 1995, in connection with the 1995 Transaction, Playtex recorded an
extraordinary loss of $7.9 million (net of income tax benefit of $5.2 million)
for costs and expenses related to the write-off of the unamortized portion of
deferred financing costs associated with the 1994 Credit Agreement. See notes 2
and 7.
In December 1993, in connection with the Recapitalization completed in the
first quarter of 1994, Playtex recorded an extraordinary loss of $39.4 million
(net of income tax benefit of $25.4 million) for costs and expenses related to
the redemption of its public debt, the repayment of all amounts under its
previous credit agreement and the redemption of its redeemable preferred stocks.
See notes 3 and 7. Such costs included premiums paid on the redemption of the
public debt and the redeemable preferred stocks ($31.3 million), the write-off
of deferred financing costs and unamortized debt discount related to the retired
debt ($20.2 million), interest on redeemed debt from February 2, 1994 (the
issuance date of the 9% Notes) to the March 4, 1994 redemption date ($10.8
million), together with incurred legal and other expenses ($2.5 million).
14. Leases
Future minimum payments under non-cancelable operating leases for years after
December 30, 1995 are as follows (in thousands): $2,880 in 1996, $2,608 in 1997,
$1,678 in 1998, $1,368 in 1999, $1,299 in 2000 and $5,151 in later years.
Rent expense, for operating leases amounted to (in thousands): $5,092,
$4,240, and $3,539 for the twelve-month periods ended December 30, 1995,
December 31, 1994, and December 25, 1993, respectively.
20
<PAGE>
15. Pension and Other Postretirement Benefits
Pension Plans - Substantially all Playtex U.S. hourly and approximately 96% of
all Canadian employees participate in pension plans. At December 30, 1995,
approximately 1,100 employees were covered by these plans, of which
approximately 170 retirees or beneficiaries were receiving benefits.
Changes in pension benefits, which are allocable to previous service of
employees, and gains and losses that occur because actual experience differs
from assumptions will be amortized over the estimated average future service
period of employees. Actuarial assumptions for the plans include: (a) 8% for the
expected long-term rate of return on plans assets, (b) 7.5% for the discount
rate for calculating the projected benefit obligation and (c) 3.25% for the rate
of average future increases in compensation levels.
Net pension expense (income) for the twelve months ended December 30, 1995,
December 31, 1994, and December 25, 1993 includes the following components:
Twelve Months Ended
------------------------------------------------------------------------------
December 30, December 31, December 25,
(In thousands) 1995 1994 1993
------------------------------------------------------------------------------
Service cost - benefits
earned during the period $ 616 $ 622 $ 581
Interest cost on projected
benefit obligation 1,559 1,414 1,285
Actual return on plan assets (6,000) 872 (4,565)
Amortization of prior service cost 73 59 45
Amortization of unrecognized
net (gain) loss (2) (106) 7
Amortization of transition
gain over 10 years (193) (192) (194)
Excess (shortfall) of actual return
on plan assets over estimated 4,190 (2,797) 2,952
- -------------------------------------------------------------------------------
Net pension expense (income) $ 243 $ (128) $ 111
- -------------------------------------------------------------------------------
A reconciliation of the projected benefit obligation for the pension plans
to the prepaid pension expense recorded at December 30, 1995 and December 31,
1994 is as follows:
December 30, December 31,
(In thousands) 1995 1994
- ------------------------------------------------------------------------
Projected benefit obligation for
service rendered to date $(22,740) $(18,910)
Plan assets at fair value, primarily
listed stocks, money market funds
and guaranteed investment contracts 28,313 22,958
- ------------------------------------------------------------------------
Plan assets in excess of projected
benefit obligation 5,573 4,048
Unrecognized net (gain) loss from past
experience different from that assumed
and effects of changes in assumptions (3,019) (1,159)
Prior service cost not yet recognized
in net periodic pension cost 438 511
Unrecognized transition gain (589) (769)
- ------------------------------------------------------------------------
Prepaid pension expense $ 2,403 $ 2,631
- ------------------------------------------------------------------------
The portion of the projected benefit obligation at December 30, 1995 and
December 31, 1994 representing the accumulated benefit obligation was $20.6
million, of which $19.8 million was vested, and $17.4 million, of which $16.6
million was vested, respectively.
Postretirement Benefits Other than Pensions - The Company adopted SFAS 106
effective December 25, 1992. This statement focuses primarily on postretirement
health care benefits. SFAS No. 106 significantly changed the prevalent practice
of accounting on a "pay-as-you-go" basis by requiring the accrual of the
expected costs of providing the benefits to an employee and the employee's
beneficiaries and covered dependents during the years that the employee renders
the services. Playtex elected to immediately recognize the transition obligation
as the cumulative effect of an accounting change which resulted in an after- tax
charge against earnings of approximately $1.1 million in the first quarter of
fiscal 1993.
Playtex provides Company-sponsored postretirement health care and life
insurance benefits to certain U.S. retirees. These plans require employees to
share in the costs. Approximately 90% of all U.S. personnel may become eligible
for Company-sponsored postretirement health care and life insurance, if they
were to retire from the Company. The cost of providing Company-sponsored
postretirement health care and life insurance benefits for U.S. retirees was
approximately $0.8 million, $0.8 million, and $0.4 million for the twelve months
ended December 30, 1995, December 31, 1994, and December 25, 1993, respectively.
The Company accrues the estimated cost of these benefits during the
participants' active service periods up to the dates on which they become
eligible for full benefits.
Playtex also provides two non-contributory defined contribution plans and a
contributory 401(k) plan covering various employee groups. The amounts charged
to earnings for Playtex's defined contribution plans totaled $4.7 million, $4.2
million, and $4.1 million for the twelve months ended December 30, 1995,
December 31, 1994, and December 25, 1993, respectively.
21
<PAGE>
16. Related Party Transactions
Joel E. Smilow, a director and former senior executive officer of Playtex, and
Hercules P. Sotos, a former director and senior executive officer of Playtex,
have significant equity positions in Playtex. In addition, Messrs. Smilow and
Sotos are general partners of the Apparel Partnership, holding beneficial
interests therein of 58.5% and 13.5%, respectively. Under a consulting
agreement, which commenced in the third quarter of 1995, the Company has
retained Mr. Smilow as a consultant for a five-year period at an annual fee
of $250,000 plus expenses and certain benefits. The consulting agreement does
not require Mr. Smilow to devote any minimum amount of time to the performance
of consulting services.
On October 31, 1995, Playtex and a wholly owned subsidiary acquired all of
the issued and outstanding common shares of BBH not previously owned by the
Company. Prior to the BBH Acquisition, BBH was controlled by Thomas Lee Equity
Partners, L.P. and certain employees and affiliates of the Thomas H. Lee
Company. Thomas H. Lee, President of the Thomas H. Lee Company, is a director
and significant stockholder of Playtex. Starting in December 1992, Playtex had a
distribution agreement with Sun Pharmaceuticals Corp. ("Sun"), a wholly-owned
subsidiary of BBH, pursuant to which Playtex was the exclusive distributor of
Banana Boat products in all of the areas Sun had repurchased distribution rights
from its then current distributors. Concurrent with the acquisition, the
distribution agreement between Sun and Playtex was canceled. For the ten month
period ended October 31, 1995 and for the twelve months ended December 31, 1994
and December 25, 1993, Playtex purchased $30.1 million, $30.5 million and $6.4
million, respectively, of Banana Boat products from Sun and at December 31, 1994
Playtex had accounts payable to Sun of $3.9 million.
Playtex believes that the terms of all the arrangements with the Apparel
Partnership and BBH were fair to Playtex and comparable to those which could be
obtained from unrelated third parties.
17. Business and Credit Concentrations
Most of Playtex's customers are disbursed throughout the United States and
Canada. No single customer accounted for more than 10% of Playtex's net sales in
1995, 1994, or 1993 with the exception of Wal-Mart Stores, Inc., including Sam's
Club, ("Wal-Mart") (approximately 17% in 1995, 15% in 1994, and 13% in 1993 ).
At December 30, 1995 and December 31, 1994 , no account receivable from any
customer was significant, except for Wal-Mart (approximately $11.1 million in
1995 and $5.2 million in 1994). Aggregate receivables from highly leveraged
customers are not considered significant and Playtex estimates, based upon past
experience, that it has sufficient reserves to cover any losses arising from any
such accounts.
18. Disclosure About the Fair Value of Financial Instruments
Cash, Receivables, Accounts Payable, Income Taxes and Accrued Expenses - The
carrying amounts approximate fair value because of the short-term maturity of
these instruments.
1995 and 1994 Credit Agreements - The carrying amounts approximate fair value
because the rate of interest on borrowings under the 1995 and 1994 Credit
Agreements is or was, at Playtex's option, a function of various alternative
short-term borrowing rates, as defined in the 1995 and 1994 Credit Agreements,
respectively.
Long-term Debt and Other Financial Instruments - Fair value of the following
financial instruments was estimated at December 30, 1995 and December 31, 1994:
<TABLE><CAPTION>
December 30, 1995 December 31, 1994
- ----------------------------------------------------------------------------------------
Carrying Estimated Carrying Estimated
(In thousands) Amount Fair Value Amount Fair Value
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9% Senior Subordinated Notes(a) $ 360,000 $ 317,700 $ 360,000 $ 315,900
15% Debentures due from Playtex
Apparel Partners, L.P. (b) 80,017 80,017 80,517 80,517
151/2% Subordinated Notes
due to Playtex Apparel
Partners, L.P.(b) 78,386 78,386 78,893 78,893
Other noncurrent assets (c) 4,403 4,270 7,600 7,370
Other noncurrent liabilities (c) 16,784 15,270 23,120 21,040
- ----------------------------------------------------------------------------------------
</TABLE>
(a) At December 30, 1995 and December 31, 1994, the estimates were based on
the average range of bid/ask quotes provided by independent securities
dealers.
(b) The estimated fair value approximates the carrying amount at December 30,
1995 and December 31, 1994 based on the amount of future cash flows
associated with these instruments, discounted using on appropriate interest
rate.
(c) The fair values are based on a combination of actual cost associated with
recent purchases or the amount of future cash flows discounted using
Playtex's borrowing rate for similar instruments.
22
<PAGE>
19. Information by Major Geographic Segment
Net sales by geographic area represent sales to unaffiliated customers only.
Intergeographic sales and transfers between geographic areas are nominal and
have not been disclosed separately.
Operating earnings (loss) is defined as total revenue less operating
expenses. In computing operating earnings, interest and income taxes have not
been deducted.
Identifiable assets by geographic area represent those assets that are
used in Playtex's operations in each area.
<TABLE><CAPTION>
Twelve Months Ended
- ------------------------------------------------------------------------------------------------
December 30, December 31, December 25,
(In thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------------
Net sales:
<S> <C> <C> <C>
United States $ 445,880 $ 436,091 $ 369,199
Canada 37,701 37,184 40,659
- ------------------------------------------------------------------------------------------------
$ 483,581 $ 473,275 $ 409,858
- ------------------------------------------------------------------------------------------------
Operating earnings (loss):
United States $ 80,085 $ 127,136 $ (11,032)
Canada 2,201 2,558 4,185
- ------------------------------------------------------------------------------------------------
$ 82,286 $ 129,694 $ (6,847)
- ------------------------------------------------------------------------------------------------
Identifiable assets (at year end):
United States $ 671,722 $ 589,649 $ 567,560
Canada 11,139 9,751 20,897
- ------------------------------------------------------------------------------------------------
$ 682,861 $ 599,400 $ 588,457
- ------------------------------------------------------------------------------------------------
</TABLE>
20. Quarterly Data (Unaudited)
The following is a summary of the quarterly results of operations and market
price data for the Company for the years ended December 30, 1995 and
December 31, 1994:
<TABLE><CAPTION>
First Second Third Fourth
(In thousands, except per share data) Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------------------------------------------------------------
Fiscal 1995
<S> <C> <C> <C> <C>
Net sales $132,767 $135,627 $111,744 $103,443
Operating earnings (loss) 27,259 30,199 25,433 (605)
Earnings (loss) before
extraordinary items 3,753 6,521 5,488 (12,988)
Net earnings (loss) 3,753 (1,414) 5,488 (12,988)
Earnings (loss) per share(a):
Before extraordinary item $ .12 $ .18 $ .11 $ (.26)
Net earnings (loss) $ .12 $ (.04) $ .11 $ (.26)
Market price - high $ 8 5/8 $ 10 1/4 $ 12 1/2 $ 9
- low $ 6 3/4 $ 7 1/2 $ 8 3/8 $ 6 1/2
Fiscal 1994
Net sales $123,057 $136,803 $122,329 $ 91,086
Operating earnings 30,025 38,338 37,977 23,354
Net earnings 5,523 10,596 10,820 2,608
Earnings per share(a) $ .18 $ .34 $ .35 $ .08
Market price - high $ 13 $ 11 1/8 $ 10 $ 9 7/8
- low $ 9 5/8 $ 7 7/8 $ 7 1/2 $ 6 3/8
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Per share data is computed independently for each of the periods presented;
therefore, the sum of the earnings per share amounts for the quarters may
not equal the total for the year.
23
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Playtex Products, Inc.
We have audited the accompanying consolidated balance sheets of Playtex
Products, Inc. and subsidiaries as of December 30, 1995 and December 31, 1994,
and the related consolidated statements of operations, redeemable preferred
stocks, common stock and other stockholders' equity and cash flows for the
twelve months ended December 30, 1995, December 31, 1994, and December 25, 1993.
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
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Playtex
Products, Inc. and subsidiaries as of December 30, 1995 and December 31, 1994
and the results of their operations and their cash flows for the twelve months
ended December 30, 1995, December 31, 1994, and December 25, 1993, in conformity
with generally accepted accounting principles.
The Company changed in 1993 its method of accounting for income taxes and
postretirement benefits other than pensions.
/s/ KPMG Peat Marwick LLP
February 6, 1996
Stamford, Connecticut
Report of Management
The management of Playtex Products, Inc. is responsible for the financial and
operating information contained in the Annual Report, including the financial
statements covered by the independent auditors' report. These statements were
prepared in conformity with generally accepted accounting principles and
include, where necessary, informed estimates and judgments.
The Company maintains systems of accounting and internal control designed
to provide reasonable assurance that assets are safeguarded against loss, and
that transactions are executed and recorded properly so as to ensure that the
financial records are reliable for preparing financial statements.
Elements of these control systems are the establishment and communication
of accounting and administrative policies and procedures, the selection and
training of qualified personnel, and continuous programs of internal review.
The Company's financial statements are reviewed by its Audit Committee,
which is composed entirely of non-employee Directors. This Committee meets with
the independent auditors and management to review the scope and results of the
annual audit, interim reviews, internal controls, and financial reporting
matters. The independent auditors have direct access to the Audit Committee.
/s/ Michael R. Gallagher /s/ Michael F. Goss
Michael R. Gallagher Michael F. Goss
Chief Executive Officer Executive Vice President,
and Director Chief Financial Officer and Director
February 6, 1996
Westport, Connecticut
24
<PAGE>
Corporate Information
Shares of Playtex's Common Stock are traded in the New York Stock Exchange under
the symbol PYX. Playtex has not paid a cash dividend since its inception, and
its present policy is to retain earnings for use in
its business. Under its debt agreements, Playtex is restricted from paying
dividends unless it meets certain specified financial criteria immediately
following such payment.
Stock Transfer Agent and Registrar
Chemical Mellon Shareholder Services, L.L.C.
Ridgefield Park, New Jersey 07660
10-K Report
A copy of Form 10-K Annual Report filed with the Securities and Exchange
Commission by Playtex Products, Inc. for the year ended December 30, 1995 is
available upon request from the Secretary of the Corporation at the Company's
corporate offices. Requests may be faxed to (203)341-4260.
Board of Directors
Robert B. Haas
Chairman and Director,
Chairman and Chief Executive Officer
of Haas Wheat & Partners Incorporated
Michael R. Gallagher
Chief Executive Officer and Director
Michael F. Goss
Executive Vice President, Chief Financial Officer and Director
Nancy S. Amer
Managing Director of Harvard Private Capital Group, Inc.
Thomas Herskovits
Former Chief Executive Officer and President of Specialty Foods Corporation
Thomas H. Lee
President of the Thomas H. Lee Company
Joel E. Smilow
Former Chairman and Chief Executive Officer
Douglas D. Wheat
President of Haas Wheat & Partners Incorporated
Kenneth F. Yontz
Chairman of the Board, President and Chief Executive Officer
of Sybron International Corporation
Auditors
KPMG Peat Marwick LLP
Stamford, Connecticut
Corporate Offices
300 Nyala Farms Road
Westport, CT 06880
Principal Officers
Michael R. Gallagher
Chief Executive Officer and Director
Michael F. Goss
Executive Vice President, Chief Financial Officer and Director
Irwin S. Butensky
Senior Vice President, Research & Development
James S. Cook
Senior Vice President, Operations
Glenn A. Forbes
Vice President, Finance
John D. Leahy
Vice President, Sales
Brenda O. Liistro
Vice President and Business Manager - Infant Care,
Tek, Licensing and New Products
Max R. Recone
Vice President and Business Manager-Sun Care,
Hair Care and Household Products
Frank M. Sanchez
Vice President, Human Resources
Paul E. Yestrumskas
Vice President, General Counsel and Secretary
In Recognition of Service
After 25 years of dedicated service, Joel E. Smilow, former Chairman and Chief
Executive Officer, and Hercules P. Sotos, former Vice Chairman, retired during
1995. The management and employees of Playtex want to thank these two
individuals for their tireless efforts to grow and develop the Company and to
wish them well in their future endeavors.
<PAGE>
[PLAYTEX LOGO]
PLAYTEX PRODUCTS, INC.
300 Nyala Farms Road
Westport, CT, 06880
EXHIBIT 13(b)
PLAYTEX MANUFACTURING, INC.
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
BALANCE SHEET
DECEMBER 30, 1995
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<PAGE>
PLAYTEX MANUFACTURING, INC.
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
INDEX TO FINANCIAL STATEMENT
PAGE
Report of KPMG Peat Marwick LLP 3
Balance Sheet as of December 30, 1995 4
Notes to Balance Sheet 5
2
<PAGE>
Independent Auditors' Report
The Board of Directors
Playtex Manufacturing, Inc.
We have audited the accompanying balance sheet of Playtex Manufacturing, Inc.
(wholly owned by Playtex Products, Inc.) as of December 30, 1995 (date of
inception). This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Playtex Manufacturing, Inc. as
of December 30, 1995, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
March 15, 1996
Stamford, Connecticut
3
<PAGE>
PLAYTEX MANUFACTURING, INC.
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
BALANCE SHEET
(IN THOUSANDS)
December 30,
1995
----
ASSETS
Property, plant and equipment, net $46,627
-------
Total Assets $46,627
=======
LIABILITIES AND STOCKHOLDER'S EQUITY
Deferred income taxes $ 7,922
-------
Total Liabilities 7,922
-------
Stockholder's equity:
Common stock, $.01 par value; 100 shares authorized,
100 shares issued and outstanding --
Additional paid-in capital 38,705
-------
Total Stockholder's Equity 38,705
-------
Total Liabilities and Stockholder's Equity $46,627
=======
See notes to balance sheet
4
<PAGE>
PLAYTEX MANUFACTURING, INC.
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
NOTES TO BALANCE SHEET
DECEMBER 30, 1995
1. THE COMPANY
Playtex Manufacturing, Inc. ("PMI" or the "Company") is a wholly owned
subsidiary of Playtex Products, Inc. ("Playtex"). PMI was formed on May 23,
1995 to manufacture all of Playtex's inventory requirements. In addition,
PMI will also provide Playtex with distribution and research and
development ("R & D") services.
On December 30, 1995, Playtex transferred, at historical cost, its
manufacturing, distribution and R & D facilities, and machinery and equipment
to PMI as a contribution to PMI's capital. In addition, Playtex transferred
its personnel related to purchasing, manufacturing, distribution, and R & D
to PMI effective December 31, 1995. PMI will bear all direct and indirect
costs associated with all manufacturing, distribution and R & D activities
starting the first day of fiscal 1996. PMI and Playtex have executed
intercompany agreements for the sale of inventory and provision of R & D
services by PMI to Playtex. Prior to December 30, 1995, there was no
predecessor business of the Company as there was no comparable Manufacturing
Agreement and R & D Agreement in effect.
See Note 5 for additional information.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 40 years. Repairs and maintenance costs are
expensed; renewals and betterments are capitalized.
5
<PAGE>
PLAYTEX MANUFACTURING, INC.
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
NOTES TO BALANCE SHEET
DECEMBER 30, 1995
3. BALANCE SHEET COMPONENTS
The components of net property, plant and equipment are as follows (in
thousands):
December 30,
1995
----
Net property, plant and equipment:
Land $ 1,190
Buildings 22,468
Machinery and equipment 70,487
------
94,145
Less accumulated depreciation (47,518)
-------
Net $46,627
=======
4. 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 bases 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.
The Company's deferred tax liability at December 30, 1995 is due to the
excess of the net book value of property, plant and equipment over their
underlying tax basis.
6
<PAGE>
PLAYTEX MANUFACTURING, INC.
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
NOTES TO BALANCE SHEET
DECEMBER 30, 1995
5. RELATED PARTY TRANSACTIONS
PMI and Playtex have entered into a 3-year and renewable manufacturing
agreement whereby PMI will purchase, manufacture and assemble all of PPI's
inventory requirements effective the beginning of Playtex's 1996 fiscal year
(the "Manufacturing Agreement"). PMI will also receive and reprocess for
resale all inventory returns from sales made by Playtex. PMI will sell the
inventory to Playtex on a cost plus basis.
Playtex has engaged PMI to provide R & D technical services effective the
beginning of Playtex's 1996 fiscal year (the "R & D Agreement"). The R & D
Agreement between Playtex and PMI will remain in force until terminated by
either party. PMI will be reimbursed by Playtex for its R & D costs plus
receive a fee equal to 5 percent of its R & D costs.
PMI and another wholly owned subsidiary of Playtex, Playtex Sales & Services,
Inc. ("PSSI") have entered into an administrative services agreement
effective the beginning of PSSI's 1996 fiscal year whereby PSSI will provide
PMI with various corporate administrative services (the "Admin Agreement").
Under the Admin Agreement, PSSI will receive a fixed monthly fee, $15,830 per
month during 1996, which is determined annually by PSSI. Either party may
terminate the agreement at any time by written notice.
Management believes that the terms of the Manufacturing Agreement, R & D
Agreement, and the Admin Agreement are fair to PMI and comparable to those
which could be obtained from unrelated third parties.
6. DEBT GUARANTEES
The Company is a guarantor of Playtex's 1995 Credit Agreement, which provided
for borrowings of $387.5 million under the 1995 Term Loan Facility, and up to
$75.0 million and $37.5 million under the 1995 Working Capital Facility and
the 1995 Acquisition Credit Facility, respectively. The Company is also a
guarantor of Playtex's $360 million 9% Senior Subordinated Notes due 2003.
The Company may be released from these guarantees provided Playtex meets
certain conditions.
7. LEASES
Future minimum payments under non-cancelable operating leases assigned to the
Company from Playtex for years after December 30, 1995 are as follows (in
thousands): $734 in 1996, $637 in 1997, $150 in 1998 and $75 in 1999.
7
EXHIBIT 13(c)
PLAYTEX SALES & SERVICES, INC.
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
BALANCE SHEET
DECEMBER 30, 1995
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<PAGE>
PLAYTEX SALES & SERVICES, INC.
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
INDEX TO FINANCIAL STATEMENT
PAGE
Report of KPMG Peat Marwick LLP 3
Balance Sheet as of December 30, 1995 4
Notes to Balance Sheet 5
2
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors
Playtex Sales & Services, Inc.
We have audited the accompanying balance sheet of Playtex Sales & Services, Inc.
(wholly owned by Playtex Products, Inc.) as of December 30, 1995 (date of
inception). This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Playtex Sales & Services, Inc.
as of December 30, 1995, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
March 15, 1996
Stamford, Connecticut
3
<PAGE>
PLAYTEX SALES & SERVICES, INC.
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
BALANCE SHEET
(IN THOUSANDS)
December 30,
1995
----
ASSETS
Property, plant and equipment, net $4,130
------
Total Assets $4,130
======
LIABILITIES AND STOCKHOLDER'S EQUITY
Deferred income taxes $ 132
------
132
------
Stockholder's equity:
Common stock, $.01 par value; 100 shares authorized,
100 shares issued and outstanding --
Additional paid-in capital 3,998
------
Total Stockholder's Equity 3,998
------
Total Liabilities and Stockholder's Equity $4,130
======
See notes to balance sheet
4
<PAGE>
PLAYTEX SALES & SERVICES, INC.
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
NOTES TO BALANCE SHEET
DECEMBER 30, 1995
1. THE COMPANY
Playtex Sales & Services, Inc. ("PSSI" or the "Company") is a wholly owned
subsidiary of Playtex Products, Inc. ("Playtex"). PSSI was formed on May 23,
1995 to provide sales solicitation and corporate administration services to
Playtex and other subsidiaries of Playtex.
On December 30, 1995, Playtex transferred, at historical cost, its sales and
corporate administration office facilities, furniture, fixtures, equipment,
and vehicles to PSSI as a contribution to PSSI's capital. In addition,
Playtex and another wholly owned subsidiary of Playtex, Playtex Beauty Care,
Inc. ("Beauty Care"), transferred sales force and certain corporate
administration personnel to PSSI effective the beginning of its 1996 fiscal
year. PSSI will bear all costs related to sales solicitation and corporate
administration effective on the first day of fiscal 1996. Prior to December
30, 1995, there was no predecessor business of the Company as there was no
comparable Sales Agreement or Admin Agreement in effect.
See Note 5 for additional information.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 costs are
expensed; renewals and betterments are capitalized.
3. BALANCE SHEET COMPONENTS
The components of net property, plant and equipment are as follows (in
thousands):
December 30,
1995
----
Net property, plant and equipment:
Machinery, equipment, furniture and fixtures $9,320
Less accumulated depreciation (5,190)
------
Net $4,130
======
5
<PAGE>
PLAYTEX SALES & SERVICES, INC.
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
NOTES TO BALANCE SHEET
DECEMBER 30, 1995
4. 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 bases 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.
The Company's deferred tax liability at December 30, 1995 is due to the
excess of the net book value of its office furniture, fixtures and equipment
and vehicles over their underlying tax basis.
5. RELATED PARTY TRANSACTIONS
PSSI and Playtex have entered into a 5-year nonexclusive Sales Representation
Agreement (the "Sales Agreement") whereby PSSI will solicit sales on behalf
of Playtex. PSSI will bear all costs normally associated with sales
representation including maintaining a well trained sales force and regional
sales office locations. PSSI will receive a 6 3/4 percent commission on all
Playtex sales solicited by PSSI. The Sales Agreement may be renewed for an
additional 5-year period unless terminated by either party.
PSSI and Beauty Care have entered into a sales representation agreement that
has the same terms as described above for the Sales Agreement.
PSSI, Playtex, and each United States subsidiary of Playtex have entered into
a Corporate Administration Services Agreement (the "Admin Agreement")
effective December 30, 1995. Under the Admin Agreement, PSSI will provide
corporate administrative services to each contracting party including: human
resources and employee relations, management information systems, legal,
finance, and office services. PSSI will bear all costs incurred in providing
the services. Each contracting member will pay PSSI a monthly fee that is
determined annually at the beginning of each fiscal year. Total fees to be
received by PSSI from Playtex and its U.S. subsidiaries for 1996 will be
$37,510 per month. Any contracting party may terminate the Admin Agreement
with respect to itself at any time.
Management believes that the terms of the Sales Agreement and the Admin
Agreement are fair to PSSI and comparable to those which could be obtained
from unrelated third parties.
6
<PAGE>
PLAYTEX SALES & SERVICES, INC.
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
NOTES TO BALANCE SHEET
DECEMBER 30, 1995
6. DEBT GUARANTEES
The Company is a guarantor of Playtex's 1995 Credit Agreement, which provided
for borrowings of $387.5 million under the 1995 Term Loan Facility, and up to
$75.0 million and $37.5 million under the 1995 Working Capital Facility and
the 1995 Acquisition Credit Facility, respectively. The Company is also a
guarantor of Playtex's $360 million 9% Senior Subordinated Notes due 2003.
The Company may be released from these guarantees provided Playtex meets
certain conditions.
7. LEASES
Future minimum payments under non-cancelable operating leases assigned to the
Company from Playtex for years after December 30, 1995 are as follows (in
thousands): $999 in 1996, $764 in 1997, $296 in 1998 and $2 in 1999.
7
EXHIBIT 13(d)
BANANA BOAT HOLDING CORPORATION
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO MONTH PERIOD ENDED DECEMBER 30, 1995
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<PAGE>
BANANA BOAT HOLDING CORPORATION
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of KPMG Peat Marwick LLP 3
Consolidated Balance Sheet as of December 30, 1995 4
Consolidated Statement of Operations
For the Two Month Period Ended December 30, 1995 5
Consolidated Statement of Common Stock and Other Stockholder's Equity
For the Two Month Period Ended December 30, 1995 6
Consolidated Statement of Cash Flows
For the Two Month Period Ended December 30, 1995 7
Notes to Consolidated Financial Statements 8
2
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors
Banana Boat Holding Corporation
We have audited the accompanying consolidated balance sheet of Banana Boat
Holding Corporation and Subsidiary (wholly owned by Playtex Products, Inc.) as
of December 30, 1995 and the related consolidated statements of operations,
common stock and other stockholder's equity and cash flows for the period from
October 31, 1995 (date of acquisition) to December 30, 1995. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Banana Boat Holding
Corporation and Subsidiary as of December 30, 1995, and the results of their
operations and their cash flows for the period from October 31, 1995 to December
30, 1995, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
March 15, 1996, except as to note 7,
which is as of March 22, 1996
Stamford, Connecticut
3
<PAGE>
BANANA BOAT HOLDING CORPORATION
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
December 30,
1995
----
ASSETS
Current Assets:
Income tax benefits $ 460
--------
Total current assets 460
Intangible assets, net:
Excess of cost over net assets of acquired businesses 44,021
Proprietary formulas, patents and other 24,816
Deferred income taxes 6,626
--------
Total Assets $ 75,923
========
STOCKHOLDER'S EQUITY
Common stock, $.01 par value; 10,000 shares authorized,
10,000 shares issued and outstanding $ --
Additional paid-in capital 76,637
Retained earnings (deficit) (714)
--------
Total Stockholder's Equity $ 75,923
========
See notes to consolidated financial statements
4
<PAGE>
Two Months Ended
December 30,
1995
----
Miscellaneous income $ 46
Amortization of intangible assets (365)
-----
Loss from continuing operations before income tax benefit
and discontinued operations (319)
Income tax benefit 72
Net loss before discontinued operations (247)
Loss from discontinued operations,
net of income tax benefit of $269 (467)
-----
Net loss available to common stockholder $(714)
=====
See notes to consolidated financial statements
5
<PAGE>
BANANA BOAT HOLDING CORPORATION
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
CONSOLIDATED STATEMENT OF COMMON STOCK AND
OTHER STOCKHOLDER'S EQUITY
(IN THOUSANDS)
Additional Retained
Common Paid-In Earnings
Stock Capital (Deficit)
----- ------- ---------
Balance at October 31, 1995 $ -- $76,601 $ --
Net loss -- -- (714)
Forgiveness of debt by Parent -- 36 --
------ ------- -------
Balance at December 30, 1995 $ -- $76,637 $ (714)
====== ======= =======
See notes to consolidated financial statements
6
<PAGE>
BANANA BOAT HOLDING CORPORATION
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
Two Months Ended
December 30,
1995
----
Cash flows from operating activities:
Net loss $(714)
Noncash items in earnings and changes in assets and liabilities:
Discontinued operations 467
Amortization of intangibles 365
Deferred income taxes 119
Increase in income tax benefits (191)
-----
Net cash provided by continuing operations 46
Net cash used by discontinued operations (783)
-----
Net cash used by operations (737)
Net cash provided by investing activities --
-----
Net cash provided by financing activities --
-----
Net change in cash (737)
Cash balance - beginning of the period 737
-----
Cash balance - end of the period $ --
=====
See notes to consolidated financial statements
7
<PAGE>
BANANA BOAT HOLDING CORPORATION
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
DECEMBER 30, 1995
1. THE COMPANY
In December 1992, Banana Boat Holding Corporation ("BBH") and its wholly
owned subsidiary, Sun Pharmaceuticals Corp. ("Sun" and together with BBH, 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").
On October 31, 1995, Playtex Products, Inc. ("Playtex" or "Parent") and BBH
Acquisition, Inc., a Delaware corporation and wholly owned subsidiary of
Playtex, acquired the 78% of the issued and outstanding common shares of BBH,
not previously owned by Playtex (the "BBH Acquisition"). The BBH Acquisition
was pursuant to an agreement and plan of merger dated October 17, 1995. The
acquisition has been accounted for as a step acquisition in accordance with
the purchase method of accounting and the purchase price was allocated as of
October 31, 1995 to the net assets acquired based on their relative fair
values.
Following the BBH Acquisition, all of the Company's operating assets related
to its former business as a manufacturer and distributor of Banana Boat (R)
sun and skin care products were transferred to Playtex. As of December 30,
1995, the Company's only assets were intangible assets including trademarks,
patents, formulas and excess cost over net assets of acquired businesses, and
tax benefits. Therefore, the Company's former business operations from the
date of acquisition through December 30, 1995 are reported in the
consolidated financial statements as discontinued operations.
Sun owns and licenses the Banana Boat (R) trademark, patent, product
formulations and other proprietary information to Playtex and unrelated
licensees in and outside the United States.
See Footnote 5 for additional information.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 5 to 40 years. Excess of cost over net assets of acquired
businesses ("Excess Cost") is amortized on the straight-line basis over 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.
8
<PAGE>
BANANA BOAT HOLDING CORPORATION
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
DECEMBER 30, 1995
3. BALANCE SHEET COMPONENTS
The components of certain balance sheet accounts are as follows (in
thousands):
December 30,
1995
----
Excess cost:
Cost $ 44,202
Less accumulated amortization (181)
--------
Net $ 44,021
========
Proprietary formulas, patents and other:
Gross $ 25,000
Less accumulated amortization (184)
--------
Net $ 24,816
========
4. 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 bases 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.
9
<PAGE>
BANANA BOAT HOLDING CORPORATION
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
DECEMBER 30, 1995
The company's provision (benefit) for income taxes for the two months ended
December 30, 1995 is as follows (in thousands):
Current Deferred Total
Federal $(183) $111 $(72)
State (13) 8 (5)
Foreign 5 - 5
------ ---- ----
Total $(191) $119 $(72)
====== ==== ====
The Company's tax benefit from discontinued operations of $269 thousand was
determined using statutory tax rates.
Taxable and deductible temporary differences and tax operating loss
carryforwards which give rise to the Company's deferred tax assets and
liabilities at December 30, 1995 are as follows (in thousands):
December 30,
1995
----
ASSETS:
Net operating loss carryforward $6,745
------
Total deferred tax assets $6,745
======
LIABILITIES:
Acquired intangible assets $ 119
------
Total deferred tax liabilities $ 119
======
10
<PAGE>
BANANA BOAT HOLDING CORPORATION
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
DECEMBER 30, 1995
For periods subsequent to October 31, 1995, the Company will be included as
part of Playtex's consolidated federal and certain state tax returns.
Pursuant to a tax sharing arrangement with Playtex, the Company will be
reimbursed by Playtex for the amount of its net operating losses that are
utilized in Playtex's consolidated tax returns. At December 30, 1995, the
Company has net operating losses of $18.4 million that expire in years 2007
through 2010. Based on the expected cash flows under the Agreement, (see Note
5), the Company expects to fully utilize these net operating loss
carryforwards prior to their expiration. Accordingly, no valuation allowance
account is established.
The Company's tax benefit related to loss from continuing operations for the
two months ending December 30, 1995 differed from the amount calculated using
the federal statutory rate of 35% as follows (in thousands):
Expected federal income tax benefit at statutory rate $111
Amortization of goodwill (40)
State and local tax benefit (3)
Other, net 4
----
Total tax benefit $ 72
====
5. RELATED PARTY TRANSACTIONS
Sun and Playtex have entered into a 5-year agreement, renewable by Playtex
for successive 5- year periods, for the license of the Banana Boat (R)
tradename, patent, product formulation and other proprietary information
(the "Licensed Assets") effective December 30, 1995 ("the Agreement"). Under
the terms of the Agreement, Playtex pays Sun a 5 percent royalty on all
sales made by Playtex that utilize any of the Licensed Assets. Either party
may terminate the Agreement after the initial 5-year term. The Agreement may
also be terminated under certain other conditions.
11
<PAGE>
BANANA BOAT HOLDING CORPORATION
(WHOLLY OWNED BY PLAYTEX PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
DECEMBER 30, 1995
The Company transferred certain of its operating assets, net of liabilities,
including cash ($0.5 million), trade receivables ($2.6 million), inventories
($17.4 million), fixed assets ($1.3 million) and note receivables ($2.0
million) to Playtex in satisfaction of its net balance owed to Playtex
($20.3 million). Playtex forgave Sun the remaining net balance owed ($36
thousand). The forgiveness of Sun's net payable to Playtex was accounted for
as a contribution to the Company's capital.
Management believes that the terms of each of the arrangements outlined
above are fair to the Company and comparable to those which could be
obtained from unrelated third parties.
6. DEBT GUARANTEES
BBH and Sun are guarantors of Playtex's 1995 Credit Agreement, which
provided for borrowings of $387.5 million under the 1995 Term Loan Facility,
and up to $75.0 million and $37.5 million under the 1995 Working Capital
Facility and the 1995 Acquisition Credit Facility, respectively. The Company
is also a guarantor of Playtex's $360 million 9% Senior Subordinated Notes
due 2003. BBH and Sun may be released from these guarantees provided Playtex
meets certain conditions.
7. SUBSEQUENT EVENT
On March 22, 1996, BBH was merged with and into Sun, with Sun being the
surviving corporation.
12
EXHIBIT 22(a)
SUBSIDIARIES OF PLAYTEX PRODUCTS, INC.
PERCENT JURISDICTION OF
CORPORATION OWNERSHIP INCORPORATION
----------- -------- -------------
Playtex Products, Inc. Delaware
Playtex Marketing Corporation 50% Delaware
Playtex Beauty Care, Inc. 100% Delaware
Playtex Sales & Services, Inc. 100% Delaware
Playtex Manufacturing, Inc. 100% Delaware
Banana Boat Holding Corporation(1) 100% Delaware
Sun Pharmaceuticals Corp.(1) 100% Delaware
SmileTote, Inc. 100% California
Playtex Investment Corp. 100% Delaware
Playtex International Corp. 100% Delaware
Playtex Ltd. 100% Canada
(1) On March 22, 1996, BBH was merged with and into Sun, with Sun
being the surviving corporation.
EXHIBIT 23
The Board of Directors
Playtex Products, Inc.:
We consent to incorporation by reference in the registration statement
(No. 33-88806) on Form S-8 of Playtex Products, Inc. of our reports dated
February 6,1996, relating to the consolidated balance sheets of Playtex
Products, Inc. and subsidiaries as of December 30, 1995 and December 31, 1994,
and the related consolidated statements of operations, redeemable preferred
stock, common stock, and other stockholders' equity, and cash flows for the
twelve months ended December 30,1995, December 31, 1994 and December 23, 1993
and related schedule, which reports appear or are incorporated by reference in
the December 30, 1995 annual report on Form 10-K of Playtex Products, Inc, Our
report refers to a change in accounting tar income taxes and post-retirement
benefits other than pensions in 1993.
/s/ KPMG PEAT MARWICK LLP
Stamford, Connecticut
March 28, 1996
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